was formed by the will of the parties to undertake an obligation,241 and described the process of formation in offer and acceptance terms.242 There was some development of doctrine: Jean Demolombe, for instance, suggested that an offer should be deemed to be irrevocable even if the offeror did not expressly promise this, since a promise to this effect should be implied in to the offer; such an implied promise was itself an offer which the offeree should be deemed to accept as soon as he learnt of it.243 A similar solution was advocated in German law by Ferdinand Regelsberger,244 the approach being eventually adopted, in modified form, in the provisions of the BGB.245 It is a solution which bears some similarities to the description used in the Common law (and discussed in Chapter 4) in the more restrictive circumstances of breach of pre-contractual tendering conditions.

5.  Contract theory and practice in the twentieth century

In German law, the adoption of the BGB in 1900 solidified an approach to contract (Vertrag) as clearly based upon the will of the parties, as expressed in their respective declarations of intent (Willserklärungen), and resting upon agreement. Contract is the general method prescribed under the BGB by which an obligation may be created by ‘legal transaction’ (Rechtsgeschäft), as opposed to by operation of law.246

German lawyers see the legal transaction constituted by a contractual relationship as comprising two ‘declarations of intention’ or ‘declarations of will’. These declarations of intent are comprised in an offer and acceptance, though that basic statement is not iterated in the text of the BGB itself. In the Motive (the published deliberations of the First Commission on the BGB) the theory underlying the notion of a legal transaction was expressed in strong and explicit will terms thus: ‘A legal transaction is a private declaration of intention aiming at a legal consequence which the law sanctions because it is intended.’247

241See, for instance, Duranton, Cours de droit, x, §§51–2; Demante and Colmet de Santerre,

Cours analytique, v, §§2, p. 2 bis, 3; Demolombe, Cours de Code Napoléon, xxiv, §12; Laurent, Principes de droit, xv, §§ 424–7; Larombière, Theorie et pratique des obligations, i, § 41.

242Aubry and Rau, Cours de droit, iv. §343; Demolombe, Cours de Code Napoléon, xxiv, §45.

243Demolombe, Cours de Code Napoléon, xxiv, §66.

244 Regelsberger, Die Vorverhandlungen, §13. 245 §145 BGB. 246 §311(1) BGB.

247Motive, vol. 1, p. 126 (contained in Mugdan, Die gesammten Materialien zum Bürgerlichen Gesetzbuch).

Such language and conceptualisation clearly discloses the prime importance given to the concept of the will in modern German contract law. This concept finds a ready expression in the large freedom of will which was originally given to contracting parties under the BGB (though subject to the duty of good faith). There is no requirement of a just price; there is no doctrine of laesio enormis;248 and the parties can generally contract out of the default BGB rules. As with other legal systems, however, this freedom is increasingly being constrained as a result of the interest of EU legislators in consumer protection and in a growing human rights jurisprudence. Markesinis has opined that the time may have come ‘when one should treat these developments as prompted by a socio-economic environment which is different from that which gave rise to the classical law of contract’.249 In addition to such socio-economic factors, one might add a prevailing political culture with an emphasis on state regulation which has held sway over the European political landscape since the latter half of the last century.

A further remark of Markesinis is worth highlighting (though it is made without any citation of sources), that in German law the obligation of contract

arises out of the promise of the parties (with its almost religious connotations in the Middle Ages) and not, as in the common law, from the notion of a bargain or (in later times) the idea of detrimental reliance.250

Given that the role of unilateral promise suggested by von Kübel was distinctly scaled down in the final text of the BGB, these remarks must be interpreted either as relating to the distant origins of German contractual doctrine or else, if intended as a description of the current law, as referring to conditional promissory conceptions of offer and acceptance, rather than to unilateral promise. Even so, the comparison made between German and English law fails to capture the historic role of promise in English law, even if that role was not as directly influenced by the canon law as was the case in Germany.

In German law, contracts are interpreted objectively. Declarations of will forming a contract are, by virtue of the doctrine of the ‘objective horizon’ of the recipient of the declaration (Empfängerhorizont), interpreted in a way that a reasonable addressee of the declaration would understand it. An exception is where both parties share a common misconception

248Which was rejected by the drafters of the BGB: see Motive, vol. 1, p. 321.

249Markesinis et al., The German Law of Contract, pp. 47–8.

250Ibid., p. 55.

