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This article argues that New Zealand should pass a Contracts (Consolidation) Act. This Act could bring together the provisions from a number of different contract statutes that are currently in force, namely, the Minors’ Contracts Act 1969, the Illegal Contracts Act 1970, the Contractual Mistakes Act 1977, the Contractual Remedies Act 1979, the Contracts (Privity) Act 1982, the Frustrated Contracts Act 1944, and (possibly) the Contracts Enforcement Act 1956. Encapsulating the provisions of these statutes in one Act would make the law relating to contract more accessible, more consistent, easier to amend and keep up to date, and more responsive to further reform.
The article begins with an overview of New Zealand’s five main “contract statutes” in terms of their underlying policy, their provisions, and their operation in the eyes of judges and legal commentators. It also briefly discusses some other contract statutes that are, for our purposes, of less importance. It then goes on to examine the policy and jurisprudence behind consolidation Acts and law reform in general. Particular emphasis is placed on the Law Commission’s 1993 Contract Statutes Review, how the reforms recommended in that review have languished, and why this delay is unfortunate. The crux of the article is the final section, which evaluates the reasons supporting a Contracts (Consolidation) Act. The article concludes with an affirmation of the desirability of reform in this area.
Between 1969 and 1982, New Zealand enacted five pieces of legislation which are often collectively referred to as “the contract statutes”.[1] These statutes - the Minors’ Contracts Act 1969, the Illegal Contracts Act 1970, the Contractual Mistakes Act 1977, the Contractual Remedies Act 1979, and the Contracts (Privity) Act 1982 – all share the “distinctive feature” of conferring broad discretionary powers on the courts to award relief as is thought just in the circumstances of the case.[2] Additionally, these statutes are all relatively short: the longest is only 19 sections. The latter four also share the common feature of having been designed by the Contracts and Commercial Law Reform Committee, a major player in New Zealand’s commercial law reform from the 1960s to the 1980s.[3] Together, these statutes have been described as having “dramatically changed the face of the law of contract in New Zealand”.[4] Before this point can be properly evaluated, however, it is necessary to consider each of these statutes – and the policy behind them – in turn. The discussion in this section also provides background to the provisions that make up the primary subject-matter of the proposed Contracts (Consolidation) Act.
Before the passage of this Act, the law relating to contracts made by minors was a complicated mix of common law and statute. There were many different rules for different kinds of contracts, and the rules were difficult to apply and to use. Following an examination of the law by members of the New Zealand Law Society and the Department of Justice, a draft bill – further scrutinised by the Contracts and Commercial Law Reform Committee – was introduced into Parliament and passed as the Minors’ Contracts Act 1969.[5]
The Act treats married minors as though they are of full adult capacity.[6] For minors 18 years or older, it gives the courts considerable discretion both in deciding whether or not to enforce certain contracts, and in deciding on appropriate remedies. The Act allows the Court to grant “such order as to compensation or restitution of property” as the Court thinks just.[7] For minors below the age of 18 years, the Act explicitly states that the Court may enquire into the “fairness and reasonableness” of contracts,[8] and is given wide scope in making orders. In exercising its discretion, the Court must consider a number of factors, including the circumstances in which the contract was formed,[9] the subject matter,[10] and “[a]ll other relevant circumstances”.[11] Section 7 gives the Court further powers to award “such relief by way of compensation or restitution of property as the Court in its discretion thinks just”.
The leading case on the Act is Morrow & Benjamin Ltd v Whittington,[12] which, while illustrating some difficulties in tying the sections together, has been applauded as providing the “correct” interpretation of the Act.[13] Overall, the Minors’ Contracts Act has been the subject of very little criticism, probably because it is easy to accept that minors’ contracts should be subject to different rules than contracts made by adults. As one of the first commentaries on the Act observed: “[w]hatever its drawbacks it is a distinct advance on the pre-existing law, and succeeds in avoiding its complexities and injustices”.[14] In historical terms, the Act is significant because it heralds the beginning of an important period of reform in New Zealand’s contract law. In giving the courts such broad discretionary powers of relief, this Act and the four that followed it gave force to substantial changes in the nature of contract law in New Zealand.
In 1966 the Minister of Justice gave the Contracts and Commercial Law Reform Committee the task of examining the law relating to illegal contracts with a view towards “restatement”, which the Committee members understood as allowing ameliorative change.[15] There was, the Committee felt, almost universal agreement that the law in this area could be improved, and a draft bill was set out for consideration.[16] The Committee had this to say:
Any general reform should, in our view, have the effect of making such contracts as are illegal, of no effect, so that no rights will pass under them and the position of the parties will be the same as if the illegal contract had never been entered into (clause 6 of the draft statute). We would qualify this rule, however, by giving to the court a discretion to order that, notwithstanding the illegality, the contract be enforced in whole or in part. We would make this exception because we recognise that there may be circumstances where it would be impossible or unjust that the parties should be restored to their original position. We therefore make the recommendation set out in clause 7 of the attached draft statute.
The only argument against such a proposal that we feel the need to mention is this. It could be said that any such discretion would (because of the impossibility of foreseeing all possible circumstances) necessarily have to be largely unfettered and that conferring such boundless discretions on the courts is undesirable as a source of uncertainty and an abdication by the legislature of its proper functions in favour of the courts. We acknowledge the force of this contention but consider that to confer on the courts such powers as we propose is very much a lesser evil than to leave the law as it would otherwise stand and we have moreover provided some curbs on the exercise by the courts of the proposed powers.[17]
We have in these two paragraphs a useful indication of the reach of the Act. It was to be applicable to a wide range of contracts, including those illegal only in part, and was to confer a broad discretion on the courts to grant “such relief by way of restitution, compensation, variation of the contract, validation of the contract in whole or part or for any particular purpose, or otherwise howsoever as the Court in its discretion thinks just”.[18]
We also have recognition of the problems inherent in the granting of such discretion: that it could lead to uncertainty, and could upset the balance between the courts and the legislature. As the extract shows, however, the Committee did not see this as a major problem. It thought that giving the courts broad discretionary powers (however they might be exercised) was preferable to leaving the law as it was.
