Wilful default
The one, bastard part of that sainted triplet “negligence, fraud or wilful default” without an obvious legal meaning. Some call it wilful misconduct, which is even more baffling.[1]
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Negotiation Anatomy™
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Whereas “negligence” and “fraud” are terms of forensic science — the former hailing from the common law of tort, being the failure to observe the standards of the sort of fellow one might meet on the Clapham omnibus; the latter hailing from criminal law[2] and involving a false representation, knowingly made, with the intent to profit from it — “wilful default” has no such lineage, and is wanting even as a work of legal art.
Contractual definitions
Thus you do see earnest legal eagles trying to define it. Most such efforts wind up in an untidy tautological heap — “any wilful failure to comply with or wilful breach of any of its obligations under this deed” sort of thing: thanks for coming, ninja — but some do try to break the usual vicious circle:
“Wilful Default” means a deliberate act or omission which will result in (and can reasonably be expected to have been intended to result in) a breach of this Agreement and which, as soon as practicable, but in any event within 30 days after written notice (particularising the alleged breach) is given to the party alleged to be in default, is not either:
(a) acknowledged by the defaulting party and rectified; or
(b) disputed by the party allegedly in default and referred to dispute resolution in accordance with clause 15, but if the notice of default is ultimately determined by arbitration or order of a court or agreement to have been justified, then rectified as soon as practicable but in any event within 30 days of the adjudication or agreement.
I mean to the extent it doesn’t shriek “negotiation oubliette alert”, it shrieks “shoot me”, right?
Authority
The British courts, as a literary phenomenon, are unrivaled among the judiciaries of the modern world, but every now and then even they will execute a long, raking spiral punt into touch on the far side of the paddock. When asked what “wilful default” was meant to mean as long ago as 1885, Lord Justice Bowen did exactly that.[3] Taking a pop ball off the base of the scrum, deep in his own 22, his Lordship explained that “wilful” generally “implies nothing blamable, but merely that the person of whose action or default the expression it used, is a free agent, and that what has been done arises from the spontaneous action of his will”, and “default” means “nothing more, nothing less, than not doing what is reasonable under the circumstances” or “not doing something which you ought to do.”
Perhaps realising this didn’t help, and to ensure he found the touch he was seeking, he concluded “wilful default” not to be a term of art, despite its common use in commercial contracts, and that an attempt comprehensively define it would be “a delusion and an idle pursuit”.
So that’s that sorted then.
Analysis
Now for those of you rumbling up the park for the line-out, allow this crusty old fool to rush in where the irascible Lord Justice could not bring himself to tread. “Wilful default” is a silly phrase. So is “wilful misconduct”.
The “default” part suggests a contractual breach, but there are better words for that kind of thing — “breach”, for example — but in any case the wilfulness, wantonness or licentiousness of those who misperform their contracts has never been of much interest to the courts (as Lord Justice Bowen illustrates): what matters is that there is a breach. If there is, the responsible fellow is for for the same high-jump regardless of how obstreperous her frame of mind may have been when she did, or didn’t, do what she shouldn’t, or should, have done.
Thus the wronged lamb on the other side of the bargain is free from mental strife that comes from having to assess the breacher’s wilfulness. This is the very beauty of contractual relations: one need not care a jot about your counterparty’s intentions; what matters is her actions. That she does what she must do through gritted teeth or with a heavy heart is neither here nor there.
So, wantonly changing your contractual outcome depending on your counterparty’s bad attitude seems a rum affair.
Now, there is limited call for the sainted triplet in any contract in the first place — one makes a contract precisely to slip these sanctimonious strictures of the general civil law — but where you are reining the girth of an indemnity and, if it is well-crafted, there hasn’t been a breach of contract there is at least a good reason to impose a different standard.
You indemnify me for losses I incur in performing this contract except where those losses arise from my negligence (okay), fraud (okay), or —
Isn’t the concept you are reaching for “breach of contract”?
See also
References
- ↑ Though not without legal precedent: see wilful misconduct for more discussion.
- ↑ Interestingly, the there is no tort of fraud; it is called “deceit” and was ably summarised in The Kriti Palm as follows: “The elements of the tort of deceit are well known. In essence they require (1) a representation, which is (2) false, (3) dishonestly made, and (4) intended to be relied on and in fact relied on.”
- ↑ Re Young and Harston’s Contract.