Traditionally in English contract law, a common law rule called the ‘penalty doctrine’ has applied. This rule prohibits the enforceability of contractual clauses that stipulate the payment of an extravagant level of damages in the event of breach. Recently, this doctrine has come into question in Talal El Makdessi v Cavendish Square Holdings BV; judgment from the Supreme Court on the case is currently awaited. In Makdessi, the Supreme Court must decide whether the penalty doctrine should remain. This essay submits there is no place for the doctrine in present-day English law. The main justification for the penalty doctrine tends to echo the judgment in Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd, that it is ‘extravagant and …show more content…
In any case, it hardly seems unconscionable to apply a clause in the commercial context where two parties of equal bargaining power have freely agreed on a liquidated damages sum, which explains courts’ reluctance to apply the doctrine between commercial parties. Even in cases of unequal bargaining power – for example, between a large corporation and an individual consumer – the penalty doctrine is redundant in light of the Unfair Terms in Consumer Contract Regulations 1999, where Schedule 3 paragraph (e) stipulates that terms imposing a disproportionately high payment are presumptively unfair, and hence …show more content…
This principle represents the default rule in contract to award the claimant a sum placing him in the position he would have been in had the breach not been committed. Penalty clauses, on the contrary, may go over and above this amount. However, parties are already able to contract out of certain limits in the law of damages, such as mitigation principles or the rules on remoteness. It would be illogical for the courts to permit this at the same time as prohibiting parties from contracting out of the compensatory principle
The decision in Equuscorp is significant, as it has made clear several principles that were once ambiguous under Australian law. It ratifies that restitutionary remedies are unavailable for a claim for money had and received where recovery would reduce coherence in the law. Furthermore, Equuscorp has confirmed that a bare cause of action can be assigned where the assignee has a genuine commercial interest in its enforcement.
(1) When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach? (2) Was the amount set as damages a reasonable estimate and not excessive? (Cross & Miller, 2012)
If a breach of contract is both material and opportunistic, the injured promisee has a claim in restitution to the profit realized by the defaulting promisor as a result of the breach. Liability in restitution with disgorgement of profit is an alternative to liability for contract damages measured by injury to the promisee.
Having evaluated the current state of English contract law, mainly made up of piecemeal solutions, it can be seen that despite being satisfactory and doing its job, there still remain gaps within the law of contract where unfairness is not dealt with. Moreover, due to the ad hoc nature of those piecemeal solutions, the latter have often produced inconsistent justice and have manifested cases of unfairness. Hence, “a relatively small number of respected Justices have endeavored to draw attention to the fact that the application of a general principle might be useful and even necessary in English law.”
Change of position is not up to the court’s discretion and there are principles guiding them in their judgments. However, in Lipkin Gorman, Lord Goff stated that the development of change of position should be dealt with on a case to case basis , leading to much uncertainty in the Law of Restitution today. A failure in cr...
The will be in question the adequate amount of compensation, the degree that the all parties involved have failed to perform and will suffer forfeiture along with the behavior of the parties that have failed to perform with the values of goods faith and fair dealing.
This essay will examine the main cause of the demise of the derivative claim which is the possibility of pursuing a corporate relief and even costs via an unfair prejudice petition, a relief and order that was initially only available via derivative action. Further this essay will discuss as to how the boundaries between the statutory derivative action and the unfair prejudice should be drawn and what restrictions should be added to the unfair prejudice remedy under section 994 of the Companies Act 2006 so that the significance of the statutory derivative action can be reinstated.
Based on common law and precedent, the English law of contract has been formulated and developed over a number of years with it’s primary purpose to provide a regulated framework within which individuals can contract freely. In order to ensure a contract is enforceable there are certain elements which must be satisfied, one of which is the doctrine of consideration. Lord Denning famously professed; “the doctrine of consideration is too firmly fixed to be overthrown by a side wind” . This is a crucial indication that consideration has long been regarded as the cardinal ‘badge of enforceability’ in the formulation and variation of contracts in English common law.
In the case of Williams’s v Roffey Brothers (1990) attracts much controversy. The case involved the defendants who were the main contractors on a building site, he also realizes that the subcontractor carpenters who has financial difficulties and threat the subcontractor by not completing the work. To ensure the claimants completed work on time the defendants offered them extra payments. This was because the defendants would have been taken a penalty just because if the work was not completed on time. The offer was accepted but when the payments were not asked the claimants sued for the payments. It was held that the claimant was entitled to the amount of money because the subcontractors were in financial difficulties and the defendants did obtain a benefit from the subcontractors work. They wouldn’t have to pay the penalty clause. The case has contributed to the criticisms of the consideration doctrine, that only one sided contract modifications need to be involving “the same for more”, but not “less for the same” modification (Atiyah,
Contract law is vital as it provides legality for agreements made between parties. English contract law was developed as common law which relies a lot on precedent. To form a legal contract, there needs to be offer, acceptance, consideration, and intention to create legal relations, capacity to contract and the final contract (Open University, 2016).
It is evident from case law that the law regarding mistake has been inconsistent as a result of irregular decisions being made in cases with similar facts. In situations where a third party and their rights are concerned it is necessary to consider if the contract between A and B is void or voidable. Therefore, It is no surprise that Lord Nicholls and Lord Millet have raised an issue with the decision taken by the majority in Shogun Finance Ltd v Hudson and have deemed the law of contract to be unsatisfactory and unprincipled. However, before discussing that in depth it is important to understand the basic law of mistake. As defined by Pendleton in Vickey [1998] mistake can be a ‘misunderstanding regarding a fact, causing one or more parti...
An agreement of indemnity as a concept developed under common law is an agreement. Where in the promisor promises to save the promise from harmless loss caused by event or accidents. Which do not or may not depend on the conduct of any person or form liability for something done by the promise at the request of the promisor. The promise could be express or implied in this whole project we talked about indemnity from where it is borrowed actually borrowed from Halsbury law of England within common lawin this project w...
United Kingdom is a country with a distinctive set of legal system. It is fairly different from other countries having civil law based legal systems. The legal system in the United Kingdom consists of various sources of law, where other civil law based countries rely only on a written set of law. European influences on the English Legal System came much later in near decades. This essay will aim to examine the development of the English Legal System by reviewing applications of various sources of law in the English Legal System furthermore to discuss the recent European influences on the law of England.
During my second year at YLS, the focus of my studies has shifted. Whereas the majority of my studies in year one revolved around the common law, this last year my legal education has focused upon the prevalence of the courts of equity in relation to the law of obligations and the law of property. Most notably, I have explored the far-reaching application of equitable redress. Additionally, another topic, which was touched upon last year, has been a core element of my work in relation to the interaction between the law and commerce - fiduciary duty. I have actively considered the functions of these two legal 'items ' in my foundation stream modules - Property 2 and Obligations 2.
The courts of England and Wales acknowledge that the above must be something of value, in order to amount to consideration. A valuable consideration in the perspective of the English La...