TY - JOUR
AU - McMeel, Gerard
AB - Abstract Recent developments in the construction of contracts have favoured a more literal approach to contractual language, and been hostile to the implication of words to fill perceived gaps in professionally drawn contracts. At the same time there has been renewed interest in the role of good faith in contract law. Until very recently the two topics had not been linked in the case law. The retreat towards literalism, or more kindly textualism, evidences a philosophy of contracting which is diametrically opposed to one which embraces objective standards of good faith and fair dealing. The two strands of development are analysed and the likely future direction of travel considered from a perspective which embraces a more contextual and common sense approach to contract law. Introduction Poor idiot! Are you so foolish as to believe we will openly teach you the greatest and most important of secrets? I assure you that anyone who attempts to study, according to the ordinary and literal sense of their words, what the Hermetic Philosophers write, will soon find himself in the twists of a labyrinth from which he will be unable to escape, having no Ariadne’s thread to lead him out.1 Foucault’s pendulum proves the world keeps turning.2 This is as true in the law of contract as in any other human endeavour. Recent developments in two fields point in different directions, and the tension between them illustrates deeper problems in the underlying philosophy of the common law. In the level of attention they received, these two topics yielded matched asymmetries. The first was traditionally of zero interest to academic lawyers, but the meat and drink of commercial practitioners. What does this contract, or these particular contractual words, mean? This question embraces two principal legal tools or techniques. First, the interpretation of the express language of written contracts; this topic has achieved far greater prominence and undergone significant development over the last five decades, and there has been an explosion in academic writing on the topic in the last 20 years. Secondly, the implication of terms into any contract, whether written, oral or by conduct. This is essential where there has been no negotiation of terms, such as in the most common of contracts, the sale of goods. But I am not so much concerned with the legislature or the courts spelling out the minimum decencies of routine transactions—so-called ‘terms implied in law’—but rather with cases where the courts are invited to plug alleged gaps in particular contractual arrangements, usually otherwise fully articulated written contracts; that is ‘terms implied in fact’. This was a rather sleepy subject until the Privy Council roused it from its slumber in 2009, but six years later—in the manner of some cheesy television dramas—the Supreme Court informed us that it had all been a bad dream. English law had traditionally tacked to a more textual, rather than contextual approach to contractual language, and was suspicious of invitations to read between the lines. More recently it seemed that the construction of contracts—embracing both techniques of interpretation and implication—had been revamped and modernized, embracing a common sense approach to language, and a broadly contextual approach to the evidence, often at the expense of the actual text. Most recently the Supreme Court has signalled a retreat to textualism, trumpeting the values of certainty and predictability over flexibility and fairness. The second topic, which conversely, has always attracted the attention of law professors, but had been of zero interest to practitioners and judges, addresses the question: What is the role of good faith in contract law? Legal systems can be classified on a spectrum between those which adopt a strict approach to contractual negotiations and require exact performance on the one hand, and those which embrace, to a greater or lesser degree, more objective notions of commercial good behaviour. The last five years has seen an explosion of interest in the role of good faith arising from one first instance case in this jurisdiction, and developments elsewhere in the common law world. English law has no general principle of good faith, and never explicitly assigned a role for good faith and fair dealing in the construction of contracts, in stark contrast to many other jurisdictions and international instruments. The most recent appellate rhetoric remains hostile, and has linked the domestic rejection of good faith to the perceived merits of a stricter approach to contractual language. This article addresses the developments in these fields, from a perspective which favours a more contextual and pragmatic approach to contractual disputes, informed by common sense and objective standards of commercial good behaviour. Certainty and Flexibility: Law, Fact and Proof In an essay first published in 1968 Professor Patrick Atiyah observed in a highly prescient discussion: it hardly seems to be open to doubt that construction has become by far the most popular technique for the solution of practically all problems in the law of contract which do not depend on unyielding rules of positive law, such as capacity, illegality and the doctrine of consideration.3 He discerned the principal advantage of the technique as being its ‘extreme flexibility’ and the avoidance of the ‘suffocating grip’ of precedent.4 Balanced against that, Atiyah noted the risk of uncertainty, and expressed concern about the artificiality of the tool. That balance between certainty and predictability on the one hand, and flexibility and justice on the other remains at the core of all discussions of interpretation. Bemoaning what was then a dearth of academic, and indeed judicial, discussion, Atiyah concluded ‘that too little attention has hitherto been paid to what is involved in the technique of construction, a technique which has absorbed almost as much of the law of contract, as negligence has absorbed of the law of torts.’5 Given the explosion of scholarly comment since the turn of the millennium on interpretation and implication, together with scholarly analysis of entire agreement, non-reliance and conclusive evidence clauses, that lament cannot be echoed now. We now know—because the Supreme Court has told us authoritatively6—that the starting point for the modern incarnation of the subject of contractual interpretation was 1971 and Lord Wilberforce’s speech in Prenn v Simmonds.7 One would scour the law reports of the 1950s and 1960s in vain for general pronouncements on this topic. This was the era of rampant exemption clauses, not then subject to general legislative intervention, when strained construction was commonly used as a judicial ‘secret weapon’ against the excesses of small print.8 The alternative starting point is 1997 and the celebrated judgment of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (‘ICS’).9 But curiously that landmark is not mentioned, nor even cited, in the Supreme Court’s most significant recent decision in Arnold v Britton.10 One could encapsulate what Lord Hoffmann achieved in his discussions of the topic—principally in Mannai Investments Ltd v Eagle Star Assurance Co Ltd11 and ICS—as being to spell out what the Courts were doing when routinely faced with unclear, ambiguous, incomplete and botched contractual provisions. They were doing their best to make sense of them from a perspective of a reasonable person, knowing what the parties knew or reasonably should have known. Nobody had quite voiced this elementary proposition in appellate judgments so authoritatively and elegantly before, although it might be said that both Lord Goff and Lord Hoffmann had done so in extra-judicial lectures.12 It put common sense at the heart of the legal interpretation of texts, as Hart and Honoré had done with the legal concept of causation in the 1950s.13 The topic was that straightforward. All those Latin maxims and clumsy presumptions were really extraneous and unnecessary ‘intellectual baggage.’ Broad histories of the development of English law on contractual interpretation often instance two rival (perhaps caricatured) schools of contractual interpretation; namely, the literalists (or the more traditional approach)14 and those favouring a more purposive approach (supposedly the more modern view). Lloyd LJ once quipped that many questions of construction seem ‘designed to separate the purposive sheep from the literalist goats’.15 The idea of two rival schools of thought based on differing theories of the interpretation of legal texts may have deep roots. One view is that a major schism between the Sabinian and Proculian schools of jurists in classical Roman law was based on interpretatio verborum.16 The Proculian school favoured an objective approach to texts ‘in the interests of certainty and the encouragement of exact drafting’.17 That disciplinary approach sometimes resurfaces. In modern English law the supposed dichotomy is too simplistic. In Arbuthnott v Fagan18 Sir Thomas Bingham MR observed that ‘construction is a composite exercise, neither uncompromisingly literal nor unswervingly purposive’.19 Subsequently, Lord Bingham described his own dictum as the ‘sober truth’, and further remarked that ‘it is one thing to abjure pedantic literalism, as we all do; it is quite another to suggest that the terms in which the contracting parties have chose to express their bargain are not in all cases important and in most decisive’.20 So too Lord Mustill cautioned that clauses ‘should not be interpreted in the manner of a philologist or a pedant’.21 By 2013 in the Supreme Court Lord Mance was emphatic that ‘the proper approach is contextual and purposive.’ 