What Is Meant by the Phrase Classical Contract Law - Essay Example

What is meant by the phrase ical contract law’? To what extent are such ideas still relevant in contemporary contractual relations? Introduction The law of contract is a popular genre of law in most academic institutions. The law of contract attempts to conceptualise some important aspects of interactions between two parties and ensure that justice is served. In this paper, we examine the traditional view of contract as it evolved in the 1800s and how events in the second half of the 20th Century modified key elements of the traditional view. The research begins by defining the idea of classical contract law. This end is attained by describing the concept and how it plays out in real life. The three main concepts of classical contract law are then examined individually. This ranges from the independence of contracts to the bargaining powers through to the formal elements of contracts. We do this examination by looking at various debates and dominant ideas and conceptions as they play out in academia and in practice. The inherent advantage of using the classical model to analyse contracts is one that cannot be overlooked. This is because it makes it easier and more convenient to define the parties of contracts and their expectations. This promotes justice. However, the whole idea has been challenged through the dynamism of the post-world war society. This has led to some important modifications and this is what the paper seeks to examine in-depth through the proposed objectives. The balance between the traditionalist and modern positions on the subject are brought to bear in this paper. Classical Contract Law Holmes states that law uses deductive systems through which logic can be induced and applied to examine things in a fair manner1. In other words the science of law in itself requires the establishment of frameworks and parameters within which issues and matters can be evaluated justly and deductions made. This is the essence of law. This idea is described as the axiomatic of law by Eisenberg. The classical school of thought used the principle logic and deduction to draw frameworks for different branches of law2. This way, they played a crucial role in setting up a system of justice which ensured that cases were separated into the most appropriate classes and dealt with according to the right principles and the application of correct jurisprudence. Classical contract law developed between the mid-19th Century through to the first part of the 20th Century3. It laid down a framework which defined an airtight genre known as contract law which was strictly adhered to in that era during cases involving contract. Features of Classical Contract Law Classical Contract Law contained three main elements: consideration, bargaining and discharge4. In other words, a contract involved two parties who agree to a mutual exchange involving some item or commodity of value be each party to the other. Secondly, the bargain is to include a valid offer and a valid acceptance for a contract to be formed. Thirdly, discharge of a contract involved either the completion of the exchange or the breach by one or both parties. Each of the three stages and components of classical contract law came with rules and regulations that defined the validity or otherwise of a contract. These rules were to be applied objectively in all cases to ensure that justice and fairness are met. In the classical contract law, there was no room for moral and policy propositions5. Everything related to the two parties in question and nothing else. Other situations gave rise to distinct legal matters or areas. For instance, certain breaches were considered to be out of the scope of contract law and they were to be handled under the law of tort. Nolan identifies three main assumptions that define the three main features of classical contract law6. First of all, the idea of classical contract law automatically present contracts as independent and distinctive sets of obligations that arises for the parties in a contract. This is a set of separate legal events that can be handled independently in a court of law. Secondly, there is an ideology that there is a freedom of contract and each of the parties has a different autonomy. In other words, a contract is seen as a private engagement between two parties that is recognised in law. Although they are private, parties are free to enter them and this assumption plays a great role in the examination of cases relating to contract law. This brings to play the idea of bargaining power which indicates that each party is free until s/he enters the contract. This means that prior to entering a contract each person had some inherent rights and obligations that were to be limited by the responsibilities that would arise from the future contract. Due to this, each party can make demands and adjust the demands during the offer and acceptance period. Thirdly, once a person enters a contract, s/he is bound by the terms. Every court would therefore view the contract according to general rules and assumptions of the law of contract. These three ideas made the law of contract a very distinct branch of English Law. The classical law of contract enabled contracts to be viewed objectively and independently. This was very appropriate for Britain and most other English-speaking nations. This is because it allowed transactions to be handled without emotions and promoted integrity amongst people. However, the assumptions of the law of contract were challenged as the social structures of the British society was significantly modified after the Second World War. Independence of Contractual Obligations The idea of the independence of contract creates a defined legal space within which the obligations of parties to a contract can be legally enforced7. In other words, the identity of parties to contracts were irrelevant under classical contract law8. The substance of contracts were judged strictly by the terms and nothing else. This allowed objectivity to be invoked in contracts. However, the classical law of contract comes with some difficulty. The formal and entrenched view of the independence of contracts can turn out to be problematic. For instance, the relationship between an citizen and the state can be potentially problematic. This