House remarked that there was ‘no doubt that parties must achieve consensus in idem upon all the essential matters before there can be said to be a contract between them’.263 The agreement of the parties must, however, be accompanied by a clear intention to be bound; without such intention, mere agreement is insufficient for a binding contract.264

The unilateral promise has continued as a separate obligation in Scotland, though under-utilised and seldom litigated on, and (from 1995) subject to a revised requirement of form which stipulates the need for a unilateral and gratuitous promise to be in subscribed writing unless undertaken in the course of business.265 The neglect of this obligation, even in the one jurisdiction which has explicitly recognised it as a separate species of obligation, is marked. This is regrettable, as there are a number of transactions for which the gratuitous and unilateral promise is the most natural obligation, in the sense that it most accurately describes the nature of the relationship between the parties. Such transactions include offers of reward, IOUs, negotiable instruments, duties undertaken at the contract negotiation stage, third party rights, and options.266 Some of these transactions are discussed in later chapters of this work, where the utility of a promissory analysis is explored.

I have previously suggested that, given the current state of Scots law, defence of the will approach to contract liability is easier in Scotland than in the Common law.267 This is so for a number of reasons. First, because descriptions of contract liability in Scotland are typically agreement and not promissory based, this means that the oft levied charge that it is inappropriate to use the idea of promise to explain contract (because promise is a unilateral act whereas contract is bilateral) is evidently irrelevant. Scots law does indeed confine the language of promise to unilateral acts. This is so even in the one case where promissory language is used in a contractual context, namely to describe the nature of a third party right in contract, because (as the discussion in Chapter 5 will show) both of the contracting parties can be conceived of as making separate unilateral promises to the third party. In any event, the charge itself is somewhat suspect, given that it was suggested in Chapter 1 that the idea of promise is quite able to accommodate mutual, conditional undertakings.

263Avintair Ltd v Ryder Airline Services Ltd 1994 SC 270, 273.

264W. S. Karoulias, S. A. v. The Drambuie Liqueur Company Ltd [2005] CSOH 112, 2005 SLT 813; Aisling Developments Ltd v. Persimmon Homes Ltd [2008] CSOH 140.

265Requirements of Writing (Scotland) Act 1995, s. 1.

266See further Hogg, Obligations, Ch. 2, and ‘Promise: The Neglected Obligation’.

267See Hogg, ‘Perspectives on Contract Theory’.

Second, as the history of contractual theory narrated above has shown, the origin of will theory in Scots law can be traced to Stair’s idea of law as the dictate of reason, and contract as an expression of the rational will, and not to much later nineteenth-century, mercantile free trade ideas, even if such ideas reinforced Stair’s approach. Given this history, attacks on will theory which argue that such free trade ideology is outdated as a basis for explaining the underlying force of contracts have much less force. Third, as the discussion of remedies in later chapters will demonstrate, will theory is more easily supported in Scots law because of the importance placed upon performance remedies. As a result, modern Scots contract law can withstand the criticism that contracts are really only about making reparation for breach, as reliance theorists like Atiyah have argued.268 Last, Scots law’s lack of a doctrine of mutual consideration means it is immune from any arguments that consideration undermines a will-based approach because the law is actually about putting things in the correct form rather than enforcing the will of the parties. In a system with no mutual consideration requirement, the emphasis can be argued much more naturally to lie in enforcement of the will of the parties.

This last Scottish aid to defending will theory (the absence of a doctrine of consideration) is also shared by Louisiana and South Africa. Though no separate obligation of promise exists in each of those two systems, by the twentieth century each had clearly accommodated gratuitous contracts, any requirement of consideration having been rejected, with each supplementing the general approach by giving a limited role to promissory estoppel.269 It is not uncommon to see in older South African cases descriptions of contract in promissory terms. Thus, in Rood v. Wallach the essential elements of contract were described as

the promise to do or forbear some act made by one and accepted by the other party and the intention that the legal relations of the parties shall be governed by the promise in matters to which it relates, or, as is sometimes put, there must be consent and an intention to create legal relations. 270

In more recent times, however, the preference has been for describing the essential element of contract as consensus ad idem.271 Roman-Dutch

268Atiyah, Essays on Contract, Ch. 2.

269In South Africa, what have been referred to in this work as gratuitous contracts are ­usually referred to as unilateral contracts.

