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We are told that contract, like God, is dead. And so it is.[1]
Perhaps no other subject in the standard canon of legal education can claim such an august tradition, such rigour of analysis, and such a sublime irrelevance, as the law of contract.[2]
[T]o this day in England there is no indication of any decline in the vogue for treatise writing. The continual production of such works, even in fields such as contract law that have been worked over for nearly two centuries by a multitude of writers, must reflect a curious stagnation in English private law.[3]
If the law of contract is irrelevant or dead then the idea of writing a text about it must be futile or impossible. Yet, paradoxically, the species seems healthy and continues to thrive. However there is evident a collective affirmation of a particular doctrinal taxonomy which has persisted over time and throughout most of the common law world. In this article I will investigate this paradox and seek to critically appraise the orthodox arrangement of the subject.
Before making the case for a particular approach, I had better deal with a minor preliminary question raised by Grant Gilmore and Morton Horowitz in the USA and Patrick Atiyah in the UK.
In his elegant and provocative short book called The Death of Contract, Grant Gilmore described the nineteenth century invention of the classical law of contract based upon the theory of enforcing bargains and put forward the thesis that it has subsequently been consumed by reliance, restitution and other fairness principles to the point where soon there will be nothing left of the classical construct. A similar thesis has been advanced by Morton Horowitz[4] who, more controversially,[5] attributes the displacement of a pre-industrial law of contract centred on principles of fairness by the classical law of contract to the courts' conscious promotion of emerging commercial interests. This account of the development and disintegration of classical contract law is further endorsed in Patrick Atiyah's magisterial[6] Rise and Fall of the Freedom of Contract,[7] in which he describes the intellectual link between, on the one hand, prevailing[8] economic and philosophical theory and, on the other, the form and substance of the law.[9] This work of Patrick Atiyah has recently been described as part of the '[t]he first major wave of [contract] theorizing'[10] following the publication of the most celebrated article ever written on contract law.[11]
How does one refute a thesis such as Gilmore's?[12] Can one point to the large number of books which continue to be written on the subject? There are now about 30 English contract textbooks before the market disintegrates into 'crammers' and revision aids.[13] Can one point to the central place of the law of contract in the compulsory curriculum and the consequent numbers of students studying the subject? It is perhaps true that both pieces of evidence should be rejected as hearsay, though the latter may possibly provide a partial explanation for the former. Rather, it is necessary to examine the evidence upon which Gilmore bases his claims. It is not possible in this article to consider all of Gilmore's arguments. Indeed I suspect that he would not expect commentators to do so. It is perhaps implicit in his overstated prose style that some statements, such as the one that opens his book and this article, are, at least in part, rhetorical hyperbole beyond proof.[14] The Death of Contract was originally presented as a series of lectures.[15] Gilmore notes in the Foreword to the published edition that T have retained the somewhat informal style which initially seemed appropriate for material meant to be listened to instead of read ... A lecturer ... avoids qualifications, refinements, and collateral developments which ... would be immensely confusing to any audience.' However I will examine one central plank in Gilmore's argument. He places great emphasis upon the emergence, through the two Restatements, of promissory estoppel as an independent source of reliance based obligation. In a similar vein, Patrick Atiyah has argued that almost all of the English law of contract is best understood as justified by the protection of reliance supplemented by the reversal of unjust enrichment. On this view, the principles of contract law are similar to those of the law of torts; they are standards of appropriate behaviour imposed externally upon the parties.[16] In perhaps the most radical reinterpretation of the general law of contract in England, Hugh Collins suggests that 'the reliance model' provides 'a second general test of enforceability in addition to the doctrine of consideration', despite the fact that it 'encounters resistance[17] because it subverts the orthodox classical analysis that all contracts must be supported by consideration' .[18] The English commentators, like Gilmore, support their claims by reference to the development of estoppel doctrines. The extent and appropriateness of these developments will now be briefly examined.[19] Lawyers love metaphors.[20] Never more so, it seems, than when debating the proper limits of promissory estoppel. In the English case of Combe v Combe,[21] Birkett LJ approved the 'vivid',[22] now 'time-honoured',[23] phrase of counsel which described the doctrine 'as a shield but not a sword'.[24] The first instance judge appeared to have dispensed with the need for consideration in order to enforce a promise, as opposed to giving more limited effect to the promise which the common law and equitable doctrines of waiver and promissory estoppel would allow. This would create a new cause of action and abrogate the requirement of consideration. The Court of Appeal strongly disclaimed this view. Lord Denning said of promissory estoppel that 'the principle never stands alone as giving a cause of action in itself'.[25] Metaphors are confusing and hide subtle shades of meaning. Nonetheless, no English authority directly supports the proposition that promissory estoppel can, of itself, create a cause of action. More radical developments in this area have taken place in Australia,[26] reflecting an earlier trend in Canada.[27] Although the doctrine of promissory estoppel was not recognised by the High Court of Australia until 1983,[28] its subsequent development has been dramatic. A number of Australian cases have demonstrated one of the most fundamental challenges to the basis of orthodox contract law. These recent cases evidence the weakening, or removal, of a number of the restrictive doctrines or maxims which have traditionally limited the operation of the doctrines of estoppel, and thereby avoided an overt challenge to the primacy of the agreement intended to create legal relations and supported by consideration as the means of enforcing promissory obligations. In Walton's Stores (Interstate) Ltd v Maher,[29] the majority[30] of the High Court held that Maher, a builder, who had been negotiating an agreement with the appellant, Walton's, whereby Maher would demolish buildings upon ground which he owned and then construct and lease to Walton's a building to its specification, could rely on the doctrine of promissory estoppel when Maher demolished the old buildings assuming that an agreement between the parties would be reached.[31] In reaching this conclusion, the majority did not feel constrained by the supposed rule that such estoppels do not found a cause of action, nor by the requirement of a pre-existing legal relationship. They thought that these restrictions simply evidenced a concern that estoppel should not, without more, permit all gratuitous promisees to demand the fulfilment of their expectations. However, only Brennan J tried to fashion the doctrine in a way that would meet this concern. He emphasised that the role of estoppel was to protect a disappointed promisee from the detriment he would suffer in the event of the promisor unconscionably refusing to fulfil his promise; it was not to satisfy the promisee's expectations.[32]
In Commonwealth of Australia v Verwayen,[33] the High Court of Australia was again called upon to consider the limits of estoppel. The case was not 'contractual',[34] concerning as it did the question of whether the Commonwealth was free to dispute its liability to an injured member of the Australian navy and, in particular, whether it could, at variance with its previous policy, either deny the existence of a duty of care or plead a limitation defence. However the principles discussed have an obvious application to contractual disputes. As in Walton's Stores, the members of the High Court in Verwayen took different approaches. The majority held that the Commonwealth was not able to deny its liability to the claimant; Deane and Dawson JJ on the basis that the Commonwealth was estopped from doing so,[35] and Toohey and Gaudron JJ on the basis that it had waived its right to do so.[36] There is strong support in the case for a rejection of any distinction between common law estoppels based upon representations of existing fact, and equitable estoppels[37] which are more flexible both as to the type of statement or the conduct required and the remedy eventually awarded. It appears to be generally assumed by the High Court in Verwayen that Walton's Stores lies to rest any insistence upon a pre-existing legal relationship. In Verwayen there was considerable support for the approach developed by Brennan J in Walton's Stores, which sought to restrict the remedy available to the representee to the consequences of his detrimental reliance. According to Mason CJ:
it should be accepted that a court... may do what is required, but no more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs ... from suffering detriment in reliance upon the assumption as a result of the denial of its correctness [emphasis added].[38]
The application of this reliance based approach could result in a restriction upon the representee's remedy; recovery could be limited to financial compensation in respect of expenses incurred which are directly attributable to his reliance upon the representations made by the Commonwealth. Alternatively, this approach might justify an expectation based remedy, i.e. one which seeks to put the representee in the position he would have been in if the representation, assumption or promise was respectively true or had been carried out. Indeed, in both Walton's Stores and Verwayen the remedies eventually granted had the effect of fulfilling the representee's expectations. In Walton's Stores, damages were awarded on the basis that the representor was estopped from retreating from its promise that the contract would be completed.[39] In Verwayen, the Commonwealth was prevented from going back on the beliefs it had excited. The point is simply that the proper application of the principles adumbrated in Verwayen means that this will not inevitably be so.
