The Judicial Control Of Contractual Unfairness*
| Date | 01 September 1983 |
| DOI | http://doi.org/10.1111/j.1468-2230.1983.tb02536.x |
| Author | David Tiplady |
| Published date | 01 September 1983 |
THE JUDICIAL CONTROL
OF
CONTRACTUAL
UNFAIRNESS*
JUSTICE
or
fairness,’ and certainty, are often assumed to be opposed
values in contract law.2 And it is often claimed that there is an under-
lying conflict between the judicial instinct for justice and the traditional
-or,
at least, Benthamite-perception of a judge’s function in
adjudicating contract cases.3 The tension4 which these apparent
oppositions create is reflected, we are told, in the overstrained way
courts have applied supposedly value-free rules-of offer and
acceptance, for example, or the incorporation and construction
of
terms-in order, covertly, to achieve
a
just resuk6 Further distortion
is
added by the fact that this method makes it impossible to articulate the
true reasons for decision. Judgment is given in terms of a misapplied
procedure. The unsuccessful litigant is told that his objective-to
exclude or limit liability, for example-can be achieved, but that he has
simply failed
to
reach it
on
this occasion. The implicit invitation is to go
away and try again, when in fact the court’s true purpose is a substantive,
distributional one: to prevent that particular thing from being done at
alL6
How
much better-the argument proceeds-to abandon the pretext
*
This is an amended version of a paper given at the Hart Legal Workshop, Institute of
Advanced Legal Studies, London. My grateful thanks to Professor
A.
M. Prichard for
his helpful suggestions.
The two terms are used here synonymously.
CA
Rawls,
A
Theory
of
Justice,
Chap.
1,
and Llewellyn,
The Common Law Tradition: Deciding Appeals,
p.
60.
See,
e.g.
Wade
(1940) 4
M.L.R.
183, 187:
Thompson
J.
in
McMaster Universfty
v.
Wilchar Construction Ltd.
(1972) 22
D.L.R.
(3d)
9, 18;
Treitel,
The Law
of
Contract
(5th ed.), p.
223;
See
also Corbin,
Contracts,
Vol.
3,
p.
682;
Cardozo
J.
in
Jacob
&
Youngs
Inc.
v.
Kent.
129
N.E.
889 (1921)
and in the
Growth
of
the Law,
Chap.
3,
and Murray,
31
U.Pitt.L.Rev.
I,
5.
i.e.
to
give effect to the intention
of
the parties, objectively determined. Jessel M.R.’s
famous dictum in
Sarrrpson’s Case
(1875)
L.R.
19
Eq.
462,
465
closely follows Bentham’s
view that
‘‘
no man of ripe years and
of
sound mind, acting freely, and with his eyes open,
ought to be hindered, with a view to his advantage, from making such bargain, in the way
of obtaining money, as he thinks
fit,
nor.
.
.
anybody hindered from supplying him
upon
any terms he thinks proper to accede to.” But the potential for judicial intervention which
this observation admits
is
clear. Only a superficial reading of the Bentham or Jesse1
opinions justifies the glib criticism these views seem now to attract. See,
e.g.
Reiter
(1981)
OxfordJournal
of
Legal Studies
347.
See generally Atiyah,
The Rise and Fall
of
Freedom
of
Contract,
pp.
324-332.
The doctrine of misrepresentation is one product of an attempt to resolve this tension.
In
Redgrave
v.
Hurd
(1881) 20
Ch.D.
1,
for example, the crucial statement was both meant
seriously to affect the terms
of
the contract, and not to be a term itself.
15
See,
e.g. per
Lord Denning M.R. in
Gillespie Bros.
v.
Roy Bowles Ltd.
(1973)
1
Q.B.
400,415
and
per
Robert
Goff
L.J.
in
The Scaptrade
(1983) 1
All E.R.
301
at
308d.
A well-known, and influential example
of
this analysis, by Karl Llewellyn in
(1939)
52
Harv.L.Rev.
700
contains the potent aphorism,
“
covert tools are never reliable tools.”
This
is
the essence of the case for changing from traditional principles to doctrines such
as
unconscionability or inequality of bargaining power. But arguing from metaphor can be
dangerous: change the metaphor and the whole bias
of
the sentiment shifts. One might
therefore just as easily invoke Lord Devlin’s image
of
crossing the Rubicon, achieving
more by surreptitious infiltration than by direct assault: See
39
M.L.R.
