English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the Industrial Revolution, it shares a heritage with countries across the Commonwealth (such as Australia, Canada, IndiaThe Judicial Committee of the Privy Council decided cases on appeal from the Australian courts until 1985, from Canada until 1959, from India until 1948.). English contract law also draws influence from European Union law, from the United Kingdom's continuing membership in Unidroit and, to a lesser extent, from the United States.
A contract is a voluntary obligation, or set of voluntary obligations, which is enforceable by a court or tribunal. This contrasts with other areas of private law in which obligations arise as an operation of the law. For example, the law imposes a duty on individuals not to unlawfully constrain another's freedom of movement (false imprisonment) in the law of tort and the law says a person cannot hold property mistakenly transferred in the law of unjust enrichment. English law places great importance on making sure that individuals genuinely consent to the agreements that can be enforced in court, as long as those agreements comply with statutory requirements and Human Rights.
Generally, a contract is formed when one person makes an offer, and another person accepts it by communicating their assent or performing the offer's terms. If the terms are certain, and the parties can be presumed from their behaviour to have intended that the terms are binding, generally the agreement is enforceable. Some contracts, particularly for large transactions such as a sale of land, also require the formalities of signatures and witnesses and English law goes further than other European countries by requiring all parties bring something of value, known as "consideration", to a bargain as a precondition to enforce it. Contracts can be made personally or through an agent acting on behalf of a principal, if the agent acts within what a reasonable person would think they have the authority to do. In principle, English law grants people broad freedom to agree the content of a deal. Terms in an agreement are incorporated through express promises, by reference to other terms or potentially through a course of dealing between two parties. Those terms are interpreted by the courts to seek out the true intention of the parties, from the perspective of an objective observer, in the context of their bargaining environment. Where there is a gap, courts typically imply terms to fill the spaces, but also through the 20th century both the judiciary and legislature have intervened more and more to strike out surprising and unfair terms, particularly in favour of consumers, employees or tenants with weaker bargaining power.
Contract law works best when an agreement is performed, and recourse to the courts is never needed because each party knows their rights and duties. However, where an unforeseen event renders an agreement very hard, or even impossible to perform, the courts typically will construe the parties to want to have released themselves from their obligations. It may also be that one party simply breaches a contract's terms. If a contract is not substantially performed, then the innocent party is entitled to cease their own performance and sue for damages to put them in the position as if the contract were performed. They are under a duty to mitigate their own losses and cannot claim for harm that was a remote consequence of the contractual breach, but remedies in English law are footed on the principle that full compensation for all losses, pecuniary or not, should be made good. In exceptional circumstances, the law goes further to require a wrongdoer to make restitution for their gains from breaching a contract, and may demand specific performance of the agreement rather than monetary compensation. It is also possible that a contract becomes voidable, because, depending on the specific type of contract, one party failed to make adequate disclosure or they made misrepresentations during negotiations.
Unconscionable agreements can be escaped where a person was under duress or undue influence or their vulnerability was being exploited when they ostensibly agreed to a deal. Children, mentally incapacitated people, and companies whose representatives are acting wholly outside their authority, are protected against having agreements enforced against them where they lacked the real capacity to make a decision to enter an agreement. Some transactions are considered illegal, and are not enforced by courts because of a statute or on grounds of public policy. In theory, English law attempts to adhere to a principle that people should only be bound when they have given their informed and true consent to a contract.
History
The modern law of contract is primarily a creature of the Industrial Revolution and the social legislation of the 20th century. However, the foundations of all European contract law are traceable to obligations in Ancient Athenian and Roman law,See further Plato, The Laws, Book 11, §23, Contracts. B Nicholas, An Introduction to Roman Law (Clarendon 1963) 165–193 while the formal development of English law began after the Norman Conquest of 1066. William the Conqueror created a common law across England, but throughout the Middle Ages the court system was minimal. Access to the courts, in what are now considered contractual disputes, was consciously restricted to a privileged few through onerous requirements of pleading, formalities and court fees. In the local and manorial courts, according to English law's first treatise by Ranulf de Glanville in 1188, if people disputed the payment of a debt they, and witnesses, would attend court and swear oaths (called a wager of law).R Glanvill, Tractatus de legibus et consuetudinibus regni Angliae (1188) 216 ff They risked perjury if they lost the case, and so this was strong encouragement to resolve disputes elsewhere.
The royal courts, fixed to meet in London by Magna Carta, accepted claims for "trespass on the case" (more like a tort today). A jury would be called, and no wager of law was needed, but some breach of the King's peace had to be alleged. Gradually, the courts allowed claims where there had been no real trouble, no tort with "force of arms" (vi et armis), but it was still necessary to put this in the pleading. For instance, in 1317 one Simon de Rattlesdene alleged he was sold a tun of wine that was contaminated with salt water and, quite fictitiously, this was said to be done "with force and arms, namely with swords and bows and arrows".Rattlesdene v Grunestone (1317) Year Books 10 Edw II, Selden Society vol 54 The Court of Chancery and the King's Bench slowly started to allow claims without the fictitious allegation of force and arms from around 1350. An action for simple breach of a covenant (a solemn promise) had required production of formal proof of the agreement with a seal. However, in The Humber Ferryman's case a claim was allowed, without any documentary evidence, against a ferryman who dropped a horse overboard that he was contracted to carry across the River Humber.Bukton v Tounesende (1348) Baker & Milsom 358 Despite this liberalisation, in the 1200s a threshold of 40 shillings for a dispute's value had been created. Though its importance tapered away with inflation over the years, it foreclosed court access to most people.See Statute of Gloucester 1278 Moreover, freedom to contract was firmly suppressed among the peasantry. After the Black Death, the Statute of Labourers 1351 prevented any increase in workers' wages fuelling, among other things, the Peasants' Revolt of 1381.
Increasingly, the English law on contractual bargains was affected by its trading relations with northern Europe, particularly since Magna Carta had guaranteed merchants "safe and secure" exit and entry to England "for buying and selling by the ancient rights and customs, quit from all evil tolls".Magna Carta §41 In 1266 King Henry III had granted the Hanseatic League a charter to trade in England. The "Easterlings" who came by boats brought goods and money that the English called "Sterling",HS Barker, 'The Rise of the Lex Mercatoria and Its Absorption by the Common Law of England' (1916–1917) 5 Kentucky Law Journal 20, 24 and standard rules for commerce that formed a lex mercatoria, the laws of the merchants. Merchant custom was most influential in the coastal trading ports like London, Boston, Hull and King's Lynn. While the courts were hostile to restraints on trade, a doctrine of consideration was forming, so that to enforce any obligation something of value needed to be conveyed.e.g. Dyer's case (1414) 2 Hen. V, fol. 5, pl. 26 Some courts remained sceptical that damages might be awarded purely for a broken agreement (that was not a sealed covenant).Watkins' or Wykes' case (1425) Baker & Milsom 380, 383, where a man had promised to build a mill, but had failed, per Martin J, 383, 'if this action should be maintained… then a man would have an action of trespass for every broken covenant in the world.' Other disputes allowed a remedy. In Shepton v Dogge(1442) Baker & Milsom 390 a defendant had agreed in London, where the City courts' custom was to allow claims without covenants under seal, to sell 28 acres of land in Hoxton. Although the house itself was outside London at the time, in Middlesex, a remedy was awarded for deceit, but essentially based on a failure to convey the land.