22 Lord Hope noted ‘the way strict rules for the interpretation of contracts have been discarded in favour of giving effect to what a reasonable person would have understood the parties to have meant by the language used’.23 More recently, it might be thought that the Supreme Court’s emphasis on the language of the contract in Arnold v Britton24 indicates that the pendulum is swinging back to a stricter, and less liberal, approach.25 However, subsequent authorities seem to insist that the common sense approach prevails, and that literalism has been firmly rejected.26 More generally, the same approach is now seen to underlie the interpretation of statutes, contracts, and wills. A seminal example is the statement of principle by Lord Blackburn in River Wear Commissioners v Adamson.27 More recently, in Trump International Golf Club Scotland Ltd v Scottish Ministers Lord Hodge noted: There is a modern tendency in the law to break down divisions in the rules on the interpretation of different kinds of document, both private and public, and to look for more general rules on how to ascertain the meaning of words. In particular, there has been a harmonisation of the interpretation of contracts, unilateral notices, patents and also testamentary documents.28 As part of the process of construction the courts may test rival formulations of the rule against various hypothetical situations which could have arisen in order to ensure that the proposition ultimately adopted is suitable for the range of disputes which could potentially arise, particularly where it is considering a standard form or a widely used provision.29 Arden LJ has stated that ‘unless the contrary appears, the court must assume that the parties to a commercial document intended to produce a commercial result, and the court must thus take into account the commerciality of the rival constructions’.30 It has become somewhat modish to describe the process of weighing the consequences as ‘iterative construction’.31 So Lord Mance has stated that ‘the resolution of an issue of interpretation in a case like the present is an iterative process’.32 Private law scholars have recently expressed puzzlement at the failure of contract law scholarship to employ the concept of ‘defences’, either analytically or as an organizing tool. This is in sharp contrast to other categories of tort or unjust enrichment, or the criminal law.33 Obviously, there is a distinction between a party denying that one of the positive elements for a binding contract (agreement, consideration, or form) is present, and reliance on vitiating factors (fraud, misrepresentation, duress, or undue influence). Denials in the former category put the other party to proof. Broadly speaking, a party asserting a vitiating factor has the burden of pleading and proving it. I understand contractual interpretation to be different. Each party will ordinarily advance its preferred construction (or alternative constructions), and make submissions in support of it. But neither side bears a burden of proof.34 If a question as to the meaning and effect of the contract is an issue between the parties, which needs to be determined to resolve the case, the judge must grasp the nettle, and determine it. There is no doubt that the judge may prefer a construction which neither party has advanced. This point, and the absence of any discussion of burden of proof, may derive from the time-honoured characterization of questions of construction as questions of law.35 The Supreme Court of Canada recently revisited this characterization, preferring the view that such questions were mixed ones of law and fact.36 However that Court has beaten a hasty retreat in the context of standard terms,37 one of the areas where the characterization of this question as one of law is typically lauded.38 The Singapore Court of Appeal has recently embraced the proposition that neither party bears the burden of proof in a contract interpretation case.39 One might wonder what role solicitors and barristers play. Of course, most commonly, because issues and disputes resolve themselves, or cases settle, they are making educated predictions about how a court might resolve the point. But even in the forensic arena how the debate is framed and argued is often pivotal. The modern day Cicero, one or other of the stars of the commercial bar, is valued for his or her ability to cajole a court to read a document their way. Selecting the relevant evidence may be crucial. We continue to adhere to exclusionary rules on prior negotiations and subsequent conduct, but the boundaries of these exceptions are notoriously porous, and circumventable.40 Given the importance of the background evidence or ‘factual matrix’, judges now use case management powers to control the admission and extent of evidence in specialist courts in England and Wales, and in other jurisdictions. The Admiralty and Commercial Courts Guide now explicitly provides for parties in their statements of case to ‘specifically set out in his pleading each feature of the matrix which is alleged to be of relevance’.41 That requires a party to set out their stall on the extrinsic evidence at the commencement of the case, and presumably controls disclosure, submissions, and other matters. Similar steps have been adopted by judicial guidance in Scotland42 and Singapore.43 A word about standard of proof. Again there is little or no explicit discussion. Once the construction issue is resolved, that is what the contract means as a matter of law. If neither party has the burden of proof, how can a standard of proof be relevant? It would be tempting to think that implication of terms is the same. I think the correct characterization is that, as part of the process of construction (the meaning and effect of the contract as a whole, including its implicit provisions) the presence or absence of an implied term is also a question of law. However, Lord Hoffmann has recently been castigated44 for appearing to suggest in the Belize Telecom case, or at the very least misleading academic commentators to suppose, that the test for implying terms was one of mere reasonableness, and not one of strict necessity.45 Decades earlier Lord Denning was similarly chastised by the House of Lords for brazenly advocating that the courts could imply a term where it was merely reasonable to do so.46 What Lord Hoffmann in fact said was that implication of terms should be aligned with the interpretation of express terms. This yields some useful insights neglected by the traditional tests: the objective principle applies; the instrument should be considered as a whole; and the admissible surrounding circumstances are the same. But any suggestion that necessity is not the threshold was anathema to the highest court. What this seems to be about is akin to a burden and standard of proof point. Where a party submits a term should be implied they are treated as bearing a burden of proof, and the courts wish to insist that the threshold is high for such an implication. However, I am not really sure that this analysis—which appears instinctive—is correct. There have been many occasions where judges themselves suggest or discern necessary additional language or terms when they consider the instrument as a whole. It sometimes happens after submissions have finished in the process of judgment writing. Overall the implication of terms in fact is a legal question and an essential part of the exercise in construction.47 Fundamental Principles of Contractual Interpretation A defining feature of English contract and commercial law is that the actual language chosen by the parties is taken very seriously indeed, with the words of the document often determinative of the result. It is the jumping off point for all exercises in construction, and often the ultimate destination. Many have trumpeted this loyalty to the contractual language, coupled with the absence of any general principle of good faith, as virtues of the common law approach.48 Even leading proponents of the modern approach to construing commercial contracts, who favour a broad approach to evidence outside the four corners of the contract, nevertheless stress that primacy ought to be accorded to the document which records the parties’ agreement. This is the principle of the ‘primacy of the contractual language’, or of ‘loyalty to the text’.49 In the words of Lord Steyn in Society of Lloyd’s v Robinson: ‘Loyalty to the text of a commercial contract, instrument or document read in its contextual setting is the paramount principle of interpretation.’50 This principle of the primacy of the document is reflected in Lord Hoffmann’s restatement in Investors Compensation Scheme Ltd v West Bromwich Building Society which endorses ‘the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents’.51 In Bank of Credit and Commerce International SA (in compulsory liquidation) v Ali52 Lord Hoffmann reaffirmed that ‘the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage’.53 In 2015, the majority of the Supreme Court in Arnold v Britton54 put the principle of loyalty to the text at the heart of its discussion of contract interpretation.55 Loyalty embraces the remainder the text: that is a holistic approach In addition to the internal context, the external context matters, and is always relevant. The modern approach to construction adopts a generally permissive attitude to the admissibility of matters within the legal, factual, and regulatory matrix as part of the contextual scene.56 The exercise is carried out in the light of the objectively ascertainable background facts (including, where appropriate, the legal and regulatory environment) available to both parties. In contrast, as a general rule the declarations of subjective intent, the prior negotiations57 and subsequent conduct58 of the parties are inadmissible.59 Balanced against loyalty to the text is purposive reasoning, which gives effect to perceived business common sense. The seminal statement of the importance of business common sense came in The Antaios60 where Lord Diplock stated: ‘if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.’ Writing extra-judicially, Lord Bingham somewhat saucily insisted on this approach: ‘Any other approach would flout the principle that the law should be the handmaid of commerce, not its dominatrix.’61 This has proved to be one of the most contentious principles in recent authorities. Lord Diplock’s language was subsequently toned down, with business common sense taking on the role of a tie-breaker. Longmore LJ restated the approach: ‘it is much more appropriate to adopt the more, rather than the less, commercial construction.’62 This formulation found favour in the Supreme Court in 2011, in Rainy Sky SA v Kookmin Bank63, where in a judgment delivered by Lord Clarke, he rejected any ‘plain meaning’ rule, and clearly held that where there were two tenable constructions of a commercial contract judges were entitled to prefer the one which accorded with business common sense. Also in Rainy Sky counsel for the bank submitted it was not necessary for it to formulate any credible commercial reason for a construction which was linguistically tenable, but otherwise surprising. This received short shrift from Lord Clarke who sagely noted that if any such reason could have been discerned it would have featured prominently in the bank’s case.64 Accordingly, the absence of a commercial purpose may doom many strict readings of contractual terms.65 However, some judges have expressed doubts about their ability to weigh considerations of commercial common sense.66 These doubts reflect the change of emphasis which prioritizes the language of the document over context and commercial common sense most closely associated with Arnold v Britton.67 Arnold v Britton Lord Carnwath laconically