What happened in contract law in 2017?

The sessions considered developments in the law in both Scotland and England. Issues discussed included interpretation of contract; implication of terms; retention of performance and developments in the law of damages for breach of contract. Many further topics were analysed and discussed in the presentations and in the 140 pages of materials provided to delegates.

If you didn’t make it along to the sessions what did you miss? Interpretation, as any practitioner will know, is an important part of the law of contract. This area of law makes up the vast majority of contract disputes heard by the courts in any year, and of course, those that proceed to a decision are only the tip of the iceberg. This year saw relative stability in the way in which the courts will go about interpreting a contract, following previous years in which the pendulum has swung between the primacy of the words used in the contract, on the one hand, and commercial common sense, on the other.

The Supreme Court in Højgaard A/S v E.On Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59 confirmed the court’s stance, following recent decisions in Arnold v Britton [2015] UKSC 36 and Wood v Capita Insurance Services Ltd [2017] UKSC 24, that the words used in a comprehensive and professionally drafted contract are of significant importance in the interpretive exercise.

This is so even where there are some problems with the quality of the drafting. Whether this period of calm in the law of interpretation is here to stay remains to be seen (and will be tracked by the Contract Update in years to come).

Closely linked to interpretation is implication of terms, with the English courts continuing to be asked, on the basis of Yam Seng Pte Ltd v International Trade Corporation [2013] EWHC 111 to imply a term into contracts obliging each party to act in good faith. This will be done were the contracts are so-called relational contracts; that is a category of contract in which the parties are committed to collaborating with each other, typically on a longer term basis. The good faith obligation includes a requirement to act honestly and with fidelity to the bargain, and to act reasonably, essentially involving fair dealing. That such a term might be implied in fact has created much consternation in some quarters. Yet in Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Ioannis Kent [2018] EWHC 333 the English High Court went even further with Leggatt LJ suggesting that a good faith duty would be implied in law into relational contracts. The reception of this decision north and south of the border is awaited with interest.

More questions were posed than answered by the Inner House in J H&W Lamont of Heathfield Farm v Chattisham Ltd [2018] CSIH 33 regarding the ability to retain performance in face of a breach of contract. The scope and limits of the right to retain, as well as the status of Bank of East Asia v Scottish Enterprise 1997 SLT 1213 were thrown into doubt, given the differing approaches of the judges to the issue. This causes significant difficulties in determining when the right to retain (an important remedy, often used) is available.

Finally, the Supreme Court provided analysis of the basis on which damages can be sought where it is difficult to prove a loss in Morris-Garner and anor v One Step (Support) Ltd [2018] UKSC 20. In certain cases it is open to the court to find that the claimant’s loss is, in fact, the loss of being unable to negotiate with the defendant to remove or vary the contractual provision that has been breached in return for a benefit, typically payment. Such damages are compensatory in nature are termed, “negotiating damages”.

If you were unable to attend a session it is possible to buy the accompanying course notes (described as “superb”). Please email admin@edinburghlawseminars.co.uk for further details. If we didn’t see you this year we look forward to seeing you next year where we’ll give you all the information you need on what happens in the law of contract in the next 12 months. To receive information about next year’s seminar as soon as it is available make sure you are on our mailing list, see our website www.edinburghlawseminars.co.uk for details.