is because in the stricter sense, this is some kind of a contract but were the terms independently enforceable in court? There have been many instances where the employment of people in the public sector has come under disrepute. For instance, the contract to discharge certain responsibilities in the public sector comes with so many welfare concerns which makes it almost impossible to classify it as independent. The relationship between a citizen and the state is technically a contract but the concept of independence cannot be invoked in this contract since many welfare requirements come to play in this arrangement. The idea of arms length transaction or consensus ad idem becomes an issue of concern when the independence of contract is invoked. This is because where parties are seen to be independent, there are many unfair treatments that can be meted out in the state. Although the supporters of classical contract law argue that equitable estoppel and other elements of tort can always be used to address such differences, there is a strong case for the state to intervene through statutes to promote fairness. This is mainly seen in cases relating to the bargaining powers of parties. Freedom of Contracts & Bargaining Power of Parties The freedom of contract and equal bargaining power of contracts is rooted in the concept of caveat emptor where the buyer is assumed to be aware of the terms s/he is negotiating. This is an underlying element of the classical contract law school of thought. However, in a consumer age, there is collective political strengths of the public9. This means that the public has a strong influence on the major legislative bodies which influence the judiciary. Through democracy and welfare political systems, parliamentary sovereignty can and has been moved to make laws that limit the freedom of contract assumptions of classical contract law. Ideas like the potential to misuse advertising and monopoly present corporate entities as dominant parties in consumer contracts10. Due to this, parliament has had to make laws protecting consumers like the Consumer Credit Act of 1974 and the Unfair Contract Terms Act 1977. This prevents the abuse of power by dominant entities in the country when they deal with ordinary buyers. Unified Law of Contract Another assumption of classical contract law is that there is a unified contract law which presents a framework within which all contracts can be examined legally. However, modern circumstances have caused the need to break down the law of contract into different components. Due to this, there are various commercial branches of contract law as well as streams that address different domestic and family contract issues. This division is necessary because the different streams of law come with different circumstances. Thus, to ensure that fairness prevails and proper assumptions are made in examining such cases, the English legal system has had to balkanise contract law to address specific matters into greater depth to promote justice. Also, the differences in subject matter and circumstances have caused the need to redefine some important aspects of contract law relating to contract law. Thus, we have witnessed the changes in family contract rules which allows same sex marriages and this has substantially altered the concept of subject matter in courts. Other matters like sex change is likely to have effects on the classical contract law school of thought. Atiyah argues that classical contract law exists only because of ad hoc rules that were made by authorities in the last two centuries11. He goes on to identify that in our own time, it might be more appropriate to merge the classical contract law with the law of tort to ensure proper development of commercial law. However, the classical contract law provides important principles and guidance that promotes objectivity and legal consistency in transactions between parties. It is therefore important for important elements to be maintained. In the issues where the classical approach is deficient, it might be appropriate to develop statutes to reflect fairness and other contemporary issues. Conclusion Classical law of contract sets a framework for the regulation of transactions between parties who enter contracts. This framework is made up of rules and conventions that guide objectivity and fairness which ensures that contracts are examined fairly in the legal sense. The classical view of the law of contract however eliminates all elements of morality and policy which can influence contracts. In spite of the authoritative nature of the classical school of thought in contract law, it has some discrepancies that have been challenged in modern law after the 1950s. First of all, the independence of parties to some contracts are not complete. This calls for some legal interventions to promote morality and fairness. Also, the assumption that contracts are made through even bargains of informed individuals is in doubt, especially in cases where a consumer operates with a large business entity. There is therefore the need for the development of statutes to reflect fairness and morality. The dynamism of the society makes it impossible to accept the classical view that contracts are standardised. Diversity and recognition of human rights means that different branches of law need to evolve to ensure the fairness of law. In spite of the downsides, classical law of contract needs to be promoted to ensure that basic elements of law are upheld in the society and consistency is promoted. Bibliography Charles Langdell. Summary of the Law of Contract (2nd Edn Oxford University Press 1880) Daniel Nolan. The Classical Legacy & Modern English Contract Law in Good Faith & Fault in Contract Law (Clarendon Press 1995) David Slawson. Binding Promises: The Late 20th Century Reformation of Contract Law (Princeton University Press 1996) Oliver Williamson. The Mechanisms of Governance (2nd Edn OUP 1996) Owen Holmes. Law in Science and Science in Law in Collected Legal Papers (New York: Harcourt, Bauce & Lowe 1920) Melvin Eisenberg. The Theory of Contracts in Theory of Contract Law: New Essays (1st Edn Cambridge University Press 2001) Michael Gilmore. The Death of Contract (Ohio: Columbus Press, 1974) P. S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford: Clarendon Press, 1979) Read More