English Contract Law - Cancelling The Contract

Cancelling The Contract

See also: English unjust enrichment law, English trusts law, and English tort law

"If a man fails to fulfil an agreed contract - unless he had contracted to do something forbidden by law or decree, or gave his consent under some inquitous pressure, or was involuntarily prevented from fulfilling his contract because of some unlooked-for accident - an action for such an unfulfilled agreement should be brought in the tribal courts, if the parties have not previously been able to reconcile their differences before arbitrators (their neighbours, that is)."

Plato, The Laws, Book 11, §23, Contracts.

Because contracts concern voluntary obligations, the courts employ a number of protections to ensure only people who give informed and true consent are legally bound. Before 1875, the common law courts only allowed escape from an agreement and damages if someone was induced to enter an agreement by fraud or was put under physical duress, or suffered from a lack of legal capacity. The courts of equity, however, were significantly more generous because they allowed "rescission" (i.e. cancellation) of a contract if a person was the victim of any misrepresentation, even an innocent one, and any "undue influence", beyond influence by physical threats. In these situations the victim of the misrepresentation or unconscionable behaviour has the option to avoid the contract. If avoided, the parties are both entitled to have returned whatever property they had already conveyed, so nobody remains unjustly enriched (though this terminology was not used till the 20th century). As the 20th century unfolded, the courts and statute expanded on the range of circumstances in which a person could claim damages for negligent misrepresentation, on top of fraud. As concern over the use of unfair terms grew, there were calls to recognise a positive duty on contracting parties to disclose material facts as part of a broader duty of "good faith" and some judges attempted to follow the American Uniform Commercial Code by fashioning a broader doctrine of "unconscionable" bargains, procured through inequality of bargaining power. This development was, however, stopped by the House of Lords, so that problems of unfair contract terms continued to be dealt with through targeted legislation. The courts also declare contracts void if they were for an illegal purpose, and refuse to enforce the agreement, or give any legal remedy if doing so would require a person to rely on their illegal act.