Yet, despite the clear and careful statements of principle in Verwayen, the subsequent Australian experience is that the remedy granted seems unreflectively to involve the fulfilment of the expectations of the representee.[40] Such an approach creates a tension between the principles of contract and estoppel. This same confusion is apparent in the USA. Section 90(1) of the Restatement, Contracts 2d,[41] gives the impression that the doctrine of promissory estoppel in the USA is distinguished from contract proper by its concern with the protection of reasonable reliance on the part of a promisee. This has certainly appeared as a theme in some of the classic authorities on estoppel where the recovery of lost profits was denied.[42] In contrast, the recovery of such profits is a regular feature of the legal protection afforded to contractors' expectations in an action for breach of contract. However recent studies in the USA have revealed an increasing use of promissory estoppel as a means for protecting contractual expectations.[43] This produces a tension between traditional contract principles and the doctrine of promissory estoppel which has caused some commentators to speculate about the imminent demise of the latter,[44] and others to attempt a synthesis of both types of promissory liability.[45]
Developments in New Zealand have, to a limited extent, followed those in Australia. The requirement of a pre-existing relationship has been abandoned,[46] and the rule that promissory estoppel cannot found a cause of action departed from.[47] Further, the view that it is possible to draw clear lines between the various sub-species of estoppel has been questioned by Cooke P: 'The tide is setting or has set, I think, against the view ... that proprietary and promissory estoppel are entirely separate and take their origins from different sources' .[48] However although 'there have been some major steps in the direction of Waltons',[49] the journey is not yet complete. Some, I would suggest justified, hesitancy is apparent. In National Westminster Finance NZ Ltd v National Bank of NZ Ltd,[50] Tipping J spoke of 'a single doctrine of estoppel'[51] through which runs 'the element of unconscionability' but none the less emphasised that 'the broad rationale ... is not a test in itself',[52] rather '[f]or ease of analysis it is convenient to examine the particular ingredients of different manifestations ... of the doctrine.' In another case, Hammond J noted, but did not resolve, the conflict between the 'conventional view' of the requirements of estoppel and the 'somewhat broader view ... taken by the Court of Appeal in Gillies v Keogh' .[53] To similar effect is the recent statement of Wild J that '[u]nderlying, but I think not substituting, for the three basic elements identified [i.e. belief or expectation, reliance and resulting detriment] ... is the Court's unwillingness to allow a promisor to act unconscionably' .[54]
It is suggested that the disinclination of the English courts, and the slight hesitancy shown by the New Zealand courts, to embrace a unified doctrine of estoppel is amply justified. Unfortunately, while there has been a considerable display of academic enthusiasm for a unified principle of estoppel,[55] the contrary arguments have not been examined so exhaustively.[56]
The most frequently articulated criticism of an expanded doctrine of promissory estoppel is that it would create uncertainty. This is usually taken to refer to the unpredictability of outcome of any dispute to counsel and contractors.[57] This general unpredictability can itself be ascribed to more specific uncertainties in the doctrines, including the use of vague concepts. In order to establish a promissory estoppel, it is necessary that the following be present: an unequivocal promise by one party to another that he or she will not insist upon his or her strict rights; reliance by the promisee to the extent that it would be inequitable to allow the promisor to renege on his or her promise; and equitable conduct on the part of the promisee. The first requisite should not occasion the courts undue difficulty. However the second and third requirements, reflecting the dimension of unconscientious conduct which some believe to be the common thread running through estoppel doctrines, may lack definition. The application of these broad standards introduces uncertainty. However close attention to the policy considerations which inform the doctrine of promissory estoppel can help give greater definition to these concepts. The opposite effect would result from any attempt to construct a single unified doctrine of estoppel.
The plea for a unified concept of estoppel seems to be based upon an unarticulated premise: that the disparate doctrines share a common purpose. Perhaps, at a general level, this is so; each doctrine expresses the courts' disapproval of the unconscientious departure from beliefs excited in another. However such an expression of purpose is over-inclusive; it would encompass much of the law of contract and trusts. Rather, the question posed here is whether the expression of common purpose at such a level of generality serves only to obscure the location of the objectionable conduct. The danger is that the pursuit of a universal panacea might squander such expertise as the law has acquired in dealing with specific problems under particular rubrics. A major thesis of this article is that different policy considerations are relevant to different episodes in the life of a contract. Later we will see that the different doctrines which collectively comprise the law of contractual modifications can be analysed in terms of the tension between the policy objectives of encouraging contractual flexibility and restraining opportunism. It will also be argued that common policy concerns inform the disparate legal doctrines that 'police' pre-contractual negotiations.