2701904 TS 187, 219, per Mason J.

271See, for instance, Bloom v. The American Swiss Watch Co. 1915 AD 100, 105; SaambouNasionale Bouvereniging v. Friedman 1979 (3) SA 978 (A), 993.

law, the precursor of modern South African law, had in addition required iusta causa for a valid contract. In the late nineteenth and early twentieth century, de Villiers CJ tried to equate iusta causa with the common law doctrine of consideration, but this approach was eventually conclusively rejected in Conradie v. Rossouw,272 in which the Appellate Division conclusively held that consideration was not part of the law of South Africa. This left the idea of iusta causa in a somewhat uncertain state,273 though as recently as 1979 iusta causa was still being said judicially to be a component aspect of contracts.274 Hutchison has expressed the ardent hope that ‘when it next has an opportunity to pronounce on the matter, the Appellate Division will unequivocally declare that the iusta causa requirement, having served its historically important purpose, has now become redundant’.275 In South African law both options and offers of reward are analysed as contracts; binding offers are unenforceable, showing up a weakness in the non-recognition of unilateral promises.

An important element in the development of contract law in South Africa since 1994 has been the influence of the values and rights established­

in the new Constitution. The Constitutional Court has had occasion to remark that

the approach of the Constitutional Court is that contractual obligations are enforceable unless they are contrary to public policy, which is to be discerned from the values embodied in the Constitution and in particular the Bill of Rights. Where the enforcement of a contractual provision would be unreasonable and unfair in the light of those fundamental values it will be contrary to public policy to enforce the contract or the contractual term in question.276

Importantly, however, freedom of contract has itself been described by the Constitutional Court as supporting constitutional values:

public policy, as informed by the Constitution, requires in general that parties should comply with contractual obligations that have been freely and voluntarily undertaken. This consideration is expressed in the maxim pacta sunt servanda, which, as the Supreme Court of Appeal has repeatedly noted, gives effect to the central constitutional values of freedom and dignity. Self-autonomy or the ability to regulate one’s own affairs, even to one’s own detriment, is the very essence of freedom and a vital part of

274See the comments of Jansen JA in Saambou-Nasionale Bouvereniging v. Friedman 1979

(3) SA 978, 990–92 (A).

275Hutchison, ‘Contract Formation’, p. 173.

276Wallis AJ in Den Braven SA (Pty) Ltd v. Pillay & Anor 2008 (6) SA 229, para. 32.

dignity. The extent to which the contract was freely and voluntarily concluded is clearly a vital factor as it will determine the weight that should be afforded to the values of freedom and dignity.277

This view was referred to approvingly in Den Braven v. Pillay, where Willis AJ added:

suggesting that contractual autonomy is not in appropriate circumstances reflective of freedom and gives effect to the central constitutional values of freedom and dignity … is contrary to the views of both the Constitutional Court and the Supreme Court of Appeal.278

All of this means that where restraints operate upon freedom of contract in South African law, they tend to do so by way of flexible public policy considerations underpinned by constitutional values, rather than by hard and fast legislative restrictions as in the UK.

In Louisiana, there is a clear codal statement that contract derives from the will of the parties, Article 1757 of the Civil Code stating that obligations ‘arise from contracts and other declarations of the will’. This leaves no room for doubt that the contract theory of Louisiana is will based, in the sense that contracts are created through the operation of free will; any academic arguments to the contrary would be in contradiction to this clear statement of the Civil Code. Of course, the fact that this statement has been legislatively made also makes it clear that, while contracts are to be seen as arising through acts of the will, their obligatory force derives ultimately from the normative power of the state, channelled through the discretionary exercise of the will of contracting parties. Will theory in Louisiana thus has that form discussed in the last chapter which was characterised as seeing the will as exercising a devolved rather than an independent normative power.279 In addition, as discussed earlier, there is in Article 1967 of the Code a limited reliance-based type of liability, criticised earlier for its equation of reliance with lawful cause.280

In the Common law world, the twentieth century was marked by a number of developments in contract theory. The reliance theory, discussed in Chapter 2, came to prominence, with some arguing that the convergence of contract and tort under a general reliance basis essentially marked the end of contract.281 This prediction proved to be premature, as

277Ncobo J in Barkhuizen v. Napier 2007 (5) SA 323 (CC), para. 57.

278Den Braven SA (Pty) Ltd v. Pillay & Anor 2008 (6) SA 229, para. 33.

279See the discussion in Ch. 2, at p. 88.

280See the discussion in Ch. 2, at p. 105.

281Gilmore, The Death of Contract.