contractual law case study

Contract Law: From Trust to Promise to Contract

Investigate contracts from ideation to execution, their pitfalls and remedies.

Learn about contracts in this online course from Harvard Law Professor Charles Fried, one of the world's leading authorities on contract law.

What You'll Learn

Contracts are promises that the law will enforce. But when will the law refuse to honor a promise? What happens when one party does not hold to their part of the deal? This version of the course adds new units on Interpretation, Agency, Partnerships, Corporations, and Government Regulation.

We are exposed to contracts in all areas of our life–agreeing to terms when downloading a new computer program, hiring a contractor to repair a leaking roof, and even ordering a meal at a restaurant. Knowing the principles of contracts is not just a skill needed by lawyers, it illuminates for everyone a crucial institution that we use all the time and generally take for granted.

This contract law course, with new materials and updated case examples, is designed to introduce the range of issues that arise when entering and enforcing contracts. It will provide an introduction to what a contract is and also analyze the purpose and significance of contracts. Then, it will discuss the intent to create legal relations, legality and morality, and the distinction between gifts and bargains. The course also investigates common pitfalls: one-sided promises, mistake, fraud, and frustration. With the knowledge of what makes contracts and how they can go wrong, Professor Fried will discuss remedies and specific performance. Finally, Professor Fried will introduce how contracts can create rights for third parties.

The course's instructor, Charles Fried, has been teaching at Harvard Law School for more than 50 years and has written extensively on contracts. Not only is Professor Fried a leading authority on contract law, but he also utilizes a story-telling approach to explaining the topic, which creates a unique and interesting class experience.

The course will be delivered via edX and connect learners around the world. By the end of the course, participants will be able to:

• A theoretical background of contracts, trust, and promise
• How to form contracts through valid offer and acceptance
• Limits to enforcing contracts
• Issues excusing contractual performance
• Available remedies for contractual breaches
• Third parties’ ability to enforce contracts

Your Instructor

Charles Fried is the Beneficial Professor of Law at Harvard Law School, where he has been teaching since 1961. Most recently, Fried has taught Contracts and Constitutional Law. He was the Solicitor General of the United States from 1985 to 1989, where he argued 25 cases in front of the Supreme Court. Fried was also an Associate Justice of the Supreme Judicial Court of Massachusetts from 1995 to 1999. Fried has authored many books, including  Anatomy of Values ,  Right and Wrong ,  Modern Liberty ,  Contract as Promise ,  Making Tort Law , and  Saying Where the Law Is: The Constitution in the Supreme Court , in addition to more than 30 journal articles.

Ways to take this course

When you enroll in this course, you will have the option of pursuing a Verified Certificate or Auditing the Course.

Alternatively, learners can Audit the course for free and have access to select course material, activities, tests, and forums.  Please note that this track does not offer a certificate for learners who earn a passing grade.

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Blue v Ashley – Case Summary

Blue v ashley.

Citations : [2017] EWHC 1928 (Comm).

Blue was an investment banker. Ashley was the founder and majority shareholder of Sports Direct. The pair had prior business relationships, but did not know each other well. In 2012 Blue was employed by Sports Direct’s subsidiaries. One of his first tasks was to find a new corporate broker for the company. To facilitate this, he arranged an informal meeting between himself, Ashley and representatives from Espirito Santo Investment Bank.

The men met at a pub for drinks. The group hit it off, and the atmosphere was jovial. What was originally conceived of as a short chat turned into a longer evening of heavy drinking, which eventually moved to a Soho bar.

Early in the evening, after Ashley had consumed four pints, the men were discussing Sports Direct’s share price. At some point, the topic of incentivising Blue based on the company’s share price came up. Ashley stated:

‘What should I do to incentivise Jeff? If he can get the stock to £8 per share why should I give a fuck how much I have to pay him, as I will have made so much money it doesn’t matter. So let’s say if Jeff can get the stock to £8 per share…I’ll pay him £10 million. Jeff: what do you think?’

Blue responded that this would require him to up the company’s share price from £4 a share to £7.20. Tracey stated that this would be immaterial compared to the increase in value of Ashley’s own shares in the company. One of the other Espirito representatives jokingly added that a fairer incentive would be £20 million. Ashley allegedly responded to this by saying

‘I’ll tell you what let’s split the difference and call it £15 million if the stock gets to £8 per share…’

Blue responded that this sounded fair. When Sports Direct’s share price began to rise, Blue asked Ashley if the agreement was ‘still on’. Ashley responded ‘I’ve got it, I’ve got it. We’re cool, we’re cool.’

The company’s share price later exceeded £8. Blue attempted to enforce the incentive agreement. Ashley denied there was any binding agreement. He argued that the conversation was ‘general banter’ and not seriously intended.

• Was Ashley’s statement an offer ?
• Did Ashley intend to be legally bound by the statement?

The Court held in favour of Ashley. The following factors indicated that Ashley did not make an offer which he intended to be legally bound by:

• The informality of the setting;
• The ‘jocular’ and ‘mischievous’ tone of the conversation;
• Ashley being drunk;
• The presence of strangers;
• The ‘incentive’ made no commercial sense for Ashley. He did not know Blue well, had not offered similar incentives to anyone else in the past and the number chosen was essentially random;
• The meeting was not arranged to discuss Blue’s work or his role at the company;
• It was not clear how a single person could double a company’s share price. The ‘offer’ was vague as to what exactly Blue needed to do. Indeed, the share price doubling probably did not have much to do with Blue’s efforts;
• Ashley’s later responses when asked about the agreement were vague and indicated that he did not even remember the pub conversation.

Given these factors, a reasonable bystander would not concluded that there was a binding contract. Even if there had been a seriously intended agreement, it would be void for uncertainty . This was because the parties had not agreed on the time-frame which Blue had to double the share price.

This Case is Authority For…

This case contains a summary of the basic principles of contract law, including an outline of the requirements of contract formation: offer , acceptance , intention to create legal relations , consideration and certainty of terms . The case focuses primarily on the first and third requirements.

Leggatt J defined an offer as ‘an expression, by words or conduct, of a willingness to be bound by specified terms as soon as there is acceptance by the person to whom the offer is made.’ This is assessed objectively, from the perspective of a reasonable bystander in light of ‘all relevant matters of background fact known to both parties’. The parties’ subjective interpretations are irrelevant.

Something might seem to be an offer if taken literally. However, if it is said in circumstances which indicate that the speaker does not genuinely intend to be bound if the statement is accepted, it is not an offer. Some cases have called statements like these ‘mere puffs’.

Factors relevant to deciding whether something is an offer or a mere puff include:

• The formality and setting of the occasion in which the ‘offer’ was made;
• The speaker’s tone (e.g. whether he was being jokey);
• Whether the offer makes any commercial sense for the speaker;
• Whether the statement is vague or seems exaggerated.

These factors are also relevant to determining whether the third requirement of contract formation is met: intention to be legally bound.

One of Ashley’s subsidiary arguments was that Blue had not provided any consideration. This was because he was already obliged to work for the company, and past obligations cannot be relied on as consideration. Leggatt J suggested that the past consideration rule has been rendered ‘obsolete’ by cases such as Williams v Roffey Bros [1999] 1 QB 1. In any case, Leggatt J stated that the rule did not apply here. This was because the past obligation was owed to the company and not to Ashley directly.

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Essential Cases: Contract Law (6th edn)  

Essential Cases : Contract Law provides a bridge between course textbooks and key case judgments. Essential Cases provides you with succinct summaries of some of the landmark and most influential cases in contract law. Each summary begins with a review of the main case facts and decision. The summary is then concluded with expert commentary on the case from the author, Nicola Jackson, including an assessment of the wider questions raised by the decision.

It can act as a succinct reference source alongside your core textbooks as you proceed through your course. It can also be used as a stand-alone revision aid as you approach examinations. But central to the Essential Cases series is the aim to encourage your own critical exploration of the legal matters under discussion.

Where possible, a link to a free-to-access full version of the judgment is included in each summary, providing you with an opportunity to deepen your understanding by reading the judgment of the court for yourself.