Other dangers are apparent.[58] The law fails to gather expertise in dealing with particular problems. Lawyers and judges deprived of the accumulated expertise of the courts may apply the general doctrine in a way that is in conflict with policy considerations specific to a particular context. In the future such inappropriate cataloguing of legal disputes is unlikely to generate sensible debate. Not only do the parties to the particular dispute have their conflict resolved by reference to inappropriate considerations, but their misfortune is not a stimulus to further discussion of the subject. A number of recent statements in the English appellate courts have recognised these concerns.[59] In The Indian Grace, Lord Steyn, with whom the other members of the House agreed, had to consider the requirements and province of the doctrines of estoppel by convention and estoppel by acquiescence (a type of proprietary estoppel). While declining to embark on a full scale review of these doctrines, he said:
The question was debated whether estoppel by convention and estoppel by acquiescence are but aspects of one overarching principle. I do not underestimate the importance in the continuing development of the law of the search for simplicity. I also accept that at a high level of abstraction such an overarching principle could be formulated. But Mr Rokison QC, for the owners, persuaded me that to restate the law in terms of an overarching principle might tend to blur the necessarily separate requirements, and distinct terrain of application, of the two kinds of estoppel.[60]
More recently, and more concisely, Lord Goff stated that 'the many circumstances capable of giving rise to an estoppel cannot be accommodated within a single formula.'[61]
However if contract, represented by the protection of expectations excited by bargains, is not dead, is it any more than the 'twitching corpse' once described by A W B Simpson?[62] Even he would actually concede that it is. There remains a central core of contractual activity which is concerned with the protection of expectations created by freely entered contracts. The cases heard in the English Commercial Court and Construction and Technology Court[63] proceed upon the basis that parties are free to contract, or not, and that, if they do, they may determine the obligations assumed unencumbered by any duty to co-operate with their contractual partner. In other words, the norms enforced (or more accurately the lack of them) are those of the supposedly discredited neo-classical law of contract. Even outside this sphere it cannot be argued that these concepts have no relevance. Rather, the contract law applied to disputes concerning consumers is a blend of classical contract principles based upon freedom of contract and voluntary obligation tempered by considerations of co-operation, fairness etc; a mixture usually called neo-classical contract law. In the end, my conclusion is that a law of contract comprising classical and neo-classical principles survives, though there is room for debate about its exact sphere of operation and the frequency of its subjugation to competing principles. I am fortified in this conclusion by a reading of Stephen Smith's recently published book, Contract Theory,[64] which aims to survey and refine the existing literature on contract theory.[65] In the first half of this book,[66] Smith describes and evaluates the most important general theories of contract. He posits four criteria by reference to which any contract theory may be evaluated:
1. FIT - Does the theory fit that which it seeks to explain?[67]
2. COHERENCE - Is it internally consistent?[68]
3. MORALITY—The best theory is one that shows law to be morally justified.[69]
4. TRANSPARENCY - Law is transparent to the extent that the reasons given by legal actors are genuine explanations of conduct.[70]
On the basis of these criteria, Smith evaluates how successful different theories of contract have been in answering two questions. The first is what he terms the ANALYTIC question: What are the essential characteristics of a contractual obligation?[71] The second is what he terms the NORMATIVE question: Why give legal force to contractual obligations?[72] One of his major conclusions is that promissory,[73] as opposed to reliance based, theories provide the best answer to the analytic question on the basis that they[74] demonstrate good fit and transparency, fair coherence, and are no less morally convincing than their competitors.[75]
What is a contract textbook?[76] I will define it as a text (i.e. excluding books which primarily comprise extracts and quotations) from which one may learn about the law of contract. This leaves at large the question how the subject matter is defined and how it is approached. One of my major theses in this article is that the phrase 'textbook' has become associated with a particular scheme of presentation and thereby lost some of its ambition and explanatory power.
It is a fact that contract textbooks are more prolific in England, New Zealand and Australia than in the United States. Various reasons have been advanced to explain this. First, it is suggested that it is accounted for by different teaching methods. The prevalence of case method teaching in the US has resulted in the substitution of materials collections for textbooks. Second, it has been suggested that textbook production here is encouraged by a general prestige attached to treatise writing which encourages authors in pursuit of advancement to adopt this style of scholarship. This was certainly true in the last century when the treatise was a means by which previously unknown authors secured a reputation prior to a lucrative career at the Bar.[77] However, it has been suggested that this is still the case. Professor A W B Simpson has written of more recent times that
the authorship of a lapidary treatise is more or less essential to preferment as an academic lawyer proper, and it is only in odd subjects like jurisprudence that one can get on through promise and the odd article.[78]
Third, in his reflective Hamlyn lecture, Blackstone 's Tower: The English Law School,[79] William Twining has suggested that American law simply outgrew the treatise. There was too much state law on any particular subject to be presented in a single authored treatise.[80] Perhaps this is evidenced by the apparent lack of enthusiasm and speed in the present generation of scholars for the task of updating the large multi-volume treatises of Williston and Corbin on the law of contract. Fourth, it may be accounted for by the influence of distinct jurisprudential traditions. It has been said that 'the greatest negative effect on the treatise-writing tradition in America is the realist movement' which 'involved scepticism and even a cynicism about the significance of legal doctrine'.[81]
Appendix 1 records contents summaries of a number of leading contract textbooks. The names of the authors and the dates of publication have been omitted. A few revealing details have also been omitted (eg, the dates of statutes) in order to allow me to pose the question to the reader, 'When were these texts written?'
What is striking about these books is the degree of homogeneity. They present a common picture. Apart from perhaps a brief historical excursion, each text begins with an account of the birth of a contract (agreement, consideration, intention to create legal relations etc). This is almost immediately followed by a morbid list of defects which might afflict the infant and cause its premature demise (or in some cases its still birth) -mistake, misrepresentation, frustration, duress, undue influence, illegality etc. The only pause in this rapid transition from birth to death may be to briefly examine the character of the child (contents, capacity etc) and his relations with others (privity, third parties). Once death is pronounced, a brief post-mortem takes place (remedies) before the body is laid to rest. Yet, despite the degree of similarity, books 1-4 were, respectively, published in 1876, 2003, 1879 and 2002.[82] A similar position is revealed by books 5-8, published in 1945, 2001 and 2002, from the UK, Australia and New Zealand.[83]
If you ever have a few hours to spare in London, an interesting exercise in diplomacy is to visit the Institute for Advance Legal Studies and to ask to visit the 'Depository'. If admitted, you may be escorted to the basement where you will find a fascinating collection of old editions. I secured entry when I was searching for a first edition of Anson's Law of Contract.[85] I found it there with a number of other books which were monogrammed 'GCC’, which I suspect were part of the late Geoffrey Cheshire's personal library which were later obtained by the IALS. Interleaved in the copy of Anson, I found some correspondence between Sir William Anson and his former pupil master, Theseiger LJ. After enquiring about Mrs T's health, Sir William Anson said
[W]riting as I have done, for students & beginners, I have assumed (?) a definiteness of statement as to the results of the cases which would have been presumptuous in a book of practice. I took a good deal of trouble to arrange the various parts of the subject in due proportion and order but it wasn't until I began to fill in my outline that I realised how much labour was needed & how much more learning than I possessed.
The structure seems to have derived simply from an attempt to impose order upon the cases for students as opposed to the unstructured approach to the cases taken in contemporary practitioner works. David Sugarman has retrospectively described these aspirations:
Pedagogically, their ultimate raison d'etre was simplicity of exposition, orientation and standpoint. They did their best to ignore 'exceptions' and 'aberrations'; they concentrated upon the principles and 'the general part' of the law. They emphasised 'the best law', that is they were highly selective in the cases they cited and deliberately eschewed the enumeration of numerous authorities which was the hallmark of practitioner texts.[86]
In this context, it is interesting to note that when JHC Morris took over the editorship of Chitty on Contract, the major practitioner work, in 1961, he restructured it on the lines of Pollock, Anson, and Cheshire and Fifoot. He justified this on the basis that the present generation of practitioners would expect no less because they were the student texts they had been brought up with. In this way the doctrinal arrangement became universal throughout legal books on contract.
If invited to write a new book today, I think it would be strange if the same scheme of arrangement commended itself. Perhaps a different structure should be adopted to achieve three related objectives:
1. To better reflect significant developments in the law of contract over the last 60 years.
2. To emphasise the interrelation between several existing doctrines.
3. To better incorporate some of the insights provided by broader and interdisciplinary writings on the subject.
I do not wish to denigrate the value of what has gone before. Without the encyclopaedists of the past it would be very difficult to think creatively about this subject.[87] Karl Llewellyn is reported to have said that he did not understand the English law of contract until he discovered the Lloyds Law Reports.[88] I suspect that many modern writers on contract might acknowledge that they understood more of what was reported in the Lloyd's Law Reports after they had read Treitel. It is, of course, also the case that authors are sometimes subject to pragmatic or artificial constraints. A new offering may for marketing advantage seek to emulate the structure of an established volume it seeks to rival. Nor am I suggesting that it is impossible to integrate original and innovative analysis within a traditional arrangement of the subject. However this may be more difficult than doing the same within a more flexible and accommodating structure. My point is simply that, given the opportunity to start again, it seems unlikely that an approach to the subject cast in the last century would be the best to present contemporary contract law.