Commentary on the Act has been mixed. Some have described the Committee’s report as overly short, and the definition of an illegal contract in section 3 of the Act as “evasive”.[19] Others have defended the Act as “deliberately minimalist”, designed to leave such matters as the interpretation of section 3 to “judicial policy”.[20] Certainly section 7, which seems to grant the courts huge discretion, has been treated in such a manner that clear principles of its application can be discerned.[21] At any rate, it is clear that the Contracts and Commercial Law Reform Committee of the time did not see the criticisms of the Act as prohibitive of further reforms of this kind.
Some years after the report on illegal contracts, the Committee was given the task of examining the effect of mistakes on contracts. Again, the resulting report reviewed the law in this area, expressed certain criticisms, and proposed a draft bill. The report argued that the “single thread” running through the varying common law doctrines of mistake was that the law should:
strike a balance between avoiding the unfairness of holding a party to an inappropriate transaction which was not fully assented to, and protecting other parties to the contract (and those claiming under them) who have a legitimate interest in seeing the contract performed.[22]
The Committee considered it dangerous to give the courts too much discretion, particularly in regard to jurisdiction, as this could broaden the law of mistake to the extent that it could overwhelm the general law of contract. For this reason, the Committee observed, the term “mistake” deserved careful definition. This appears a very different approach to that taken for illegal contracts, though the ultimate result was perhaps just as evasive.[23]
Of course, the Committee did take things somewhat further. “Mistake” was identified to mean one of three things: a mistake made by one party and known to the other, a mistake made by both parties, or a mistake in respect of a particular matter on which one party had one belief and the other party had another belief.[24] It was thought desirable to allow the courts “a wide discretion to make such order as best meets the needs of that particular case”,[25] and the statute follows this directive. Section 7(3) gives the Court the broad power “to make such order as it thinks just”. The situations in which the courts may grant relief are also broadly defined.[26]
Early on, the Act was described as “well-intentioned but ill-executed”.[27] Overall, the Act attracted little attention, and case law was slow to develop: in the five years following its introduction the Act was the subject of only one reported case.[28] This was all to change. Conlon v Ozolins,[29] for example, was seen by some as an abandonment of the objective theory of contract formation,[30] with the Court of Appeal, swayed by the personal circumstances of the parties, using its discretion to give considerable weight to subjective factors.[31] One scholar went so far as to say that “the potential of this Act for the destruction of the law of contract as generally understood is unsurpassed”.[32] Matters settled down somewhat with cases like Paulger v Butland Industries Ltd,[33] which expressly moved away from Conlon v Ozolins, though the Act continues to invite academic and judicial debate.[34]
The Contractual Mistakes Act 1977 was closely followed by the Contractual Remedies Act 1979. However, the latter had a far longer gestation period. The Contracts and Commercial Law Reform Committee first reported on misrepresentation and breach of contract in 1967. Over 10 years later, in January 1978, the Committee reissued its report with a draft Contractual Remedies Bill.
The 1967 report recognised the need, based on common law, to interpret contractual intentions objectively.[35] However, many of the rules relating to contractual remedies were thought to be “too complex and correspondingly difficult to apply in practice”.[36] The English Misrepresentation Act 1967 was thought to be inadequate as a model on the basis that it allowed too much judicial discretion: “[t]here should be known rules so that the parties may be encouraged and enabled to settle their disputes out of court”.[37] There was some debate among the writers of the report over whether courts should be allowed to look into pre-contractual negotiations.
The 1978 Committee summarised the 1967 findings as being:
(a) that a party to a contract who is induced to enter into it by the misrepresentation (whether innocent or fraudulent) of another party should be entitled to damages from such other party as if the representation had been a term of the contract;
(b) that the law applicable in situations of repudiation or breach of contract should be reformed and codified by statute.
This summary pointedly ignores the broad judicial discretion granted by the proposed Bill. The Court was given the power both to look into pre-contractual negotiations and to have regard to, among other matters, “all the circumstances of the case, including the subject-matter and value of the transaction, [and] the respective bargaining strengths of the parties”.[38] In addition, the courts were given the power to make an order for relief “subject to such terms and conditions as the Court thinks fit”, and taking into account a number of considerations, including “[s]uch other matters as it thinks proper”.[39]
In final form, the Contractual Remedies Act has been described as “the most important and far reaching” of the contract statutes proposed by the Committee.[40] Under section 9, the Court can make an order for relief when a contract is cancelled by any party.[41] An order of this kind can be for the transfer of property subject to the contract,[42] payment of “such sum as the Court thinks just”,[43] or directing a party to do or refrain from doing any act or thing, “as the Court thinks just”.[44] Section 9 also specified certain matters that the Court should take into account in making such an order, including the terms of the contract,[45] expenditure incurred,[46] and, notably, “[s]uch other matters as the court thinks fit”.[47]
The Act clearly grants considerable discretion to the Courts. It did not take long for contract scholars to express disquiet. Following the decision in Gallagher v Young, where Greig J remarked on the “wide discretion under s 9 to give justice as between the parties”,[48] one commentator described section 9 as “a super-remedy – as long as the [particular] case is pleaded under s. 9, established rules as to damages go out of the window, and the criterion is what the court thinks just”.[49] Another scholar thought that the discretion allowed under section 9 brought “unnecessary and undesirable uncertainty to important areas of the law of contract”.[50] However, while the proper application of the section remains unclear – at least to some[51] - the emergence of a substantial body of case law on the Act has made it easier for lawyers to work with this legislation.[52]
The report on this topic, presented to the Minister of Justice in 1981, “review[ed] the legal principle that only the parties to a contract ... can have rights or obligations under that contract”.[53] Aside from the special importance of consideration in contract law, the Committee saw the doctrine of privity as having “a firm basis in legal policy, resting on the proposition that, generally speaking, the parties to a contract have control over its effect, operation and performance”.[54] Yet the common law, with some exceptions, did not really provide for this.[55] The Committee was adamant that “[i]f it is the law .. that where by contract A promises B to pay C, A cannot be compelled, at the suit of B or C or both, to make payment, then the law should be changed immediately”.[56] Preferring broad policy-oriented reform over incremental development, the Committee proposed a Contracts (Privity) Act to allow for situations like this. Legislation was passed in 1982.