observed in Arnold v Britton: ‘As Tolstoy said of unhappy families, every ill-drafted contract is ill-drafted “in its own way”’.68 There are no particular rules applicable to badly drafted contracts.69 The Supreme Court revisited the topic of interpretation in Arnold v Britton70 and emphasized the importance of loyalty to the actual language of the document. However, the facts illustrate that manifest unfairness may result when a legal system gives absolute priority to the actual language of the contract, where there is no statutory or regulatory override on grounds, such as reasonableness, of the substantive terms.71 The case concerned a holiday park on the picturesque Gower peninsular in South Wales, owned by the landlord, comprising 91 chalets let on very similar terms for 99 years, with one significant discrepancy between two classes of tenants. Each lease asserted that all chalets were let on similar terms, that the various covenants with the landlord were for the benefit of all in the park, and that leases of other chalets would contain similar obligations. The disputed clause was the annual service charge. In respect of 70 of the leases it provided for a payment which was ‘a proportionate part of the expenses and outgoings incurred by the lessors in the repair maintenance renewal and the provision of services’ and provided for ‘the yearly sum of £90’ for the first three years, increasing by 10% thereafter for every subsequent three-year period. In respect of the other 21 leases the clause was similar save that the 10% increase was for every subsequent year.72 Illustrating the exponential effect of compound interest, by the time of the Supreme Court judgment in 2015 the annual service charge for the minority tenants had grown to over £2500 per annum, and would reach the dizzying sum of over £550,000 by 2072.73 It was, therefore, unsurprising that the 21 lessees argued that the words ‘up to’ should be read into the clause prior to ‘the yearly sum of £90’. That is, the numerical figure was a cap and the rate should be set with regard to the actual expenses and outgoings of the lessor. The lessees stressed the astronomical numbers as illustrating the extreme unlikelihood of their having agreed to automatic, compounded increases. These arguments were rejected by a 4:1 majority of the Supreme Court, with Lord Carnwath the sole dissentient. In the leading judgment Lord Neuberger (with whom Lords Sumption and Hughes agreed) identified 45 years of pronouncements on the interpretation or construction of contracts from Prenn v Simmonds,74 through Chartbrook Ltd v Persimmon Homes Ltd,75 to Rainy Sky SA v Kookmin Bank.76 Drawing the threads together his Lordship stated: When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’77. And it does so by focussing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the [contract], (iii) the overall purpose of the clause and the [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions. …’78 Three points clearly emerge. First, the re-emergence of the phrase ‘natural meaning’ in the highest court, despite Lord Hoffmann’s previous scepticism about the phrase. Secondly, this fed into what was clearly intended to be emphatic endorsement of the principle of the loyalty to the text. Thirdly, whilst still relevant and admissible, the subordination of both the contractual context and commercial common sense to the principle of loyalty to the text. Indeed the only evidence considered by each court was the various iterations of the leases and the Retail Price Index from 1970 to 2010.79 The majority, while acknowledging some drafting errors, did not consider that anything had gone significantly wrong with the language.80 That conclusion can be immediately contrasted with the careful dissenting judgment of Lord Carnwath, to which it is impossible to do justice in a summary. Lord Carnwath considered the factual matrix to include the knowledge of the landlords as parties to the leases of not just the ‘extraordinary’ increases which would be faced by the minority lessees, but also of the ‘dramatically increasing, and ultimately grotesque, differences between the amounts payable by the two different groups of lessees on the same estate’.81 So too, the individual lessees would have viewed the chalets as a long-term investment for their families, and would not have risked undue financial burdens.82 The reasonable expectation of each lessee in the same development that all other leases would be granted on the same terms was reflected in the other provisions of the contract.83 Lord Carnwath, unusually but compellingly, invoked public policy as evidenced by statutory interventions as a legitimate source of guidance in areas analogous to those where the legislature had intervened.84 Lord Carnwath observed: Even where the legislature has not intervened, the courts have a responsibility in my view to ensure that such clauses are interpreted so far as possible not only to give effect to their intended purpose, but also to guard against unfair and unintended burdens being placed on the lessees.85 Lord Carnwath unhesitatingly concluded that something had gone wrong with the drafting. The clause contained two mutually inconsistent formulations—a proportionate share and a fixed amount—leaving an ambiguity to be resolved.86 He concluded that the modest implication making the fixed sum an upper limit was warranted. The implication of ‘up to’ avoided a result which was a commercial nonsense.87 In stark contrast Lord Neuberger clearly intends Arnold v Britton as the last word for now on contractual construction in the Supreme Court.88 Writing extra-judicially Lord Neuberger has suggested that in a case like Arnold ‘I believe a common law judge has to harden his or her heart’ in the interests of certainty or predictability. This is difficult to understand. A one-off case concerning individual consumers should never have been the vehicle for this exercise in the disciplinary approach, or perhaps in modern parlance virtue-signalling, the perceived virtues being certainty and loyalty to the text above all other principles.89Arnold also appeared to signal an apparent down-grading of the role of commercial or business common sense from its prominent role in Rainy Sky v Kookmin Bank.90 Obviously this represents at least an important change of emphasis,91 but nevertheless should not be seen as undoing the central tenets of the modern restatement of contractual construction brought about by the preceding five decades of case law in the House of Lords and Supreme Court.92 No doubt was cast on the general principles enunciated in the sequence of decisions from Prenn v Simmonds93 to Rainy Sky SA v Kookmin Bank.94 Nevertheless, whilst unexceptionable in its statement of the applicable principles of construction, the application of those principles to the facts of Arnold demonstrates that something has gone seriously wrong with the reasoning of the majority, representing a marked departure from the common sense approach that has characterized this topic over the last five decades. Loyalty to the text, the holistic principle, the relevance of the wider legal and factual matrix, commercial common sense and regard to the commercial purpose of the parties are all essential principles guiding the technique of interpretation. The question arises: how are these potentially competing principles to be balanced? It is because each may point in different directions that parties and lawyers can disagree in good faith about the meaning and effect of contractual language so routinely. Ultimately it is a question of judgment how the different principles are traded off in a particular case, and where the parties cannot resolve the dispute a judge or arbitrator must give a reasoned resolution. Ordinarily little is to be gained from criticizing the results in construction cases involving one-off disputes. However, given its prominence, Arnold v Britton represents an exception. The majority of the Supreme Court got the balancing exercise very badly wrong. Most importantly, there was over-concentration on the latter half of the disputed clause, rendering the preceding words mere surplusage. Insufficient weight was given to the remainder of the instrument, the relevant background and common sense. Lord Carnwath’s sensible and holistic reading of the leases is more consistent with the common law approach to interpretation over the centuries, and not just the preceding 50 years, and demonstrates that (as Atiyah suggested) that the technique of construction is sufficiently flexible to reach just and appropriate results on facts such as these. In contrast it was a failure of leadership, and a collective failure of judgment on the part of the majority to subject the minority lessees to what has recently been colourfully described, by Boris Johnson, as a punishment beating. Implication of Terms in Fact Turning to implication in fact, the most significant recent case is Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd.95 As stated above, here Lord Neuberger expressed concern, in part based on a considerable body of academic comment on Belize Telecom96, that there had been some perception that that authority had changed the law, shifting the threshold for implication from necessity to reasonableness. Lord Neuberger considered that Belize Telecom was open to misinterpretation and opined that Lord Hoffmann’s approach should now be seen as ‘a characteristically inspired discussion rather than authoritative guidance’.97 Despite referencing his otherwise ‘outstanding’ contributions to the law in this context Lord Neuberger came to bury Lord Hoffmann, not to praise him. In contrast, Lord Carnwath, whilst accepting that the necessity threshold had survived Belize Telecom, refused to question the continuing authority of Lord Hoffmann’s advice. Rather: ‘properly understood, I regard it as a valuable and illuminating synthesis of the factors which should guide the court’.98 Lord Clarke (agreeing with both Lord Neuberger and Lord Carnwath) was clear that the Privy Council ‘was not watering down the traditional test of necessity’.99 With that caveat it is submitted that Lord Carnwath’s view is to be preferred to Lord Neuberger’s, and that Lord Hoffmann’s approach will continue to be seen as a useful additional part of the judicial armoury, alongside the traditional tests, for answering the intensely practical and contextual questions which arise when a court is invited to imply a term or words into a contract.100 The facts of Marks & Spencer concerned commercial leases which provided for rent to be payable on the usual quarter days ‘yearly and proportionately for any part of a year by equal quarterly instalments in advance’. A break clause permitted termination on 24 February 