One of the most significant developments in contract law in the past 50 years is the creation, or re-creation, of a doctrine of promissory estoppel. Close attention to the facts of the cases that gave rise to this development in England[89] reveals that the doctrine gives limited legal effect to promises by one party to another not to insist on his or her strict contractual rights under that contract, eg, the landlord's promise to accept half rent in High Trees.[90] In Williams v Roffey Bros & Nicholls (Contractors) Ltd,[91] the English Court of Appeal adopted an approach to consideration which emphasised the fact of benefit or detriment at the time of performance,[92] and this approach has been accepted and followed recently on two occasions by the New Zealand Court of Appeal.[93] What seems to have been ignored by many textbook writers, or if recognised not acted upon, is that both of these inventions are primarily concerned with the modification, rather than the formation or termination, of a contract.[94] The more conservative approach to the development of promissory estoppel in England has kept the province of each doctrine distinct:[95] the first dealing with 'reducing' modifications whereby one party seeks to reduce the obligations owed to him or her under a pre-existing contract and the latter dealing with 'increasing' modifications whereby a party seeks to enlarge his or her rights under the pre-existing contract. In England, despite pressure, the dam has not yet burst. In New Zealand the dyke has, it seems, been breached, but it is not yet apparent what damage the waters of estoppel have inflicted upon the land of contract.
A related development is the emergence of a doctrine of economic duress which seeks to control the illegitimate exercise of economic power, for example, the threat of a shipyard to breach a contract with a client by refusing to deliver a ship unless outstanding payments were increased.[96] Indeed the doctrine of economic duress now assumes greater significance as a result of recent changes to the doctrine of consideration. To the extent that a factual rather than a legal definition of consideration is more easily satisfied, it is the presence or absence of pressure amounting to economic duress which ultimately will determine the enforceability of a modification. Thus the developing principles of economic duress assume a more significant role.[97] The recent expansion of the doctrine of duress beyond its long accepted domain of threats to the person[98] and to goods[99] to include more subtle forms of economic pressure occurred in the context of a small number of cases, almost all of which have involved contractual modifications.[100] Again, I would suggest that the importance of the context of these important doctrinal developments has gone largely unnoticed.
In a classic essay, Karl Llewellyn wrote:
Law and Logic go astray whenever [contract modifications] are regarded as truly comparable to new agreements. They are not. No business man regards them as so. They are going transaction adjustments, as different from agreement formation as are corporate organisation and management.
A particular school of economists, sociologists and lawyers (Goetz and Scott, Goldberg, Klein, MacNeil, Williamson, etc)[101] have built upon this insight to promote a particular approach to so called 'relational' contracts.[102] Problems of definition abound[103] but the typical features of a relational contract seem to be that it is a long term contract where the parties enjoy a relation beyond any contemplated exchange, characterised by incomplete planning for the future and the need for a high degree of co-operation between the parties. An example might be a long term supply contract between an up-market supermarket and a poultry supplier. Particular problems attend such contracts. One problem is the restraint of opportunistic behaviour on the part of one transactor which seeks to take advantage of a vulnerability of his partner created by the contract itself. During the life of such contracts one contractor frequently makes investments which are valueless to anyone other than his contractual partner, for example, the supermarket insisting that its poultry be cleaned in a particular way which does not add value to the chickens in the marketplace. Such sunk investments create the potential for the other contractor to 'chisel' on the original bargain, for example, the supermarket saying, 'I'll pay you less.' Much of the literature on relational contracting seeks to argue that opportunism can only be restrained by the discriminating matching of contractual relationships and governance structures. The ultimate harmonisation of the antithetical needs of the two entities within the same governance structure is vertical integration, where one entity buys the other to form one large firm.[104] In an article in the Law Quarterly Review,[105] I argued that the possibility of adapting one particular governance structure, neo-classical contract law, to respond to the particular needs of contractors has not been fully developed. That argument was developed in relation to the emerging principles of economic duress. The point here is that the distinct issues about the control of opportunism in relation to contractual modifications merit separate treatment for all modification doctrines.
The task described of adapting neo-classical contract law to reflect these concerns is simply not assisted when the law relating to contractual modifications is dispersed throughout a doctrinally arranged textbook, frequently absent any recognition of the inter-relationships between, and common purpose of, the doctrines. An example of such an inter-relationship is that between the pre-existing duty rule of consideration and the doctrine of economic duress. To the extent that recent decisions[106] have relaxed the requirement of consideration for a contractual modification, the ultimate enforceability of the variation will now, in a greater number of circumstances, fall to be determined by the principles of economic duress. In addition to aspects of the doctrine of consideration, promissory estoppel and economic duress, frustration, and even mitigation, must be considered to give a complete account of the law relating to contractual modifications. Many fingers or bookmarks are needed to answer a question involving contractual modification using a typical contract textbook.
If you compare the two diagrams in Appendix 2, it will be immediately apparent how the doctrinal response to a proposed contractual modification is more complex than the theoretical analysis I have developed elsewhere suggests it should be.[107]
The same point I have made about the dispersal of the legal doctrines that collectively comprise the legal response to a contractual modifications can be made about pre-contractual negotiations. These precede the contract but are invariably analysed in a misrepresentation chapter, usually located in the centre of the book. I would argue that this serves to obscure the wrong that a misrepresentor commits. What he or she has done is to breach a standard of fair dealing. There is a danger that traditionally arranged textbooks do not sufficiently emphasise the role that other legal doctrines can play in 'policing' contractual negotiation. The principle that prevents an offeree from 'snapping up' a contractual offer which he or she is aware, or should be aware, is mistaken[108] is a control exercised over abusive bargaining tactics. The same can be said about the recovery of wasted expenditure in the law of restitution after contractual negotiations have failed as in BSC v Cleveland Bridge and Engineering Co Ltd,[109] or, about the finding of a collateral contract to consider all conforming tenders when a local authority invited the present franchisee to bid for a concession to operate pleasure flights as in Blackpool and Fylde Aero Club.[110] More controversially, the same may be said about the awakening of judicial interest in the doctrine of estoppel by convention, whereby one party is prevented from departing from a common assumption underlying the parties' contractual negotiations.[111] To the extent that this assumption must be evidenced by communication between the parties, it is a powerful tool to protect the interests of negotiating parties. The same point can perhaps even be made about the many applications of the doctrine of proprietary estoppel. Other examples could be given. It is perhaps the failure to recognise the common purpose underlying these separate doctrines that causes common lawyers to bristle when it is suggested that we should adopt a duty to bargain in good faith. As Bingham LJ hinted in the Interfoto case,[112] perhaps we are closer to having one than many common lawyers think. In this respect the United Kingdom has been subject to pressure from Europe,[113] which New Zealand has not, to recognise explicitly a doctrine of good faith.
I would suggest that the market leaders in contract textbooks have shown hesitancy in responding to these developments. Why? I suspect that the almost universal place of contract at the beginning of a law degree is relevant here as is what many in the UK perceive to be a clear drop in the standard of law students. Both factors must exercise a downward pressure upon the ambitions of textbook writers.
