Holiday Reading List

 Works of Legal Fiction and Warranties

Common law courts (not unlike those in civil law jurisdictions) have long sought to champion the rights of merchants to negotiate contracts without undue interference.

Recent court decisions in England have reinforced this “freedom to contract” through a concept of  “contractual estoppel” whereby parties to a contract (including sales agreements) may, in particular circumstances, exclude any warranties except those allowed by the contract wording. The English Court of Appeal set out the principle most clearly in 2006:

“There is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction, whether it be the case or not. For example, it may be desirable to settle a disagreement as to an existing state of affairs in order to establish a clear basis for the contract itself and its subsequent performance.” (Peekay International v Australia and New Zealand Banking Group Limited [2006] EWCA Civ 386 at [56]

Thus, if it were agreed in an English law international supply contract* that:

“The Purchaser has had the opportunity to inspect the Goods before delivery and the Purchaser has satisfied itself that there are no defects or matters of non-conformity in relation to the Goods.”

the principle of contractual estoppel would operate to prevent the Purchaser from later asserting a breach of contract due to a defect even if the Purchaser had in fact no opportunity whatsoever to check the goods.

Such is the power of contractual fiction!

*international supply agreements are excluded from the reasonableness tests under the UK Unfair Contract Terms Act (UCTA) 

There is more interesting reading to discover at our webinar:

For info and registration details CLICK HERE