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• Alphabetical contents  
• Adams v Lindsell [1818] EWHC KB J59; (1818) 1 B & Ald 681; (1818) 106 ER 250  
• Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401, Court of Appeal  
• Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256  
• Dickinson v Dodds (1876) 2 Ch D 463  
• Entores Ltd v Miles Far East Corporation [1955] 2 QB 327  
• Felthouse v Bindley [1862] EWHC CP J35; 142 ER 1037  
• Fisher v Bell [1961] 1 QB 394; [1960] 3 WLR 919  
• Harvey & Facey [1893] AC 552  
• Hyde v Wrench (1840) 49 ER 132  
• Partridge v Crittenden [1968] 1 WLR 1204  
• Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401  
• Balfour v Balfour [1919] 2 KB 571 including commentary on Merritt v Merritt [1970] EWCA Civ 6; [1970] 1 WLR 1211.  
• Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130  
• Chappell & Co. Ltd v Nestlé Co. Ltd [1960] AC 87  
• Pao On & others v Lau Yiu Long and another [1980] AC 614  
• Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24  
• Stilk v Myrick [1809] EWHC KB J58; (1809) 2 Camp 317  
• Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1  
• Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407  
• Shogun Finance Ltd v Hudson [2003] UKHL 62  
• Smith v Hughes (1871) LR 6 QB 597 includes commentary on Centrovincial Estates plc v Merchant Investors Assurance Company Ltd [1983] Com LR 158  
• Bisset v Wilkinson [1927] AC 177  
• Edgington v Fitzmaurice (1885) 29 Ch D 459  
• Spice Girls Ltd v Aprilia World Service [2002] EWCA Civ 15  
• With v O’Flanagan [1936] Ch 575  
• Zurich Insurance Co. Ltd plc v Hayward [2017] AC 142; [2016] UKSC 48  
• Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] QB 833  
• Times Travel (UK) Ltd v Pakistan International Airlines Corporation [2021] UKSC 40; [2021] 3 WLR 727  
• Royal Bank of Scotland v Etridge (No.2) [2001] UKHL 44  
• George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803  
• Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371  
• Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433  
• L’Estrange v Graucob Ltd [1934] 2 KB 394  
• Parker v The South Eastern Railway Company (1877) 2 CPD 416  
• Arnold v Britton [2015] UKSC 36  
• Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896  
• Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26  
• Lombard North Central plc v Butterworth [1987] QB 527  
• L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235  
• White and Carter (Councils) Ltd v McGregor [1962] AC 413  
• Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696  
• J. Lauritzen v Wijsmuller (The ‘Super Servant Two’) [1990] 1 Lloyd’s Rep 1  
• Krell v Henry [1903] 2 KB 740  
• Attorney General v Blake & another [2000] UKHL 45; [2001] 1 AC 268  
• Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67  
• Farley v Skinner [2001] UKHL 49  
• One Step (Support) Ltd v Morris-Garner [2019] AC 649; [2018] UKSC 20  
• Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344  
• Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528  
• Watts & another v Morrow [1991] 1 WLR 1421  

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Uber Technologies Inc. v. Heller

Supreme Court of Canada Targets Standard Form Contracts.

Comment on: 2020 SCC 16, 447 D.L.R. 4th 179 (Can.)

• See full issue

When does an agreement “drive[] too hard a bargain for a court of conscience to assist”? 1 Recently, in Uber Technologies Inc. v. Heller , 2 the Supreme Court of Canada confronted this question in the context of Uber’s attempts to quash court proceedings brought by one of its drivers and compel arbitration in accordance with the contract he had signed. The Court rejected Uber’s efforts after finding the arbitration clause unconscionable and, therefore, unenforceable — a predictable result in light of the steep upfront costs arbitration would have imposed on the driver. Yet the concurring and dissenting opinions raised important questions about the majority’s wide-ranging denunciation of Uber’s standard form contract. The Court justified its treatment of the contract in part by pointing to the presence of a link between standard form contracts and unconscionability in U.S. unconscionability doctrine. In doing so, however, it overlooked divergent approaches to such contracts within the United States, an omission that underscores criticisms that charge the majority with crafting an overbroad decision.

On January 19, 2017, David Heller, a thirty-five-year-old resident of Ontario who used the UberEats app to earn money delivering food, commenced a proposed class action against Uber, 3 alleging that it had violated Ontario’s Employment Standards Act 4 by not recognizing its drivers as employees. 5 Heller, who worked forty to fifty hours a week using the app and earned CAD 400–600 a week doing so, 6 had entered into a driver services agreement with Uber in order to use the app. 7 The agreement was governed by the laws of the Netherlands and stated that any disputes would be subject to mediation and binding arbitration, 8 a process entailing upfront costs to Heller of USD 14,500. 9

The Ontario Superior Court of Justice heard Heller’s claim and granted Uber’s request for a stay of proceedings in favor of arbitration. 10 The court explained that cases where an arbitrator prima facie has jurisdiction should be referred to the arbitral authority to determine “what, if anything,” falls outside of her jurisdiction. 11 Turning to the exceptions in Ontario law from the rule on referring disputes to arbitration, the court found that the agreement was not unconscionable, 12 and thus not excepted from referral, because the court “[did] not see how it can be said that Uber preyed [on] or took advantage of Mr. Heller.” 13

The Court of Appeal for Ontario reversed the order. 14 The court expressed some uncertainty about the appropriate test for unconscionability but concluded that the arbitration clause was unconscionable under either the four-part test employed by Ontario courts 15 or the two-part test applied by the concurring and dissenting Justices in Douez v. Facebook, Inc ., 16 and that Uber “chose this Arbitration Clause in order to favour itself and thus take advantage of its drivers.” 17

The Supreme Court of Canada upheld the court of appeal’s decision. Writing for the majority, Justices Abella and Rowe 18 affirmed the unconscionability of the arbitration clause. 19 The Court, after determining which legislation governed the agreement, 20 examined the applicability of its prior holding in Dell Computer Corp. v. Union des Consommateurs 21 that challenges to arbitral authority should generally be resolved by arbitrators. 22 The Court reiterated that where only questions of fact are in dispute, courts should generally refer the case to arbitration, and that mixed questions of fact and law should be referred unless the issues can be resolved through a “superficial” consideration of the record. 23 However, it added that Heller’s case raised an issue of accessibility that justified a departure from that general rule of arbitral referral, which “did not contemplate a scenario wherein the matter would never be resolved if the stay were granted.” 24 The Court thus established that a closer review of the record may be warranted where a bona fide challenge to arbitral jurisdiction exists and there is a “real prospect” that referral would leave the challenge unresolved. 25

Turning to the merits of Heller’s claim, the majority adopted a two-part test for unconscionability that “requires both an inequality of bargaining power and a resulting improvident bargain.” 26 With respect to the first prong, the Court noted that the inequality in question need not adhere to “rigid limitations,” 27 but may result from “[d]ifferences in wealth, knowledge, or experience” 28 or “the presence of dense or difficult to understand terms” giving rise to “cognitive asymmetry.” 29 With respect to the second prong, the Court noted that “[i]mprovidence must be assessed contextually.” 30 Where the weaker party did not understand important terms in the contract, “the focus is on whether they have been unduly disadvantaged by [those terms].” 31 Finally, the Court emphasized that a finding of unconscionability need not rest on proof of one party knowingly taking advantage of the other. 32

The Court then applied this standard to Heller’s claim. In finding inequality of bargaining power, the majority pointed to the fact that Heller was powerless to negotiate the contract he signed, which was offered on a take-it-or-leave-it basis. 33 Though it noted that the presence of a standard form contract does not, “by itself, establish[] an inequality of bargaining power,” 34 the Court suggested that “[r]especting the doctrine of unconscionability has implications for boilerplate or standard form contracts” 35 because such contracts “can impair a party’s ability to protect their interests[,] . . . mak[ing] them more vulnerable.” 36 It also found that other qualities of standard form contracts render them susceptible to a finding of unconscionability, including that they are “drafted by one party without input from the other and . . . may contain provisions that are difficult to read or understand.” 37 Characterizing its extension of the doctrine of unconscionability to standard form contracts as “not radical,” the Court noted that the link between such contracts and unconscionability has been suggested in lower courts and in academia for some time, and has been present in American jurisprudence for decades. 38 The result, the Court found, was an improvident agreement with upfront costs that were roughly equal to Heller’s annual income, 39 placing arbitration out of reach and rendering Heller’s contractual rights “illusory” 40 and the agreement unconscionable. 41

Justice Brown concurred in the finding that the arbitration clause was invalid, but on the basis of public policy. 42 Casting the agreement as one “ not to arbitrate,” 43 Justice Brown found that it closed off access to the courts without providing a comparable measure of justice. 44 Underscoring the narrow nature of his opinion, he noted “[i]t will be the rare arbitration agreement that . . . acts as an effective bar to adjudication,” 45 given the Court’s acceptance of reasonable limitations on access to justice and the efficiency advantages offered by most arbitration agreements. 46 Justice Brown suggested that the doctrine of unconscionability was ill-suited to resolve the dispute at hand because it was intended to redress significant procedural deficiencies in the contract formation process, and because the only procedural shortcomings uncovered by the majority related to the presence of a standard form contract. 47 Finally, he cautioned that the absence of a knowledgeable-exploitation requirement in the majority’s unconscionability test, 48 and its embrace of “subjective, even idiosyncratic” 49 analysis with respect to the improvident-transaction prong, would create significant commercial uncertainty in Canada. 50

Justice Côté dissented, suggesting that Uber’s request for a stay of proceedings should be granted provided that the company advance Heller the funds necessary to enter into arbitration, 51 and disagreeing in the first instance with the majority’s derogation from the rule that challenges to arbitral tribunal jurisdiction should be decided by the tribunal itself. 52 Justice Côté criticized the majority for setting the threshold for inequality “so low as to be practically meaningless in the case of standard form contracts,” 53 while overestimating Heller’s vulnerability and the degree to which the costs of arbitration amounted to a barrier as compared to those associated with judicial proceedings. 54

The majority’s finding that the arbitration agreement was unconscionable is perhaps unsurprising — the agreement presented a seemingly insurmountable obstacle to Heller’s ability to vindicate his contractual rights. Yet in the Court’s desire to shift its jurisprudence toward a “modern application” of the unconscionability doctrine to standard form contracts, where “the normative rationale for contract enforcement . . . [is] stretched beyond the breaking point,” 55 it painted with a broad brush, an approach that was the subject of compelling critiques from the concurrence and dissent. And while the majority was right to note that U.S. unconscionability doctrine generally recognizes a link between standard form contracts and unconscionability, it overlooked significant diversity in state approaches, an oversight that seems to accentuate the critiques leveled by the concurrence and dissent.