2012 by giving six months’ written notice provided that, on the break date, there were no rent arrears, and on condition that the lessee had paid a premium calculated as one year’s rent. The lessee made the necessary payments, including the full quarter’s rent in advance due on 25 December 2011, and gave due notice, but then sought repayment of the sum paid for the post-termination period on the basis that there was an implied term that such sums were recoverable. The Supreme Court held that no such term should be implied. Given that it was well established that rent was not apportionable at common law or under statute, in a professionally drafted lease it would not be appropriate to imply a term, save in very clear cases, because such a term was not necessary to make the lease work or avoid absurdity. In Marks & Spencer, the Supreme Court was emphatic that the benchmark for implication was necessity. It has now been made very difficult to imply terms in fact into professionally drafted contracts. The Supreme Court might have gone further in the articulation of an arguably more stringent standard, suggested by Lord Sumption in argument, and recorded by Lord Neuberger, that ‘a term can only be implied, if, without the term, the contract would lack commercial or practical coherence.’101 Whilst this appears to have been thrown out only tentatively, as a matter of conventional language a requirement that a court would only plug an alleged gap if the contract would otherwise be incoherent looks like it sets the bar higher than business necessity. It would be a retrograde step if adopted. Overall Marks & Spencer marches in step with Arnold v Britton, and represents a backlash against the more pragmatic and contextual approach which appeared to be entrenched in the decisions of the House of Lords in its last few decades as the UK’s highest appellate court. Where Are We Now? It may be that the excessive literalism, strictness of the rhetoric, and the actual results in the Supreme Court decisions in Arnold v Britton (on interpretation) and Marks & Spencer (on implication), both in 2015, represented an aberration or an over-correction. None of the modern principles of interpretation have been scorned and no leading authorities held to be wrongly decided. The continued relevance of modern principles of contractual construction is best demonstrated by two subsequent decisions of the Court of Appeal, the first of which has been upheld by the Supreme Court. First, in December 2015 BNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 plc (‘the Lloyds Bank Bonds case’), which was upheld by the majority of the Supreme Court in June 2016.102 Secondly, Globe Motors, Inc v TRW Lucas Varity Electric Steering Ltd decided in April 2016.103 The Lloyds Bank Bonds case featured the capital raising efforts of one of the UK’s leading banking groups in the wake of the Global Financial Crisis of 2007–08. Amongst the prudential measures required of banks are minimum capital requirements based on international standards (at the time of the Crisis, known as Basel II). In order to test their resilience to economic shocks central banks and regulators subjected banks to ‘stress tests’ based on negative economic conditions. In March 2009 the then UK regulator conducted such a test on Lloyds and concluded that it had failed to meet the core regulatory capital requirement. At a time when it was difficult for the bank to raise sufficient new investment purely through equity issues it launched a capital-raising issue of over £8 billion by way of the bonds, offering attractive coupon interest averaging over 10 per cent, and in some cases not redeemable until 2032. However, under their terms the Bonds would be converted into bank shares or equity if the Bonds ‘ceased to be taken into account’ for the purpose of any stress test. The terms were unsatisfactorily drafted in utilizing the language of the Basel II regime. In the wake of the crisis the international measures for regulatory capital were enhanced under a new regime, using different terminology (‘Basel III’), with effect from 2013. At a further stress test in 2014 the regulator did not take into account the Bonds, so Lloyds bank claimed a ‘Capital Disqualification Event’ had occurred. That contention was upheld by the Court of Appeal and by a majority of the Supreme Court,104 applying the modern principles of contractual construction. In some respects the reasoning of the Court of Appeal is wider, especially in relation to the admissible materials. However, both courts to some extent were correcting a badly drafted contract, and had regard to some pretty recondite regulatory and other background material by way of admissible background to justify their conclusions. Therefore, just as Lord Hoffmann had done in Investors Compensation Scheme, in the Lloyds Bank Bonds case both Gloster LJ in the Court of Appeal and Lord Neuberger (delivering the judgment of the majority of the Supreme Court) set out in considerable detail the legal, regulatory, and factual matrix, before even quoting the disputed clauses.105 Indeed, the background was the Global Financial Crisis and the near-collapse of several of the UK’s high street banks. The nine judges who heard the case unanimously rejected the bondholders’ explicitly literal argument106 based on an ‘embedded definition’ by reference to superseded regulatory language which, it was argued, meant that the 2014 exercise was not a relevant stress test for the purposes of determining a Capital Disqualification Event. In respect of the other construction issues both Gloster LJ and Lord Neuberger invoked the commercial purpose of the Bonds and the relevant clause, common sense and concluded that something had gone wrong with the language.107 It is difficult to resist the conclusion that if there was an occasion to hold a party to the exact terms of its badly drafted document to demonstrate the strictness of the English approach, it should have been Lloyds and its bonds, not the hapless lessees in Wales. In Globe Motors108 Beatson LJ drew the threads of recent developments together, referring to ‘adjustments of emphasis’ in 2015 in Arnold v Britton and Marks & Spencer. The former emphasized the importance of loyalty to the contractual language. The latter—whilst accepting that interpretation and implication are neighbouring techniques—insisted they were governed by different rules. That puts things into proper perspective. As subsequent cases, including the Lloyds Bank Bonds case,109 have shown, the commercial or contextual approach to construction and implication is entrenched. The modern approach was pithily summarized by Briggs LJ in the Court of Appeal in 2016 in Nobahar-Cookson v The Hut Group Ltd110 where his Lordship stated: ‘The court must still use all of its tools of linguistic, contextual, purposive and common-sense analysis to discern what the clause really means.’111 Most recently, in 2017, in Wood v Capita Insurance Services Ltd112 the Supreme Court went so far as to refuse to hear argument based on the proposition that Arnold v Britton113 had ‘rowed back’ from the guidance in Rainy Sky SA v Kookmin Bank,114 stating that ‘the legal profession has sufficient judicial statements’ on contractual interpretation.115 Despite that, Lord Hodge went on to summarize the approach, stressing the continuities in the authorities and stating that: Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation… . The recent history of the common law of contractual interpretation is one of continuity rather than change. One of the attractions of English law as a legal system of choice in commercial matters is its stability and continuity, particularly in contractual interpretation.116 Were it not for the highly regrettable misapplication of the governing principles to the leases in Arnold that conclusion might be defensible.117 It is to be hoped that in future courts are better able to balance the governing principles of construction than the Supreme Court managed in Arnold, and that that literalist jerk of the knee proves to be a one-off. The next question which arises is whether the process would benefit from the recognition of another principle to add to the mix. A Role for Good Faith? Many legal systems would consider it obvious that one of the factors which a court should take into account in interpreting a contract (or implying a term) are considerations of good faith and fair dealing, based on objective standards of acceptable commercial behaviour. This factor is strikingly absent from orthodox accounts of English law. This distinguishes it from many other legal systems, including the civil law countries of the European Union,118 and the USA under the Uniform Commercial Code.119 The principle of good faith also appears in international restatements of contract law.120 The orthodox position is that English law does not recognize any overarching obligation to act in good faith in the negotiation or performance of contracts, or in their construction.121 Three judicial perspectives have surfaced in this jurisdiction. First, the sceptical approach represented by Walford v Miles, where Lord Ackner described a duty to negotiate in good faith as being ‘inherently repugnant’ to the adversarial position of negotiating parties and ‘unworkable in practice’.122 Secondly, the functional equivalence approach in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd123 where Bingham LJ identified ‘piecemeal solutions’ developed at common law, in equity and by legislation which played an analogous role to good faith in civil law systems. Thirdly, and more boldly, in a widely discussed and much-cited judgment in 2013 Leggatt J in Yam Seng Pte Ltd v International Trade Corporation Ltd124 observed that if the orthodox position was correct then: ‘In refusing, however, if indeed it does refuse, to recognise any such general obligation of good faith, this jurisdiction would appear to be swimming against the tide.’125 Interestingly (and echoing Atiyah’s flexibility) Leggatt J rejected concerns that an overarching duty might entail uncertainty by noting that it involves ‘no more uncertainty than is inherent in the process of contractual interpretation’.126 Historical Roots of Good Faith In contrast to English orthodoxy, good faith is prominent in modern civil law systems. This can arguably be traced back over 2000 years to an era when the Roman Republic was tottering. It was in 44 BC that one of the most influential discussions was essayed by Marcus Tullius Cicero. His treatise On Obligations (De Officiis)127 was addressed to Marcus Junior, whom one suspects was neglecting his course of philosophical studies in Greece in favour of the more sybaritic pleasures offered by that province. I do not claim that Cicero was a great