Complete Course Notes on Contracts Law

168 Pages • Complete Study Notes • Year: Pre-2021

WEEK 1 – Lecture 1 Definition of Contract, Background, Theories of Contract Law, Ethical Considerations Wilmott: Chapter 1, 8-12, Chapter 27, 875-893 – READ both Clarke: Chapter 1, 1-17 Not covered in detail in this lecture What is a contract?  What is our expectation of a contract?  What do we think are the important features?  What role does the law have to play? Contract  A legal expression of agreement between parties.  The parties make the rules.  A mechanism to define, arrange and regulate a transaction. Key Elements Promise. Capable persons. Obligation. Enforceable. Law does not lay down rights, not concerned with specifics only mechanics The Law  Can provide a framework for us to work with. It can set parameters.  Some of these parameters are laid down in a set of ‘rules’.  Before we get into the rules we need to look briefly at some ethics and the history and context. History and Context The classical contract theory (reflects historical origins) Classic theory had at its centre the doctrines of freedom and sanctity. Freedom - Individuals are the best judges of what is in their own interests and they should be ‘free within the broad limits of the law to contract upon whatever terms they wish. From laissez-faire in nineteenth century. Doctrine of Sanctity – takes one step further and states once contract made is ‘sacred’ and therefore be enforced and not rewritten by courts as they think parties not made good bargain. Developments in 20th century realized these limitations, now become the ‘neoclassical’ theory. Substantive principal, of neoclassical, attempts to balance the individuals ideals of classical contract with communal standards of responsibility to others. Focuses on fairness and independence of parties rather than on parties ‘actual agreements’. Court weigh classical values of liberty, privacy and efficiency against the values of trust, fairness and cooperation which have been identified as important by post-classical scholars. Guides judges, sometimes quite strongly, but it allows them enough discretion in hard cases to reach just, socially desirable outcomes. Economic Theory Begins with the assumption that people are motivated by self-interest and will alter their behavior to aximize their welfare. A set of rules to economic exchange. Posner – to prevent opportunism, to interpolate efficient terms, to prevent avoidable mistakes, to allocate risk to superior bearer, reduce costs of resolving contract disputes. Contract as a moral obligation Focuses on the rights or duties of individual contracting parties. Formal rules to serve an ideological function – (capitalist system to keep existing heirachy systems in place – critical legal scholars – under some circumstances should not be committed to serving these functions)? Market-Individualism – sections that stress the self-selecting nature of contract, people selecting the terms in which they will contract, autonomy, reinforce this ideology. Consumer-Welfarism – all consumer contracts closely regulated and commercial contracts attract more regulation than Market-Individualism would allow. Courts will enforce standards and policies set out by Parliament. Both ideologies important and continue to exert a powerful influence on the content and trajectory of contract law, and provide some of the tensions that underpin theory and practice of contract law. Gone are the laissez-faire days, and now in favour of contract law that is far more protective of interest of contracting parties – particularly consumers.

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