The majority framed the development of unconscionability doctrine in connection with standard form contracts as “not radical,” disclaiming any attempt to issue a blanket opinion on standard form contracts. 56 Yet the concurring and dissenting Justices rightly observed that, in crafting its new standard, the majority lumped commonplace characteristics of standard form contracts, like the absence of negotiation and presence of dense language, into its doctrinal analysis. 57 The broad sweep of that approach was further amplified by the Court’s “contextual[]” assessment of the improvident-transaction prong 58 and the seemingly ineffable quality of an inquiry into whether one party has been “unduly disadvantaged” by terms produced by unequal bargaining power. 59 The majority justified linking standard form contracts with unconscionability by pointing to developments in Canadian legal academia and in lower courts. While some commentators had indeed called for the Court to take a sterner approach to such contracts, 60 others were quick to criticize the move as lacking definitional clarity. 61 Nor was the Court’s reliance on Canadian precedent immune to criticism: the majority’s opinion seemed to go beyond both the framing of unconscionability relied on by the lower courts it cited 62 and the Court’s own precedent. 63

In explaining its decision to link standard form contracts with unconscionability, the Court noted that such a link “has also been present in the American jurisprudence for more than half a century.” 64 U.S. jurisprudence made for a seemingly persuasive comparison: Canada and the United States share many of the same common law traditions that underpin unconscionability doctrine, after all. 65 The comparison also had a claim to established pedigree. The Uniform Commercial Code (U.C.C.) represented the first formal codification of the unconscionability defense in U.S. contract law, 66 and standard form contracts were the focus of the principal drafter, Professor Karl Llewellyn, who “originally intended to . . . invalidate or weaken the force of many such contracts.” 67 And since then, the doctrine of unconscionability has indeed been used to invalidate provisions in a wide variety of standard form contracts. 68

Nevertheless, the Court’s cursory reference to the link in U.S. doctrine between standard form contracts and unconscionability belied a more complicated reality. To speak of U.S. contract law, and unconscionability doctrine in particular, in a manner that suggests homogeneity is to overlook the fact that both largely grew out of state law and are thus necessarily heterogeneous across jurisdictions. 69 U.S. courts generally separate unconscionability into two elements: substantive and procedural. 70 At varying levels, U.S. courts do find that the presence of a standard form contract contributes to procedural unconscionability, but few would declare such a contract procedurally unconscionable only because it is a standard form one. 71 Instead, a vast array of extenuating and mitigating factors come into play.

Some courts, like the Heller majority, look to the presence of complex language beyond the ken of an ordinary consumer to determine whether procedural unconscionability exists. 72 Yet, even in those jurisdictions, factors extending beyond difficult-to-understand terms to elements such as the time and opportunity available to read a contract are often taken into consideration. 73 And the list goes on: courts have considered, among other factors, the “take-it-or-leave-it nature” of the contract and the presence of economic compulsion, 74 unfair surprise, 75 grossly unequal bargaining power, 76 and monopoly power 77 in assessing unconscionability in standard form contracts. Even the District Court for the District of Columbia, applying the D.C. Circuit’s archetypal consideration of unconscionability doctrine in a standard form contract setting relied upon by the Heller majority, 78 has interpreted the doctrine as requiring “something more,” in the form of “greatly disparate” bargaining power, no negotiation, and great necessity. 79 To different lengths, then, U.S. jurisdictions share the Court’s skepticism of verbiage in standard form contracts, but many look for more than a mere showing of difficult-to-read contractual language. Against this laundry list of contractual deficiencies, U.S. unconscionability analysis weighs “the practical utility and universality of [standard] form contracts,” which supports enforceability. 80 Subjectivity is the norm in this jumbled landscape. 81

The comparison drawn by the majority is therefore unlikely to inspire confidence in those who share the concerns of the concurrence and dissent that Heller “vastly expand[ed]” the scope of unconscionability doctrine 82 or pointed to the creation of an “illusory” standard 83 applicable to this extremely common species of contract. 84 More likely, the majority’s casual reference to U.S. unconscionability doctrine will reinforce the concerns of those who worry that the opinion presages a shift in Canadian contract law back to a time “when equity was measured by the length of the Chancellor’s foot,” 85 and further muddies the waters for courts of conscience trying to find the line between the hard bargain and the unconscionable.

^ Campbell Soup Co. v. Wentz, 172 F.2d 80, 84 (3d Cir. 1948).

^ 2020 SCC 16, 447 D.L.R. 4th 179 (Can.).

^ The named defendants in the suit were Uber Technologies Inc., Uber Canada, Inc., Uber B.V., and Rasier Operations B.V. They are collectively referred to as “Uber” because the distinctions between them are not relevant here.

^ S.O. 2000, c 41 (Can.).

^ Heller v. Uber Techs. Inc., 2018 ONSC 718, paras. 2, 26, 421 D.L.R. 4th 343 (Can. Ont. Sup. Ct. J.).

^ Id . para. 29.

^ Id . paras. 17–19, 27–28.

^ Heller v. Uber Techs. Inc., 2019 ONCA 1, para. 11, 430 D.L.R. 4th 410 (Can. Ont. C.A.).

^ Id . para. 15.

^ Heller , 2018 ONSC 718, paras. 3–4.

^ Id . para. 52.

^ Id . para. 74.

^ Id . para. 70.

^ Heller , 2019 ONCA 1, para. 20.

^ Id . para. 60 (describing the Ontario test as requiring “(1) a grossly unfair and improvident transaction; (2) a victim’s lack of independent legal advice or other suitable advice; (3) an overwhelming imbalance in bargaining power caused by the victim’s [disadvantaged position] . . .; and (4) the other party’s knowingly taking advantage of this vulnerability”).

^ 2017 SCC 33, para. 115, [2017] 1 S.C.R. 751 (Can.) (Abella, J., concurring in the result) (requiring inequality of bargaining power and unfairness for unconscionability); id . para. 145 (McLachlin, C.J. & Moldaver & Côté, JJ., dissenting) (same); see Heller , 2019 ONCA 1, para. 61.

^ Heller , 2019 ONCA 1, paras. 62, 68–69.

^ They were joined by Chief Justice Wagner and Justices Moldaver, Karakatsanis, Martin, and Kasirer.

^ Heller , 2020 SCC 16, para. 4.

^ It found Ontario’s Arbitration Act, S.O. 1991, c 17 (Can.), rather than the International Commercial Arbitration Act, S.O. 2017, c 2, sched. 5 (Can.), to be applicable because the dispute was “fundamentally about labour and employment.” Heller , 2020 SCC 16, para. 19.

^ 2007 SCC 34, [2007] 2 S.C.R. 801 (Can.).

^ Heller , 2020 SCC 16, paras. 31–46.

^ Id . para. 32.

^ Id . para. 38. In this case, the Court found that “staying the action in favour of arbitration would be tantamount to denying relief for the claim.” Id . para. 39.

^ Id . paras. 44, 46. It conceded that determining whether there was a “real prospect” of the challenge never being resolved would require “some limited assessment of evidence,” id . para. 45, a level of scrutiny beyond the assessment of “facts that are either evident on the face of the record or undisputed,” which the Court’s precedent had associated with superficial review, id . para. 36, but warned that the assessment “must not devolve into a mini-trial,” id . para. 45.

^ Id . para. 65. In defining its test, the majority rejected Uber’s suggestion that it adopt a four-part requirement similar to the prevailing test in Ontario courts. Id . para. 82.

^ Id . para. 67 (quoting John D. McCamus, The Law of Contracts 429 (2d ed. 2012)).

^ Id . (citing Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution 524–25 (2014)).

^ Id . para. 71 (quoting Stephen A. Smith, Contract Theory 343–44 (2004)).

^ Id . para. 75 (citing McInnes , supra note 28, at 528).

^ Id . para. 77.

^ Id . para. 84.

^ Id . para. 93. The Court also made note of the “significant gulf in sophistication” between the two parties and the absence of any information regarding the costs of mediation and arbitration in the agreement. Id .

^ Id . para. 88 (citing S.M. Waddams, The Law of Contracts 240 (7th ed. 2017)).

^ Id . para. 87.

