Reform of Law of Contracts
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T . WO Acts of Parliament which received the Royal
Assent last month were unsensational in nature and to a large extent concerned with the mechanics of the law. Thus they passed almost unnoticed, but are nevertheless of vital interest to everyone.
The first, the Law Reform (Enforcement of Contracts) Act, 1954, results in sweeping changes in the law of contract generally and in the sale of goods in particular, 'and its provisions are therefore of obvious concern to any man of business. The second, the Law Reform (Limitation of Actions) Act, 1954, is concerned with changes in the rules as to the time limits within which actions for personal injuries must be brought and certain ancillary matters. As any one of us may at any time suffer injuryupon the roads through another person's negligence it is obvious that this, too, affects everybody.
To the Point
The Law Reform (Enforcement of Contracts) Act is short and to the point, consisting as it does of only two substantive Sections. The first of these repeals the old Section 4 of the Statute of Frauds, 1677, except for one provision, and the second repeals the whole of Section 4 of the Sale of Goods Act, 1893. Just what the significance of these changes in the law may be requires explanation.
Many people know that some forms of contract have always required a certain formality about them to be enforceable at law. 1 say " always " but, in fact, these formal requirements go back to the Statute of Frauds, 1677, which was passed—to quote its preamble—" for prevention of many fraudulent practices, which are commonly endeavoured to be upheld by perjury and subornation of perjury.
' It was evidently difficult to get at the truth by oral evidence alone in those days and-matters were not made easier by the fact that it was not until 1851 that a party was Permitted to give evidence on his or her own behalf! Accordingly, the law hoped to fill this vacuum with the requirement that certain kinds of contract would be unenforceable (not illegal) unless evidenced by a note or memorandum in writing of the terms signed by the defendant or his agent.
Answer for Debt
The types of contract involved were not all of general interest, but three at least have been of constant interest to the everyday business of trade or "making a living" in its widest sense. These were (a) a " promise to answer for the debt, default or miscarriage of another "—in other words, a guarantee; (b) "any agreement not to be performed within the space of one year from the making thereof;" and (c) " the sale of goods to the value of flO or upwards."
in the case of the last contract, the Sale of Goods Act, 1893, into which the requirement became incorporated, provided that an alternative to the note or memorandum might be a delivery and acceptance of part of the goods or the existence of a deposit or sum by way of part payment.
It had been felt by generations of lawyers that these provisions had outlived their usefulness as a preventive to fraud, for they enabled far too many unscrupulous persons to wriggle out from their obligations under a bargain, if the latter turned out not to suit them after all, simply by "pleading the Statute" and relying on the absence of the written note or memorandum. There had accordingly been strong pressure, backed by two recent Law Revision Committee's reports, to abolish these requirements_
One Man's Word This has now been done by the new Act except as regards the provision relating to guarantees, which accordingly must still be evidenced by a note or memorandum signed by the guarantor or his authorized agent in order to be enforceable in law. The result of this is that in future it may be merely a question of one man's word against another to establish the terms of a contract, or even if there was a contract at all.
Obviously, where this change will be felt most is in contracts for the sale of goods, but it would be most unwise merely on account of the new Act to abandon at once all common prudence and former mercantile practice. The reason for this is that if a court is faced with a choice between one man's word and another's, it is likely to come down on the side of the one who has some corroboration in writing—other things being equal.
The other point to note is that although the Act became effective on the day it received the 13,oyal Assent, it applies to all contracts made either after or before that date, so that anyone who has been in the position of being unable for lack of due formality to enforce a contract made within the past six years may now sue for its enforcement with at least An even chance of success.
Actions for Injury
The Law Reform (Limitation of Actions) Act provides that for all actions in respect of personal injuries the period of limitation is now, three years from when the cause of action arose. Formerly it was six years in all cases except where Public" authorities and certain nationalized undertakings were defendants; they were favoured at the expense of individuals. The former 12months' period within which actions under the Fatal Accidents Act, 1846, had to be started has now been extended to three years from the date of death.
A further change is effected in actions in tort against the estates of deceased persons. Formerly, under the 1934 Act, which first permitted such proceedings, it was necessary that the cause of action 'must have arisen within the six months' period immediately before the death, but this rule is now abolished. However, the requirement that proceedings must be commenced within six months after the grant of probate or letters of administration is retained.
It should be noted that the Act does not adversely affect persons whose rights of action are already in existence but who have not yet commenced proceedings, for by Section 7 it is provided that if the cause of action arose before ihe passing of the Act the period of limitation is to be whichever is the longer of the two periods—the old or the new,