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Commercial contract law: how important is the quest for certainty?
Ewan McKendrick *
The claim that certainty is an important feature of English contract law is one that is frequently made. This article examines that claim as it applies to commercial contracts and the balance that the courts have attempted to strike between the sometimes competing claims of the need to provide certainty and the desire to ensure a fair and just outcome. It does so in a number of contexts, such as the drafting of some standard terms to be found in modern commercial contracts, the principles applicable to the interpretation of contracts and the exercise of certain rights under the contract, including the right to terminate the contract. The central conclusion is that the importance to be attached to certainty varies depending on the context of the particular contract and is at its greatest in the case of a contract drafted in some detail with the benefit of professional legal advice where contracting parties of roughly equal bargaining power have a legitimate expectation that the courts will give effect to their agreement as it has been drafted. However, in other contexts, such as contracts concluded on an informal basis or which are expressed in open and flexible terms, the need for certainty is less obvious and it therefore weighs less heavily in the scales.
We live in turbulent times. Uncertainty abounds and takes many forms: commercial, political and, increasingly, environmental. The dangers created by these uncertainties are compounded by the apparently frail grasp which some of our political leaders have of the importance of the rule of law and of the need to comply with it. Concerns about the rule of law may at first sight seem a long way from the title of this article and its focus on the importance of certainty for parties who enter into commercial contracts. But, as is so often the case, first impressions can deceive. Lord Bingham sought to express the rule of law in the form of eight rules, the first two of which can be applied directly to the law of contract. The first is that “the law should be accessible and so far as
* QC (Hon), Professor of Anglo-American Private Law, University of Leiden and Professor of English Private Law in the University of Oxford and Fellow of Lady Margaret Hall. This is a slightly revised text of my inaugural lecture at the University of Leiden which, but for the current pandemic, would have been given at the University on 23 March 2020 and has been postponed until a later date. I am grateful to my colleagues at Leiden for their support, a full acknowledgment of which is to be found in the original text of the lecture.
CERTAINTY IN COMMERCIAL CONTRACT LAW
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