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Steve Hedley
Wed, 17 Dec 1997 14:03:10
Barclays: the suing bank


At 13:02 17/12/97 +0000, Peter Birks wrote:

Lionel must be right. The right to rescind can only belong to contract in a contextual sense. That is, it belongs in the law which is about contract.

Contract law *is* the law about contracts. Contracts are creatures of the law. It makes no sense to distinguish between "contract law" and "contextual contract law" : the context of contract law is necessarily a legal context.

When we look at the events from which rights arise, we can rarely derive a right to rescind from contract. We can when the parties have provided expressly for a right to rescind in certain events. In all other cases the right to rescind is raised by operation of law.

All contractual rights involve the operation of law : that is why we look in law books to determine the legal effects of contracts, rather than merely interviewing the parties. Many rules in contract cannot intelligibly be derived from the intentions of the parties, eg rules on formalities, offer and acceptance, and consideration.

All rights which arise by operation of law arise from a wrong, an unjust enrichment, or some other event. Because in the leading case Lord Browne-Wilkinson repeatedly called misrepresentation a wrong and undue influence a wrong, many will think that the O'Brien right to rescind arises from a wrong. That cannot be correct, unless Lord Browne-Wilkinson meant to restrict the relief to those cases in which the facts can be re-analysed as a wrong, thus excluding, for example,purely innocent misrepresentation and many instances of undue influence. If we reject the notion that the right to rescind arises from a wrong, we are left with only the other two categories. Since the purpose and effect of recognizing the right to rescind is to cause the bank to surrender a benefit which it wants very much to hang on to but which the law evidently regards as one which ought not to be retained, it does not seem incorrect to attribute the right to rescind the security to unjust enrichment.

There is no particular difficulty in treating morally blameless conduct as "wrong" - witness the common law tort of conversion and the statutory tort of supplying defective products. The incorrectness lies not in invoking unjust enrichment, but in supposing that invoking unjust enrichment somehow excludes other explanations.


Steve Hedley

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