CONTRACT LAW IN COMMONWEALTH COUNTRIES: UNIFORMITY OR DIVERGENCE?

• Author: Andrew PHANG Judge of Appeal, Supreme Court of Singapore. GOH Yihan LLB (Hons) (National University of Singapore), LLM (Harvard); Advocate and Solicitor (Singapore); Associate Professor of Law, School of Law, Singapore Management University.
• Publication year: 2019
• Published date: 01 December 2019
• Date: 01 December 2019

I. Introduction

1 The present article was presented (in much shorter form) at a conference celebrating the 30th anniversary of the Journal of Contract Law1 (“the Journal”). In contrast with another article (also by the present authors) which, in conjunction with the same celebration, analyses the

influence of the Journal in the context of the contract law of the Commonwealth (which analysis is necessarily rough and ready, and more quantitative in nature),2 this article, on the other hand, is a qualitative analysis of Commonwealth contract law – in particular, whether and in what areas the contract law of various Commonwealth jurisdictions has diverged and, more importantly, perhaps, why such divergence has occurred. A closely related point is whether a shift back towards uniformity is desirable.

2 At the outset, we should note that the concepts of uniformity and divergence are themselves relative. For example, whilst a particular Commonwealth court could decide to diverge from English law as at a particular point in time, this might be because that court chose to adhere to English law as it had previously been. Considered in that particular light, that court would have preferred to maintain uniformity with English law as it had been. Or a particular Commonwealth court might decide to diverge from not only English law as it is but also the English law as it was. In doing so, it might decide to follow the law of another Commonwealth court and, to that extent, there would be uniformity with the law of that court. Or a particular Commonwealth court might decide to diverge not only from English law as it is and as it was, but also from the law of all other Commonwealth jurisdictions – in effect, striking out on a wholly new and unique legal path in relation to a particular area of the common law of contract. It is therefore important to bear in mind the various ways in which uniformity and divergence can operate, conceptually. What is clear is that, where a particular Commonwealth court chooses to strike out on a new path, that would clearly constitute divergence in the fullest sense of that concept. What we will see, however, is that when we speak of divergence, this tends to relate more to divergence from English law. This is not surprising for, as we will explain below, English law was the starting point for all the Commonwealth jurisdictions that were former colonies of England. To that extent, there was a kind of “forced” uniformity at the beginning; hence, any change was likely to be a divergence from English law more than any other law. Hence, when we speak of “divergence” in this article, this will be the primary sense in which the concept of “divergence” will be used.

3 However, as we shall see, there is yet a third situation where the contract law in a particular area appears to be in a state of flux. A situation of flux could conceivably coincide with a situation of divergence. The issue that arises in such a situation is how the law in each jurisdiction ought to develop. In this regard, we would suggest that

courts ought always to be sensitive to (and even utilise, wherever appropriate) the relevant case law from other jurisdictions.3 Put simply, especially in novel or developing areas of contract law, courts ought to search across all common law jurisdictions for the principles that are most appropriate to the jurisdiction concerned from the perspectives of both logic and local conditions. To put it even more simply, courts engage in the search for principle.4 Looked at in this light, comparative analysis is of the first importance,5 and this is, in our view, common to the development of Commonwealth contract law generally. This also ensures that there ought not to be autochthonous or indigenous development (here, of the domestic law of contract) merely for its own sake (for this would be mere parochialism), and that due regard ought to be paid to developments in other jurisdictions. As we will point out below, such an approach is not only relevant to the development of the law when it is in a state of flux. Indeed, we would argue that it is also the primary or dominant approach adopted by Commonwealth courts when deciding whether or not there ought to be uniformity or divergence in a particular area of the common law of contract and it is characterised by many of the central threads which we consider below.

4 A moment's reflection will reveal that this is a mammoth project – one that would require a book-length study (or perhaps even a multi-volume study). We hope that we will have the opportunity to elaborate on it in a more extended study in the future (hopefully, with the assistance of colleagues across the Commonwealth). In the meantime, though, we present it as a more modest contribution that, we hope, will generate more legal food for thought. Most importantly, we thought that this was appropriate for the present Conference which not only celebrates the 30th anniversary of the Journal but also examines, as the central theme of the conference itself, how contract law will meet the challenges of the 21st century.

