Rules of The Law Of Contract

Objectives Explain the origins and function of the law of contract. Explain the concept of freedom of contract. Understand the influence of European law on contract formation and discharge.

The origins of contract law Activity: Think about how many contracts you have engaged in today? Make a list: Parking your car and taking a ticket? Bought something from a shop? Bid for something on eBay? Downloaded a music album from iTunes? Bought something from an online store? You probably do not give these simple transactions a second thought, but what if only half your album downloaded, or your car had been crashed into when you returned to the car park, or that the sandwich you bought had no filling? If something went wrong, you would seek redress and some form of solution.

The origins of contract law A contract is essentially an agreement between two parties which is enforceable in law. It is based on promises that the two parties make to each other. Not all promises are contractual, and the aim of contract law is to distinguish those promises that can be enforced, from those that cannot. A contract can alternatively be called a bargain. One party makes a promise in return for the promise of the other – one party will have paid some sort of price for the promise of the other. This “price” need not always be financial. Where a contract “goes wrong”, the aim of contract law is to compensate innocent parties and put them in the position they would have been in had the contract been performed.

Freedom of contract This has its origins in laissez-faire which promotes the idea that since parties are the best judges of their own interests, they should be free to make contracts on any terms they choose. The court then acts as a “referee”, holding the parties to their promises – it is not the courts’ role to ask whether the bargain made was a fair one.

The influence of European Law A range of European Directives have been passed in the notion of promoting a harmonious internal market and these have had a huge influence on UK contract law, particularly in relation to consumer law. There is an encouragement of the use of standard European contractual terms for certain types of contract. The final draft of the Common Frame of Reference was published in December 2008. In terms of the sale of goods across Europe, the Common European Sales Law was published in 2011, in order to remove the barriers in place between Member States wanting to do business with each other. European Law has also been influential in regulating online shopping in the UK, and the Consumer Contracts Regulations 2013 were as a direct result of EU legislation.