Is another reason perhaps the conservatism of publishers and readers who are discomforted if their old 'guide, philosopher and friend' suddenly has cosmetic surgery? When he was writing his Brief History of Time, Stephen Hawking was warned by his publisher that sales would halve for each equation that he included. The result was that he included only one, E = MC2 . Perhaps the inclusion of economics and theory in standard contract textbooks would have a similar effect. I am reminded here of the memorable comment by Judge Harry Edwards, who has re-asserted the importance of expository scholarship in the United States as a means of bringing judges, practitioners and the legal academy into closer contact by calling for more 'practical doctrinal scholarship'. He warned that
when law and economics becomes economics by lawyers it may just pass muster; when lawyers indulge in literary theory one raises an eyebrow; when law and psychiatry becomes psychiatry by lawyers one dives for cover.[114]
I do not share this distaste for theory at the core of legal scholarship. I hope that I have already demonstrated how an awareness of, and interest in, legal theory can help legal exposition as it can also help legal reform.[115]
Some authors have tried to buck the conservative trend I identified above. In recent years the law of contract has been subject to critical commentary,[116] feminist perspectives,[117] contextual analysis,[118] and had its key issues exposed.[119] Each offers valuable insights into their subject matter but perhaps each only offers 'one view of the cathedral'.[120] Only Hugh Collins has set out to survey the whole field in a radical way by using less familiar aggregating categories to accommodate his view of the transformation of English contract law. This reconstruction has attracted criticism, both intemperate[121] and measured.[122] It is a challenging work but may only give a partial account of the enforcement of promissory obligations; the evidence upon which the author relies is drawn mainly from the consumer, as opposed to the commercial, sphere. The taxonomy and vocabulary of the book would probably not be familiar to judges and practitioners. This fact perhaps limits the usefulness of the book for students struggling for the first time to understand what the courts are doing when considering contract cases.
I used to begin my contract law lectures each year with a joke that strained the patience of Longman a little more each year. It was that 'the perfect book on the law of contract has not yet been written but that I was working on it.' I have now had one tilt at the windmill,[123] and been subject to some of the pressures described above, and realise of course that it has still not yet been written. The second edition of my contract textbook will again seek to identify a via media by incorporating the insights provided by interdisciplinary scholarship into a structure that has explanatory value. Though based upon a dilution or rearrangement of traditional doctrines, I hope it will remain accessible to its intended audience. I will surely fail again but, as before, thoroughly enjoy and profit (intellectually) from the attempt.
[*] Professor of Law, University of Leeds, d.r.halson@leeds.ac.uk. This article is a revised version of a Staff seminar presented at the School of Law, University of Canterbury in 2005. I am very grateful to Professor Scott Davidson for the invitation to visit Christchurch, the facilities made available to me, and to the participants in the seminar for their time and comments.
[1] G Gilmore, The Death of Contract (1974) 1.
[2] H Collins, The Law of Contract (4th ed, 2003) iv.
[3] A W B Simpson, 'The Rise and Fall of the Legal Treatise: Legal Principle and the Forms of Legal Literature' (1981) 48 University of Chicago Law Review 632, 663.
[4] See M Horowitz, 'The Historical Foundations of Modern Contract Law' (1974) 87 Harvard Law Review 917; M Horowitz, The Transformation of American Law 1780-1860 (1977).
[5] A W B Simpson, 'The Horowitz thesis and the History of Contracts' (1979) 46 University of Chicago Law Review 533 (arguing that the origins of the classical law predate the time of the 'transformation' identified by Horowitz and further questioning the possibility of such a change). G E White, in a combined review of Horowitz's original work and its 'updating' in The Transformation of American Law 1870-1960: The Crisis of Legal Orthodoxy (1992), suggests that Horowitz's original thesis may have softened a little: see G E White, 'Transforming History in the Postmodern Era' (1993) 91 Michigan Law Review 1315.
[6] For a more concise distillation of this work by Atiyah himself, see his Introduction to the Law of Contract (5th ed, 1995) 7-26.
[7] P Atiyah, Rise and Fall of the Freedom of Contract (1979). This work was originally intended to be followed by a later volume examining the modern law of contract. Atiyah's later text, Promises, Morals and Law (1981), is expressly not the intended 'update'. Atiyah has however offered a limited postscript describing the re-emergence of the values and solutions of classical contract law during the period of conservative government in the UK in the 1980's: see P Atiyah, 'Freedom of Contract and the New Right' in P Atiyah, Essays on Contract (1986) ch 12.
[8] J Gordley, in The Philosophical Origins of Modern Contract Law (1991) 3-4, traces the origins of the classical law of contract to the philosophical traditions of an earlier era when the 'late scholastics ... attempted to synthesise the Roman legal texts with the moral philosophy of Thomas Aquinas', these concepts were received into English law via the influence of a French jurist, Pothier, with the result that ' [t]he fundamental concepts and doctrines of private law with which we are familiar are a simplification of the synthesis they achieved'. However while the concepts of the classical law of contract were retained, their philosophical origins and justification, including an emphasis upon non agreed terms for particular classes of transaction derived from Roman Law and 'Aristotelian and Thomistic moral conceptions', were forgotten.
[9] For other critiques see J L Barton, 'The Enforcement of Hard Bargains' (1987) 103 Law Quarterly Review 118.
[10] P Benson (ed), The Theory of Contract Law (2001) 4.
[11] L Fuller & W Perdue, 'The Reliance Interest in Contract Damages' (1936) 46 Yale Law Journal 52, 373. On the 'status' of this article see R Birmingham, 'Notes on the Reliance Interest' (1985) 60 Washington Law Review 217; Linzer, A Contracts Anthology (1989); T D Rakoff, 'Fuller And Perdue's The Reliance Interest as a Work of Legal Scholarship' [1991] Wisconsin Law Review 203, 203 (a 'pre-eminent example' of a lasting contribution to legal literature) and C Frost, 'Reconsidering the Reliance Interest' (2000) 44 Saint Louis University Law Journal 1361, 1361 ('perhaps no single article in any legal discipline has had the pervasive impact ...') cf Friedmann, 'The Performance Interest in Contract Damages' (1995) 111 Law Quarterly Review 628. It is said that one Richard Nixon would have been the co-author with Fuller had Nixon's law grades been a little better!
[12] For more detailed overviews of the work of these writers see J Wightman, Contract: A Critical Commentary (1996) ch 5, 6; R Hillman, The Richness of Contract Law (1997) ch 5. See also D Ibbetson, A Historical Introduction to the Law of Obligations (1999) ch 12, 13.
[13] '[T]o this day in England there is no indication of any decline in the vogue for treatise writing:' A W B. Simpson, above n 3, 663.
[14] J White records a similar view of Horowitz in 'Transforming History in the Postmodern Era' (1993) 91 Michigan Law Review 1315, 1318-9: 'The collective assessment of [Horowitz's The Transformation of American Law 1780-1860] was that the book was a provocative thesis in search of evidence, resting more on rhetoric and passion than on fact'.
[15] Delivered at the Ohio State University Law School in 1970.
[16] See P Atiyah, Essays on Contract (1986) Essay 2 and G Gilmore's comment that '[s]peaking descriptively, we might say that what is happening is that "contract" is being reabsorbed into the mainstream of "tort"' in The Death of Contract (1974) 87.
[17] D Campbell suggests that such 'resistance' is inevitable in 'The Undeath of Contract: A Study in the Degeneration of a Research Programme' (1992) 22 Hong Kong Law Journal 20, 21: 'The classical law of contract is merely displaying the typical features of a research programme which, in its degenerating phase, resists falsification by minimising the significance of its explanatory shortcomings.'
[18] H Collins, The Law of Contract (4th ed, 2004) 74. See, generally, ch 5.
