Lord Sumner put forward a similar concept in Bank Line Ltd v. Arthur Capel and
Company
15 stating that “the theory of dissolution of a contract by the frustration of
its commercial object rests on an implication, which arises from the presumed
common intention of the parties,” but his consideration seemed not to attract much
attention until Lord Denning restated the doctrine of “presumed intent” after three
decades. Lord Denning’s proposition points to the court’s prerogative to determine
what the parties presumably intended when they reached an agreement.
It may seem that presuming intent points to a subjective approach contrary to the
tenets of the common law which upholds objectivity in virtually all cases. However,
that is not quite the case because presumption of what was in the minds of the parties
when they bargained, must be done objectively. In other words, the court is not
concerned with what in fact the parties intended, but rather, what they should have
intended as reasonable businessmen. Incidentally, the “officious bystander” test
enunciated in Shirlaw v. Southern Foundries Ltd.
16 Clearly reflects a requirement
of “reasonableness”. It is recognized in this context that in the field of commercial
endeavor, subjective speculation is inconsistent with the philosophical foundation of
freedom of contract or party autonomy. Contract theory provides that mutual consent
is determined by reference to objective, external acts and manifestations, not by
evidence of subjective, internal intention. This is what is embraced by common law
jurisdictions. In contrast, civil law jurisdictions apply the subjective theory under
which the actual mental assent of the parties determines the formation and interpretation of a contract.
17
It needs no reiteration that freedom of contract is the very bulwark of English
contract law. It is a paramount principle that courts are quick to uphold. In time
charterparty cases, for example, unless there is an express clause providing for a
charterer to extend the time of withdrawal of the vessel by the owner, the courts will
not imply the existence of any clause allowing for such withdrawal. It is a matter
open to bargain between the parties under the doctrine of freedom of contract; and
therefore, in the absence of an express clause, the court will infer that there was no
intention on the part of the parties to extend the time for withdrawal by the
shipowner.
18 In a similar vein it may be submitted that in the absence of an express
clause in the charterparty, a court will not be inclined to imply into it, a duty of the
shipowner to act reasonably when exercising his right in respect of a lien clause.
However, before such a submission can be made definitively, further discussion is
necessary on this matter.
15 Bank Line Ltd v. Arthur Capel and Company [1919] A.C. 435, at 455.
16 [1939] 2 KB 206 per Lord Justice Mackinnon who held at p. 227 that “if an officious by-stander
were to suggest some express provision for it in the agreement, they (the parties) would testily
suppress him with a common “Oh, of course”.
17 See Barnes (2008), pp. 1119–1120 and 1122; Perillo (2000), pp. 429–430.
18 Scandinavian Trading Tanker Co. A.B. (Respondents) v. Flota Petrolera Ecuatoriana (Appellants), [1983] 2 A.C. 694 pp. 703–704.
316
S. Jia and H. Yu
Company
15 stating that “the theory of dissolution of a contract by the frustration of
its commercial object rests on an implication, which arises from the presumed
common intention of the parties,” but his consideration seemed not to attract much
attention until Lord Denning restated the doctrine of “presumed intent” after three
decades. Lord Denning’s proposition points to the court’s prerogative to determine
what the parties presumably intended when they reached an agreement.
It may seem that presuming intent points to a subjective approach contrary to the
tenets of the common law which upholds objectivity in virtually all cases. However,
that is not quite the case because presumption of what was in the minds of the parties
when they bargained, must be done objectively. In other words, the court is not
concerned with what in fact the parties intended, but rather, what they should have
intended as reasonable businessmen. Incidentally, the “officious bystander” test
enunciated in Shirlaw v. Southern Foundries Ltd.
16 Clearly reflects a requirement
of “reasonableness”. It is recognized in this context that in the field of commercial
endeavor, subjective speculation is inconsistent with the philosophical foundation of
freedom of contract or party autonomy. Contract theory provides that mutual consent
is determined by reference to objective, external acts and manifestations, not by
evidence of subjective, internal intention. This is what is embraced by common law
jurisdictions. In contrast, civil law jurisdictions apply the subjective theory under
which the actual mental assent of the parties determines the formation and interpretation of a contract.
17
It needs no reiteration that freedom of contract is the very bulwark of English
contract law. It is a paramount principle that courts are quick to uphold. In time
charterparty cases, for example, unless there is an express clause providing for a
charterer to extend the time of withdrawal of the vessel by the owner, the courts will
not imply the existence of any clause allowing for such withdrawal. It is a matter
open to bargain between the parties under the doctrine of freedom of contract; and
therefore, in the absence of an express clause, the court will infer that there was no
intention on the part of the parties to extend the time for withdrawal by the
shipowner.
18 In a similar vein it may be submitted that in the absence of an express
clause in the charterparty, a court will not be inclined to imply into it, a duty of the
shipowner to act reasonably when exercising his right in respect of a lien clause.
However, before such a submission can be made definitively, further discussion is
necessary on this matter.
15 Bank Line Ltd v. Arthur Capel and Company [1919] A.C. 435, at 455.
16 [1939] 2 KB 206 per Lord Justice Mackinnon who held at p. 227 that “if an officious by-stander
were to suggest some express provision for it in the agreement, they (the parties) would testily
suppress him with a common “Oh, of course”.
17 See Barnes (2008), pp. 1119–1120 and 1122; Perillo (2000), pp. 429–430.
18 Scandinavian Trading Tanker Co. A.B. (Respondents) v. Flota Petrolera Ecuatoriana (Appellants), [1983] 2 A.C. 694 pp. 703–704.
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S. Jia and H. Yu