Contarct Law Essay

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The English law of contract has developed over hundreds of years of history. As society has developed it has been necessary for the law of contract and the law in general to develop in order to reflect the needs of society and varying commercial landscape that is being experienced at that point in societal development.

In this essay I propose to discuss the objective view of contract law in an ever developing commercial world that relies more on contracts than perhaps in the past and the need for it to be fair to both parties and interpret the true intention of the contracting parities. The essay will also look at the development of various pieces of statutory law albeit very generally. Further the need to promote fairness and objectivity in dealing with contract disputes underpins the basic principles of English contract law.

The objective test in contract law is common with most European legal systems. This was first, set out in English law in the case of Smith v Hughes[i]. This case I would argue provides a good starting point for dealing with cases from the objective standpoint, particularly the judgment of Blackburn J where he states; ‘If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other parties terms.;[ii]

Thus, by way of contrast the subjective test is used to establish the actual intentions of the parties contracting and the objective test therefore ascertains what the parties actually said and did and not what they intended to say or do.[iii] The argument which supports the use of the objective test stems from the commercial justification namely ‘that great uncertainty would be caused if a person who appeared to have agreed to certain terms could escape liability by claiming that he had no real intention to agree to them.’[iv] An example of the application of the objective test can be found in the case of Centrovincial Estates plc v Merchant Investors Assurance Company Ltd.[v] There is it has been argued three different interpretations of the objective test, namely the standard of detached objectivity which takes the view point of the fly on the wall, the second is to interpret the words in the contract as they were reasonably understood by the promisee which is the closest to the case of Smith v Hughes[vi]. The third interpretation of the objective test is standard of the reasonable person in the shoes of the individual making the offer.[vii] The test that is most favoured by the courts is illustrated by the case of Butler v Ex – Cell-o Corporation (England) Ltd[viii]. Which illustrates the approach the courts take in deciding whether or not the parties to the contract have reached agreement. This case involved the company Butler who wished to sell machine tools to Ex – Cell-O. An offer was sent to Ex Cell-O which contained Butler’s standard terms and conditions. Ex- Cell- O replied accepting the offering but enclosing their standard terms of contract. Butler returned the standard form to Ex – Cell-O stating they were in agreement with the terms therein. Butler added a further letter stating the contract was in accordance with their terms of business. Butler delivered the machine tools and invoice which is higher than previously contracted, which was in line with Butler’s standard terms of business. Ex – Cell – O refused to pay the increase. The Court of Appeal held that it was on Ex – Cell-O’s standard terms of business that the contract was made. While, it has been argued that the view taken in Butler[ix] is perhaps quite rigid, it is supported by many as it creates certainty which is a key element of English contract law. It assists both legal advisers and the judiciary in deciding whether, a contract has been formed....
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