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Implied Contract and Restitution

Published online by Cambridge University Press:  06 July 2004

Steve Hedley
Steve Hedley*
Affiliation:
University College Cork
*
e-mail me at: [email protected]
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Abstract

Most modern writers in restitution assume that that the theory of “implied contract” has somehow been disproved or discredited. Yet the justification for this is weak, and begs important questions about the nature and methodology of “genuine” contract law.This article argues for the continued usefulness of “implied contract”, and applies it as the basis of significant portions of the modern law of restitution.

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Articles
Information
The Cambridge Law Journal , Volume 63 , Issue 2 , 18 June 2004 , pp. 435 - 455
Copyright
Copyright © The Cambridge Law Journal and Contributors 2004

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Footnotes

I gave an earlier version of this paper at the SLS Conference, Oxford, on 19 September 2003. Many thanks to Frank Rose, who organised the papers, to Eoin O’Dell, who chaired my session, and to the audience for their reactions. I would be delighted to receive comment on, or criticism of, anything in this paper: e-mail me at [email protected].

References

1 On Pomponius's vague maxim (iure naturae aequum est neminem cum alterius detrimento et iniuria fieri locupletiorem, Digest 50.17.206; see also D.12.6.14), which must be the historical root of unjust enrichment if anything is, see J. Dawson, Unjust enrichment—A comparative analysis (Boston, Mass. 1951), especially introduction and ch. 1.

2 On this see S. Hedley, ‘Restitution: Contract's twin?’ in F. Rose (ed.), Failure of contracts— Contractual, restitutionary and proprietary consequences (Oxford 1997), at p. 247.

3 See especially Burrows, A., Understanding the law of obligations: Essays on Contract, Tort and Restitution (Oxford 1998)Google Scholar, ch. 1.

4 For an excellent example see the discussion of ‘bargained-for enrichment’ in A. Burrows, The law of restitution (2nd ed., London 2002), pp. 23-24.

5 Birks, P., Unjust enrichment (Oxford 2003), p. 234.Google Scholar

6 Birks, Unjust enrichment, p. 233.

7 Holdsworth, W., ‘Unjustifiable enrichment’ (1939) 55 L.Q.R. 37, 42.Google Scholar

8 Cf. Burrows, The law of restitution, p. 14.

9 Cf. P. Birks and G. McLeod, ‘The implied contract theory of quasi-contract: Civilian opinion current in the century before Blackstone” (1986) 6 O.J.L.S. 46.

10 See especially H. Collins, Regulating contracts (Oxford 1999).

11 S. Hedley, Restitution: Its division and ordering (London 2001), ch. 3.

12 On conceptual divisions within restitution see Hedley, Restitution: Its division and ordering, pp. 224-228.

13 E.g. Burrows, The law of restitution, pp. 14-15.

14 I explore this further in ‘The taxonomic approach to restitution”, in A. Hudson (ed.), New perspectives on property law, obligations and restitution (London 2004), p. 151.

15 It will be seen that the implied contract is more unilateral than bilateral, though the case law on the point is sparse.

16 For example, Burrows (The law of restitution) sometimes treats lack of age as a defence (pp. 559-564) and sometimes as a ground of liability (pp. 412-416), without any discussion of the rationale.

17 See especially D. Srivastava, ‘Alarming Levels of Provisional Liquidators’ Remuneration and Costs’ (1998) 9 Australian Journal of Corporate Law 263.

18 Companies Act 1985, s. 36C, on which see generally J. Savirimuthu, ‘Pre-incorporation contracts and the problem of corporate fundamentalism’ (2003) 24 Company Lawyer 196.

19 E.g. R. Long, ‘A theory of hypothetical contract” (1984) 94 Yale Law Journal 415.

20 Dagan, H., ‘In defense of the good Samaritan” (1999) 97 Michigan Law Review 1152;Google Scholar Cf. K. Williams, ‘Doctors as Good Samaritans: Some empirical evidence concerning emergency medical treatment in Britain” (2003) 30 Journal of Legal Studies 258, 279-280.

