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Ineffective transactions, unjust enrichment and problems of policy

Published online by Cambridge University Press:  02 January 2018

Sue Arrowsmith
Sue Arrowsmith*
Affiliation:
University College of Wales, Aberystwyth
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Extract

In a previous article in Legal Studies I suggested a general framework of rules for analysing problems of restitution which arise from ineffective transactions. It was explained that normally a claim should be available to a party who has performed his part, usually based on mistake or failure or consideration, or on ‘policy’ grounds. A benefit to the recipient of goods and services will usually be shown by the fact that in making the agreement he requested the performance Problems may arise, however, when the factor which renders the contract unenforceable also provides an argument against allowing a claim in restitution. One problem which arises frequently with goods and services is that the factor which vitiates the contract makes it difficult to show a benefit. For example, when the defendant mistakes the nature of the goods which he is purchasing, it may be impossible to say that he requested them for the purpose of showing they are of benefit to him.

Type
Research Article
Information
Legal Studies , Volume 9 , Issue 3 , November 1989 , pp. 307 - 322
Copyright
Copyright © Society of Legal Scholars 1989

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References

1 (1989) 9 Legal Studies 121.

2 Ibid at pp 123–125.

3 Ibid at pp 125–133.

4 Whether it should do is of course a separate question open to debate. The common law position with ultra vires contracts under the Companies Acts has been altered by statute: see below at n 13 and associated text.

5 Introduction to the Law of Restitution (1985) at p 436.

6 This is the approach of R. Goff & G. Jones in The Law of Restitution (3rd ed, (1986): see pp 29–30.

7 Although, arguably, in some of these cases it may be legitimate to say that there is no valid request.

8 It should be pointed out that contracts purportedly made on behalf of a company not yet incorporated do not fall into this category. Where it is sought to enforce the contract against the company the problem is one of want of authority (see (1989) 9 Legal Studies 121): there is no principal in existence to give authority when the contract is made. Where the company seeks to enforce the contract there is no policy reason to refuse to allow it to do so: the company should be allowed to ratify the agreement as can any other alleged principal, as recommended in Report of the Company Law Committee (1972) Cmnd 1749, para 44. The restitutionary ‘problem’ in this latter situation, considered in Rover Film International v Cannon Film Salts Ltd [1988] 2 FTLR 536, CA, only arises because of the anomalous contract rule.

9 The Crown is considered to possess an unlimited power to contract: see C. Turpin, Government Contracts (1972) at p 19; P. Hogg, Liability of the Crown (1971) at pp 120–121.

10 Ashbury Carriage Co v Rich (1875) 7 HL 653; Sydney v Chappell (1910) 43 SCR 479.

11 Or by statute where created directly by statute: Ashbury Carriage Co v Riche, above, n 10. On the doctrine see J.W. Mayson D. French, and C.L. Ryan, Company LQW (1988) at pp 39–57.

12 In the private law context in Bell Houses Ltd v City Wall Properties Ltd [1966] 1 QB 207 it was suggested (obiter) that the remedy would be in restitution. On appeal Salmon LJ left the question open: see [1966] 2 QB 656 at 694, CA. For the Canadian authority see S.L. Arrowsmith, Government Procurement and Judicial Review (1988) at pp 242–244.

13 Clause 101.

14 There can be no question of conversion since it seems that the property will pass: see Trades Hall Co v Eric Tobacco Co (1916) 29 DLR 779, (Man CA); Breckenbridge Speedway Ltd v The Queen [1970] SCR 174.

15 A purchase made with the intention of using it for ultra vires purposes is probably ultra virex although there are lawful uses to which it could be put: see, for example Lamb v Estevan (1922) 70 DLR 670, (Sask CA).

16 Whether there could be a claim in such a case in private law was left open in Re Jon Beauforte [1953] Ch 131at 137.

17 Introduction to the Law of Restitution [1985] at p 436. Goff & Jones, op cit n 6, seem on the other hand (at 445) to assume a benefit exists, but do not really discuss the point.

18 Birks, op cit n 15 at p 436.

19 It can be said that any tortious act is ultra vires since the legislature can hardly be said to confer a power to do tortious acts.

20 For the Canadian authority (where recovery has been refused in cases of substantive ultra vires) see Arrowsmith op cit n 12, at p 271.

21 See below ns 28–29 and associated text.

22 (1883) 8 App Cas 517.