[19] For a more extensive treatment see R Halson, 'The Offensive Limits of Promissory Estoppel' [1999] Lloyd's Maritime and Commercial Law Quarterly 256.
[20] See also G Spencer Bower & A Turner, Estoppel by Representation (1977) 7: 'To use the language of naval warfare, estoppel must always be a mine layer or a mine sweeper: it can never be a capital ship'.
[21] [1952] EWCA Civ 7; [1951] 2 KB 215.
[22] Ibid 228.
[23] The Prodos C [1981] 3 All ER 189, 191.
[24] [1952] EWCA Civ 7; [1951] 2 KB 215, 218.
[25] Ibid 220.
[26] See, generally, M Spence, Protecting Reliance (1999).
[27] This is well illustrated by two cases in which investors in a building scheme that became less attractive following a recession sought to escape their obligations because of the developer's breach of a statutory provision requiring him to furnish each investor with a prospectus. In Revell v Litwin Construction (1973) Ltd (1991) 86 DLR (4th) 169 the British Columbia Court of Appeal held that the investor was estopped from relying upon the statute even in the absence of detrimental reliance. In Welch v O'Brian Financial Corporation Ltd (1991) 86 DLR (4th) 155 the same Court held that no estoppel could be raised against the investors by the developers in view of the developer's failure to disclose facts critical to the success of the investments. What is perhaps more significant is the endorsement in both cases of the 'broad principle' laid down in the earlier case of Litwin v Pan (1986) 52 DLR (4th) 459, 468 which rejects the traditional distinctions between 'estoppel, promissory estoppel, waiver' etc. and endorses the 'underlying concept ... of unfairness or injustice' to which 'knowledge, detriment, acquiescence or encouragement' are relevant only in so far as they go to prove the requisite degree of unfairness or injustice. Indeed there are traces of a doctrine 'akin ... to promissory estoppel' as early as 1847 according to Gilbert Steel Ltd v University Construction Ltd (1973) 36 DLR (3d) 496, 506.
[28] Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406. See also the support for a limited doctrine in Je Maintiendrai v Quaglia (1980) 26 SASR 101 and Gollin & Co Ltd v Consolidated Fertilizer Sales Pty Ltd [1982] Qd R 435.
[30] Mason CJ, Wilson and Brennan JJ.
[31] The minority, Deane J (at 443) and Gauldron J (at 463-4), found that Maher had assumed that a contract had come into existence.
[32] Ibid 423-4.
[34] Cf Robertson v Minister of Pensions [1949] 1 KB 227; Deane v Attorney-General [1996] NZHC 1147; [1997] 2 NZLR 180.
[35] (1988) 164 CLR 387, 443 (Deane J), 462 (Dawson J).
[36] Ibid 475 (Toohey J), 487 (Gaudron J).
[37] Ibid 413 (Mason J), 433-4 (Deane J): '[I]t should be accepted that there is but one doctrine of estoppel.'
[38] Ibid 413. See also 429-430 (Brennan J), 454 (Dawson J), 475-6 (Toohey J), 501 (McHugh J). 39 This may have been a result of the fact that the High Court did not hear argument about the appropriate remedy.
[40] A Robertson, 'Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen' [1996] MelbULawRw 5; (1996) 20 Melbourne University Law Review 805 cf Spence, above n 26, 68-9.
[41] Section 90(1) provides that 'a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise. The remedy granted may be limited as justice requires.'
[42] See, eg, Hoffman v Red Owl Stores (1967) 133 NW 2d 267.
[43] See M Metzger & M Phillips, 'The Emergence of Promissory Estoppel as an Independent Theory of Recovery' (1983) 35 Rutgers Law Review 472; J Feinman, 'Promissory Estoppel and Judicial Method' (1984) 97 Harvard Law Review 678; D Farber & J Matheson, 'Beyond Promissory Estoppel: Contract Law and the "Invisible Handshake”’ (1985) 52 University of Chicago Law Review 903; M Becker, 'Promissory Estoppel Damages' (1987) 16 Hofstra Law Review 131; E Yorio & S Thel, 'The Promissory Basis of Section 90' (1991) 101 Yale Law Journal 101; E Holmes, 'Restatement of Promissory Estoppel' (1996) 32 Williamette Law Review 263. For a contrary view see R Hillman, 'Questioning the "New Consensus" on Promissory Estoppel: An Empirical and Theoretical Study' (1998) 98 Columbia Law Review 580 cf the analysis of the English cases in E Cooke, 'Estoppel and the Protection of Expectations' (1997) 17 Legal Studies 258.
[44] See Gilmore, above n 16.
[45] See Farber & Matheson, above n 43.
[46] Harris v Harris [1988] NZCA 220; [1989] 1 NZLR 356; Burberry Mortgage Finance and Savings Ltd v Hindsbank Holdings Ltd [1988] NZCA 220; [1989] 1 NZLR 356.
[47] McDonald v AG (unreported, HC, Invercargill, 20 June 1991).
[48] Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327, 331.
[49] J Burrows, J Finn & S Todd, Law of Contract in New Zealand (2nd ed, 2002) 138.
[50] The case was decided in 1993 but not reported until [1996] 1 NZLR 548.
[51] Ibid 549-50.
[52] This passage was relied on by Tipping J in Rattrays Wholesale v Meredyth-Young & A'Court [1996] NZHC 1837; [1997] 2 NZLR 363, 378. See also Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80, 86.
[53] Prudential Building Investment Society v Hawkins [1997] 1 NZLR 114, 121.
[54] Greymouth Petroleum Acquisition Co Ltd v Ngatoro Energy Ltd (unreported, HC, Wellington, 30 May 2003).
[55] For instance see M Spence, Protecting Reliance (1999) ch 2; E Cooke, The Modern Law of Estoppel (2000) ch 4, 8; Thompson, 'From Representation to Expectation: Estoppel as a Cause of Action' (1983) Cambridge Law Journal 257; Duthie, 'Equitable Estoppel, Unconscionability and the Enforcement of Promises' (1988) 104 Law Quarterly Review 362; Kirk, 'Confronting the Forms of Action: The Emergence of Substantive Estoppel' [1991] AdelLawRw 11; (1991) 13 Adelaide Law Review 225; Lunney, 'Towards a Unified Estoppel - The Long and Winding Road' [1992] Conveyancer 239; and the limited enthusiasm of M Halliwell, 'Estoppel: Unconscionability as a Cause of Action' (1994) 14 Legal Studies 15.
[56] For exceptions, see Parkinson, 'Equitable Estoppel: Developments after Walton's Stores v Maher' (1990) 3 Journal of Contract Law 50; R Halson, 'The Offensive Limits of Promissory Estoppel' [1999] Lloyd's Maritime and Commercial Law Quarterly 256.
[57] The predictive value of the law in this regard must not be limited to legal personnel since most disputes are settled out of court. The parties are more likely to arrive at a settlement, and therefore expend fewer resources in doing so if their legal entitlements are subject to little doubt. See Harris & Veljanovski (1983) 5 Law and Policy Quarterly 97.
[58] See B Reiter, 'Courts, Consideration and Common Sense' (1977) 27 University of Toronto Law Journal 439, 445-7.