^ Id . para. 89. The Court here offered that some mitigating factors, such as the involvement of “sophisticated commercial parties” or “[s]ufficient explanations” that “offset uncertainty,” could help standard form contracts survive unconscionability analysis. Id . para. 88.

^ Id . para. 89 (citation omitted).

^ Id . para. 90 (citing Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449–50 (D.C. Cir. 1965)); see also id . para. 87 (discussing the perspective of the Uniform Commercial Code’s (U.C.C.) primary drafter on standard form contracts).

^ Id . para. 94.

^ Id . para. 97.

^ Id . para. 98.

^ Id . para. 101 (Brown, J., concurring).

^ Id . para. 102.

^ Id . paras. 115–19. In these limited circumstances, Justice Brown suggested courts should be allowed to conduct more than a superficial review of the record, but disagreed with the majority’s conclusion that a contested hearing on the issue was necessary or beneficial. Id . paras. 127–28.

^ Id . para. 130.

^ Id . paras. 129–30.

^ Id . paras. 157–62.

^ Id . para. 166.

^ Id . para. 170.

^ Id . paras. 164–67, 170.

^ Id . para. 199 (Côté, J., dissenting).

^ Id . para. 222. She also disagreed with the majority’s conclusion regarding the applicability of the Arbitration Act. Id . para. 218.

^ Id . para. 257.

^ Id . paras. 257, 264, 282–86.

^ Id . para. 90 (majority opinion) (alteration in original) (quoting Margaret Jane Radin, Access to Justice and Abuses of Contract , 33 Windsor Y.B. Access to Just . 177, 179 (2016)).

^ The majority’s decision to do so was made all the more puzzling by the presence of uncommonly pernicious contractual deficiencies unique to Uber’s contract, like the exclusion of key contractual terms, which would seem to provide a narrower basis for a finding of unequal bargaining power in this case. See supra note 33 and accompanying text.

^ Heller , 2020 SCC 16, para. 75.

^ See, e.g ., Jean Braucher, Unconscionability in the Age of Sophisticated Mass-Market Framing Strategies and the Modern Administrative State , 45 Can. Bus. L.J . 382, 383 (2007). But see Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability , 70 U. Chi. L. Rev . 1203, 1259 (2003) (“The suggestion by some courts that adhesive contracts are particularly prone to terms that are undesirable for buyers arises from a fundamental misunderstanding about how the market disciplines sellers.”).

^ See Jassmine Girgis, The Expansion of Unconscionability — The Supreme Court’s Uber Reach , ABlawg (July 23, 2020), https://ablawg.ca/2020/07/23/the-expansion-of-unconscionability-the-supreme-courts-uber-reach [ https://perma.cc/P95E-LBEC ].

^ See Heller , 2020 SCC 16, para. 90 (citing Davidson v. Three Spruces Realty Ltd. (1977), 79 D.L.R. 3d 481, 493 (Can. B.C. S.C.) (assessing unconscionability by looking at six factors, in addition to the presence of a standard form contract, including whether the plaintiffs’ attention was “drawn to the limitation clause . . . [and whether] representations [were] made which would lead an ordinary person to believe that the . . . clause did not apply”)); see also Braucher, supra note 60, at 383–84 (noting Canadian unconscionability doctrine “require[d] a term to be both unusual and onerous, as well as poorly disclosed,” and could therefore be “viewed by the judiciary as one to be invoked very sparingly and only against terms considered way beyond the pale,” id . at 384).

^ See Douez v. Facebook, Inc., 2017 SCC 33, paras. 47, 50–53, [2017] 1 S.C.R. 751 (Can.) (declining to apply unconscionability doctrine to invalidate forum selection clause in standard form contract); see also Heller , 2020 SCC 16, para. 162 (Brown, J., concurring) (criticizing the majority for relying on the Douez concurrence to justify its holding and noting that “[the] Court has never before accepted that a standard form contract denotes the degree of inequality of bargaining power necessary to trigger the application of unconscionability”).

^ Heller , 2020 SCC 16, para. 90 (majority opinion).

^ See S.M. Waddams, Unconscionability in Canadian Contract Law , 14 Loy. L.A. Int’l & Compar. L.J . 541, 541 (1992).

^ Colleen McCullough, Comment, Unconscionability as a Coherent Legal Concept , 164 U. Pa. L. Rev . 779, 792 (2016).

^ Id . The Heller Court found this history to be significant. See Heller , 2020 SCC 16, para. 87 (“As [U.C.C. drafter] Karl N. Llewellyn . . . explained: ‘Instead of thinking about “assent” to boiler-plate clauses, we can recognize that so far as concerns the specific, there is no assent at all.’” (quoting Karl N. Llewellyn , The Common Law Tradition 370 (1960))). The U.C.C. provisions on unconscionability in the end did not reflect Llewellyn’s desire to link the doctrine explicitly to standard form contracts. See McCullough, supra note 66, at 793.

^ McCullough, supra note 66, at 795–96.

^ See Susan Landrum, Much Ado About Nothing?: What the Numbers Tell Us About How State Courts Apply the Unconscionability Doctrine to Arbitration Agreements , 97 Marq. L. Rev . 751, 758 (2014).

^ See Melissa T. Lonegrass, Finding Room for Fairness in Formalism — The Sliding Scale Approach to Unconscionability , 44 Loy. U. Chi. L.J. 1 , 11 (2012). The Heller Court used the terms “inequality of bargaining power” and “improvident bargain” to describe an analogous test. Heller , 2020 SCC 16, para. 65.

^ See McCullough, supra note 66, at 782; see also Korobkin, supra note 60, at 1258 n.201 (citing California, Montana, and Mississippi court decisions as examples equating standard form contracts with procedural unconscionability, but noting that “[t]he majority of courts, however, find that the fact that a contract is adhesive is not alone enough for a finding of procedural unconscionability”).

^ See McCullough, supra note 66, at 807.

^ Quilloin v. Tenet Healthsystem Phila., Inc., 673 F.3d 221, 235–36 (3d Cir. 2012) (quoting Salley v. Option One Mortg. Corp., 925 A.2d 115, 125 (Pa. 2007)).

^ See, e.g ., East Ford, Inc. v. Taylor, 826 So. 2d 709, 716–17 (Miss. 2002) (finding arbitration clause printed in miniscule fine print procedurally unconscionable).

^ See, e.g ., Sun Tr. Bank v. Sun Int’l Hotels Ltd., 184 F. Supp. 2d 1246, 1261–62 (S.D. Fla. 2001) (finding forum selection clause presented to hotel guest at check-in unenforceable).

^ See, e.g ., Entergy Miss., Inc., v. Burdette Gin Co., 726 So. 2d 1202, 1208 (Miss. 1998) (finding indemnity clause drafted by monopoly-holding energy supplier procedurally unconscionable).

^ See Heller , 2020 SCC 16, para. 90 (citing Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965)).

^ Samenow v. Citicorp Credit Servs., Inc., 253 F. Supp. 3d 197, 205 (D.D.C. 2017) (quoting Ruiz v. Millennium Square Residential Ass’n, 156 F. Supp. 3d 176, 181 (D.D.C. 2016)).

^ Lonegrass, supra note 70, at 10.

^ See Paul Bennett Marrow, Squeezing Subjectivity from the Doctrine of Unconscionability , 53 Clev. St. L. Rev . 187, 192, 199–206 (2005–2006).

^ Heller , 2020 SCC 16, para. 103 (Brown, J., concurring).

^ Id . para. 257 (Côté, J., dissenting).

^ See, e.g ., Korobkin, supra note 60, at 1203 (“[N]early all commercial and consumer sales contracts are form driven.”).

^ Heller , 2020 SCC 16, para. 153 (Brown, J., concurring).

• Contract Law
• Foreign & Comparative Law
• Private Law

May 10, 2021

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Contract Law: From Trust to Promise to Contract

Contracts are a part of our everyday life, arising in collaboration, trust, promise and credit. How are contracts formed? What makes a contract enforceable? What happens when one party breaks a promise?

Associated Schools

Harvard Law School

What you'll learn.

A theoretical background of contracts, trust, and promise

How to form contracts through valid offer and acceptance

Limits to enforcing contracts

Issues excusing contractual performance

Available remedies for contractual breaches

Third parties’ ability to enforce contracts

Course description

Learn about contracts from Harvard Law Professor Charles Fried, one of the world’s leading authorities on contract law. Contracts are promises that the law will enforce. But when will the law refuse to honor a promise? What happens when one party does not hold to their part of the deal? This version of the course adds new units on Interpretation, Agency, Partnerships, Corporations, and Government Regulation

We are exposed to contracts in all areas of our life — agreeing to terms when downloading a new computer program, hiring a contractor to repair a leaking roof, and even ordering a meal at a restaurant. Knowing the principles of contracts is not just a skill needed by lawyers, it illuminates for everyone a crucial institution that we use all the time and generally take for granted.

