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The basic principles of contract

Horton hatches the egg.jpg
Didn’t include a Contracts (Rights of Third Parties) Act 1999 clause. May now be regretting it.

Formation: capacity and authority · representation · misrepresentation · offer · acceptance · consideration · intention to create legal relations · agreement to agree · privity of contract oral vs written contract · principal · agent

Interpretation and change: governing law · mistake · implied term · amendment · assignment · novation
Performance: force majeure · promise · waiver · warranty · covenant · sovereign immunity · illegality · severability · good faith · commercially reasonable manner · commercial imperative · indemnity · guarantee
Breach: breach · repudiation · causation · remoteness of damage · direct loss · consequential loss · foreseeability · damages · contractual negligence · process agent
Remedies: damages · adequacy of damages ·equitable remedies · injunction · specific performance · limited recourse · rescission · estoppel · concurrent liability
Not contracts: Restitutionquasi-contractquasi-agency

Index: Click to expand:

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“I meant what I said, and I said what I meant.
An Elephant’s faithful
One-hundred percent!”

-- Dr. Suess — Horton Hatches the Egg

Some principles which should help you make a good bargain.

The contract versus the written agreement

The contract, consensus ad idem is an immaterial thing. It has no physical extension. It does not intrude on the mortal plane. Its best Earthly representative is the written agreement, a memorial on parchment wherein the parties do their best to set out the boundaries of their compact. The document is not the contract; the contract is not the document — they are spirit and flesh; a Platonic ideal and its flickering shadow on the grotto wall.

But if there should be some executed paper — for most contracts there need not, but let’s just say there is — a court will be disinclined to look beyond its “four corners” when divining the parties’ commercial intentions in signing it. This is in part convenience, in part laziness, but in part the fair assumption that, since the parties were bothered to write down the important parts of their agreement, anything they didn’t write down either didn’t exist or can’t have been important enough to justify memorialising. In this way the Platonic form of the contract and its bodily extension into our decadent organic realm become one. It’s rather biblical.

Since an issue that has attracted the attention of the Queen’s Bench Division must be important, the Court’s doubt will benefit not one party or the other, but the paperwork both of them signed. The Lord is not your witness, so the signed written record will have to do.

This rule against extraneous evidence — as with so many historic principles of the common law, these days a diminished thing — is known as the “parol evidence” rule.

The unilateral contract

Curiously, the foregoing is less obviously true in the case of a unilateral contract which is signed by neither parties: for example the famous carbolic smoke-ball. In that unique case, the immaterial consensus ad idem and the written form of the contract, albeit unsigned, are coextensive. There is no other articulation of the agreement.

Different approaches to evidence of the contract in the UK and US

England and the US have taken different paths when it comes to respecting the sanctity of that four-cornered document representing the contract. Whereas the parol evidence rule gives the written form a kind of “epistemic priority” over any other articulation of the abstract deal in the common law, in the new world greater regard will be had of how the parties behave when performing their contract, and less significance on what at the outset they wrote down.

So whereas in England action to not insist upon strict contractual rights will have scarce effect on those rights (at best a waiver by estoppel might arise, at least until it is withdrawn[1]), in the United States Uniform Commercial Code[2] a “course of dealing” between the parties at variance with the written terms of their bargain will tend to override those written terms. Thus, by not insisting on the strict terms of her deal, an American risks losing that deal, and will be taken by the course of dealing to have agreed something else; whereas an Englishman, by granting such an indulgence, at worst suspends his strict contractual rights but does not lose them.

In this way the parol evidence rule is less persuasive in American jurisprudence than in British.

See also