[59] Thereby departing from the earlier statements of Oliver J in Habib Bank Ltd v Habib Bank AG [1981] 1 WLR 1265, 1285: T detect in myself ... a strong pre-deliction for the view that such distinctions [between estoppels] are both archaic and arcane' echoing similar views expressed in Taylor Fashions v Liverpool Victoria Trustees [1981] 1 All ER 897. See also the comment of Scarman LJ in Crabb v Arun DC [1976] 1 Ch 179, 193 that T do not find the helpful the distinction between promissory and proprietary estoppel.'
[60] The Indian Endurance (No. 2) Republic of India v India Steamship Co Ltd [1997] UKHL 40; [1997] 4 All ER 380, 392.
[61] Johnson v Gore Wood (A Firm) [2001] 1 All ER 481, 508. See also Millett LJ in First National Bank v Thompson [1996] Ch 231, 236: 'Spencer Bower's valiant attempt in The Law Relating to Estoppel by Representation (1923) to demonstrate that all estoppels ... are now subsumed in a single and all embracing estopppel ... and that they are all governed by the same requirements has never won acceptance. Historically unsound, it has been repudiated by academic writers and is unsupported by authority.' See also Mance LJ in Baird Textile holdings Ltd v Marks and Spencer plc [2001] EWCA Civ 274; [2002] 1 All ER 737, [83-4].
[62] A W B Simpson, 'Contract; The Twitching Corpse' (1980) 1 Oxford Journal of Legal Studies 1, 263. See also R Austen-Baker, 'Gilmore and the Strange Case of the Failure of Contract to Die After All' (2002) 13 Journal of Contract Law 1.
[63] Formerly known as the Official Referee's Court.
[64] (2004).
[65] Cf the comment of E Posner, 'Economic Analysis of Contract Law after Three Decades: Success or Failure?' [2003] YaleLawJl 21; (2003) 112 Yale Law Journal 829, 864 that '[o]ne cannot avoid being impressed by the contrast between the large and ingenious economic body of work on default rules, and the small and vapid body of work produced by philosophers' before ultimately concluding (at 880) that 'economics fails to explain contract law ... economics provides little normative guidance for reforming contract law.'
[66] The second half of the book examines particular theories addressing the main substantive doctrines of contract law. The two halves of the book are preceded by a chapter, 'What is Contract Theory?', discussing general methodological issues.
[67] Ibid 7-11.
[68] Ibid 11-13.
[69] Ibid 13-24.
[70] Ibid 24-32.
[71] Ibid 43-6, ch 3.
[72] Smith believes that 'rights-based theories' better answer the normative question than economic 'efficiency ... or any other version of utilitarian theories.' Ibid 162.
[73] That is, theories that emphasise contracts as the creation of the parties usually, but not necessarily, arising from agreements. Ibid 56.
[74] The best known 'promissory' theory is that advanced by C Fried in Contract as Promise (1981). The most recent may be that advocated by D Kimel in From Promise to Contract (2003). Whereas Fried would 'conclude that the life of contract is indeed promise' (at 37), Kimel would reply to the question 'Are contracts promises?' with a more qualified 'Yes, but ...' (at1).
[75] Smith, above n 64, 103-105.
[76] For a methodological definition see TFT Plunkett, Early English Legal Literature (1958) 19: 'The characteristic of the modern English text-book ... is its method. It begins with a definition of the subject matter, and proceeds by logical and systematic stages to cover the whole field. The result is to present the law in a strictly deductive framework, with the implication that in the beginning there were principles, and that in the end those principles were found to cover a large multitude of cases deducible from them.'
[77] A W B. Simpson, above n 3, 659-662.
[78] 'Contract: The Twitching Corpse' (1981) 1 Oxford Journal of Legal Studies 265, 269. See also, Simpson, above n 3, 677.
[79] (1994).
[80] Simpson, above n 3, 676.
[81] Ibid 677.
[82] The details are:
Book 1: F Pollock, Principles of Contractual Law at Law and in Equity (1st ed, 1876). Book 2: Treitel, The Law of Contract (11th ed, 2003), (1st ed, 1962). Book 3: Anson's Principles of the English Law of Contract (1st ed, 1879). Book 4: Anson's Law of Contract, (28th ed, 2002).
[83] The details are:
Book 5: Cheshire & Fifoot, Law of Contract (1st ed, 1945). Book 6: Burrows, Finn & Todd, Law of Contract in New Zealand (2nd ed, 2002). Book 7: Cheshire, Fifoot and Furmston's Law of Contract (14th ed, 2001). Book 8: Carter & Harland, Contract Law in Australia (4th ed, 2002).
[84] For a discussion of the earlier origins of treatise writing see Simpson, above n 3.
[85] W Anson, Principles of the English Law of Contract and of Agency in its Relation to Contract (1879).
[86] In 'Legal Theory, the Common Law Mind and the Making of the Textbook Tradition' in W Twining (ed) Legal Theory and the Common Law Mind (1986) ch 3.
[87] There is an interesting parallel here with the law of restitution. In the preface to what might claim to be the first textbook on that subject, The Law of Restitution (1992), Andrew Burrows acknowledges that this would not have been possible without the encyclopaedia of R Goff & G Jones, The Law of Restitution (3rd ed, 1986) and the theoretical work of Peter Birks, An Introduction to the Law of Restitution (revised ed, 1989).
[88] F M B Reynolds, reviewing the first edition of H Collins, The Law of Contract (1986) at (1986) 102 Law Quarterly Review 628, 630.
[89] See, eg, Hughes v Metropolitan Railway [1876] UKLawRpCP 15; (1877) 2 App Cas 439 (waiver of forfeiture clause in lease); Metal Manufacturing v Tungsten Electric [1955] 1 WLR 561 (reduction of compensation payable under license to exploit patents); Emmanuel Ayodeji Ajayi v RT Briscoe [1964] 3 All ER 556 (suspension of hire-purchase instalments); The Post Chaser [1981] 2 Lloyd's Rep 695 (CIF buyer's waiver of seller's timely notification of carrying vessel).
[90] Central London Property Trust Co v High Trees House [1946] EWHC KB 1; [1947] KB 130.
[91] [1990] 1 All ER 512; Adams & Brownsword, 'Contract, Consideration and the Critical Path' (1990) 53 Modern Law Review 536; M Chen Wishart, 'Consideration: Practical Benefit and the Emperor's New Clothes' in Beatson & Friedman (eds), Good Faith in Contract Law (1995) ch 5; R Halson, 'Sailors, Sub-Contractors and Consideration' (1990) 106 Law Quarterly Review 183; Phang, 'Consideration at the Crossroads' (1991) 107 Law Quarterly Review 21.
[92] The Court of Appeal's reformulation of consideration was arguably under-inclusive and ambiguous. It has been helpfully reformulated by Santow J in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.
[93] A-G for England and Wales v R [2002] 2 NZLR 91, 109 (this aspect of consideration was not discussed in the appeal to the Privy Council reported at [2003] UKPC 22; [2004] 2 NZLR 577) and Antons Trawling Co Ltd v Smith [2002] NZCA 331; [2003] 2 NZLR 23, [93].
[94] See R Halson, 'The Modification of Contractual Obligations' (1991) 44 Current Legal Problems 111.
[95] In England this 'bright line' distinction is supported by Re Selectmove Ltd [1995] 1 WLR 474 (Williams v Roffey inapplicable to a promise to accept less). In New Zealand a similar line of demarcation is supported by Homeguard Products v Kiwi Packaging Ltd [1981] 2 NZLR 322 (promissory estoppel does not operate to reduce a debt which is already due). However it may be difficult to support this limit in the context of an expanded doctrine of estoppel.