Like the other statutes already discussed, the Contracts (Privity) Act 1982 confers “broad discretionary powers to award relief as the court thinks just” within the space of a few short sections.[57] Section 4 of the Act establishes that third parties may seek to enforce a contract which confers benefits on them, and section 7 allows the Court, in certain circumstances, to make an order authorising the variation or discharge of this kind of agreement “if it is just and practicable to do so” and “on such terms and conditions as the Court thinks fit”.[58] Similar discretion is also given in relation to compensation.[59] This Act has attracted less attention than some of the other statutes mentioned. Perhaps this is because it is “more closely drawn than its predecessors”.[60] In its first years of operation, it was considered in relatively few cases, and it has been suggested that no serious problems have arisen since.[61]
This section began with an overview of what the five statutes discussed have in common. Recognition should also be given to their differences. Each was designed to resolve difficulties in the common law in a particular area of contract law, whether that be illegality, mistake, remedies, or otherwise. These areas are not always discrete: in the complicated world of commercial dealings, they can overlap and intermingle. Often, the “legal” nature of a contractual problem is superimposed by the courts on a factual situation long after the formation or performance of the agreement in question. The Contracts and Commercial Law Reform Committee certainly never intended a comprehensive overhaul of the entire law of contract. Rather, it took on the reform of particular areas of contract law in piecemeal fashion.
Yet, while the many and varying circumstances which can give rise to contractual disputes may be complex, the statutes discussed in this section have approached these problems of contract law from a related perspective. While the Acts are all different, the policies behind them are similar. The development of these five contract statutes, all with an emphasis on judicial discretion to reach a “just and fair” result for the parties, was largely a response to three main problems with the common law of contract. These were that the law was often complex and highly technical; it did not always (or perhaps even often) achieve a just result; and certainty – “said to be so important in contract law” – was difficult to attain.[62] It is clear from the reports of the Contract and Commercial Law Reform Committee that its members often did not envisage major changes to the existing law and wished to restrict the discretion that the statutes would grant. However, it should be equally clear that this wish has not always come true, and that the statutes have often been given expansive interpretations in the courts. This has often led some jurists to comment disparagingly on the statutes.
There have been two main lines of criticism. The first is that the statutes give individual judges too much discretion. Considering the Illegal Contracts Act, the Contractual Mistakes Act and the Contractual Remedies Act as a group, one scholar remarked that:
In all three statutes the prevailing premise is that the remedies of the parties may be determined (at least in certain circumstances) not by clearly defined criteria but by the individual judge’s measure of justice.[63]
To some, certain provisions in these statutes raise images of the ghost of Selden, with the question of what is “just” being such a subjective concept that decisions will be made according to the length of the Chancellor’s (or judge’s) foot.[64] However, while concerns have been raised that giving effect to the discretion demanded by these Acts is something for which judges have no training or special abilities, it has also been emphasised that much of the common law depends on judicial discretion anyway.[65]
The second key line of criticism hinges less on the role of judges in exercising discretion than on the statutes themselves. One scholar wrote that “[t]he great common law subject, moulded and developed by the judges over several centuries, is gradually being turned into a statutory edifice”.[66] Another wrote that “[t]he common law is not very well equipped to deal with codes”.[67] To some, it seems, the common law has a kind of purity that statute law cannot match.
But while some provisions of these contract statutes aimed only to codify existing legal principles, full codification was never intended. It was said that this “simply would not have worked”.[68] While the Minors’ Contracts Act and the Contractual Mistakes Act contain express provision that they are to be codes,[69] the other statutes contain no similar provision.[70] All list exceptions or “savings”: areas of law to which the statutes do not apply. The failure to provide proper definitions of the terms in a number of provisions – section 3 of the Illegal Contracts Act, for example[71] - means that recourse to the common law is often necessary. Debate about the merits and pitfalls of codification continues.[72]
Other criticism lies somewhere in between these two lines of discourse. In stark response to a claim by the Contracts and Commercial Law Reform Committee that the statutes were not intended to alter the common law’s general theory of contract, one commentator has written that these five statutes have “dramatically altered the law of contractual obligation in New Zealand”.[73] New Zealand jurists, the writer continues, have been given the “daunting task” of assembling a new theory of contractual obligation “which will not only explain what role should be accorded to contractual autonomy under the statutory regime but which will also explain why it is appropriate for courts to interfere with the parties’ own arrangements”.[74]
This statement was made in the mid-1980s. Since then, things seem to have settled down somewhat. Lawyers, academics and judges have all become more used to dealing with the statutes, and case law on their provisions has helped to clarify them in a number of respects. However, this does not mean that their operation has been entirely unproblematic. Indeed, concern over many aspects of these statutes among members of the legal community led to a review of them in the early 1990s. But this was not done by the Contracts and Commercial Law Reform Committee. By this time, the part-time committees had been replaced by the (full-time) New Zealand Law Commission. Before discussing this body, however, it is necessary to mention the “other” contract statutes.
The five statutes already considered are not New Zealand’s only statutes relating to contract law. The Frustrated Contracts Act 1944 and the Contracts Enforcement Act 1956 also cover general matters of the law of contract. These statutes, however, belong to a different era. Following one account of New Zealand’s legal history, the years since 1960 can be seen as part of a “new wave of individuality and reform”, with many areas of law undergoing “far-reaching change”.[75] The five statutes examined above are clearly part of this “new wave”. From about 1914 to 1960, however, “there was relatively little in the way of law reform”, and what there was, was largely unoriginal.[76]
The Frustrated Contracts Act 1944 is a striking example of this: it is “virtually identical” to the English Law Reform (Frustrated Contracts) Act 1943.[77] There have been few reported cases on the Act,[78] and it has been largely ignored by legal commentators. It has been suggested that, given that the Act does not work satisfactorily in all cases, changes allowing judicial discretion in the granting of relief would be beneficial.[79] Though the archaic language of the Act remains a problem, reform of this nature would bring the Act very much in line with the statutes already mentioned.
