Chapter 1: Introduction

To cooperate [kəʊˈɒpəreɪt] is to Act or operate jointly with another, to concur in action, effort or effect Cooperation is the act of cooperating …1

In this book I argue that, to make symbiotic contracts successful, to make them “work” those managing them at the sharp end need and expect active cooperation. This commercial expectation can be defined and distilled into readily accessible legal duties to cooperate. My intent is to create improved alignment between commercial contract law and the commercial world; finding a way to meld law with the expectations of those managing complex modern contracts. I take a pragmatic, instrumental, approach, working on the mechanics as opposed to the structure of contract law, the aim being to determine what cooperation means in these contracts, and what incentives the law can and should offer to commerce to help make them successful, all under the general assumption that contracts are made to be performed. I apply a three-pronged methodology, combining doctrinal analysis and theoretical reflection with a real-world empirical investigation; seeking a pragmatic way to implement the views of commercial actors while preserving the commercial strengths of the Law. I engage in a critical analysis and evaluation of the current law by examining whether and when a duty to cooperate does and should exist and I identify consequent needs for legal reform; mainly comprising more imaginative and flexible use of currently available remedies, and more attention to context and contractual purpose when considering party intention.

The first appearance of “cooperation” in terms in an English contract case seems to be in 1843 in Startup v MacDonald, Rolfe J referring to delivery in shipping as “that common act which can only be effected by the cooperation of both”.2 In 1892, in Harris v Best Lord Esher refers to shiploading activity as “joint”, meaning that “Each is to do his own part of the work, and to do whatever is reasonable to enable the other to do his part.”3 The word “cooperation” then vanishes from the judicial vocabulary until 1941 when Lord Simon remarks:

where B is employed to do a piece of work which requires A’s cooperation – eg to paint A’s portrait, – it is implied that the necessary cooperation will be forthcoming – eg A will give sittings to the artist.4

In ground-breaking work, in 1963, Stewart Macaulay made the now uncontroversial observation that:

businessmen often fail to plan exchange relationships completely, and seldom use legal sanctions to adjust these relationships or to settle disputes. Planning and legal sanctions are often unnecessary and may have undesirable consequences.5

Lord Devlin recognised a similar issue in 1951, saying that businessmen think of the contract as “merely a seal”6 whereas the law is apt to “canonise”7 judicial statements, and is insufficiently flexible to react to changes in commercial practice, ending with a plea “that the law might go further than it does towards meeting the business attitude”.8 Since Macaulay’s work, many empirical studies9 have supported the claim that much commercial activity is characterised by cooperation, problem-solving, relationship building and maintenance and ad-hoc deal-making, together with a reluctance to enter into black letter negotiation or initiate formal end-game mechanisms.10 As Robson points out, surveys used to turn the world into data, create knowledge or tell a story, are not new, the Domesday Book and 17th-century efforts to assess the effects of the plague being notable landmarks.11 I tested Macaulay’s conclusions using a survey involving 500 experts. The results largely agreed with him, but with an undertone suggesting that the contract, qua contract, was somewhat more important than his analysis suggests

Most major English Law texts deal descriptively, rather than analytically, with the duty to cooperate.12 Much of the theoretical literature, legal and law and economics, is predicated on a binary dichotomy between discrete transactions and long-term iterative contracts. Neither model accurately describes modern business contracts which are often medium/long-term, fixed-term, complex and multi-layered/multi-disciplinary/multi-site, incorporating management provisions which deal with change through, for example, unilateral powers to vary and termination for convenience provisions which allow the parties to adjust their relationship without court intervention or renegotiation.

Cooperation debates are dominated by classical contract theory, probably best described by Patrick Atiyah,13 and relational contract theory, the latter being spawned by Macaulay’s work. Crudely, but typically, classical contract theorists are asserted to support a law red in tooth and claw, in which amoral and opportunistic self-interested commercial actors prey on the unwary, awaiting the chance to earn or save a quick buck.14 This is not a plausible picture of contract law and the reality is more granular.15 A comparable parody of relational theory is that it ends in support for a fluffy compromise which is subjective and cannot be expressed in default rules which allow parties a reasonable degree of certainty in analysing the end game.16 This is also extreme and it is not impossible to envisage ways of effecting, at least in part, certain relational norms such as preservation of the relationship, conflict harmonisation and adjustment to new situations.

Some relational theorists and some law and economics scholars argue for cooperation as a general foundation or norm for contract law.17 Jonathan Morgan, while accepting that cooperative relationships are important in business and agreeing that this proposition is well supported by empirical evidence, argues firmly against any reformulation of the law to bring cooperation into play:

whether this means that the law of contract must be reformulated to promote co-operation rather than to resolve disputes in a clear-cut fashion is questionable. A “co-operative” law of contract may paradoxically fail to promote co-operation, or rather to curb opportunism …18

This assumes that the debate lies between a contract law wholly based on cooperation and one in which there is no duty of cooperation or that cooperation simply means the opposite of opportunism.19

I argue that there is a “third way” in which an enlarged or deeper duty to cooperate can be envisaged for symbiotic contracts without creating uncertainty. I take a pragmatic, incremental approach, consistent with the general approach of the English and Commonwealth courts, arguing that these contracts should meet commercial expectations and that to help make symbiotic contracts successful courts must construe them, contextually, as including a deep duty to cooperate. I explore the possibility that the classical law is not quite so red in tooth and claw as sometimes claimed20 and that an extensive duty to cooperate in symbiotic contracts is not likely either to cause major uncertainty or destroy the adversarial commercial spirit inherent in contracting. Indeed, it may increase certainty as it will be more in line with the expectations of those who manage and negotiate contracts. This “third way” differs from relationalism. It is less concerned with preserving a relationship in circumstances not planned for at the time the contract is made and more with the day to day, the pathways to success and performance, of an agreed deal.

I demonstrate that commercial expectations are that cooperation in the day-to-day work is vital in a commercial context. I argue that commercial expectation is based on party respect for the deal, on a perceived need for successful performance, hedged by realism and a pragmatic approach. Recognising that the pathways to success in performing these contracts lie in cooperation characterised by communication and problem-solving, those at the sharp end know that they must build relationships to discern what drives the other party, which, in turn, provides a foundation for solid communication and practical problem-solving activity, requiring some “give and take”. As Robert Frank advises, failure “to recognize that we live in Darwin’s world rather than Smith’s” prevents us “seeing that competition alone will not solve our problems”.21

The structure of the book is that I begin by discussing some of the “countless” cases which feature in law reports.22 I draw out six threads from the basic duty not to prevent the other party from performing through to a duty of active cooperation in which constructive engagement and problem-solving are of the essence, and further consider decision-making powers where these impinge on enabling performance. This is a functional approach, differing from Samuel Stoljar’s influential, seminal, 1953 work,23 in which he created a breakdown of Building, Commission, Employment and Notice categories.24 Finally I consider whether abandoning implying terms and employing commercial construction would provide coherence. In Chapter 3 I discuss my survey, which involved asking some 500 experienced contract managers, an elite group,25 for their views on what success means in contract management, whether cooperation is required, what cooperation means and how to achieve it. I found no other empirical work on the source of reasonable or commercial expectations, and my work shows that these can be uncovered and defined at a level of abstraction that can underpin a duty to cooperate, despite the claim that “In fact, there is good reason to believe, both in theory and from empirical studies, that commercial contractors do prefer a formalist law of contract”.26 Respondents overwhelmingly consider cooperation to be important or even mission critical. The theme which runs through responses is management/problem-solving. Sometimes that is by problem avoidance: seizing on issues early. At other times respondents build a relationship, through communicating formally and informally, allowing the...