or original legal philosopher128 (as opposed to advocate or orator or politician), but his fame129 and the survival of many of his works make him hugely influential. In Robinson, Fergus, and Gordon’s European Legal History130 Cicero’s shadow is there throughout, from the first paragraph. In the course of his occasionally pompous pronouncements to his offspring, Cicero cited two scenarios which have both attracted much subsequent discussion. Here is the first one: let us assume that a good man has shipped a large cargo of corn from Alexandria to Rhodes at a time when the Rhodians were suffering shortage and hunger, and grain was extremely expensive. Assume too that he knew that several merchants had put out from Alexandria, and that he saw their ships laden with corn on course making for Rhodes. Should he report this to the Rhodians, or without divulging the fact sell his own cargo for the highest possible price?131 There is then discussion of two rival views. One narrow, limiting any duty of disclosure to defects in the goods. The other insists on full cards on the table: there should be no asymmetry of information between seller and buyer. The more narrow advocate ripostes: ‘Concealment is one thing, and silence another…. I am under no obligation to tell you what it is in your interest to hear.’132 This leads to Cicero’s second scenario, and the one which has proved much more common in human experience: Suppose that a good man is selling his house because of certain defects in it known to him but to no one else. Though considered healthy, it actually harbours disease. People do not know that snakes are to found in every bedroom. The timber has rotted and is on the verge of collapse.133 Is he entitled to get the best price he can without informing potential buyers of these facts? Cicero is clear that the answer in both cases is that there should be disclosure.134 Thus the good man will not indulge in pretence or dissimulation to gain a better bargain in buying and selling. In fact dolus malus (malicious fraud) which we have been considering has been punishable both by the laws … and by judgements unsupported by law where the phrase AS GOOD FAITH DEMANDS is appended… . So all falsehood must be excluded from business transactions.135 One could read certain passages as restricted to fraud, concealment, or pretence but overall assertions that ‘BETWEEN HONEST MEN DEALING MUST BE HONOURABLE AND WITHOUT DECEIT’ and that good faith should have the widest terms of reference applicable to buying and selling, hiring and letting, partnerships and other ‘activities which form the structure of our communal life’136 favour an expansive approach to the principle. That communitarian ethic is hard-wired into the Continental legal tradition in comparison with the more individualistic ethic of the common law. ‘The case of the Rhodian Corn’ was analysed in some detail by one of the 20th century’s great contract lawyers, Professor Michael Furmston.137 He noted that Cicero was interested in the ethical issue, more than the law and goes on to consider how a modern legal system would answer the question. He identifies typical textbook treatments differentiating the supposedly general principles of contract law from special cases (insurance, fiduciary relationships), including—in the most common contract in the real world—the requirement for the seller of goods to supply satisfactory goods: In practice, this means that a commercial seller of goods is liable under the doctrine of implied terms for most of the defects which are to be found in the goods. Indeed, the law of sale of goods tells us that one of the ways for the seller to avoid this liability is actually to make the defects known to the buyer.138 Furmston notes that the Rhodian case is not concerned with defects, but market knowledge. He recounts the story of an undergraduate chum who one weekend bought a painting from one art dealer for £50 and sold it to another nearby one for £15,000. English lawyers would assume both contracts are valid. French law might suggest a different answer. Furmston notes that Cicero’s expansive approach to disclosure was way ahead of the law of his time and even centuries later. But he concluded here and developed the argument elsewhere139 that it is too simplistic to say that English law does not recognize good faith. Like many of the discussions on good faith Furmston focuses on its potential role in the negotiation process (and hence duties of disclosure). Post formation the recognition of a duty of good faith in the context of the performance would have a major impact on the construction of those contracts. I think most common lawyers would instinctively give a negative answer to both Cicero’s scenarios. Indeed, on the practically more relevant second example we have erected a whole superstructure of pre-contract enquiries and surveys on the premiss that caveat emptor is the bedrock rule for the sale of land. That is not to say that Cicero’s influence has not been felt on this island. Three modern biographies tackle legal giants of the Age of Enlightenment. In the 18th century a classical education was the norm for aspiring professionals. William Murray, later Lord Mansfield, was already being compared to Cicero for his gifts as schoolboy at Westminster (when he was not being teased about his Scottish accent), and the same tribute appears on his epitaph.140 Cicero also prominently features in the intellectual hinterland of Sir William Blackstone141 and Welsh polymath Sir William Jones.142 Accordingly, in the 18th-century Cicero is referenced by the father of English commercial law, Lord Mansfield in two prominent authorities. First, Luke v Lyde143 where international harmonization of commercial and maritime law is lauded. Secondly, a general duty of good faith in contract law was pronounced in Carter v Boehm,144 in the seminal discussion of duties of disclosure in insurance law: ‘The governing principle is applicable to all contracts and dealings. Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.’145 However, as noted by Lord Hobhouse over two centuries later in The Star Sea: Lord Mansfield’s universal proposition did not survive. The commercial and mercantile law of England developed in a different direction preferring the benefits of simplicity and certainty which flow from requiring those engaging in commerce to look after their own interests.146 The Interstitial Presence of Good Faith in English Law After the 18th century good faith was closeted up as the contractual principle which dared not speak its name. English law committed itself to a more pragmatic and piecemeal approach. As suggested by Lord Bingham’s functional equivalence approach many doctrines, especially the implication of terms, and some principles of interpretation, such as strict construction of exemption clauses, may play a role analogous to that of an overarching duty of good faith in other systems. Similarly Lord Steyn, writing extra-judicially, observed that English law tends to use discrete doctrinal tools, rather than an overarching principle: ‘Thus the continental systems recognize an overarching duty of good faith in the performance of contracts. The common law achieves similar results by a resort to implied terms, rectification and estoppel.’147 Previously, with respect to the technique of implication, Sir Johan Steyn made these comparative observations: Compared to the civil law, English law shows a considerable hospitality to implied terms. In civil law countries the existence of a generalized duty of good faith in the performance of contracts reduces the need for the implication of terms. In the absence of a doctrine of good faith English law has to resort to the implication of terms by reason of the nature of the contract … or by reason of special circumstances of a particular contract.148 A prominent example is the implication of terms which impose a duty to cooperate on the parties.149 Obviously, there are statutory interventions in this field, often based on EU law, for example, the explicit recognition in Part 2 of the Consumer Rights Act 2015, and previously the Unfair Terms in Consumer Contracts Regulations 1999, Regulation 5, of a ‘good faith’ control over unreasonable terms in consumer contracts.150 In this context, in the first House of Lords guidance on the earlier 1994 version of the Regulations—Director General of Fair Trading v First National Bank plc—Lord Bingham said of good faith that ‘since Lord Mansfield was its champion, it is not a concept wholly unfamiliar to British lawyers’.151 Lord Bingham was of course referring to Carter v Boehm.152 In the commercial field, there is provision for mutual duties of good faith between principal and agent in commercial agency arrangements.153 Teubner’s Irritant In the context of European influence one of the most provocative discussions of the impact of good faith in English law is Professor Gunther Teubner’s meditation, nearly two decades old now.154 He is sceptical of the ‘convergence thesis’, by means of international and regional harmonization, which is assumed by much scholarship to be the inevitable direction of travel. That now seems prescient. Teubner also takes issue with one of the central tools of comparative lawyers, that of ‘functional equivalence’, whereby careful examination identifies different doctrinal tools providing solutions to the same factual problems. This concept of functional equivalence is the underpinning of Lord Bingham’s enumeration of various specific doctrines as English equivalent solutions in Interfoto. Discussing good faith and similar ‘general clauses’ which characterize the continental legal tradition, Teubner foresaw an unhappy integration into our domestic scene: The specific way in which continental lawyers deal with such a ‘general clause’ is abstract, open-ended, principle-oriented, but at the same time strongly systematised and dogmatized. This is clearly at odds with the more rule-oriented, technical, concrete, but loosely systematised British style of legal reasoning, especially when it comes to the interpretation of statutes.155 That last point can be readily illustrated by referring back to Lord Carnwath’s dissenting speech in Arnold v Britton and his innovative, but untypical, willingness to develop the common law to reflect statutory policy. Teubner briskly surveys the dynamic impact of Treu und Glauben in German law, through professorial and judicial activism and systematization, facilitating a relational approach to contracting, and involving duties of performance, information-provision and cooperation. Good faith also prevents the abuse of rights, and underlies legal responses to change of circumstances.156 In contrast, Teubner foresaw any deployment of good faith in English