This contract law course, with new materials and updated case examples, is designed to introduce the range of issues that arise when entering and enforcing contracts. It will provide an introduction to what a contract is and also analyze the purpose and significance of contracts. Then, it will discuss the intent to create legal relations, legality and morality, and the distinction between gifts and bargains. The course also investigates common pitfalls: one-sided promises, mistake, fraud, and frustration. With the knowledge of what makes contracts and how they can go wrong, Professor Fried will discuss remedies and specific performance. Finally, Professor Fried will introduce how contracts can create rights for third parties.

The course’s instructor, Charles Fried, has been teaching at Harvard Law School for more than 50 years and has written extensively on contracts. Not only is Professor Fried a leading authority on contract law, but he also utilizes a story-telling approach to explaining the topic, which creates a unique and interesting class experience.

Instructors

Charles Fried

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5 Classic Contracts Cases Made Easy for 1Ls

First-year contracts class is where some of the most classic law school cases can be found. Hairy hands? Chicken? You'll remember these wacky situations years later.

So let's take a quick break from the case books and try a somewhat more entertaining approach to a few of the all-time classic cases from Contracts...

1. Hawkins v. McGee (New Hampshire 1929)

The "hairy hand" case is known even among non-law students because it appears in The Paper Chase , which you watched to prepare for school, right? Hawkins' hand was scarred nine years earlier. He went to Dr. McGee to fix it; McGee promised "a one hundred percent good hand." McGee used skin from Hawkins' chest to repair the scar. Not only didn't it work, but Hawkins' hand grew thick hair on it. The case is notable (not just for the hairy hand) because the court used "expectancy" as the value of Hawkins' damages; that is, the value of a "one hundred percent good hand."

2. Hadley v. Baxendale (English Exchequer Court 1854)

Hadley operated a mill that ground grain into flour. One of the wooden shafts that operated the mill broke, so he had it sent off for repair, using Baxendale to deliver the shaft. Baxendale failed to deliver it to the repair company on time, causing Hadley to lose business. Hadley sued for the profits he lost after the expected delivery date. The court held that these types of damages, called consequential damages, could only be fairly levied if both parties were aware of them at the time the contract was made. If there were special circumstances -- such as that Hadley would lose money if the delivery were late - then he had to let Baxendale know beforehand.

3. Frigaliment Importing Co. v. BNS International Sales Corp. (New York 1960)

"What is chicken?" An epistemological quandary lies at the heart of this case . BNS sold chickens to Frigaliment. When the chickens arrived, Frigaliment discovered they were "stewing hens," not "broiler chickens," the former being lower-quality. BNS was a German company, and in German, the English translation of "chicken" can mean either type of chicken; BNS claimed that "chicken" always means "broiler chickens." This case is about determining the definition of a word when each party has a different interpretation of an ambiguous word. The court ultimately dismissed the case, as Frigaliment didn't prove its definition should control.

4. Carlill v. Carbolic Smoke Ball Co. (Queen's Bench 1893)

The carbolic smoke ball was a device the eponymous company assured could prevent anyone from catching influenza. It was so confident, in fact, that its advertisement for the carbolic smoke ball offered a reward of £100 to anyone who contracted influenza after using it as directed. Mrs. Carlill used it and still contracted influenza. She wrote to the company asking for his reward, but they refused to pay, so she sued. The court held that the advertisement was a unilateral contract and normally, Carbolic would need notice that Mrs. Carlill accepted by purchasing. However, because this was a mass advertisement, no such notice was required.

5. Hamer v. Sidway

"Consideration" is a tricky subject in first-year contracts. Sidway was the executor of William Story's estate. Story promised his nephew $5,000 if the nephew would refrain from smoking, drinking, swearing, and gambling until he turned 21. The nephew turned 21, then wrote to his uncle that he had fulfilled the agreement. Story promised to pay, but died shortly thereafter. Through a series of assignments, Hamer ended up with the right to the money. The court decided that the nephew should have received the money. Consideration can be forbearance of something that someone is lawfully permitted to do; here, the nephew gave up things that he was allowed to do in exchange for $5,000. (The best question, though, is what Story got in exchange. Happiness? Knowledge that his nephew wouldn't screw his life up? It's not really clear.)

Got suggestions for cases we missed? Tweet us @FindLawLP .

Related Resources:

• Carbolic Smoke Ball: Fake or Cure? (BBC News)
• The Classic Contracts Cases in Words and Song (The Volokh Conspiracy)
• 5 Classic Civil Procedure Cases Made Easy for 1Ls (FindLaw's Greedy Associates)
• 5 Classic Criminal Law Cases Made Simple for 1Ls (FindLaw's Greedy Associates)

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Contract Law

Notes, cases, and materials on contract law, topic notes.

Past Papers

Back to Subjects | Back to Law

Introduction to contract law

Forming the agreement

Certainty and clarity

Intention to create legal relations

Consideration

The doctrine of promissory estoppel

Privity of contract

Terms of a contract

Exclusion clauses

Duress, undue influence & unconscionable bargains

Misrepresentation

Frustration

General cases

Past Papers & Questions

1. There is in my view a real danger that if a general principle of good faith were established it would be invoked as often to undermine as to support the terms in which the parties have reached agreement’, per LJ Moore-Bick in MSC Mediterranean Shipping Co v Cottonex Anstalt [2016] EWCA Civ 789, at [45]. Critically discuss

2. ‘The foundation of consideration is unconscionability and promissory/proprietary estoppel is the best example of this. It would be better to just call the beast by its name and allow the courts to assess whether the deal was unconscionable or not.’ Critically discuss.

3. “The English courts’ approach to the doctrine of consideration is artificial since it has very little to do with the parties’ agreement. A change in the law is imperative to ensure clarity in the law and to stop a slavish adherence to the neo-classical theory of contract law.” Critically discuss.

4. To what extent is “business common sense” the fundamental approach of the courts in resolving ambiguities and ascertaining the meaning of contractual terms and statements?

5. Critically discuss the impact of the Consumer Rights Act 2015 on the regulation of ‘unfair terms’ in contracts.

The University of Retexe owns a painting titled ‘the scales out of balance’ which was given to it by a grateful graduate in 1955. The University has decided that nobody really looks at the piece and therefore wants to sell it. They contact a former student, Stefan, by letter:

‘We are considering selling the painting you knew and loved when you were a student here, ‘the scales out of balance’, as long as you are willing to pay £2m for it. The sale must be within the next two months. As you will remember it was included in the BBC television series ‘the art of Hogarth’ and they considered it to be one of his best pieces. Would you be interested in purchasing this Hogarth?’

Stefan immediately replies that the gallery he owns would be happy to pay that price for the Hogarth.

The University does not reply but the accountant removes the Hogarth from the list of art pieces to be insured. Shortly after Stefan succeeds in selling the painting on to an American art gallery for £5m. He contacts the University and leaves a message:

‘I hope you don’t mind but I have managed to sell the painting to a fantastic gallery.’ A few days later the university representative, Tammy, calls Stefan back and comments that she is glad they have found a good home for the painting and asks when Stefan would like the painting to be delivered.

Stefan is about to call back when he finds out from another dealer that the Hogarth, due to the time when it was donated, must have been a forgery. The discovery was made by accident last week when a gallery moved other Hogarths to a new building.

Advise Stefan, who does not want the painting anymore.

Ugo, an architect, earns a little extra money as a self-employed author of fiction. He has previously used an accountant in his town who has recently retired.

For this year’s tax return, due in January 2018, Ugo decides to use Valentina’s online tax return service. The website offers ‘a complete preparation and filing service for your income tax’. The website offers ‘complete peace of mind’. The first page of the website asks for the income. The page states that the customer ‘must submit all statements by post’ and, provided that she pays the £200 fee, they will then send her the completed tax return back.

On the very first page of the website there is a button titled ‘what we promise’. If the customer clicks on this it takes the customer to another website with terms and conditions, which include the following:

• What we promise: We undertake to calculate the tax you must pay from the figures you give us when you tell us your income. We take no responsibility for checking that you have entered the amounts correctly
• Liability. We are not responsible for any penalty imposed on you because your income is incorrectly stated; or because your return is not submitted on time unless we are shown to have acted intentionally or with gross negligence.

This button only appears on the first page. Ugo does not see or read the terms and conditions before sending in the requested information. Ugo does not notice that he has entered the amount he has earned as £2,500 rather than £25,000. The correct amount is clearly visible from the statements but Valentina does not notice the mistake. She sends the tax return back to Ugo, who signs it without checking.

The tax authorities notice the mistake and fine Ugo a total of £500.

Advise Ugo of any rights he may have against Valentina.

Trista and Kevin have been business partners of a local garage since 2010 valued at about £200,000, with Trista owning a 25% share in the business (worth approximately £50,000). In March 2015, Trista approached Kevin about the possibility of buying her out of the business to enable Trista sort out her own personal problems. When Kevin refused, Trista threatened to do such shoddy work at the garage that the business would lose clients and eventually become financially unviable.

Initially, Kevin refused Trista’s proposal and told her that, while sympathetic with her plight, he just did not have access to the necessary funds. During the next several months, Trista did as she threatened and her work was so slow and sloppy that the business began to lose customers.