21 The better modern writing stresses the wide variety of possible conceptual bases for recovery: see especially Dietrich, J., ‘Classifying precontractual liability: a comparative analysis’ (2001) 21 Legal Studie. 154;Google Scholar Barker, K., ‘Coping with failure—reappraising pre-contractual remuneration’ (2003) 19 Journal of Contract Law 105.Google Scholar

22 Pavey and Matthews Pty. Ltd. v. Paul (1987) 69 A.L.R. 577. See D. Ibbetson ‘Implied contracts and restitution: History in the High Court of Australia” (1988) 8 O.J.L.S. 312. In that respect if in no other, Sinclair v. Brougham [1914] A.C. 398 represents a more satisfactory approach. On the financial collapse of a building society, it emerged that the extensive banking business it had conducted was ultra vires. Could the depositors nonetheless make a personal claim that would treat them in exactly the same way as if it had been intra vires? The Lords cannot be faulted for asking themselves the right question—whether such a personal quasi-contractual claim can be squared with the policy of the legislation establishing the limits of the society's powers—though of course from a 21st-century perspective we can regret their negative answer.

23 See more generally Jackman, I., ‘Promissory obligations in the law of restitution’ (1995) 69 Australian Law Journa. 614;Google Scholar Vrisakis, A. and Carter, J., ‘Restitution of payments made under contracts prohibited by statute’ (2000) 15 Journal of Contract Law 228.Google Scholar

24 See especially the long-running disagreement over whether ‘free acceptance’ is a fit concept to be accepted into unjust enrichment theory at all: issues summarised by Burrows, The law of restitution, pp. 402-407.

25 J. McCamus, ‘Restitutionary recovery of benefits conferred under contracts in conflict with statutory policy—the new golden rule” (1987) 25 Osgoode Hall Law Journal 787, 788-780.

26 For a similar approach see J. McCamus, ‘Restitutionary recovery of benefits conferred under contracts in conflict with statutory policy—the new golden rule” (1987) 25 Osgoode Hall Law Journal 787.

27 A good example is the ‘mutual will”. See discussion by J. Cassidy, ‘‘Osborne v. Estate Of Osborne” (2003) 27 Melbourne University Law Review 217.

28 See particularly on the problems of formality avoidance in land law: C. Davis, ‘Informal acquisition and loss of rights in land: What justifies the doctrines?” (2000) 20 Legal Studies 198; A. Robertson, ‘The statute of frauds, equitable estoppel and the need for ‘something more’” (2003) 19 Journal of Contract Law 173.

29 See especially Spence, M., Protecting reliance: The emergent doctrine of equitable estoppel (Oxford 1999);Google Scholar Jaffey, P., The nature and scope of restitution (Oxford 2000).Google Scholar

30 The difficulty is at least partly historical: at common law, a unilateral attempt at payment (‘tender’) seems to have had some substantive effect, even sometimes to the extent of providing a defence to later attempts to recover the money. However, the modern position (which so far as I can ascertain has been in place for over a century) is that a unilateral attempt to make a payment has no effect at all, except under the provisions for payment into court. See C.P.R. 16.5.6 and part 37.

31 For an analogous argument see Jaffey, P., ‘Restitutionary claims arising on contractual termination’, in Schrage, E. (ed.), Unjust enrichment and the law of contract (Amsterdam 2001) 243, at pp. 253–255.Google Scholar

32 For the main counter-view on these issues, see P. Birks, ‘A bank's mistaken payments: Two recent cases and their implications’ (2000) 14 Trust Law International 217.

33 See especially Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. [2002] EWCA Civ 1407, [2003] Q.B. 679.

34 Hedley, Restitution: Its division and ordering, ch. 1.

35 For discussion of the interrelationship of ‘failure of consideration’ and ‘mistake’ in this situation see O’Dell, E., ‘Bricks and stones and the structure of the law of restitution’ (1998) 20 Dublin University Law Journal 101. 128–141;Google Scholar Burrows, The law of restitution, pp. 142-147.