Little needs to be said about the Contracts Enforcement Act 1956, enacted principally in order to reform certain provisions of the Statute of Frauds 1677. In essence, the Act provides that certain contracts must be in, or evidenced by, writing – most prominently, contracts for the sale of land.[80] A paper by the New Zealand Law Commission has argued that the requirements of the Act are unjust (because the statutory requirements may give a technical defence to an otherwise meritorious claim), inconsistent (because many other contracts need not be evidenced by writing), overly complex, and a distraction from more substantive legal questions. As such, the Law Commission has recommended the repeal of the Act.[81] This has not yet occurred.
This part of the article has examined a number of New Zealand statutes which regulate the general law of contract. It has considered the shared background of a number of them, and the policy behind the reforms that the statutes were intended to effect. It has also drawn attention to a number of important provisions and similar themes in the statutes, and the thoughts of both the courts and legal commentators on the operation of the Acts. The next section of this article steps aside from these particular statutes to look at the broader issue of consolidation Acts in general, and their role in the process of law reform.
A consolidation Act is one which “comprehend[s] in one statute the provisions on a certain subject contained in a number of statutes, those former statutes being repealed”.[82] In England, there is something of a presumption that consolidation Acts (or consolidating statutes, as they are sometimes called) do not change the law, making only “minor amendments and improvements, if any”.[83] However, this presumption is rebuttable, and is at least partly due to the fact that the English Parliament has historically had special procedures for the enactment of consolidation Acts.[84] In New Zealand, consolidation Acts are passed in the same way as other statutes, and no such presumption can be said to exist. Many so-called consolidation Acts have made substantial amendments to the law: “in New Zealand’s history there has been very little pure consolidation”.[85]
Consolidation can be seen as “part of the process of keeping law up-to-date and reasonably accessible”.[86] The UK Law Commission has stated that consolidation “makes the law more comprehensible, both to those who apply it and those affected by it”.[87] There are clearly considerable benefits to this. However, consolidation Acts can also give rise to many problems. There may be inconsistencies between (or even within) statutes, and there can be difficulties in bringing together statutes from different times and different philosophies. In particular, there may be variations in expression and use of language, and inaccuracies in cross-referencing may also arise.[88]
Another difficulty is in the extent to which earlier Acts remain pertinent. In Miller v Lamb, Stout J remarked that consolidation “would be a farcical proceeding if laymen or lawyers had to try to discover the law by perusing repealed statutes”.[89] Being forced to look back in this way would certainly seem to negate the gains in accessibility and comprehensibility in the law which consolidation is supposed to create. In Farrell v Alexander,[90] the House of Lords stated that there should be a strong policy against looking at antecedent statutes. But this approach is difficult to reconcile with the purposive approach to statutory interpretation, which involves looking into the mischief that the statute was originally designed to solve. It can also create problems of continuity: the law is hardly more comprehensible if case law interpreting the earlier Act is abandoned. In any case, the tide of authority in New Zealand generally goes against Miller, and favours looking into legislative history where appropriate.[91]
It should be clear by now that consolidation Acts in New Zealand often involve an element of law reform. A brief overview of the role of law reform organisations in New Zealand is thus apposite. The work of the Contracts and Commercial Law Reform Committee has already been mentioned. This was one of a number of part-time committees which, from 1966 to 1986, took on the task of examining options for reform in a particular area of law. From 1966, there were separate committees for contract and commercial law, property law and equity, public and administrative law, and torts and general law. Other committees for criminal law and evidence followed later.
In 1986, these part-time law reform committees were disbanded and the New Zealand Law Commission established in their place. The Law Commission differed from the committees in being staffed primarily by full-time members, and in being able to deal with all matters of law reform rather than only one particular area of law. The Minister responsible for the introduction of the Law Commission suggested that the work of the separate committees “did not add up to anything like the whole body of law”, and that many matters were dealt with “too superficially or far too slowly”.[92] Far broader law reform powers were hence in order. In the words of its first President, the subject matter of the Law Commission is “the entire field of the law of New Zealand”.[93] Since its establishment, the Law Commission has proved itself far more ambitious in law reform than the part-time committees ever were. It has undertaken law reform projects in a vast range of legal areas, from the interpretation of legislation to company law, evidence, and the structure of the courts. As we shall see, however, while some of its recommendations have been passed into law, others have, at times, been left to languish.
For our purposes, the most important law reform project the Law Commission undertook was a review of New Zealand’s main contract statutes in the early 1990s.[94] Both practising lawyers and academics were involved, and the original plan was to look at the five contract statutes discussed above: the Minors’ Contracts Act, the Illegal Contracts Act, the Contractual Mistakes Act, the Contractual Remedies Act, and the Contracts (Privity) Act. All but the first of these, as noted earlier, derived from the work of the Contracts and Commercial Law Reform Committee, and all of them placed considerable emphasis on judicial discretion in both deciding cases and granting remedies. Papers on other topics – such as the Frustrated Contracts Act, the “mistaken payments” sections (94A and 94B) of the Judicature Act 1908, and international contracts – were added later. The relationship between the Contractual Remedies Act and the Sale of Goods Act 1908 was also examined. The Commission commented that:
Overall, the general consensus was that little substantive change to the statutes would be helpful. In large part, this opinion was founded on the view that the statutes had worked well and that judicial interpretation of the statutes had clarified many issues in a way consistent with the general philosophy of the legislation. ... the Commission takes the view that no fundamental changes are called for at this time. There are, however, a number of less fundamental, but nevertheless significant, matters where legislation could usefully be proposed. ... The legislation which will be proposed in this report involves fine-tuning, designed to reduce uncertainties and eliminate minor drafting infelicities and anomalies.[95]
Material amendments to the Illegal Contracts Act, the Contractual Remedies Act, and the Contracts (Privity) Act were recommended by the Law Commission. In addition, general alterations to the statutes in terms of definitions, provisions concerning international jurisdiction, and Disputes Tribunal jurisdiction were proposed. A draft Contract Statutes Amendment Act was the result.
The heft of the Law Commission’s report (it runs to over 350 pages) is a testament to the careful analysis that went into its consideration of New Zealand’s statutory contract law regime. However, after the publication of the report in 1993, the proposals went largely unheeded for a number of years. It was not until late 2001 that a statute giving force to the Law Commission’s recommendation was introduced into Parliament.
