Chapter 1 Outline answers to end-of-chapter questions

Introduction to the study of contract law

1. Explain the objective approach to contract law and how it can be used as a basis for legal development.

The first step is to explain that a contract is an expression of the parties’ intentions and it is these intentions that the courts reflect on when resolving a dispute. But when identifying the parties’ intentions, an objective approach is adopted.

Now detail what is meant by an ‘objective approach’ in contract law and how it means that the courts focus on apparent intentions rather than actual intentions. This can be done with reference to the comment by Lord Denning MR in Storer v Manchester City Council [1974] and Lord Clarke in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG [2010].

Contrast it with what is meant by a subjective approach and discuss the advantages of the objective approach.

Explain that the objective approach is based on the reasonable person in the position of the parties which then provides a standard for the objective approach based on the facts. Refer to the themes that can be reflected in this process, like fairness and certainty. Lord Radcliffe’s description of the reasonable person from Davis Contractors Ltd. v Fareham Urban District Council [1956] is useful here.

You can then turn to conclude on the objective approach as a basis for legal development. You could focus on how the approach results in an extensive range of principles that indicate what parties appear to intend based their actions and inactions.

2. Explain the classical model of contract law and the trend towards a modern contract law.

The starting point is to acknowledge the basic qualities represented by the classical model such as an exchange; the assessment of the parties’ intentions at the time of entering the contract; and, the principles of freedom of contract and the sanctity of contract. These points need to be developed in the main body of your answer.

Explain what is meant by freedom of contract and link it with parties being presumed to be individualistic and driven by their own competing self-interest.

Now turn to the 20th century where it moves towards reflecting reasonableness and fairness through implied terms by the courts and through standards from legislation.

An important development is the recent recognition of relational contracts and the implied term of good faith in performance (Yam Seng Pte v International Trade Corp [2013]). Explain the basic significance of this with reference to the recognition of parties intending to co-operate but also the fact that with relational contracts, it is a move away from the classical assessment of the contract at the time it was made.

Conclude with a reflection of the current position in which values from the classic model remain as a basis for contract law. This appears to maintain certainty and also results from judges developing the law away from the classic model but with reference to classic model values to appear faithful to it. Older cases representing the current position on an issue of contract law continue to represent the classic mode, but it appears that the courts have moved away from it to improve the legal position.

3. Explain the extent to which the common law of England and Wales reflects a duty of good faith in the performance of contracts.

Start with the traditional position in the law of England and Wales that meant good faith as a general principle in contract law was inconsistent with the values of the classical model of contact law.

Next, address the key development of an implied term of good faith in performance introduced by Leggatt J in Yam Seng Pte v International Trade Corp [2013]. This would include how the obligation was defined.

Explain how the implied term of good faith has been justified in the context of the parties’ intentions and relational contracts.

The development of the implied term by subsequent cases is important because it helps to define its current scope. On this point, explain the significance of cases such as Bristol Groundschool Ltd v Intelligent Data Capture Ltd [2014]; Globe Motors v TWR Lucas Verity Electric Steering Ltd [2016]; and Al Nehayan v Kent [2018].

Detail how the obligation was defined further in Bates v Post Office Ltd [2019] and then approved in both SPI North Limited v Swiss Post International (UK) Limited [2019], EWHC 2004 (Ch) and New Balance Athletics Inc v Liverpool Football Club and Athletic Grounds Ltd [2019]. But also recognise that the obligation has been acknowledged but not implied when the requirements have not been met UTB LLC v Sheffield United Ltd [2019] and TAQA Bratani Ltd v RockroseUKC58 LLC [2020]).

Finally conclude on the extent of the obligation. This should recognise that the obligation has emerged and has been applied in circumstances limited by the type of contract and the parties’ apparent intentions.