company with the necessary capital and specialist skills. The owner or controller
may be the state, which is the case in the ¢rst example, or a private person or
company, as in the second. In terms the provisions are much alike, but the ¢rst is
a general direction made under legislative authority by Australian Ministers
responsible for the regulation ofo¡shore oil and gas production,while the second
is a clause of an agreement between a private ownerof land in Scotland and the
holder of a coal mining lease over it. The provisions share the characteristic of
expressinga power to consent ^ or not ^ to the drilling of a well or pitin appar-
ently unfettered terms. Such consents are, in practice, rarely problematic ^ the
resourceowner or controller shares with the exploitingcompanya ¢nancial i nter-
est in speedy and full exploration and production ^ but if a dispute did arise and
require resolution by litigation, the court would need to decide whether the dis-
cretion of the owner to refuse or qualify consent had been properly exercised.
Should or will the fact that the power is administrative (as in the ¢rst case),
contractual (as in the second), determine or in£uence the court’s construction of
these discretionary powers?
Discretion ^ a legally-constituted power of decision ^ is a staple element in both
and contractual arrangements, but whereas its judicial control
provides the core of administrative law in the United Kingdom and Australia, it
is hardly even acknowledged as an issue in the standard authorities on contract.
This may be because the basic contractual discretions are commonly not
4 Powersof th is type in relation to state-ownedor controlled petroleum resources may sometimes
be expressed in contractual form, as in the United K ingdom petroleum production licence
entirely determined by regulations under s 4(1)of the Act, and I take the view that such licences
are likely to be interpretedas ifthey were regulatory in nature: see T.C. Daintith, G. D.M.Wil-
loughbyand A. D.G. Hill (eds), UnitedKingdomOil and Gas Law (London: Sweet and Maxwell,3d
ed, 2004-, looseleaf ) para 1^335, and below, 212,228.
5 There is a very largeliterature on administrative discretion, both viewedfrom a speci¢cally legal
standpoint and in terms of general discussion of decision making: see D. Galligan, Discretionary
Powers: A Legal Study of O⁄cialDiscretion (Oxford: Clarendon Press, 1986); I. Ehrlich and R. A.
Posner,‘An Economic Analysis of Legal Rule Making’ (1974) Journal of Legal Studies 257; G.
Teubner,‘Juridi¢cation: Concepts, Aspects, Limits, Solutions’ in G. Teubner (ed), Juridi¢cationof
SocialSpheres(Berlin: de Gruyter,1987) 3^49;C. Diver,‘The Optimal Precisionof Administrative
Rules’(1983) 93 YaleLJ 65; G. R.Baldwin and K. Hawkins,‘Discretionary Justice: DavisRecon-
sidered’PL 570,G. R. Baldwin,Rules and Government (Oxford: Clarendon Press,1995) 3^58,
174^192; G. R. Baldwin,‘WhyRules Don’tWork’ (1990) 53MLR 321.
6 Neither the authors of Chitty on Contracts (London: Sweet and Maxwell, 29
ed, 2004), nor
McBryde, the authorof the current standard Scottish contract text, regard discretionary power
in contract as an issue meriting explicit discussion. Chitty does not give ‘discretion’an index e ntry.
W.W. McBryde,TheLaw of Contract in Scotland (Edinburgh:W. W. Green, 2
ed, 2001) cites a few
‘discretion’ cases under such heads as implied terms (paras 9^74 to 9^76), consent to assignation
(para 12^44), and rights of termination(para 20^25).The Stair Memorial Encyclopediaof the Laws of
Scotland,vol 15 (Edinburgh:Law Society of Scotland and Butterworths,1996),title Obligations,
takes the same approach (see eg paras 860, 861). Compare W. M. Gloag, Law of Contract (Edin-
burgh: W. Green, 2
ed, 1929), who devotes a section to ‘implied limitations of discretionary
powers’ in his discuss ion of implied terms: 302^308.
555rThe Modern LawReview Limited 2005