Types of Contracts in UK Law

Rectification is concerned with contracts and documents, not with intentions. In order to got rectification, it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any other contract.

Whereas an oral contract was allowed and enforceable provided that it was evidenced in writing and the memorandum or note thereof was signed by or on behalf of the party against whom it was sought to be enforced, oral contracts are now of no effect and all contracts must be signed by or on behalf of all the parties.

At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself: see Actionstrength Ltd v International Glass Engineering In Gl En SpA [2003] 2 AC 541, paras 9 (Lord Bingham), 51 (Lord Walker).

I do not regard the decision in Yam Seng Pte Ltd v International Trade Corporation as authority for the proposition that in commercial contracts it may be taken to be the presumed intention of the parties that there is a general obligation of "good faith". I readily accept that there will generally be an implied term not to do anything to frustrate the purpose of the contract.

The confusion is caused by the fact that the term "consideration", when used in the phrase "total failure of consideration" as a reason for restitution, does not mean quite the same thing as it does when considering whether there is sufficient "consideration" to support the formation of a valid contract. Viscount Simon LC, explained this in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 48:

It is common ground that the defendant's 2001 accounts do not record the alleged oral agreement and that there is nothing specific to that effect in the 2002 accounts. There is no evidence that the £89,250 shown in those latter accounts as amounts falling due within one year from other creditors did in fact include the loans made in 2001. The contemporaneous documents do not bear out the existence of a shareholders' loan account as opposed to a directors' loan account.

So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.