law being unsystematic and characterized by ‘close fact-oriented case analysis with loosely arranged arguments from broad principles and policies.’157 That illustrates one important insight of the English perspective, namely that implementation of good faith reflects a policy choice, or recourse to some conception of social morality, which the traditional abstraction of German legal reasoning may have sought to conceal. More recent accounts of German law explicitly address the policy basis of the concept.158 Teubner’s discussion is a healthy corrective to aspirations of convergence and uniformity. His wider argument sees the Germanic concept of good faith underlying the entire German economic model—Rhineland capitalism, marked by cooperative banks providing long-term finance, harmonious industrial relations, relational contracting, and standard setting undertaken by business associations. Such a model of good faith falls on stony ground in the comparatively unregulated Anglo-Saxon model of capitalism, whose financing has been typically short-termist and where competition, and not cooperation, are the hallmarks of the business system. Rather than facilitating a more communitarian approach, the English use of good faith is likely to prohibit forms of conduct which even common lawyers regard as excessively self-interested.159 The Yam Seng Synthesis Returning to English law, in contrast to the piecemeal and pragmatic approach of Lords Bingham and Steyn, Leggatt J has launched a more ambitious synthesis in two recent judgments. First, in Yam Seng Pte Ltd v International Trade Corporation Ltd,160 a first instance decision in 2013, which has been cited and discussed in over 30 subsequent English cases. Secondly, in MSC Mediterranean Shipping Company SA v Cottonex Anstalt.161 In the former, in the context of distribution contract, Leggatt J had no difficulty in implying a duty of good faith in an ordinary commercial contract based on the presumed intention of the parties, on the basis of the implication of terms in fact. In particular, a requirement that parties would behave honestly was necessary to give business efficacy to commercial transactions. Although its requirements were sensitive to context, the test of good faith was objective in the sense that it depended not on either party’s perception of whether particular conduct was improper, but on whether, in the particular context, the conduct would have been regarded as commercially unacceptable by reasonable and honest people. What Leggatt J said in the key section of his judgment162 deserves careful study, but his principal observations started by noting three factors in English law—the preference for incremental development, the philosophy of individualism, and the preference for certainty—which underlie the traditional resistance to any overarching obligation. He noted the prevalence of good faith in civil law systems, other common law countries and international restatements. Leggatt J conceded that ‘I doubt that English law has reached the stage … where it is ready to recognise a requirement of good faith as a duty implied by law, even as a default rule, into all commercial contracts.’163 Nevertheless, he considered that the modern case law on interpretation and implication permitted development—by way of implied term—of a broader duty of honesty in ‘relational contracts’,164 being long-term contracts where openness and cooperation are required: In some contractual contexts the relevant background expectations may extend … to an expectation that the parties will share information relevant to the performance of the contract such that a deliberate omission to disclose such information may amount to bad faith. English law has traditionally drawn a sharp distinction between certain relationships – such as partnership, trusteeship and other fiduciary relationships – on the one hand, in which the parties owe onerous obligations of disclosure to each other, and other contractual relationships in which no duty of disclosure is supposed to operate. Arguably at least, that dichotomy is too simplistic. While it seems unlikely that any duty to disclose information in performance of the contract would be implied where the contract involves a simple exchange, many contracts do not fit this model and involve a longer term relationship between the parties which they make a substantial commitment. Such ‘relational’ contracts, as they are sometimes called, may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long term distributorship agreements….165 Leggatt J was prepared to accept that in principle it would be open to the parties to modify or exclude the scope of the duty, but he considered it highly unlikely parties would attempt to exclude the core requirement to act honestly.166 Overall there was nothing ‘novel or foreign’167 in the concept of good faith and fair dealing and the supposed traditional English hostility was ‘misplaced’.168 The decision in Yam Seng has been cited in over 30 subsequent English cases—with mixed receptions at first instance—and discussed briefly three times in the Court of Appeal (albeit once without express citation). First, it received a luke-warm response in Compass Group UK and Ireland Ltd v Mid-Essex Hospital Services NHS Trust.169 There Jackson LJ insisted that there was no duty of good faith at common law, and if the parties wanted one they would have to create it expressly.170 The courts now seem content to uphold such express clauses. Beatson LJ appeared more sympathetic to Leggatt J’s approach.171 Two contrasting responses were handed down by the Court of Appeal in 2016. In Globe Motors, Inc v TRW Lucas Varity Electric Steering Ltd172 Beatson LJ, again in the context of long-term or relational contracts, stated: One manifestation of the flexible approach referred to by McKendrick and Lord Steyn is that, in certain categories of long-term contract, the court may be more willing to imply a duty to co-operate or, in the language used by Leggatt J in Yam Seng173, a duty of good faith. Leggatt J had in mind contracts between those whose relationship is characterised as a fiduciary one and those involving a longer-term relationship between parties who make a substantial commitment. The contracts in question involved a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and expectations of loyalty… .174 Subsequently, in the context of contractual discretions in MSC Mediterranean Shipping Company SA v Cottonex Anstalt175 Leggatt J returned to the fray and referred to the ‘increasing recognition in the common law world of the need for good faith in contractual dealings’. In stark contrast on appeal176 in 2016 Moore-Bick LJ observed: There is in my view a real danger that if a general principle of good faith were established it would be invoked as often to undermine as to support the terms in which the parties have reached agreement. The danger is not dissimilar to that posed by too liberal an approach to construction, against which the Supreme Court warned in Arnold v Britton.177 Rather neatly for my purposes, that authority brings together the tension between the tack back to a stricter approach to language in the interpretation of contracts, and a restrictive approach to the implication of terms in the Supreme Court on the one hand, and the advocacy of a good faith principle by Leggatt J on the other. At present, at least in terms of the results of cases, rather than the principles available to the courts, the pendulum can be said to be swinging towards literalism (of which the contractual estoppel line of cases is the extreme example), or, more kindly, textualism. Ultimately, the Supreme Court’s plan—represented by Arnold v Britton and Marks & Spencer—is doomed to fail, if only because it discloses no new ideas. They are merely unbalanced applications of flexible principles developed by others. Conclusion Drawing the threads together it is unlikely that recent cases favouring textualism and repudiating good faith will be the last word. Ultimately, at a high level of generality, there are four organizing principles in any law of contract in a modern liberal society. The twin shibboleths of ‘freedom of contract’ and ‘sanctity of contract’ are universal, and embraced explicitly in English law.178 Thirdly, there are rules based on overarching considerations of public policy, where the Supreme Court has recently liberalized the rule of private law illegality.179 Lastly, both freedom and sanctity of contract must also yield to cases where a strict or literal approach would involve manifest unfairness. From the various contractual construction techniques discussed above to contractual vitiating factors, the overarching concept is, in analytical terms, good faith and fair dealing, whatever the legal system. Given this article’s interest in Cicero it is perhaps fitting to conclude that the English affirmations of textualism and express rejections of a general principle of good faith are ultimately rhetorical flourishes, or espousals of philosophy. No doubt English law, in comparison to its neighbours, has always tacked towards textualism, taking contractual language very seriously. So too its scepticism about broad principles of good faith reflect pragmatic concerns about certainty and predictability in the business arena. But the sceptical approach to policing good faith cannot stand in the light of the proliferation of express clauses requiring good faith or cooperation, and the courts’ enforcement of them. The truth lies between, or is perhaps a combination of, Lords Bingham’s and Steyn’s functional equivalence approach and Leggatt J’s broader synthesis. Personally I do not think the adoption of an ‘overarching principle’ of good faith and fair dealing for commercial transactions would do any harm to the English legal system, and might well be beneficial in its future role within a more internationally oriented UK. But I do not expect to see such a development imminently given the philosophy espoused, and results reached, in recent contract cases. Footnotes 1 Artephius, the alchemist, according to Umberto Eco, Il pendolo di Foucault (William Weaver tr, 1988; 2016 Folio edn) ch 60. The novel features three Italian vanity publishers who mischievously hatch a ‘Plan’, which embraces many popular conspiracy theories, which they release with unintended consequences. It is sometimes described as the thinking person’s Da Vinci Code, but pre-dates that work by several years. 2 First demonstrated by Leon Foucault (1819–68). There is no intentional reference to Michel Foucault (1926–84) in the title of this essay. 3 PS Atiyah, ‘Judicial Techniques in the Law of Contract’ (originally published in (1967–1968) 2 Ottawa LR 337) and revised and re-printed in Essays on Contract (Clarendon 1986; paperback edn, 1988) 244, 267. 