Fearing that he would lose the business completely, Kevin approached his new husband, Gamu, about the possibly of putting up their jointly-owned £100,000 home as security on a £50,000 bank loan, so that Kevin could buy Trista out of the business. Kevin told Gamu that he felt he had no choice but to get the loan if his business were to survive. Gamu agreed and signed the necessary documents at the bank in the presence of Kevin. Kevin, in turn, entered into contract with Trista in October 2015 to buy her out of the business for £50,000.

By February 2016, as a result of the damage to the business’ reputation after Trista’s behaviour, Kevin had lost customers and was struggling to pay his bills, including the payments on the bank loan. In May 2016, Kevin was informed that the bank now intended to take possession of his and Gamu’s house.

Advise Kevin and Gamu on whether they have any rights against Trista and the bank.

Phoebe, who won £1 million from a lottery, decided to take her parents, Monica and Chandler, and her best friends, Jahangir and Ramona, on “luxury cruising” to thank them for being there for her. Phoebe remembered seeing the following Facebook advertisement by Superb Ltd:

“Get the experience of a lifetime via our two weeks cruise; Our luxury ship will be stopping at exotic places; Enjoy five-star hotels; Fine dining all the time; Our crew and passengers are special and the nicest; £1000 per person; Discounts for groups of five or more.”

Phoebe phoned Superb’s office and asked whether “that Facebook deal is still on” and got a confirmation. She later went to Superb’s office and signed a contract after paying a discounted price of £4000 for five persons.

Phoebe, her parents and her friends left the ship after two days due to the following facts:

• The ship, Konkordium, was an ugly-looking converted fishing boat lacking some basic facilities normally seen in cruise ships. Konkordium was only going round the southeast coast of England.
• Fine dining was not available on Konkordium and passengers were often given sandwiches. The food made Phoebe’s parents quite ill and Phoebe, Jahangir and Ramona suffered varying levels of discomfort from the food.
• Konkordium’s crew were swearing and shouting at passengers at will. One pushed Jahangir for no reason.
• Other passengers on Konkordium were groups of students who were always drunk, swearing, shouting and playing loud music. Some students whistled whenever they saw Ramona. The students paid £100 per person and £80 for groups of five.

Advise Phoebe, Monica, Chandler, Jahangir and Ramona on whether they have any legal claims in contract law.

Tara wanted to extend her house. Accordingly she engaged an architect to draw up some plans. Subsequently she placed a notice in her local newspaper requesting tenders in respect of the work to be undertaken. The notice stated that the deadline for the submission of tenders was noon on 4 March and the contract would be awarded to the person submitting the lowest tender. The notice also stated that further details, including plans, could be obtained from Tara at an address provided but did not state the method for submitting tenders.

Eoin, Belinda, Siobhan and David all requested further information and subsequently submitted tenders. Eoin submitted a tender of £20,000 by e-mail. Belinda submitted a tender of £15,000 by post. Siobhan submitted a tender of “£100 lower than any other tender received” by post. David submitted a tender of £10,000 by e-mail. Tara decided not to accept David’s tender as she had heard worrying rumours about the standard of David’s work. Instead she decided to accept Siobhan’s tender. David and Belinda are very angry about this and are threatening legal action. Moreover it appears that Tara did not consider Eoin’s tender at all as there was a problem with her computer server.

Advise the parties.

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The key English contract law cases of 2020

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It has been a most unusual year. In response to the global pandemic, the Cabinet Office issued Guidance in the summer, encouraging contractual parties to act “responsibly and fairly” in the performance and enforcement of their contracts.

In a similar vein, the British Institute of International and Comparative Law (“ BIICL ”) has published three Concept Notes, the first of which noted that a plethora of disputes from the pandemic would be destructive to good contractual outcomes and the effective operation of markets. However, the BIICL also recognised that there are some cases which do require the involvement of the courts.

Inevitably then, there have been disputes which have made it to the courts this year: some which started before the pandemic hit; some borne of the pandemic itself (notably, the recent insurance business interruption case, which you can read about here   1 , and a case concerning material adverse effect clauses, which you can read about here ); and others that presumably just could not be resolved consensually. What can we learn from the decisions in these disputes? In this briefing we review this year’s important contract cases and consider what commercial parties can learn from them.

1. At the time of writing, we note that the Supreme Court heard a leapfrog appeal from the decision of the High Court from 16-19 November 2020. The judgment is pending.

Implied duties of good faith: plead at your peril.

Last year we noted that the law was still in a state of flux. One year on, is it any clearer when a contract will be subject to an implied duty of good faith? It’s fair to say the law still “has not yet reached a stage of settled clarity” ( Cathay Pacific Airways Ltd v Lufthansa [2020] EWHC 1789 ) with a continuing split between the two visions of this duty, namely:

• that there is a class of “relational contracts” that are subject to a duty of good faith as a matter of law ( Essex County Council v UBB Waste (Essex) Ltd [2020] EWHC 1581 ), or
• that such a duty will only arise where the strict tests for the implication of terms in fact are satisfied ( Taqa Bratani Ltd & Ors v Rockrose UKCS8 LLC [2020] EWHC 58 ).

Around these central themes, there have been various clarifications to the law. For example, in Morley v Royal Bank of Scotland Plc [2020] EWHC 88 (Ch) the High Court rejected a borrower’s argument that the bank had an implied duty to act in good faith towards it under a loan agreement. The Court held that this was not a relational contract of any kind but an ordinary loan facility agreement. The bank’s decision to call in the loan was the exercise of a contractual right, not a discretion (subject to the Braganza duty). The bank’s power to obtain a revaluation of the charged assets and its power to charge a default interest rate were discretions which had to be exercised for purposes connected to the bank’s commercial interests and not so as to vex the borrower maliciously (following Property Alliance Group Ltd v Royal Bank of Scotland plc [2018] EWCA Civ 355 ). On the facts, they had been exercised properly.

Similarly, the courts continue to treat references to good faith in some clauses as evidence that a wider overarching duty of good faith should not be implied into the agreement (see Russell v Cartwright [2020] EWHC 41 (Ch) ).

Perhaps most important is the nature of any duty of good faith. While this is sometimes described in broad terms, for example to “adhere to the spirit of the contract, to observe reasonable commercial standards of fair dealing, to be faithful to the agreed common purpose, and to act consistently with the justified expectations of [the other party]” ( CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010] EWHC 1535 ), the courts have recently made it very clear that the assertion that a party has not acted in good faith is a serious allegation.

In Essex County Council v UBB Waste (No. 3) [2020] EWHC 2387 (TCC) the courts suggested this was, put colloquially, an allegation of “sharp practice” . To make such an allegation without proper foundation was out of the norm and justified an order for costs on an indemnity basis.

What does this mean for you?

Good faith is still an evolving area in English law. Until we have greater clarity, it is worth considering whether your contract might be classified as “relational” or whether a duty of good faith might arise under the rules for the implication of terms in fact. In either case, you might want to address the matter expressly. Finally, allegations of a breach of good faith are serious and should not be made without foundation, so plead at your peril.

Excusing liability

In times of crisis, contractual parties may have even greater reason to examine those parts of their contracts which may exclude or limit liability or offer defences to breach (such as force majeure provisions).

Force majeure and a variety of limitations

A recent dispute concerning the 2011 riots in London put all of these provisions under the spotlight. The High Court found that a warehouse operator had failed to use reasonable skill and care to protect the contents of the warehouse (CDs and DVDs), which were destroyed by fire during the riots. Could the operator rely on any contractual terms to excuse or limit its liability?

It was not able to rely on the force majeure clause since the fire was not a circumstance “beyond [its] reasonable control” . The Court found that, if it had acted reasonably, it could and should have prevented the fire.

Since the claims (for loss of profits, business interruption costs and increased cost of working, suffered as a result of the fire) were all direct (in that they were exactly the type of loss that one would expect to result from the breach), the clause excluding liability for “indirect and consequential loss” did not apply. A cap on liability for damage to goods was no protection either as the claims were not for damage to the goods themselves. However, an overall – aggregate – cap on all liability (of £5 million) was effective.

What does this mean for you? These types of clauses are very topical in the current uncertain times and always need to be drafted carefully. This case reminds us that the position of commercial parties will depend upon the exact terms of the contracts, applied to the facts of the situation.

Where can you read more? See 2 Entertain Video Ltd & Ors v Sony DADC Europe Ltd [2020] EWHC 972 (TCC) .

Indirect and consequential loss

Another recent case highlights just how useful an exclusion of “indirect and consequential loss” could have been, if only it had been included.

A contractor terminated a construction contract for breach by its employer (on the basis that the latter had failed to provide a prepared site for the water treatment plant that was to be built). The Board of the Privy Council held that the contractor was entitled to recover, as damages for breach, the loss of profits that it would have made under an operation and maintenance contract for the same plant had it been built. These losses were not too remote (and fell within the second limb of Hadley v Baxendale [1854] EWHC Exch J70) as they were within the reasonable contemplation of the parties to the construction contract when that contract was entered into (on the same day as the operation and maintenance agreement).