36 Eg. Rumsey v. The North Eastern Railway (1863) 14 C.B.N.S. 641, 143 E.R. 596.

37 E.g. Inverugie Investments Ltd. v. Hackett [1995] 3 All E.R. 841.

38 E.g. Wrotham Park Estate Co. Ltd. v. Parkside Homes Ltd. [1974] 1 W.L.R. 798.

39 E.g. Experience Hendrix L.L.C. v. P.P.X. Enterprises Inc. [2003] EWCA Civ 323, [2003] 1 All E.R. (Comm.) 830.

40 J. Edelman, Gain-based damages—Contract, tort, equity and intellectual property (Oxford 2002), especially ch. 3; S. Waddams, ‘The relation of unjust enrichment to other concepts’, in E. Schrage (ed.), Unjust enrichment and the law of contract (Amsterdam 2001), 411, at pp. 418-421 (‘diluted’ unjust enrichment). There has recently been a suggestion that all the results may be reconciled as examples of a ‘sliding scale’ of enrichment: see ‘Summary of discussion’ in A. Burrows and E. Peel (eds.), Commercial remedies—Current issues and problems (Oxford 2003), p. 129 (Lord Nicholls); RDG discussion 24-26 March 2003 (RDG is archived at ). There are however many difficulties with this, not least that it seems to embrace a vague and discretionary approach hitherto regarded as unacceptable by all sides of the discussion.http://www.ucc.ie/law/restitution/rdg_admin/front.htm

41 See especially the views expressed on the RDG 25-27 March 2003.

42 For an analogous argument see Jaffey, P., ‘Failure of consideration: Roxborough v. Rothmans’ (2003) 66 M.L.R. 284.Google Scholar

43 See e.g. M. Kelly, ‘It's not my job!” (2003) 36 Loyola of Los Angeles Law Review 887, 890893.

44 Hedley, Restitution: Its division and ordering, ch. 3 especially pp. 56-63.

45 The High Court of Australia fell into this trap in Roxborough v. Rothmans of Pall Mall Australia Ltd. [2001] H.C.A. 68, saying that money paid to satisfy a licence requirement which turned out to be constitutionally improper could not be recovered back under an implied contract, because to say that repayment had been agreed by the parties was ‘artificial and unconvincing” (para. 20, Gleeson C.J., Gaudron and Hayne JJ.). But in all but a miniscule number of cases, this could be said of any remedy under a contract. The plea that ‘I want my money back, because I didn't get what I paid for'’ is surely at the core of the law of contract. The idea that providing a remedy for failure of consideration is alien to it, or can only be explained by invoking extra-contractual notions, is quite bizarre.

46 For an approach which escapes this formalism see M. Gergen, ‘Restitution as a bridge over troubled contractual waters'’ (2002) 71 Fordham Law Review 709.

47 P. Birks, ‘No consideration: Restitution after void contracts'’ (1993) 23 Western Australia Law Review 195, 207.

48 E.g. G. Virgo, The principles of the law of restitution (Oxford 1999), pp. 325-327.

49 See in particular the great ‘executory consideration” dispute (recounted in P. Atiyah, The rise and fall of freedom of contract (Oxford 1979), p. 688), which was concerned precisely with the interplay between the different meanings. See also B. Kremer, ‘Recovering money paid under void contracts: ‘Absence of consideration’ and failure of consideration” (2001) 17 Journal of Contract Law 37, 52-54.

50 Skelton, A., Restitution and contract (Oxford 1998), p. 23.Google Scholar

51 A. Kull, ‘Rationalising restitution’ (1995) 83 California Law Review 1191, 1204ff.

52 Kremer, ‘Recovering money paid under void contracts: ‘Absence of consideration’ and failure of consideration’ (2001) 17 Journal of Contract Law 37.

53 For discussion see Hedley, S., A critical introduction to restitution (London 2001), pp. 234–236.Google Scholar

54 Burrows, The law of restitution, pp. 354-359. Skelton (Restitution and contract) is more measured, but equally does not seem to think that the courts can reach the unjust enrichment solution without legislative assistance.

55 For a general review of the difficulties and problems see Hedley, A critical introduction to restitution, pp. 214-231; S. Smith, ‘Concurrent liability in contract and unjust enrichment: The fundamental breach requirement’ (1999) 115 L.Q.R. 245.

56 On difficulties with ‘unjust enrichment” here see P. Watts, ‘Rescission of guarantees for misrepresentation and actionable non-disclosure” (2002) 61 C.L.J. 301. To the contrary see E. O’Dell, RDG for 5 January 1998 and 10 June 1999; D. Meikle, ‘Partial rescission—removing the restitution from a contractual doctrine’ (2003) 19 Journal of Contract Law 40, 54-58.