4 ibid 269. 5 ibid 274. 6Arnold v Britton [2015] UKSC 36, [2015] AC 1619 [14]-[15] (Lord Neuberger). 7 [1971] 1 WLR 1381 (HL). 8 See Lord Denning’s swansong judgment in George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 1 QB 284 (CA) 296-9. 9 [1998] 1 WLR 896 (HL) 912–13. 10Arnold (n 6). Contrast Marley v Rawlings [2014] UKSC 2, [2015] AC 129 [18]–[23] (Lord Neuberger). 11 [1997] AC 749 (HL). 12 See Sir Robert Goff, ‘Commercial Contracts and the Commercial Court’ [1984] LMCLQ 382 and Lord Hoffmann, ‘The Intolerable Wrestle with Words and Meaning’ (1998) 56 SALJ 656. 13 HL Hart and AM Honoré, Causation in the Law (Clarendon 1959; 2nd edn, 1985). 14 Compare British Movietonews Ltd v London and District Cinemas Ltd [1951] 1 KB 190 (CA) 202 (Denning LJ). In his biographical essay on Lord Denning in the Oxford Dictionary of National Biography (online edn), Lord Goff credits the late Master of Rolls with commencing the post-war move from strict to liberal construction, including this judgment. 15Summit Investment Inc v British Steel Corpn (The Sounion) [1987] 1 Lloyd’s Rep 230 (CA) 235. According to St Matthew’s gospel, sheep go to heaven, whilst goats go to the other place. 16 P Stein, ‘The Two Schools of Jurists in the Early Roman Principate’ (1972) 31 CLJ 8, esp 17–18. See also R Zimmermann, The Law of Obligations—Roman Foundations of the Civilian Tradition (Juta 1990; paperback edn, OUP 1996) ch 20. 17 Stein, ibid 8, 30. 18 (CA, 30 July 1993). Adopted by Mance J in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 (Comm) 326, 350; and quoted with approval in Globe Motors, Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396, (2016) 168 Con LR 59 [59] (Beatson LJ). 19 See also Sirius International Insurance Co (Publ) v FAI General Insurance Ltd [2004] UKHL 54, [2004] 1 WLR 3251 [19] (Lord Steyn); but contrast Royal and Sun Alliance Insurance plc v Dornoch Ltd [2005] EWCA Civ 238, [2005] 1 All ER (Comm) 590 [15]–[16] (Longmore LJ). 20 Lord Bingham, ‘A New Thing Under the Sun? The Interpretation of Contracts and the ICS Decision’ (2008) 12 Edinburgh LR 374, 376; also in in T Bingham, Lives of the Law: Selected Essays and Speeches 2000-2010 (OUP 2011) 283, 298. 21Axa Reinsurance (UK) plc v Field [1996] 3 All ER 517 (HL) 526. 22Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] UKSC 3, [2013] 1 WLR 366 [21] (Lord Mance). 23 [2013] UKSC 3, [2013] 1 WLR 366 [43] (Lord Hope), citing Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900. 24Arnold (n 6); discussed further below. 25 Sir George Leggatt, ‘Making Sense of Contracts: the Rational Choice Theory’ (2015) 131 LQR 454, 472. 26Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] 2 WLR 1095 [10] (Lord Hodge); BNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 plc [2016] UKSC 29, [2016] Bus LR 725, [2016] 2 Lloyd’s Rep 119; Globe Motors (n 18). 27 (1877) 2 App Cas 743 (HL) 763. 28 [2015] UKSC 74, [2016] 1 WLR 85 [33]; citing Rainy Sky SA (n 23)[14]-[23] (Lord Clarke: contracts), Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 (HL) 770-771 and 779H-780 (Lord Steyn and Lord Hoffmann: unilateral notices), Kirin-Amgen Inc v Hoechst Marion Roussel Ltd, [2004] UKHL 46, [2005] 1 All ER 667 [27]-[35] (Lord Hoffmann: patents), and Marley (n 10) (Lord Neuberger: testamentary documents). 29 Goff (n 12) 389. 30Re Golden Key Ltd [2009] EWCA Civ 636 [28]; and see paras [26] to [29] and [42] (Arden LJ). 31 The origin of this terminology in the context of contractual construction appears to be the judgment of Lord Neuberger MR in Re Sigma Finance Corporation (in administrative receivership) [2008] EWCA Civ 1303 [98]. The Compact Oxford English Dictionary gives as the second meaning of ‘iterate’ (and its adjectival form): ‘make repeated use of a mathematical or computational procedure, applying it each time to the result of the previous application.’ See also Lord Grabiner, ‘The Iterative Process of Contractual Interpretation’ (2012) 128 LQR 41. 32Re Sigma Finance Corporation (in administrative receivership) [2009] UKSC 2, [2010] 1 All ER 571 [12] (Lords Hope, Scott and Collins concurring), echoing [2008] EWCA Civ 1303 [98] (Lord Neuberger MR dissenting). See also Rainy Sky (n 23) [28] (Lord Clarke); Arnold (n 6) [77] (Lord Hodge); and Wood (n 26) [12] (Lord Hodge). 33 A Dyson, J Goudkamp and F Wilmot-Smith, ‘Thinking in Terms of Contract Defences’ in A Dyson, J Goudkamp and F Wilmot-Smith (eds), Defences in Contract (Hart 2017) ch 1. 34 Compare Redrow Regeneration (Barking) Ltd v Edwards [2012] UKUT 373 (LC) [18]. 35Macbeath v Haldimond (1786) 1 Term Rep 172, 180; 99 ER 1036 (Lord Mansfield); Bowes v Shand (1877) 2 App Cas 455 (HL) 462 (Lord Cairns LC); Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724 (HL) 736 (Lord Diplock). 36Sattva Capital Corp v Creston Mining Corp 2014 SCC 53; (2013) DLR (4th) 393 [46]; noted S Waddams, ‘Contractual Interpretation’ (2015) 131 LQR 48. 37Ledcor Construction Ltd v Northbridge Indemnity Insurance Co [2016] SCC 37. 38Carmichael v National Power plc [1999] 1 WLR 2042, 2048–9, HL (Lord Hoffmann). See also Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776 [82]–[83] (Lord Neuberger). 39Yap Son On v Ding Pei Zhen [2016] SGCA 68 [64] (Sundaresh Menon CJ). 40 See Globe Motors (n 18) [61] (Beatson LJ). 41 HM Courts & Tribunals Service, Admiralty and Commercial Courts Guide (2014; updated March 2016), para C1.2(h). That sentence has a whiff of science fiction if one did not know the context. 42Arnold (n 6) [74] (Lord Hodge); citing MRS Distribution Ltd v DS Smith (UK) Ltd 2004 SLT 631 [14]. 43Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43, 151 Con LR 170 [73]-[74] (Sundaresh Menon CJ (delivering the judgment of the court)). 44 In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72,[2016] AC 742 [22]-[31] (Lord Neuberger). 45 In Attorney-General for Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988. 46 Contrast Liverpool City Council v Irwin [1976] QB 319 (CA) 329-30 (Lord Denning MR) with [1977] AC 239 (HL) 253-54 and 257 (Lord Wilberforce), 257-58 (Lord Cross), 262 (Lord Salmon) and 265-66 (Lord Edmund-Davies). 47 Rectification is different. It needs to be pleaded and proved. Traditionally a heightened civil standard of proof was insisted on, but this has recently been doubted Tartsinis v Navona Management Co [2015] EWHC 57 (Comm) [84]-[85] (Leggatt J). See also G McMeel, The Construction of Contracts (3rd edn, OUP 2017) ch 17. 48 See Lord Falconer of Thoroton, then Constitutional Affairs Secretary and Lord Chancellor, The Commercial Bar Association Lecture (18 October 2005). Contrast on good faith: Sir George Leggatt, ‘Contractual duties of good faith’, The Commercial Bar Association Lecture (18 October 2016). 49 Compare R Calnan, Principles of Contractual Interpretation (2nd edn, OUP 2017), Principle 2: ‘Where the contract is in writing, it is the writing which is the primary source of the parties’ objective intention.’ 50 [1999] 1 All ER (Comm) 545, 551; see also Total Gas Marketing Ltd v Arco British Ltd [1998] 2 Lloyd’s Rep 209 (HL) 218 (Lord Steyn). 51ICS (n 9). 52 [2001] UKHL 8, [2002] 1 AC 251. 53 ibid [39]. 54Arnold (n 6). 55 See below. 56 Whilst the extent of the material to be taken into account differed between the Court of Appeal and the Supreme Court in BNY Mellon (n 26), [2016] 2 All ER (Comm) 851, (CA and SC) a broad approach to matrix was adopted by both tribunals. In respect of the established legal background to a commercial lease for the purposes of implication, see Marks and Spencer (n 44) [43]-[48] and [50] (Lord Neuberger). 57Prenn v Simmonds (n 7). 58James Miller Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 (HL). 59 See for recent discussion, A Burrows (Assisted by an Advisory Group of Academics, Judges and Practitioners), A Restatement of the English Law of Contract (OUP 2016), s 14(4) and (5), and see Commentary at 87–89; and Globe Motors (n 18) [61] (Beatson LJ). 60Antaios Compania SA v Salen AB [1985] AC 191 (HL) 201; Re Sigma Finance Corporation (in administrative receivership) [2009] UKSC 2, [2010] 1 All ER 571 [37] (Lord Collins, Lords Scott and Mance concurring). 61 Bingham, ‘A New Thing’ (n 20) 381 (emphasis in original). 62Barclays Bank plc v HHY Luxembourg SARL [2010] EWCA Civ 1248, [2011] BCLC 336 [26]. 63Rainy Sky (n 23). 64 ibid [44]. 65Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 is a further example of this principle. 66Jackson v Dear [2012] EWHC 2060 (Ch) [40] (Briggs J); revised (but not disputing this point): [2013] EWCA Civ 89, [2014] 1 BCLC 186; BMA Special Opportunities Hub Fund Ltd v African Minerals Finance Ltd [2013] EWCA Civ 416 [24] (Aikens LJ); and Cottonex Anstalt v Patriot Spinning Mills Ltd [2014] EWHC 236 (Comm), [2014] 1 Lloyd’s Rep 615 [52]-[58] (Hamblen J). 67Arnold (n 6). See Burrows Restatement (n 59) s 14(2) and Commentary at 86–87. Contrast Lord Neuberger MR in Pink Floyd Music v EMI Records [2010] EWCA Civ 1429 [55]–[60]. 68Arnold (n 6) [108] (dissenting). 69Mitsui Construction Co Ltd v Attorney-General of Hong Kong (1986) 10 Con LR 1, 41, (1986) 33 Build LR 1, 14 (PC) (Lord Bridge). Complaints about bad drafting date back to at least the time of Lord Mansfield: Simond v Boydell (1779) 1 Cowp 268, 270-1; 99 ER 175. 70Arnold (n 6). 71 For discussion of Arnold v Britton and the cases leading up to it, as representing a retreat from the modern approach to interpretation, see D McLauchlan, ‘The ICS Principles: a Failed “Revolution” in Contract Interpretation?’ (2016) 27 NZULR 263 and R Havelock, ‘Return to Tradition in Contractual Interpretation’ (2016) 27 KCLJ 188. 72 For more detail on the various iterations of the leases, see paras [84]–[89] (Lord Carnwath dissenting). 73Arnold (n 6) [30]. Contrast Lord Carnwath who calculated a figure of £1,025,004 by 2072: [100]. 74Prenn v Simmonds (n 7). 75 [2009] UKHL 38, [2009] AC 1101. 76Rainy Sky (n 23). 77 Quoting Lord Hoffmann in Chartbrook (n 75) [14]. 78Arnold (n 6) [15]. The paragraph has been formatted to create a numerical list and the word ‘contract’ substituted for ‘lease’. See also Marley (n 10) [19] (interpretation and rectification of wills). 79Arnold (n 6) [16]. See also [72]-[74] (Lord Hodge). Contrast [81] (Lord Carnwath dissenting). The proceedings were brought under CPR Part 8, which may explain the limited background material. 80 ibid [34]. 81 ibid [104]. 82 ibid [107]. 83 ibid [117]. 84 ibid [82]-[83]; citing Johnson v Unisys Ltd [2003] 1 AC 518 [37] (Lord Hoffmann). 85 ibid [123]. 86 ibid [125]. 87 ibid [158]. 