5 It would be appropriate at this juncture to turn to an outline of what we propose to accomplish in the present article.

II. An outline

A. General

6 We commence by considering briefly the state of Commonwealth contract law at the founding of the Commonwealth. Not surprisingly, there was uniformity due to the fact that every Commonwealth jurisdiction applied the law of its colonial master, viz, English law.

7 However, such uniformity could not last indefinitely as more and more Commonwealth countries became independent nations in their own right. This entailed the need in each country to develop an independent legal system that was sensitive to, and reflective of, her needs. Whilst uniformity in the context of contract and commercial law (as opposed to, say, constitutional and administrative law) would have been (and arguably continues to be) desirable, there was always the need to ensure that the development of contract and commercial law was appropriate to the circumstances of that particular country – at least in so far as it related to its domestic sphere.

8 It is not possible, within the modest confines of the present article, to cover such divergence with regard to all the areas of Commonwealth contract law. We will therefore confine ourselves to a consideration of the most recent and most topical areas. We will first examine areas of divergence, commencing with an examination of developments in relation to implied terms (with a focus on the Judicial Committee of the Privy Council decision (on appeal from the Court of Appeal of Belize) of Attorney-General of Belize v Belize Telecom Ltd6 (“Belize”), where there has been divergence both within as well as outside English law.

9 We then turn to consider the law relating to common mistake. In this area, there is clear divergence in at least three jurisdictions, viz, England, Singapore and Australia. Indeed, the law in Australia is quite different from that in England and Singapore with regard to the very existence of a doctrine of common mistake, at least at common law, whilst, as between England and Singapore, there is a difference in the view that is taken with regard to the issue as to whether or not there is a doctrine of common mistake in equity.

10 We also consider another area of intense topical interest, inherent controversy and divergence, which is the recent UK Supreme

Court decision on contractual illegality in Patel v Mirza,7 and the reasons why the Singapore Court of Appeal in the more recent decision of Ochroid Trading Ltd v Chua Siok Lui8 declined to follow it.

11 Another area of Commonwealth contract law where there has been divergence relates to remoteness of damage in contract law. Here, the focus will be on the House of Lords decision in Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)9 (“The Achilleas”). The decision in this case has not been followed uniformly across the Commonwealth – reference may be made in this regard to the Singapore Court of Appeal decisions of MFM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd10 (“MFM Restaurants”) and Out of the Box Pte Ltd v Wanin Industries Pte Ltd11 (“Out of the Box”).

12 We will then turn to consider areas of Commonwealth contract law that are characterised by both flux and divergence. One such area is the law relating to discharge by breach of contract.

13 We also consider areas of Commonwealth contract law which are in a state of relatively greater flux. In particular, we will touch on two developing areas. The first is the doctrine of unconscionability (including its relationship to the more established doctrines of duress and undue influence). As we shall see, England, Australia, Canada and Singapore adopt somewhat different approaches and it is anyone's guess whether uniformity or divergence will ultimately result. Our preliminary analysis suggests that it is probably the latter rather than the former. The second area relates to possible new categories of damages in contract law (in particular, punitive damages, Wrotham Park damages,12 and AG v Blake damages).13

14 In order to go beyond merely describing the areas of Commonwealth contract law briefly referred to above, it is necessary to draw out some normative threads that might explain why the respective areas developed in the way they did. This might simultaneously furnish Commonwealth courts with legal methodology as well as tools for developing the law in their respective jurisdictions. We should qualify that these normative threads do not (and cannot) operate in a

mechanistic or unilinear fashion. Some may at times not be relevant at all whilst, on other occasions, may operate in an interactive fashion. We can go no further than this because the possible fact situations are myriad and, indeed, life itself is too complex to admit of a reductionist list...