What does this mean for you?  When entering into related contracts, it is vital to consider the exact relationship between them, including the consequences of a termination, breach or force majeure scenario arising under one of them and the knock-on effects this might have. Exclusion of liability under a related contract might be achieved by an exclusion of indirect and consequential loss (depending upon the specific drafting) or expressly.

Where can you read more? See AG of the Virgin Islands v GWA [2020] UKPC 18 . 

Loss of goodwill

It is also relatively common to see clauses exclude liability for “loss of goodwill”. The Court of Appeal decided that, in a commercial context, the ordinary legal meaning of “goodwill” was the good name and public reputation of the business concerned. If a contract intends the term to have an unusual or technical meaning (such as the accounting concept of goodwill) then that should be spelt out expressly.

This decision highlights how important it is to agree the meaning of (and clearly define) terms in agreements, particularly where something different from the ordinary legal meaning is intended.

Where can you read more? See Primus International v Triumph Controls [2020] EWCA Civ 1228 .

What is a reasonable condition of consent (and what is not)?

In a recent decision, the High Court considered the case law on contractual consent provisions, which often state that one party “shall not unreasonably withhold consent” to whatever is being requested.

If we call the party asking for consent, Party A; and the party being asked to give consent, Party B, the Court found that the authorities drew the following distinction:

• while it may be legitimate for Party B to impose a condition to protect or compensate it for the impairment of a benefit it enjoys under the contract which would result from giving consent,
• that is completely different to imposing a condition which would impair a right which Party A currently enjoys under the contract.

The contract was for the onshore pipeline transportation of hydrocarbons produced in the North Sea. The producer (Party A in our analogy) requested consent to amend its estimated production profile for transportation for the period from January 2021 to December 2040. The pipeline owner (Party B) stated that it was only willing to consent to the amendment if Party A agreed to an increase in the tariff payable under the agreement. Contractually, Party B was not entitled to “unreasonably withhold” its consent to the amendment. Was Party B therefore acting contractually or non-contractually by seeking to impose a tariff rise as a condition to giving consent?

The Court found that Party A was both entitled and obliged to tender its hydrocarbons for transportation at the contractual tariff for the duration of the agreement, which would continue until terminated on one of the contractual bases set out in the agreement. The terms did not limit that entitlement and obligation to the period up to 2020. In those circumstances, it would be inconsistent with the terms and scheme of the agreement if Party B was entitled to make its consent to the amendment conditional on a fundamental revision of the parties’ bargain in the form of a new tariff. Party B was acting non-contractually.

This decision clarifies that a condition might be reasonable as a prerequisite to giving consent (e.g. to make up for something lost by the consenting party as a result of the change). However, a party cannot use a consent request as an opportunity to renegotiate terms or impose an unrelated change on the other party. It may be preferable to make this clear in the drafting of any relevant provision, by stating that consent cannot be unreasonably withheld or delayed, or made subject to additional conditions.

Where can you read more? See Apache North Sea v INEOS FPS Limited [2020] EWHC 2081 (Comm) .

How will the Courts determine the law applicable to an arbitration clause?

The Supreme Court recently provided the answer to this question in a landmark decision.

An arbitration clause is generally regarded as legally distinct from the main agreement in which it is contained (and the Rome I Regulation excludes arbitration and choice of court clauses from its scope). In England, therefore, common law conflict of laws rules apply to determine the law applicable to the arbitration agreement. Under those rules that will be: (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the law “most closely connected” to the arbitration agreement.

Where the parties have not specified the law applicable to the arbitration agreement, but they have chosen the law to govern the contract as a whole, this choice will generally also apply to the arbitration agreement, rather than the law of the seat of the arbitration (as the Court of Appeal had held). But where the parties have made no choice of law to govern the arbitration agreement, either specifically or by choosing the governing law of the contract, the closest connection test will, in general, lead to the arbitration agreement being governed by the law of the seat of arbitration.

The potential for issues regarding what the applicable law of an arbitration clause is arise most frequently where the law governing the main contract and the place of the seat do not “match”. To remove the room for debate, parties, where the seat of arbitration is in England and the law of the contract is not English, therefore frequently consider using an express choice of law to govern the arbitration clause. Often, this is in favour of the law governing the main contract (the benefits of consistency with that law being something touched upon by the Supreme Court in its judgment). That approach should not change. The Supreme Court’s clarification of this area is welcome but is a general interpretative approach. Therefore, in such cases, an express designation still carries the value of some increased certainty (it will, of course, always be necessary to ensure the clause is properly drafted and works under the chosen law).

Where can you read more? See Enka Insaat Ve Sanayi AS (Respondent) v OOO Insurance Company Chubb (Appellant) [2020] UKSC 38 , and, for our ArbitrationLinks coverage see here .

What stays and what goes in assignment and novation?

The High Court held that an assignment by a contractor to an employer of “ the subcontract ” was an assignment of both (a) accrued rights, and (b) future rights under the subcontract. This meant that when the employer claimed damages in the sum of £133 million from the contractor, the contractor was left without a contractual right to seek a direct remedy from the subcontractor (in principle, it would be able to claim contribution from the subcontractor under the Civil Liability (Contribution) Act 1978, but this would have to be considered, alongside the effect of any relevant limitation or exclusion provisions, at full trial). The Court also held that the assignment did not amount to a novation, so that the contractor’s obligations under the subcontract had not been transferred to the employer.

It’s imperative to think – in advance and before agreeing to do so – what the possible effects of a transfer of rights might be, so that you are not left without a clear remedy, should that be needed. The decision also contains a handy summary of some of the key aspects of assignment and novation:

Assignment:

• Subject to any express restrictions, a party to a contract can assign the benefit of a contract without the consent of the other party to the contract.
• The burden of a contract (the obligations under it) cannot be assigned but the principle of conditional benefit can apply so as to impose on the contractual assignee a positive obligation where such obligation is inextricably linked to the benefit assigned.
• In the absence of any clear contrary intention, reference to assignment of the contract by the parties is understood to mean assignment of the benefit of both accrued and future rights.
• It is possible to assign future rights only, but clear words are needed for that.
• Novation occurs when the original contract between A and B is extinguished and replaced by the creation of a new contract between A and C.
• Novation requires the consent of all parties to the original and new contract. Consent can be given in the original contract, but clear words are needed.
• The terms of the new contract must be sufficiently certain to be enforceable.
• In every case the court must construe the contractual arrangements to give effect to the expressed intentions of the parties, using the established rules of construction.

Where can you read more? See Energy Works (Hull) Limited v MW High Tech Projects UK Limited and another [2020] EWHC 2537 (TCC) .

Notices: the devil in the detail

A share purchase agreement provided that the sellers would pay the buyer an amount equal to any tax liability which arose in certain circumstances, provided that, when making a claim, the buyer provided written notice stating “ in reasonable detail ” the matter which gave rise to the claim, the nature of such claim and (so far as reasonably practical) the amount claimed. The buyer gave notice of a claim to the sellers, referring to an investigation begun by the relevant tax authorities and gave a chronology of key milestones. Was this enough?

The High Court noted that the “reasonable detail” requirement amounted to an obligation to provide sufficient information so that the sellers, acting reasonably, knew what matter gave rise to the claim as well as the nature of the claim and, if reasonably practical, the amount. On the facts, the notice was insufficient. It contained no indication of the relevant facts, events or circumstances giving rise to the claim. Reference to the tax investigation was insufficient, and did not import all the tax authority’s comments and allegations, even if they were known to the sellers’ representatives. There had to be some indication of how the claim arose out of the facts identified.

Requirements to provide details usually mean that more, rather than less, should be included. It might help to consider what the purpose of the notification is and what it is that the recipient will need to know in order to respond or take a matter forward.

Where can you read more? See Dodika Ltd & Ors v United Luck Group Holdings [2020] EWHC 2101 (Comm) .

Waiver by election: understanding the boundaries

Rights can sometimes be lost by waiver by election: where a party has alternative, inconsistent rights, has knowledge of the facts which give rise to them and acts in a way which is only consistent with its having chosen to rely on one of them, it will be taken to have waived the other right ( Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 ). This explains why a party who communicates unequivocally an intention to continue with performance thereby loses the right to terminate a contract (instead, it is taken to have affirmed the contract).

A recent decision of the Privy Council is an important, and topical, illustration of the boundaries of the concept of waiver by election and highlights that it isn’t always applicable.

The parties entered into a fuel supply agreement against the backdrop of a potential closure of a refinery which supplied petroleum to the seller. The seller had a specific contractual right in a “Performance Relief” clause (effectively, a force majeure clause) to withhold, reduce or suspend deliveries to the extent it thought fit where necessitated by, amongst other things, the closure of the refinery.