[96] North Ocean Shipping v Hyundai Construction Co [1979] QB 705.
[97] This was predicted by Hobhouse J in The Alev [1989] 1 Lloyd's Rep 138, 147: 'Now that there is a properly developed doctrine of ... economic duress, there is no warrant for the Court to fail to recognise the existence of some consideration'.
[98] This has been recognised since ancient times. See Bracton, De Legibus, fol. 16b-17.
[99] Astley v Reynolds (1731) 2 Str 915. The doctrine may have originated even earlier according to J Dalzell, 'Duress by Economic Pressure' (1942) 20 North Carolina Law Review 237, 241, who refers to Sumner v Ferryman (1709) 11 Mod 201, where (at 202- 3) counsel sought to rely on an even earlier case.
[100] The Siboen and the Sibotre [1976] 1 Lloyd's Rep 293 (reduction of hire payable under time charter); North Ocean Shipping v Hyundai Construction Co [1979] QB 705 (increase in outstanding instalment payments in shipbuilding contract); Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614 (substitution of indemnity for 'buy-back' agreement); Moyes and Groves Ltd v Radiation NZ Ltd [1982] NZCA 65; [1982] 1 NZLR 368 (increased price offered for goods delivered late); Atlas Express Ltd v Kafco [1989] 1 All ER 641 (increase in rates payable under land carriage contract); Walmsley v Christchurch City Council [1990] 1 NZLR 199 (tenderer of substandard contract performance pressured to do more work); Shivas v Bank of New Zealand [1989] NZHC 862; [1990] 2 NZLR 327 (bank 'extorting' security by threatening withdrawal of finance); CTN Cash and Carry v Gallagher Ltd [1993] EWCA Civ 19; [1994] 4 All ER 714 (substitution of cash for credit terms); DSND Subsea Ltd v Petroleum Geo-Services Ltd [2000] EWHC 185; [2000] BLR 530 (modification of construction contract); R v A-G England and Wales [2003] UKPC 22; [2004] 2 NZLR 577 (variation of soldier's contract to include contractual duty of confidentiality).
[101] A representative sample of this burgeoning literature would be: C Goetz & R Scott, 'Principles of Relational Contracts' (1981) 67 Virginia Law Review 1089; Goldberg, 'Toward an Expanded Theory of Contract' (1976) 10 Journal of Economic Issues 45; Goldberg, 'Relational Exchange: Economics and Complex Contracts' (1980) 23 American Behavioural Scientist 337; I MacNeil, 'Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a "Rich Classificatory Index”’ (1981) 75 Northwestern University Law Review 1018; I MacNeil, 'Relational Contract Theory: Challenges and Queries' (2000) 94 Northwestern University Law Review 877; Williamson, Markets and Hierarchies (1975); Williamson, 'Transaction Cost Economics: The Governance of Contractual relations' (1979) 22 Journal of Law and Economics 233 as well as Klein, Crawford & Alchian, 'Vertical Integration, Appropriable Rents and the Competitive Contracting Process' (1978) 21 Journal of Law and Economics 297; Klein, 'Transaction Cost Determinants of "Unfair" Contractual arrangements' (1980) American Economic Review (Papers and Proceedings) 356; Klein & Leffler, 'The Role of Market Forces in Assuring Contractual Performance' (1981) 89 Political Economy 615. Ian MacNeil's writings are helpfully collated, together with introductory essays, in D Campbell (ed) The Relational Theory of Contract (2001).
[102] For a very different attempt to integrate such wider insights see H Collins, Regulating Contracts and for a critique see J Gava & J Greene, 'Do We Need a Hybrid Law of Contract? Why Hugh Collins is Wrong and Why It Matters' (2004) 63 Cambridge Law Journal 605.
[103] See M Eisenberg, 'Relational Contracts' and E McKendrick, 'The Regulation of Long-term Contracts in English Law' both in J Beatson & D Friedmann (eds) Good Faith and Fault in Contract Law (1995) ch 11, 12, and the introductory essays by D Campbell, J M Feinman & P Vincent-Jones in D Campbell (ed), The Relational Theory of Contract (2001).
[104] See the seminal article by Coase, ‘The Nature of the Firm' (1937) 4 Economic New Series 386 and Klein, Crawford & Alchian, 'Vertical Integration, Appropriable Rents and the Competitive Contracting Process' (1978) 21 Journal of Law and Economics 297.
[105] R Halson, 'Opportunism, Economic Duress and Contractual Modifications' (1991) 107 Law Quarterly Review 649.
[106] See, in the UK, Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512.
[107] Despite the fact that the latter provides for a possibility that is not catered for under existing law, that is, the enforcement in some circumstances of 'coerced' modifications: R Halson, above n 105, 649.
[108] See, eg, Hartog v Collins & Shields [1939] 3 All ER 560 where a purchaser was precluded from accepting a seller's offer of rabbit skins at a price the purchaser knew was mistaken, or, Lloyd's Bank v Waterhouse [1993] 2 FLR 97 where an illiterate farmer was negligently induced to sign a written guarantee for his son's indebtedness to a bank - the bank was unable to accept the farmer's offer because it was based upon the mistaken belief that it only extended to secure the purchase of land and not other debts and this mistake was induced by the bank's own carelessness.
[110] Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195.
[111] Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84. Perhaps since the last major consideration in Greer v Kettle [1938] AC 156.
[112] Interfoto Picture Library v Stiletto Visual Programmes Ltd [1989] QB 433.
[113] See, eg, The Unfair Terms in Consumer Contract Regulations (1999) (UK) in giving effect to a European Directive has subjected terms in consumer contracts falling within the regulations to a test of good faith. Although the legal systems of many member states of the European Union embrace a doctrine of good faith it is not always the same one according to Lord Bingham in Director General of Fair Trading v First National Bank [2001] UKHL 52.
[114] See 'The Growing Disjunction Between Legal Education and the Legal Profession' (1992) 91 Michigan Law Review 34, 41. For a more recent response see J M Balkin & S Levinson, 'Legal Historicism and Legal Academics: The Roles of Law Professors in the Wake of Bush v Gore' (2001) 90 Georgia Law Journal 173, 176-7.
[115] See, eg, R Halson, 'Variation, Privity and Law Reform' in R Halson (ed), Exploring the Boundaries of Contract (1996) ch 5. See also E McKendrick's comment that '[w]e must retain our expository skills but at the same time increase our empirical and theoretical content' in 'Contract: Rich Past, Uncertain Future?' (1997) 50 Current Legal Problems 25, 55.
[116] J Wightman, Contract: A Critical Commentary (1996).
[117] L Mulcahy & S Wheeler (eds), Feminist Perspectives on Contract Law (2005).
[118] L Mulcahy & J Tillotson, Contract Law in Perspective (4th ed, 2004).
[119] J Adams & R Brownsword, Key Issues in Contract (1995).
[120] In a seminal law and economics article, 'Property Rules, Liability Rules and Inalienability: One View of the Cathedral' (1972) 85 Harvard Law Review 1089, Calabressi & Melamed alluded to the many French impressionist paintings of Rouen Cathedral, not one of which captured the totality and essence of the place, but each of which contributed something to the view of the whole.
[121] J A Weir (1986) Cambridge Law Journal 503, 504: '[P]erverse, inaccurate and obscure'.
[122] F M B Reynolds, (1986) 102 Law Quarterly Review 628.
[123] R Halson, Contract Law (2001).
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