The Statutes Amendment Bill (No 2) 2001 was introduced to Parliament in December 2001 as an omnibus bill seeking to amend a large number of different statutes at once.[96] The Government Administration Select Committee reported back on the Bill in September 2002, and the Bill came into force in December of that year. The Bill touched on many areas of law, including New Zealand’s contract statutes. Changes to some of the statutes already discussed were made through the Frustrated Contracts Amendment Act 2002, the Illegal Contracts Amendment Act 2002, the Contractual Mistakes Amendment Act 2002, the Contractual Remedies Amendment Act 2002, and the Contracts (Privity) Amendment Act 2002.
In some respects, these amendment Acts give force to the Law Commission’s 1993 proposals. The definition of “court” in each statute is expanded to include reference to arbitral tribunals. Other minor alterations follow from this: in the Contractual Mistakes Act, for example, there is no need for a separate definition of “arbitrators”. Recent changes in the jurisdiction of the Disputes Tribunals and District Courts also led to the repeal of certain sections, and new provisions relating to international jurisdiction have been added.
Some more specific changes also follow the Law Commission’s recommendations. The word “stipulation” has been replaced with the word “term” in section 7 of the Contractual Remedies Act. Section 8(1)(b) of the Contractual Remedies Act has also been changed to allow another exception to the general rules relating to cancellation that are in the Act. Finally, section 7(3) of the Illegal Contracts Act has been altered to allow the courts to consider certain factors not only in determining whether to grant relief, but also in determining the nature and extent of the relief to be granted.
However, not all of the Law Commission’s 1993 proposals were given effect. Clause 6 of the Law Commission’s Bill suggested a number of amendments to the Sale of Goods Act 1908. Section 13 was to be repealed, and new sections 39A and 55A were to be added. Other changes, including replacing the word “condition” with the word “term” in a number of places, were also proposed.
These proposals emerged because there are some difficulties harmonising the Sale of Goods Act with the Contractual Remedies Act. Section 15(d) of the Contractual Remedies Act provides that, with a few exceptions, nothing in that Act shall affect the Sale of Goods Act. The Law Commission noted that this would mean three different codes governing the cancellation of contracts:
(a) the Contractual Remedies Act code for contracts other than sale of goods,
(b) the Consumer Guarantees code for consumer sales,
(c) the pre-Contractual Remedies Act for sales of goods other than consumer sales.[97]
This was described as “obviously unsatisfactory”,[98] and it certainly seems rather awkward, especially when it is remembered that section 60(2) of the Sale of Goods Act preserves common law rules relating to the sale of goods.[99] The inapplicability of most of the Contractual Remedies Act to contracts for the sale of goods creates “an unfortunate disharmony between the general law of contract and the law on one of the most important categories of contract”.[100]
The Statutes Amendment Bill and its associated amendment Acts, then, make a good number of cosmetic changes and a few material ones. However, some major proposals put forward by the Law Commission, such as the advised amendments to the Sale of Goods Act, were ignored. This means that the contract statutes will still not operate as smoothly as they could. It is of course entirely possible that this issue will be revisited at some stage, particularly since the disharmony continues to attract attention.[101] Given the passage of time between the Law Commission’s proposals and the emergence of the amendment Acts, however, it is conceivable that this issue will remain simmering for some time.
It should be clear by now that law reform is a tricky business. There are many twists and turns to the process, and it often does not follow a pre-ordained plan. But this does not mean that systematic reform of the law is something to be dismissed. Endeavouring to improve the operation of the law is always an important task, and it is with this in mind that this paper turns towards its crux: the advocacy of a Contracts (Consolidation) Act for New Zealand. Keeping in mind that New Zealanders “tend to exhibit an innocent and misplaced faith in the efficacy of legislation”, it is appropriate to keep in mind “[t]he basic question” of “why is this law necessary?”.[102]
The contract statutes discussed in Part 1 of this article all relate to contracts in general. As one scholar has put it, “[i]n English and New Zealand law (unlike some other systems) we start from the position that in principle the law of contract is the same for all contracts”.[103] The words “in principle” are important here, because in practical terms there are many different statutory schemes regulating the formation and operation of contracts. The Sale of Goods Act is one example, applying only to sales of goods in commercial contexts. Similarly, the Land Transfer Act 1952 regulates specific aspects of contracts in relation to land, and the Employment Relations Act 2000 provides rules solely for contracts of employment. These are just a few examples among many. What they very quickly illustrate, however, is that trying to consolidate all legislation that encroaches upon the law of contract would be a near-impossible task. As already noted, consolidation should improve the accessibility of the law. Over-consolidation would make this notion a nonsense.
As such, it is essential that the Contracts (Consolidation) Act proposed in this paper remain accessible. The easiest and soundest way to do this is to restrict its scope to legislation on the general principles of contract law. The Frustrated Contracts Act, the Contracts Enforcement Act,[104] the Minors’ Contracts Act, the Illegal Contracts Act, the Contractual Mistakes Act, the Contractual Remedies Act, and the Contracts (Privity) Act all fall into this category. Each of them sets out principles that cover the law of contract generally; none is restricted to a particular area of contract law. They are also all relatively short. They could be collected (or consolidated) together in a way that would make the provisions within them more accessible, easier to understand, easier to amend and keep up to date, and easier to compare and use than they are at present.
Consolidation also provides a good opportunity to analyse the extent to which the current contract statutes are consistent with each other. It has been stated that:
Effective consolidation should involve reconciling provisions which do not fit together, harmonising the style of provisions from different statutes, and removing anomalies.[105]
Overall, New Zealand’s main contract statutes bear a striking degree of similarity. As was pointed out earlier, the Illegal Contracts Act, the Contractual Mistakes Act, the Contractual Remedies Act, and the Contracts (Privity) Act were all designed by the Contracts and Commercial Law Reform Committee. In addition, they all (along with the Minors’ Contracts Act) share the “distinctive” features of being short in length and of conferring broad discretionary powers on the courts.[106] There is thus a great degree of commonality in the lineage of the statutes, helping to avoid the problem that different Acts may have different underlying philosophies.[107] Here, the underlying philosophies of the Act are largely harmonious.
