Romalpa and Contractual Innovation

Published date01 September 2015
Date01 September 2015
DOIhttp://doi.org/10.1111/j.1467-6478.2015.00715.x
JOURNAL OF LAW AND SOCIETY
VOLUME 42, NUMBER 3, SEPTEMBER 2015
ISSN: 0263-323X, pp. 358±86
Romalpa and Contractual Innovation
James Davey* and Cliona Kelly**
Socio-legal studies have given relatively little attention to the
mechanisms by which change occurs to the boilerplate that constitute
modern contracts. Contrary to the impression left by neo-classical
contract theory (and its descendant, Chicago School law and
economics), contracts are not routinely revised to provide an optimal
solution. As recent empirical studies show, change is sporadic, even
within high-value contracts drafted by expert practitioners. Improve-
ments to contractual form only arise after some external shock, which
reveals the weakness in the prior norm. In the first application of this
principle within the United Kingdom, the article considers the reputed
rapid change in `retention of title' clauses in sales transactions in the
mid-1970s, and identifies the factors, and personalities, that led to such
rapid legal innovation and change.
INTRODUCTION: BOILERPLATE AND CONTRACTUAL
INNOVATION
Much has been written about reservation of title (RT) clauses in the last forty
years, but relatively little about the mechanisms by which change occurs to
the boilerplate that constitute modern contracts.
1
The vast majority of those
articles and texts on RT clauses concerned themselves with the technical
law, and the limits of RT clauses as seen in the litigated cases. In this field,
the work of Sir Roy Goode is a useful exemplar. Notable as a well-respected
358
*Southampton Law School, Building 4, Highfield Campus, University of
Southampton, Southampton SO17 1BJ, England
J.A.Davey@southampton.ac.uk
** Cardiff School of Law and Politics, Cardiff University, Museum Avenue,
Cardiff CF10 3AX, Wales
Kellyc@cardiff.ac.uk
1 See, however, O. Ben Shahar (ed.), Boilerplate: the Foundation of Market Contracts
(2007) and M. Radin, Boilerplate: The Fine Print, Vanishing Rights and the Rule of
Law (2013).
ß2015 The Author. Journal of Law and Society ß2015 Cardiff University Law School
commercial law scholar, but with connections to practice, Goode was creator
of the Centre for Commercial Law Studies at QMW and consultant to
Mishcon & Co.
2
Outside of these doctrinal studies lies a penumbra of
fascinating int erdisciplina ry works. Most nota ble is Sally Wheel er's
Reservation of Title Clauses: Impact and Implications, a socio-legal study
of the extra-judicial enforcement of RT clauses across 259 disputes prior to
publication in 1991.
3
This article seeks to establish an additional branch of inquiry. We are not
concerned directly with the law in the courts (`law on the page'), or with
doubts about the practical enforcement of the rights (`law in action') but in the
mechanism by which the change in legal culture occurred (`innovation in legal
culture'). Most accounts of RT clauses describe a period of rapid transition in
the mid-1970s, with frequent reference to Muir Hunter QC's simile of the
clauses spreading `like a dreadful weed'.
4
John De Lacy
5
contrasted the
position in 1965 (`. . . in England conditional sale agreements are virtually
unknown and such authority as there is may be regarded as turning on the facts
of the particular agreement under consideration')
6
with that in 1993 (`. .. it is
stated that in the context of one administrative receivership alone about 400
retention of title claims had been made against the company').
7
What remains contested is the trigger point for this sudden proliferation.
For many, it is the Court of Appeal decision in the Romalpa case in 1976,
8
for others it is the (unlitigated) insolvency of Brentford Nylons in February
1976.
9
What is undoubted is the rapid replacement of one contractual norm
with another. Prior to the mid-1970s, reservation of title clauses were largely
unused in English commercial practice. Within a few years, the landscape
had changed fundamentally, with such clauses becoming an integral part of
the boilerplate of sales agreements. The puzzle is why the change in the
359
2 Lord Bingham writing in the Roy Goode Festschrift commented on Goode's
significance in straddling academia and high end practice: Bingham LCJ, `Professor
Roy Goode' in Making Commercial Law: Essays in Honour of Roy Goode, ed. R.
Cranston (1997).
3 S. Wheeler, Reservation of Title Clauses: Impact and Implications (1991). See, also,
J. Spencer, `The Commercial Realities of Reservation of Title Clauses' [1989] J. of
Business Law 220 (empirical) and J. Snead, `Rationalising Retention of Title
Clauses with Insolvency Law' in UCL Jurisprudence Rev. 2004, ed. C. Campbell-
Holt (2004) 288 (law and economics).
4 I. Davies, Effective Retention of Title (1991) 10.
5 J. De Lacy, `Romalpa Theory and Practice under Retention of Title in the Sale of
Goods' (1995) 24 Anglo-Am. Law Rev. 327, at 329 ff.
6 Citing R. Goode and J. Ziegel, Hire Purchase and Conditional Sale (1965) 100.
7 Citing Lipe Ltd v. Leyland Daf Ltd [1993] B.C.C. 385.
8Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium [1976] 1 W.L.R. 676; for
example, R. Goode, `The Modernisation of Personal Property Security Law' (1984)
100 Law Q. Rev. 234, at 248.
9 See, for example, Davies, op. cit., n. 4, p. 10. The Brentford Nylons insolvency is
discussed below.
ß2015 The Author. Journal of Law and Society ß2015 Cardiff University Law School

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