|
Date: Mon, 4 Aug 2008 17:07 From: Robert Stevens Subject: The Achilleas (from Andrew Burrows)
[Andrew Burrows has asked me to post his initial response to me to the ODG, as the list server refuses to recognise him. It is this post to which my last post responded.]
1. I am very grateful to Rob Stevens for his characteristically clear and punchy analysis. I am sure that what he says will be music to the ears of Adam Kramer (whose excellent 2004 article “An Agreement-Centred Approach to Remoteness etc” adopted the same type of approach). While I accept that that approach offers many useful insights perhaps I can express why I have some difficulties with it. 2. As I see it, the underlying question is whether contractual remoteness rests on the intention of the parties or whether it is a default rule imposed by law subject to the contrary intention of the parties. My root difficulty with the former is that I would regard the obligation to pay damages as being imposed by law whether the parties have agreed to it or not; and if that is so, it is hard to see how rules relating to damages can be based on the parties’ intentions. 3. Concepts such as ‘assumption of responsibility’ and ‘acceptance of risk’ are important in understanding remoteness but are ambiguous as to whether they rest on the parties’ intentions or are imposed (subject to contrary intention). 4. Strictly speaking interpretation of a contract has nothing to do with remoteness. Interpretation is concerned with understanding the express words used by the parties. On the other hand, I can see that remoteness might be helpfully regarded as resting on the implication of a term by the courts. But, as we all know, the implication of terms by the courts raises the precise ambiguity that we are trying to resolve, namely whether the term is implied because it rests on the parties’ intentions (usually referred to as a term implied in fact) or is imposed by law subject to contrary intention (usually referred to as a term implied in law). 5. Applying the default rule approach, no-one (as far as I am aware) has argued that one must apply the ‘reasonable contemplation as likely’ remoteness test ‘mechanistically’. Rather it gives us the fair starting point in the vast majority of cases. This is because it is almost always regarded as fair that the defendant should bear the risk of compensating the innocent party for a type of loss that, at the time of contracting, a reasonable man would have regarded as a serious possibility in the event of breach. That default rule encourages the giving of information about potential unusual loss so that, if it so wishes, the party undertaking the obligation can seek extra payment or can seek to exclude the risk in the contract (by an exclusion clause). But, as with the obligation to pay damages, that rule of remoteness does not rest on the parties’ intentions: it is a default rule imposed by the law. If one is to see it as resting on an implied term, the term is one implied in law not a term implied in fact. Moreover, that default rule is not always a fair rule in the circumstances e.g. where the information about unusual loss is given in a situation where the party undertaking the obligation cannot realistically negotiate extra payment or a clause excluding the risk (hence the famous hypothetical examples of taxi-drivers and shop assistants faced with information about potential unusual losses). And of course the default rule is always subject to the parties’ contrary intention. 6. I do not think that English law has regarded the default rule as unfair and therefore displaced where the actual loss is ‘disproportionate’ to the price or where the actual quantum of loss (as opposed to the type of loss) could not have been quantified at the time of contract. Leading cases such as Victoria Laundry, Heron II, Parsons v Uttley Ingham and Brown v KMR Services all seem to contradict that idea. 7. The Achilleas worries me because the reasoning of Lords Hoffmann and Hope (quaere Lord Walker) does seem to have departed from the above ‘standard’ approach and to have adopted the ‘remoteness is what the parties agreed’ approach. Moreover, as regards the actual decision, if one applies the above default rule analysis to the facts of the case, (a) the loss of a follow-on fixture would surely have been reasonably contemplated as a serious possibility had breach been thought about at the time of contracting; and (b) I am not sure that it is fair for that default rule to be displaced by the ‘general understanding of the shipping industry’ where that understanding appears to be legally flawed. (Arguably it is also contradicted by The Heron II where, as I understand it, there was also a counter-understanding by the shipping industry.) If the decision had been reached (or could retrospectively be saved!) by saying that the normal default rule is displaced in this case because of the parties’ intentions that that sort of loss should not be recoverable that would be fine. But that would require, as I see it, an implied term in fact excluding the follow-on fixture loss. Should such an exclusion clause have been implied in this case? Such a term would not be necessary for business efficacy and, applying the ‘reasonable bystander’ test, I would have expected the response of these owners to have been that they were not accepting ‘of course’ that the loss of a follow-on fixture was excluded. 8. On a more technical point, are we sure what the majority is in The Achilleas? Clearly Lords Hoffmann and Hope are together as, in not signing up to that approach, are Lord Rodger and Baroness Hale. So the crucial speech to interpret is Lord Walker’s. He agrees with Lords Hoffmann, Hope and Rodger. I find what he says rather difficult: e.g. para 86 seems to support Lord Hoffmann but earlier in para 69 he seems to talk of a common basis as distinct from an assumption of responsibility.
Andrew Burrows Norton Rose Professor of Commercial Law,
<<<< Previous Message ~ Index ~ Next Message >>>>>
|
»
»
»
»