The Statutes Amendment Bill also implicitly recognised a high degree of consistency in the mechanics of the statutes. The definitions of “court” in each statute, the non-applicability of the statutes to contracts governed by foreign law, and the removal of provisions on the jurisdiction of the District Courts and Disputes Tribunals all illustrate this consistency. The Law Commission’s review did not find any glaring problems of inconsistency between the main statutes. As noted above, the Frustrated Contracts Act – which belongs to a different era to most of the other statutes – could be brought into line with the other statutes by giving the courts broader discretionary powers of relief.[108] A move like this would help consistency. And while the Contracts Enforcement Act remains somewhat anomalous, its provisions could either be repealed in line with Law Commission recommendations, or slotted into a Contracts (Consolidation) Act with relative ease.
It was noted earlier that consolidation helps make the law more accessible. It is in the interests of a just and democratic society that laws be as accessible as they can,[109] and, indeed, one of the “principal functions” of the Law Commission is to advise the Minister of Justice on ways in which the law of New Zealand can be made “as understandable and accessible as is possible”.[110] A Contracts (Consolidation) Act would certainly improve the accessibility of New Zealand’s main statutory provisions in the field of contract law. Rather than having to look at six or seven different statutes, scattered around many different volumes of legislation, both lawyers and laypeople would only need to go to one source. For some users of legal material, this would be of considerable help. Of course, the case law interpreting the provisions of such an Act would remain scattered. But the accessibility of the law in this area would be improved.[111]
Describing the law would also be easier. Rather than talking of “section 7 of the Illegal Contracts Act, section 7(3) of the Contractual Mistakes Act, and section 9(1) of the Contractual Remedies Act” as all giving discretionary powers of relief to judges,[112] commentators discussing the Contracts (Consolidation) Act would have a much more uniform legal tool at their disposal. If the discretionary sections were properly grouped together (keeping in mind the difficulties raised in note 107), then remedial options available in different contractual disputes would be clearer and easier to understand. Ease of accessibility can thus help simplify commentary and description of the law, again improving its usefulness for both lawyers and laypeople.
Another general point in favour of consolidation is that it can help make the law easier to amend, and keep up to date. The Law Commission’s proposals for change to the contract statutes illustrate that they cannot be expected to remain relevant all on their own: regular amendments will often be necessary. Consolidation would almost certainly make this amendment process easier. Instead of five different amendment Acts to change the definition of “court” in five different statutes, a well designed Contracts (Consolidation) Act would only require one amending clause. This point is pertinent to further reform as well, especially since the amendment Acts did not give force to all of the Law Commission’s recommendations. Of course, the amendment Acts arising out of the Statutes Amendment Bill show that the contract statutes can be kept up to date without the kind of consolidation advocated in this article. But this does not take anything away from the fact that amending one Act would be a much simpler task than amending five or more different statutes.
While on the topic of amendment, some specific points concerning law reform deserve to be noted. In particular, the relationship between section 9 of the Contractual Remedies Act and the common law is in need of some clarification. Section 9(2)(b) gives judges the discretion to award “such sum as the Court thinks just”. There has been some debate over whether this provision allows the court to award sums equivalent to the damages that would normally be available at common law.[113] The Contracts and Commercial Law Reform Committee did not, it appears, intend that section 9 replace standard awards of damages, but rather that it work as a device to allow court orders for immediate transfers of funds while damages considerations were pending.[114] However, a number of cases indicate that the courts have been unwilling for section 9 to be “read down”: the judiciary has preferred a more expansive interpretation.
Newmans Tours Ltd v Ranier Investments Ltd[115] is one example. In the High Court, Fisher J interpreted the section 9 quest for a “just” solution as encapsulating common law damages, though the principles underlying the common law were not, he felt, to be ignored. The Court of Appeal in both Newmans[116] and Thomson v Rankin[117] took a similarly expansive view. The Court observed in the former that the ambit of section 9 could extend beyond traditional common law damages, and commented in the latter that section 9 could be a valuable instrument in achieving justice without being reined in by common law principles.[118]
Decisions like these show that concerns that section 9 would operate as a “super-remedy”[119] were not entirely unfounded. As one commentator has noted:
From a relief provision designed to be of modest scope, the courts have fashioned a completely new discretionary remedy for enforcement, occupying the whole ground previously covered only by the common law of damages, but untrammelled by the constraints of the common law.[120]
This particular issue is not necessarily one for the legislature to solve – the granting of such wide discretion to the courts in the first place indicates that some abrogation of control over matters in this area was intended by the legislature – but it remains a point of some concern. Careful redrafting of section 9 could make the section more restrictive, though the counterweight to this would naturally be some loss to discretionary justice in individual cases. This article is not the proper forum for a full analysis of the merits of such a change. It should suffice to say that an issue like this highlights that there is scope for a Contracts (Consolidation) Act to consolidate and amend aspects of the law of contract.
A whole generation of New Zealand lawyers has now grown up with the New Zealand contract statutes. They have become an important part of the commercial landscape, and, as shown in part one of this article, a rich and substantial jurisprudence has developed around them.
This article has argued that the provisions of these statutes should be collected together into a Contracts (Consolidation) Act. There are considerable benefits in consolidation. The proposed Act would make the law in this area more accessible, more consistent, and easier to amend. It could also provide an impetus for reform in certain areas.
The notion of a Contracts (Consolidation) Act is a simple idea, but one that deserves serious consideration by the Law Commission and the Government. Should they do so, the next generation of lawyers, jurists and judges would be grateful, for reasons both pragmatic and principled.
[*] Barrister and solicitor, Auckland.
[1] See eg Dawson, “The New Zealand Contract Statutes” [1985] LMCLQ 42; and McLauchlan, “Contract and Commercial Law Reform in New Zealand” (1984) 11 NZULR 36.
[2] Dawson, ibid, at 42. This particular feature will be discussed in more depth below.
[3] See Coote, “The Contracts and Commercial Law Reform Committee and the Contract Statutes” (1988) 13 NZULR 160.
[4] McLauchlan, supra note 1, at 39-40.
[5] See Todd, “Minors’ Contracts Act 1969” in Contracts Statutes Review, NZLC R25, 229, 229-231.
[6] Section 4, Minors’ Contracts Act 1969. In New Zealand, the age of majority is 20 years.
[7] Section 5(2)(b).
[8] Section 6(2).