23 Ibid at 528.

24 Their Lordships did not consider specifically the possibility of a restitutionary claim, but approved the earlier Court of Appeal decision in Hunt v Wimbledon Local Board (1878) 40 LT 115 where the possibility of a claim based on the receipt of a ‘benefit’ was specifically considered. With the former common law requirement for a seal the question of restitutionary recovery was never settled. It was suggested in some cases that this was allowed only where the work was necessary, but the leading case of Lawford v Billericay RDC [ 1903] 1 KB 772 is not clear on this point. Stirling LJ clearly states it as a requirement but it is not mentioned by the other two judges.

25 See eg Ayr Harbour Trustees v Oswald (1883) 8 App Gas 623.

26 On this see Arrowsmith op cit n 12 at pp 259–260. A provision in the Local Government Act 1972, s 135 requires local authorities to make standing orders providing for competitive procedures in contracting, but expressly states (s 135(4)) that non-compliance is not to invalidate any contract.

27 The possibility of such a claim for goods was left open in Re Jon Beauforte [1953] Ch 131 at 137; it was allowed in Sinclair v Brougham [1914] AC 398, in the case of money paid over, as to which see below ns 32–34 and associated text.

28 [1953] Ch 131.

29 [1914] AC 398.

30 See below n 41 and associated text.

31 As acknowledged in Sinclair v Brougham, above n 29.

32 Above, n 29.

33 It was assumed that a claim to ‘value surviving’ could only be made in rem but, as Birks explains, there is no reason why this should be so: see Introduction to the Law of Restitution, above n 5, at pp 85–37.

34 Goff & Jones, above, n 6, at p 444 suggest such a claim does circumvent the policy of the ultra vires rule but it is difficult to see how, unless they are referring to the deterrent aspect.

35 (1862) 2 J&H 441.

36 Op cit n 6.

37 Op cit n 5.

38 There has been some debate over whether a claim for necessaries against an infant is contractual or restitutionary, but authority clearly favours the former view: see Goff & Jones, op cit n 6, at pp 426–428. Birks op cit n 5 has criticised this, but the position can be supported since there is no policy at all against allowing contracts of this type; they can be compared to intra vires contracts of corporate bodies. It may be advantageous to the infant to give him the power to bind himself under such executory agreements, in order better to secure his needs.

39 For more detail on the scope of the common law capacity to contract see Lam Commission Working Paper No 82, Minors Contracts (1982) at pp 8–16.

40 In Valentini v Canali (1889) 24 QBD 166 and Steinberg v Scala [1923] 2 Ch 452 it was held that money paid was not recoverable, but these cases are based on the absence of a total failure of consideration. The requirement of total failure of consideration is inconsistent with a general principle of unjust enrichment and should not be maintained if this principle is adopted in English law: on this see Arrowsmith (1989) 9 Legal Studies 121 at 134–5.

41 On this see Goff and Jones op cit n 6 at pp 426–427; G.H. Treitel, The Law of Contract (7th edn, (1987) at p 427.

42 It seems property will pass here: Stocks v Wilson [1913] 2 KB 235.

43 The Law Commission, on whose recommendation this provision was enacted, regarded it as designed to prevent unjust enrichment and to be applied in accordance with common law principles on this subject: see Law Commission, Report No 134, Minors Contracts at 4.16–4.24.

44 See below at ns 48–49 and associated text.

45 Op cit n 6 at p 440.

46 Law Commission, above, n 46at 4.23.

47 Report of the Committee on the Age of Majority, Cmnd 3342 (1967).

48 R Leslie Ltd v Shiell [1914] 3 KB 607.

49 Cowern v Nield [1912] 2 KB 419.

50 [1954] SCR 725.

51 Scarisbrook v Parkinson (1869) 20 LT 175; Pullbrook v Lawes (1876) 1 QBD 284; James v Thorn H. Kent & Co Ltd [1951] 1 KB 551, CA per Lord Denning (Somervell LJ allowed recovery of expectation damages for breach of an ‘implied contract’ but this is clearly wrong and shows the confusion engendered by the old ‘implied contract’ fallacy). In these cases there was no policy objection to recovery either since the object of the relevant provision was to prevent false allegations of promises that might bind people for a long period.

52 (1987) 69 ALR 577.

53 A point made by Ibettson in (1988) 8 OJLS 312.

54 Ibid at 584.

55 Ibid at 608.

56 Deane J does suggest (at 609) that if specific prejudice to the building owner can be shown as a result of non-compliance this should be taken into account in evaluating the benefit.