1,
11.
Whatever
the basis of decision, the determined transgressor
is
likely to try again.
Cf.
LeR,
31
U.Pitt.
L.Rev.
349.
601
M.
L.
R.-3
602
THE
MODERN
LAW REJiEW
[Vol.
46
of neutrality, to emerge from the closet of outmoded techniques and
redundant philosophies, and to declare oneself as the instrument for
alleviating oppression, redressing bargaining imbalance, cancelling
unfair advantages, and generally overseeing and ensuring probity and
fair dealing of both a procedural and substantive kind? If, after all, this
is what courts
do
or should be able to do, let
us
say
so
openly, and
recognise for what they are the means by
which
they are to do it.
The harbinger of this new philosophy
is
Article
2-302
of the Uniform
Commercial Code., which gives American courts an overriding discretion
to cancel or amend contracts, or parts of contracts, for the sale of goods
deemed to be unconscionable.' This discretion has been extended in
some jurisdictions within the United States to cover other types of
contracts in addition to those for the sale
of
goods.8 Marching behind
come such English manifestations as the doctrine of inequality of
bargaining power: the pubescent concept of economic duress,1° and
the doctrine of fundamental breach of contract-although the House of
Lords has at last, it seems, staked that particular vampire."
It is my contention that the suppositions which have led to this new
approach are fallacious; that, far from being opposed, justice and cer-
tainty are close approximations or harmonious objectives; that tradi-
tional methods of adjudication already incorporate to a sufficient
degree the end ofjustice (or omit to do
so
for good reason) and that the
rejection of these methods is therefore essentially misguided and itself a
source of potential injustice.
I
propose to illustrate and develop these
contentions by examining a number
of
familiar decisions which present
quite directly the supposed confrontation of justice and certainty in the
common law of contract. First of all, however,
I
must say a little of
what
I
mean by these central expressions: justice and certainty.
The American Realists tell us that certainty in contract law is
a
'
No
definition of unconscionability is given
it;
the Uniform Commercial Code. This
deliberate omission is reminiscent of Stewart
J.'s
approach to obscenity: he couldn't say
what it was, but he knew it when he saw it. See his judgment in
Jacobellis
v.
Ohio,
378
U.S.
184. Many and various attempts have been made to flesh
out
a definition of un-
conscionability,
or
at least create a structure within which the concept might develop.
See further
infra,
p.
16.
*
See,
e.g. Albert Merrill School
v.
Godoy,
357
N.Y.S.
2d 378 (1974) (tuition fees);
Edgemont Associates
v.
Skolnick,
396
N.Y.S.
2d. 130 (1977) (commercial tenancy);
Fulkerton
v.
Reese,
599
P.
2d.
550
(1979) (residential tenancy);
WiNe
v.
Bell Telephone
Co.,
549 P.2d 903 (1976) (advertising). But
cJ Re Ekins-Dell Manrrfacturing
Co.,
253 F.Supp.
864 (1966) refusing to apply 2-302 by analogy to a security agreement. The court here
stressed
''
the economic dubiousness and institutional difficulty inherent in judicially
refusing to enforce otherwise valid agreements "on the ground of unconscionability.
According to Professor Atiyah, this represents a return to an era when courts exercised
a general paternalistic jurisdiction over contracts, in order to ensure their fairness and
probity, Remaining vestiges of this supposed jurisdiction reside in the control of penalty
clauses
or
contracts in restraint of trade.
See
R.F.F.C., Pt. One, and also Lord Diplock in
Schroeder MusicPublishing
Co.
v.
Mncaitley
[1974]
1
W.L.R. 1308. 1315,
lo
See,
e.g. The Siboen
and
the Sibotre
(19761
1
Lloyd's Rep. 293;
Pa0
On
V.
Lau
Yiu
119791 3 All E.R.
65;
North Ocean Shipping
Co.
v.
Hyundai
I19791
Q.B.
705;
The Universal
Sentinal
119821 2
W.L.R.
803 and
George Mitchell
Ltd.
v.
Finney Lock
Seeds(1983)2
All
E.R. 737 at 741.
l1
See
Photoprodmction
Ltd.
v.
Secirricor
119801
A.C.
827.
AlecLobb (Garages) Ltd.
v.
Total Oil
G.R.
Ltd.
(1983) 1
All
E.R. 944.
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