[9] Section 6(3)(a)
[10] Section 6(3)(b).
[11] Section 6(3)(e).
[12] [1989] NZHC 479; [1989] 3 NZLR 122.
[13] Todd, supra note 5, at 235.
[14] Burrows, “The Minors’ Contracts Act 1969 (NZ)” (1973) 47 ALJ 657, 657.
[15] Illegal Contracts: Report of the Contracts and Commercial Law Reform Committee (1969) 1.
[16] Ibid, 1-2, 13-18.
[17] Ibid, 9-10.
[18] Section 7, Illegal Contracts Act 1970.
[19] Furmston, “The Illegal Contracts Act 1970 – An English View” (1972) 5 NZULR 151, 152. See also McLauchlan, supra note 1, at 41. The section reads, in part, “for the purposes of this Act the term ‘illegal contract’ means any contract that is illegal at law or in equity”.
[20] Coote, “The Illegal Contracts Act 1970” in Contract Statutes Review, NZLC R25, 173, 174.
[21] See the analysis of Finn, “Contracts contrary to law or a statute and the Illegal Contracts Act 1970” in Burrows, J, Finn, J and Todd, S Law of Contract in New Zealand (2nd ed, 2002) 403, 448.
[22] Report on the Effect of Mistakes on Contracts (1976) 3.
[23] Ibid, 12. See supra note 19 and accompanying text. Section 2(1) of the Act reads: “‘Mistake’ means a mistake, whether of law or fact”.
[24] Ibid, 15. See section 6, Contractual Mistakes Act 1977.
[25] Ibid, 20.
[26] See section 6.
[27] Finn, “The Contractual Mistakes Act 1977” (1979) 8 NZULR 312, 320.
[28] McLauchlan, “Mistake of Identity After the Contractual Mistakes Act 1977” (1983) 10 NZULR 199, 230.
[29] [1984] NZCA 23; [1984] 1 NZLR 489.
[30] See Beck, “The New Zealand Contractual Mistakes Act: a lesson in legislation” [1987] LMCLQ 325, 331; and Chen-Wishart, “The Contractual Mistakes Act 1977 and Contract Formation” [1986] OtaLawRw 9; (1986) 6 Otago LR 334, 336.
[31] Beck, ibid 331 and generally.
[32] Dawson, supra note 1, at 48.
[33] [1989] NZCA 190; [1989] 3 NZLR 549. Though see the comments of McLauchlan, "The Demise of Conlon v Ozolins: 'Mistake of Interpretation' or Another Case of Mistaken Interpretation?" (1991) 14 NZULR 229 for criticism of Paulger; and Finn, "Mistake" in Burrows, Finn, and Todd, supra note 21, at 285, 302 for comment on how the proper interpretation of s 6(1)(a)(iii) – and hence the scope of the Act – remains a problem.
[34] See eg Dugdale, “A Code is a Code is a Code” (2002) 8 NZBLQ 129; and McLauchlan, “The Contractual Mistakes ‘Code’: A Polite Response to Mr Dugdale” (2002) 8 NZBLQ 132.
[35] Misrepresentation and Breach of Contract (1978) 33-38.
[36] Ibid, 62.
[37] Ibid, 70.
[38] Ibid, 14-15 (clause 4).
[39] Ibid, 21 (clauses 9(3) and 9(4)(f)).
[40] Burrows, “The Contractual Remedies Act 1979” [1980] CanterLawRw 7; (1980) 1 Canta LR 82, 82.
[41] Section 9(1), Contractual Remedies Act 1979.
[42] Section 9(2)(a).
[43] Section 9(2)(b).
[44] Section 9(2)(c).
[45] Section 9(4)(a).
[46] Section 9(4)(c).
[47] Section 9(4)(f).
[48] [1981] NZHC 33; [1981] 1 NZLR 734, 740.
[49] Dawson, supra note 1, at 55.
[50] McLauchlan, supra note 1, at 42. See also the discussion of Newmans Tours Ltd, supra note 115 and accompanying text; and Coote, "Remedy and Relief under the Contractual Remedies Act 1979 (NZ" (1993) 6 JCL 141.
[51] Todd, “Remedies for breach of contract” in Burrows, Finn, and Todd, supra note 21, at 741, 810.
[52] Burrows, “Contractual Remedies Act 1979” in Contract Statutes Review, NZLC R25, 61, 62.
[53] Privity of Contract (1981) 1.
[54] Ibid, 5.
[55] Ibid, 28.
[56] Ibid, 48.
[57] Dawson, supra note 1, at 42.
[58] Section 7(1), Contracts (Privity) Act 1982.
[59] Section 7(2) (“such sum as the Court thinks just”).
[60] Coote, “Security of Contract and the New Zealand Contract Statutes” (2000) 16 JCL 37,46.
[61] Todd, “The Contracts (Privity) Act 1982” in Contract Statutes Review, NZLC R25, 217, 228.
[62] Burrows, “Contract Statutes: The New Zealand Experience” [1983] Statute LR 76, 77.
[63] Stephens, “Illegality and Contractual Mistake” (1981) 9 NZULR 390,397.
[64] Dawson, supra note 1, at 57. See also Burrows, supra note 52, at 82: “[t]here is something approaching a statutory equity”.
[65] Burrows, ibid, 84, 87.
[66] McLauchlan, supra note 1, at 40.
[67] Dawson, supra note 1, at 44.
[68] Burrows, supra note 52, at 81, 96.
[69] Section 15, Minors’ Contracts Act 1969, and section 5, Contractual Mistakes Act 1977.
[70] Note, however, that section 7(1) of the Contractual Remedies Act 1979” provides, in part, that “[e]xcept as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity ...”. McLauchlan, “Contract Law Reform in New Zealand: the Contractual Remedies Act 1979” (1981) 1 OJLS 284, 286 also states that the Act operates as a code.
[71] See Furmston, supra note 19 and additional comments.
[72] See Dugdale, supra note 45; McLauchlan, supra note 45; and Coote, “The Contractual Mistakes Act as a Code: Some Further Thoughts” (2002) 8 NZBLQ 223, especially 229-231.
[73] Dawson, supra note 1, at 57.
[74] Ibid.