88 Lord Neuberger, ‘Express and Implied Terms in Contracts’ (Lecture at the School of Law, Singapore Management University; 19 August 2016) <www.supremecourt.uk/docs/speech-160819-02.pdf> accessed 17 July 2017 [40]. See also Lord Neuberger’s parenthetical comment in BNY Mellon (n 26)[30]. However for subsequent decisions on construction at the highest level see: Trump International (n 28); BNY Mellon (n 26); Impact Funding Solutions Ltd v Barrington Support Services Ltd (formerly Lawyers at Work Ltd) (AIG Europe Ltd, Third Party) [2016] UKSC 57, [2016] 3 WLR 1422; and Wood (n 26). 89 Neuberger, ‘Express and Implied’ (n 88) [18]. Surely a better target for the disciplinary approach was the bank seeking to escape a bad bargain in BNY Mellon (n 26). 90 Contrast the prominence given to Lord Clarke’s summary of general principles in Rainy Sky (n 23) at paras [14]–[30] in Lord Carnwath’s dissenting speech in Arnold (n 6) [108]-[110]. 91Globe Motors (n 18) [56]–[62] (Beatson LJ). 92 For fuller discussion see McMeel on the Construction of Contracts (3rd edn, OUP 2017) ch 1. 93Prenn v Simmonds (n 7). 94Rainy Sky (n 23). 95Marks and Spencer (n 44). 96Attorney-General for Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988. 97Marks and Spencer (n 44) [31]. Especially curious as the parties had not suggested that Belize Telecom was not authoritative: [58] (Lord Carnwath). 98 ibid [74]. 99 ibid [77]. 100 See also: Trump International (n 28)[35] (Lord Hodge: statutory construction); and Globe Motors (n 18) [58] (Beatson LJ: change of emphasis); and E Peel, ‘Contra Proferentem Revisited’ (2017) 133 LQR 6. 101Marks and Spencer (n 44) [21] (sixth proposition). 102BNY Mellon (n 26). The judgments of both the Court of Appeal—[2015] EWCA 1257—and the Supreme Court are reported together in [2016] 2 All ER (Comm) 851. 103Globe Motors (n 18). 104 Lords Clarke and Sumption dissented. 105BNY Mellon (n 26)[2015] EWCA 1257 [6]-[21] (Gloster LJ) and [2016] UKSC 29 [3]-[7] (Lord Neuberger P); [2016] 2 All ER (Comm) 851 (CA and SC). 106 See the submissions recorded by Gloster LJ at [69]. 107BNY Mellon (n 26) [2015] EWCA 1257 [80]-[90] (Gloster LJ) and [2016] UKSC 29 [35– [38] (Lord Neuberger P); although the latter thought it might not even be necessary to depart from the language of the contract properly construed. See also [39]. 108Globe Motors (n 18). 109BNY Mellon (n 26) 119. 110 [2016] EWCA Civ 128. 111 ibid [19]. 112Wood (n 26) [8] (Lord Hodge). On its particular facts the holding of the Court would strike anyone familiar with financial services regulation as a contextual and unbusiness-like. 113Arnold (n 6). 114Rainy Sky (n 23). 115Wood (n 26)[9] (Lord Hodge). 116 ibid [13]-[15] (Lord Hodge). 117 It was almost immediately undermined by Lord Sumption (who had agreed with Lord Hodge in Wood), writing extra-judicially in ‘A Question of Taste: The Supreme Court and the Interpretation of Contracts’ (8 May 2017) <www.supremecourt.uk/docs/speech-170508.pdf> accessed 17 July 2017. 118 Revised French Civil Code s 1104; the German Civil Code, BGB s 157, instructs the judge to interpret contracts according to the requirements of good faith (and see the general provision in BGB s 242); Zimmermann (n 16) 622 (for the Roman law roots); see also at 255–59, 637 and 672–77; B Nicholas, The French Law of Contract (2nd edn, Clarendon 1992) 48, 69–71, 100-6, 153-4; K Zweigert and H Kotz, An Introduction to Comparative Law (T Weir tr, 3rd edn, Clarendon 1998), 400–09, and 424–27; S Vogenauer, ‘Interpretation of Contracts: Concluding Comparative Observations’ in A Burrows and E Peel (eds), Contract Terms (OUP 2007), 123; and H C Grigoleit and G McMeel, ‘Interpretation of Contracts’ in G Dannemann and S Vogenauer (eds), The Common European Sales Law in Context: Interactions with English and German Law (OUP 2013) 341. 119 UCC, ss 1–203. Most recently, the Supreme Court of Canada has adopted an ‘over-arching principle’ of good faith in Bhasin v Hrynew, 2014 SCC 71; noted C Hunt, ‘Good Faith Performance in Canadian Contract Law’ [2015] CLJ 4. For other common law countries, see H Beale (ed), Chitty on Contracts (32nd edn, Sweet and Maxwell 2015) para [1–041]. 120 UNIDROIT Principles of International Commercial Contracts 2004, art 1.7; Principles of European Contract Law, art 1.201. Compare the narrower role expressly assigned to good faith in the Vienna Convention on the International Sale of Goods 1980, art 7(1). For discussion see R Goode, ‘International Restatements and National Law’ in W Swadling and G Jones (eds), The Search for Principle—Essays in Honour of Lord Goff of Chieveley (OUP 2000) 45–58; and M Bonell, ‘The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law: a Comparison’ in R Cranston (ed), Making Commercial Law: Essays in Honour of Roy Goode (Clarendon 1997) 91–101. See also C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR) (OUP 2010) art I-1:102(3)(b) (interpretation of DCFR) and DCFR, art III-1:103. 121 Professor Burrows’s Restatement proceeds on the basis that there is no ‘free-standing’ duty to perform in good faith at common law: see Burrows, Restatement (n 59) 93. 122Walford v Miles [1992] 2 AC 128 (HL) 138 (Lord Ackner). See also Lord Falconer of Thoroton, Constitutional Affairs Secretary and Lord Chancellor, The Commercial Bar Association Lecture (18 October 2005). 123 [1989] QB 433 (CA). See also T Bingham, ‘The Law as the Handmaid of Commerce’ (the 2001 Sultan Azlan Shah Lecture) in T Bingham, Lives of the Law: Selected Essays and Speeches 2000-2010 (OUP 2011) 283. 124 [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321. See also Sir George Leggatt, ‘Contractual duties of good faith’, The Commercial Bar Association Lecture (18 October 2016) <http://www.combar.com/public/cms/260/604/384/2566/Mr%20Justice%20Leggatt%20lecture%2018.10.16.pdf?realName=qxp9PW.pdf&v=> accessed 17 July 2017. 125 ibid [124]. 126 ibid [152]. 127 Cicero, On Obligations; A new translation by P G Walsh (Oxford World’s Classics 2000), Book 3, 50–72. 128 For the view that Cicero forms part of the natural law tradition, see JM Kelly, A Short History of Western Legal Theory (Clarendon 1992) 57–63; and see 19–21, 102–04, 141–46, 186–89, 222–29, 258–62, 265–77, 333–34, 376–80 and 418–25. 129 JPVD Balsdon lauds him as ‘perhaps the most civilized man who has ever lived’: ‘Cicero the Man’ in TA Dorey (ed), Cicero (Routledge & Kegan Paul 1965) 171, 205. For the philosophical dimension, see AE Douglas, ‘Cicero the Philosopher’ in T A Dorey (ed), Cicero (Routledge & Kegan Paul 1965) 135, and JGF Powell (ed), Cicero the Philosopher: Twelve Papers (Clarendon 1995). 130 (3rd edn, Butterworths 2000), paras 1.1.1, 1.14.6, 10.5.1, 13.2.2, 13.2.10. 131 Book 3, 50. 132 Book 3, 51. 133 Book 3, 54. Dr Roderick Clayton has suggested to me that, ironically, ‘snakes’ is a rather literal translation of ‘serpentes’. It should embrace creepy crawlies in general. 134 Book 3, 57. 135 Book 3, 60–61. 136 Book 3, 70. 137 M Furmston, ‘The Case of the Rhodian Corn’ in I Schwenzer and G Hager (eds), Festschrift für Peter Schlechtriem zum 70. Geburtstag (Mohr Siebeck 2003) 487. 138 ibid 488. 139 JW Carter and MP Furmston, ‘Good Faith and Fairness in the Negotiation of Contracts’ (1994) 8 JCL 1, 93. 140 Norman S Poser, Lord Mansfield: Justice in the Age of Reason (McGill-Queen’s University Press 2013) especially at 25, 162 and 394–95. 141 Wilfred Prest, William Blackstone: Law and Letters in the Eighteenth Century (OUP 2008). 142 Michael J Franklin, Orientalist Jones: Sir William Jones, Poet, Lawyer, and Linguist, 1746-1794 (OUP 2011). 143 (1759) 2 Burr 882, 97 ER 614; see also E McKendrick (ed), Goode on Commercial Law (5th edn, LexisNexis 2016) 40.20. 144 (1766) 3 Burr 1905, 92 ER 1162. See also Bexwell v Christie (1776) 3 Cowp 395, 396; 98 ER 1050. 145 (1766) 3 Burr 1910; 92 ER 1164. Originally codified in Marine Insurance Act 1906, ss 17–20. See now the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015. 146Manifest Shipping Co Ltd v Uni-Polaris Ins Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469 [45]. 147 Lord Steyn, ‘Interpretation: Legal Texts and their Landscape’ in B S Markesinis (ed), The Clifford Chance Millennium Lectures (Hart 2000) 79. 148 Sir Johan Steyn, ‘The Role of Good Faith and Fair Dealing in Contract: A Hair-Shirt Philosophy?’ [1991] Denning LJ 131, 133. 149Mackay v Dick (1881) 6 App Cas 251 (HL) 263 (Lord Blackburn). Compare North Sea Energy Holdings NV v Petroleum Authority of Thailand [1999] 1 All ER (Comm) 173 (CA) 185–6. 150 SI 1999/2083. See H Collins, ‘Good Faith in European Contract Law’ (1994) 14 OJLS 229; and S Bright, Unfairness and the Consumer Contract Regulations’ in A Burrows and E Peel (eds), Contract Terms (OUP 2007) 173. 151 [2001] UKHL 52, [2002] 1 AC 481 [17]. See also Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696. 152Carter (n 144). 153 Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053), regs 3 and 4. 154 G Teubner, ‘Legal Irritants: Good Faith in British law or How Unifying Law Ends Up in New Divergences’ (1998) 61 MLR 11. 155 ibid 19. 156 ibid 20. See further W Ebke and B Steinhauer, ‘The Doctrine of Good Faith in German Law’ in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (Clarendon 1995) 171. 157 ibid 21. 158 ibid 23. 159 ibid 28. 160Yam Seng (n 124). 161 [2015] EWHC 283 (Comm), para [79] (Leggatt J); but note [2016] EWCA Civ 789 [45] (Moore-Bick LJ). See further discussion below. 162Yam Seng (n 124) [119]-[153]. 163 ibid [131]. 164 This is based on the scholarship of Ian McNeil, and subsequent authors: eg D Campbell, H Collins, and J Wightman (eds), Implicit Dimensions of Contract—Discrete, Relational and Network Contracts (Hart 2003). Lord Steyn had previously alluded to ‘relational contracts’ in Total Gas Marketing Ltd v Arco British Ltd [1998] 2 Lloyd’s Rep 209 (HL) and Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518 (employment). 165Yam Seng (n 124) [142]. 166 ibid [149]. 167 ibid [145]. 168 ibid [153]. 169 [2013] EWCA Civ 200, [2013] BLR 265. 170 ibid [105]. 171 ibid [150]. 172Globe Motors (n 18). 173 Citing Yam Seng (n 124) at [131], [142] and [145]. 174Globe Motors (n 18) [67]. 175MSC Mediterranean Shipping (n 161) 176 [2016] EWCA Civ 789. 177 ibid [45], citing Arnold (n 6). 178 These twins were recently in conflict where the question was whether a ‘restriction of variation’ clause was effective. Freedom of contract prevails and parties can always vary or waive their obligations by any mode, including orally and by conduct. See Globe Motors (n 18); and MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553. 179Patel v Mirza [2016] UKSC 42, [2016] 3 WLR 399. © The Author 2017. 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TI - Foucault’s Pendulum: Text, Context and Good Faith in Contract Law
JF - Current Legal Problems
DO - 10.1093/clp/cux005
DA - 2017-12-01
UR - https://www.deepdyve.com/lp/oxford-university-press/foucault-s-pendulum-text-context-and-good-faith-in-contract-law-nnZCQBgHfe
SP - 365
EP - 397
VL - 70
IS - 1
DP - DeepDyve
ER -