[75] Spiller, P, Finn, J and Boast, R A New Zealand Legal History (1995) 78-79.
[76] Ibid, 78.
[77] Burrows, “Frustration of Contract in Contract Statutes Review, NZLC R25, 275, 295.
[78] See eg Harding v Coburn [1976] 2 NZLR 577, Karelryfbflot AO v Udovenko [1999] NZCA 331; [2000] 2 NZLR 24, and van den Brink v Smith [2001] 1 NZLR 103.
[79] See Burrows, supra n 77 at 295, 302-303: "Such an approach would be in accord with the [other] New Zealand legislation on contract".
[80] Section 2(1)(a), Contracts Enforcement Act 1956.
[81] Repeal of the Contracts Enforcement Act 1956, NZLC PP30 (1997) especially 5-9, 12. See also Dugdale, “Formal Requirements: the Proposed Repeal of the New Zealand Contracts Enforcement Act 1956” (1998) 13 JCL 268.
[82] Odgers, cited in Burrows, “Consolidation Acts” [1983] CanterLawRw 1; (1983) 2 Canta LR 1.
[83] Cross, R, Bell, J and Engle, G Statutory Interpretation (2nd ed, 1987) 6, 170.
[84] Driedger, EA Construction of Statutes (2nd ed, 1983) 214.
[85] Burrows, JF Statute Law in New Zealand (2nd ed, 1999) 287. Burrows goes on to note at 92-93 that there is a long history of more general consolidation. The Reprint of Statutes Act 1895 set up a commission to examine the consolidation of all of New Zealand’s statute law. While this commission was not in full operation until 1903, by 1908 it had overseen the introduction of the Consolidated Statutes Enactment Bill, which repealed 806 statutes and enacted a schedule of 208 revised Acts to replace them.
[86] Burrows, supra note 82, at 1.
[87] Cited in Twining, W and Miers, D How To Do Things With Rules: A Primer of Interpretation (4th ed, 1999) 257.
[88] Burrows, supra note 82, at 6-7.
[89] (1910) 20 NZLR 873, 879. This decision was made shortly after the consolidation project described supra note 85.
[90] [1976] UKHL 5; [1977] AC 59.
[91] See Burrows, supra note 85, at 285-286.
[92] Palmer, “Systematic development of the law: The function of the Law Commission” [1986] NZLJ 104, 105.
[93] Woodhouse, “The new Law Commission” [1986] NZLJ 107. See also section 3, Law Commission Act 1985: “The purpose of this Act is to promote the systematic review, reform and development of the Law of New Zealand”.
[94] Contract Statutes Review, NZLC R25.
[95] Ibid, 4-5.
[96] “A Statutes Amendment Bill is defined in Standing Order 258(1)(e) of the House of Representatives as an omnibus bill because it consists entirely of amendments to Acts. It provides for unrelated and non-controversial amendments to a number of acts that are already in force. These amendments should be unrelated to the implementation of a particular policy objective” (from the introduction to the 2001 Bill). See also Jamieson, “How Many Acts Make a Bill?” (1984) 2 Canta LR 230.
[97] Dugdale and Walker, “Harmonisation of the Sale of Goods Act 1908 and the Contractual Remedies Act 1979” in Contract Statutes Review, NZLC R25, 111, 112.
[98] Ibid.
[99] See also Moodie v Agricultural Ventures Ltd [1998] 3 NZLR 129.
[100] See Burrows, “Performance and breach” in Burrows, Finn, and Todd, supra note 21, at 623, 667. In particular, there are difficulties in the different terminology used in the two Acts. The Court in Moodie declined to comment on whether there is any difference between "rejection" under the Sale of Goods Act and "cancellation" under the Contractual Remedies Act (at 136). This reluctance highlights the need for further legislative intervention in this area. See Burrows at 667 for a discussion of other terminological difficulties.
[101] Ibid.
[102] Palmer, G and Palmer, M Bridled Power (3rd ed, 1997) 150.
[103] Burrows, “Some factors affecting modern contract law” in Burrows, Finn, and Todd, supra note 21, at 11, 29.
[104] Of course, the Contracts Enforcement Act could well be excluded, particularly in light of the Law Commission’s recommendation for its repeal. See supra note 32 and accompanying text.
[105] Burrows, supra note 82, at 1.
[106] Dawson, supra note 1, at 42. One possible problem in this area is that the discretionary powers given to the courts by the different statutes are perhaps not entirely congruent. For example, section 6(1)(b)(i) of the Contractual Mistakes Act states that one of the factors for the courts to take into account in determining relief is whether the mistake(s) resulted in “a substantially unequal exchange of values”. Section 7(4)(b) of the Contractual Remedies Act states, in part, that the right to cancel a contract exists if the effect of a misrepresentation or breach is: “(i) Substantially to reduce the benefit of the contract to the contracting party; or (ii) Substantially to increase the burden of the cancelling party under the contract”. The word “substantially” appears in different places in these two Acts, and there is currently no case law on whether the word should mean the same thing when applying the different provisions. However, while points like this one illustrate that achieving consistency between different statutes and different provisions is difficult, this does not mean that consolidation is an impossible task, and nor does it undermine the considerable benefits of consolidation.
[107] Burrows, supra note 82, at 1.
[108] Burrows, supra note 77, at 302-303.
[109] Palmer and Palmer, supra note 102, at 163.
[110] Section 5(1)(d), Law Commission Act 1985.
[111] As one commentator has observed (albeit in support of full codification): “It would be an advantage to have a clear and accessible statement of the basic New Zealand Law of Contracts” (Sutton, “Commentary on ‘Codification, Law Reform and Judicial Development’“ (1996) 9 JCL 200, 203).
[112] See Stephens, supra note 53, at 397.
[113] Much of the discussion on this point is taken from Todd, supra note 51, at 807 and following.
[114] See supra note 46, at 22.
[116] Coxhead v Newmans Tours Ltd [1993] NZCA 291; (1993) 6 TCLR 1.
[118] Ibid, 410. See Todd, supra note 46, at 809.
[119] See supra note 49 and accompanying text.
[120] Coote, “The Changing New Zealand Law of Damages in Contract” (1996) JCL 159, 161. See also Coote, supra note 50.
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