When the refinery gave notice to the seller that it was closing, the seller notified the buyer but carried on supplying fuel, purchased and shipped from elsewhere while negotiations took place between the parties (as the seller sought a price increase to offset its higher costs). When these negotiations broke down, the seller sought to rely on the clause. The buyer argued that the seller’s rights had been “exhausted” after the seller had continued making deliveries. The Board of the Privy Council disagreed: waiver by election did not apply here. The seller’s right to claim performance relief did not present the seller with a binary, all-or-nothing choice between, on the one hand, putting an end to all the parties’ obligations or, on the other hand, treating all those obligations as still binding. Instead, it had a range of options: at one end of the scale, the seller might merely delay a delivery of fuel; at the other extreme, the seller might decide to cease all further deliveries under the contract, as eventually happened.

In situations where a party is faced with deciding whether to exercise a contractual right or not, whether taking one course of action will constitute a “waiver” of its other right(s) will ultimately turn on whether the rights are truly inconsistent with each other. Parties who want to make it clear that any action they are taking is to be without prejudice to their other rights should say so expressly, in writing. It should also be kept in mind that in these types of situations, estoppel can be relevant  – for example, if the seller had unequivocally represented it would not withhold deliveries under the supply agreement despite the closure of the refinery, it might have lost its right to performance relief by waiver by estoppel. There was no argument, however, that this was so in this case.

Where can you read more? See Delta Petroleum v BVI Electricity Corporation [2020] UKPC 23 .

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The nine sets of case studies featured here showcase how law firms are innovating as businesses in Europe. They highlight law firms that are changing how they manage their people and how they are reinventing services and delivery models.

All the case studies were researched, compiled and ranked by RSGI. “Winner” indicates that the organisation won an FT Innovative Lawyers Europe award for 2024 .

Read the other FT Innovative Lawyers Europe ‘Best practice case studies’, which showcase the standout innovations made for and by people working in the legal sector:

Practice of law In-house

Law firm strategy

Paul, Weiss, Rifkind, Wharton & Garrison: Winner

Originality: 8; Leadership: 9; Impact: 9; Total: 26 From August last year to April this year, the top-tier US firm expanded its presence in London by hiring 130 new lawyers, including approximately 20 partners from rival firms. With a particular focus on rapidly building a private equity practice in London, the firm hired 14 specialist partners from international law firm Kirkland & Ellis.

A&O Shearman O: 8; L: 9; I: 8; Total: 25 In February 2023, the firm launched its artificial intelligence working group for clients, who pay a membership fee in exchange for quick responses to AI-related queries and syndicated advice. The move adds to the range of the firm’s services in this area.

Pogust Goodhead O: 7; L: 9; I: 9; Total: 25 The mass claims firm, founded in 2018, now has operations in four countries, including Brazil, and employs more than 600 people. The London firm has attracted about $1bn in litigation loans, including $552.5mn from US investor Gramercy last October.

In March 2024, it launched a £3bn action, alongside Dutch firm Lemstra Van der Korst, on behalf of around 77,000 claimants affected by the 2015 Mariana Dam disaster. It will come to court next month and adds to related action already taken in London.

Highly commended

Freshfields Bruckhaus Deringer O: 7; L: 8; I: 8; Total: 23 As part of its US-focused growth strategy, the “magic circle” firm has invested in expanding its Silicon Valley mergers and acquisitions practice group. In 2024, it brought in a new chief digital innovation officer, also based on the US West Coast.

Gómez-Acebo & Pombo O: 6; L: 8; I: 7; Total: 21 In 2022, newly appointed managing partner Iñigo Erlaiz Cotelo launched a new growth strategy for the Spanish firm. A three-year target to achieve a 20 per cent increase in revenue was met within two years, when net turnover hit €93mn in 2023.

Gide Loyrette Nouel O: 6; L: 6; I: 7; Total: 19 The French firm entered an official partnership with patent specialist firm Regimbeau last year, to coincide with the European Commission’s creation of the Unified Patent Court. The two firms now provide clients with a single service, offering Gide Loyrette Nouel’s legal expertise and Regimbeau’s technical knowhow. The partnership has gained several conglomerates as clients.

Candey O: 6; L: 8; I: 5; Total: 19 The UK-headquartered disputes firm was licensed In March 2024 to practise in the British Virgin Islands, in addition to the UK and US. The firm aims to have all its solicitors admitted to practise there.

Pérez-Llorca O: 4; L: 7; I: 8; Total: 19 In 2024, the fast-growing Spanish firm overhauled its management structure following a five-year expansion that saw it open new offices in Brussels, Lisbon, London, New York and Singapore. Last year, it achieved revenue of nearly €124mn.

Generative AI tools

A&O Shearman: Winner Originality: 9; Leadership: 9; Impact: 9; Total: 27 In December 2023, the firm launched ContractMatrix, an artificial intelligence contract negotiation tool. The service, developed with Microsoft and legal AI start-up Harvey, draws on existing contract templates to draft new agreements that lawyers can amend or accept. It has been licensed by several companies, including ASML, a Dutch supplier of chipmaking equipment.

Garrigues O: 8; L: 8; I: 9; Total: 25 Last year, the firm launched Garrigues GAIA: a platform that offers access to internally trained generative AI systems linked to its libraries of legal documents. Some 70 per cent of the staff use it daily.

Baker McKenzie O: 8; L: 8; I: 7; Total: 23 Employment lawyers worked with the firm’s AI practice, BakerML, to train a bespoke AI tool to handle the most common employment law queries received from a leading social media client over six years. The service drafts answers to routine queries across 45 jurisdictions, which a local lawyer then reviews.

CMS O: 8; L: 8; I: 7; Total: 23 The firm worked with German tech partner Xayn to launch Noxtua, a Europe-focused AI legal service in February. The service focuses on interrogating German- and English-language material and strictly complying with EU data protection legislation, to stand out as an independent European alternative to US-based rivals. Commended individual: Markus Kaulartz

Ecija O: 8; L: 8; I: 7; Total: 23 In November 2023, the firm began using a generative AI system in its daily operations, resulting in a reported 70 per cent time saving in some routine tasks. Clients have approached the firm’s tech consultancy for advice on incorporating AI platforms into their internal systems.

Dentons O: 7; L: 8; I: 7; Total: 22 In August 2023, the firm launched FleetAI: a proprietary version of ChatGPT that is designed to speed up its lawyers’ workflows — and to be licensed to clients. About 850 of its staff use the service, which is compatible with the firm’s existing tech systems.

Taylor Wessing O: 8; L: 7; I: 7; Total: 22 In October 2023, the firm launched TWLitium, an in-house generative AI tool. Around 80 per cent of staff are now using the system, which offers secure chat, document generation, and analysis in areas such as property lease documents. Commended individual: Clare Harman Clark

Travers Smith O: 8; L: 7; I; 7 Total 22 The firm built Analyse, a generative AI tool to help automate a wide range of legal document review tasks. In May 2024, the firm spun out its AI team to create technology start-up Jylo. The venture, funded by Travers Smith, aims to sell services to the broader legal market, building on Analyse and YCNBot, its open-source chatbot launched last year.

Hogan Lovells O: 7; L: 7; I: 6; Total: 20 The firm and Eltemate, its legal tech subsidiary, launched an AI-powered service, dubbed Craig, in December 2023. The system is being offered as a subscription service for clients as well as for in-house use.

KPMG Abogados O: 6; L: 6; I: 8; Total: 20 A group of lawyers helped train a generative AI tool called KAI, which allows 1,100 staff across Spain to access eight AI “personas”. Seven mimic “experts” trained in specific practice areas of law, while the eighth helps deal with automating general internal inquiries.

DLA Piper O: 7; L: 7; I: 6; Total: 20 The firm’s innovation arm, Law&, developed a generative AI-powered legal assistant called ButterflAI. The service is designed to ensure security for client work.

Womble Bond Dickinson O: 6; L: 6; I: 6; Total: 18 The firm has built its own internal chatbot, iWomble, to assist lawyers. The service, launched in March, is trained to deliver information on the firm’s policies and procedures.

New legal products

CMS: Winner Originality: 9; Leadership: 8; Impact: 9; Total: 26 Last November, the firm launched its patent management system, CMS Umbra, designed with software company IPDefine. The system aims to enable businesses with sizeable intellectual property interests to evaluate and maximise the value of their patent portfolios at high speed and low cost.

Its search facility identifies infringements by scanning the internet and providing validity and freedom-to-operate assessments. It also attempts to identify value and commercialise patents, most of which are left dormant.

The software can also help to calculate the value of any target company’s portfolio during an acquisition and to aid counterfeit protection.

KPMG Abogados O: 8; L: 8; I: 9; Total: 25 The global professional services firm’s Spanish legal arm developed Katalyst, a software platform to help clients manage and automate their tax, legal, and human resources work. More than 400 organisations currently use it in 90 jurisdictions. Different applications help legal departments to track regulation, and to manage budgets and specific legal processes, such as insolvency or procurement. Similar tailored systems are available for clients’ HR and tax departments.

Garrigues O: 8; L: 8; I: 7; Total: 23 In 2023, the firm launched its LegalApp Factory: a division dedicated to creating systems that clients can integrate directly into their operations. Authentication products include a time-stamping electronic certification tool to prove the authenticity of mobile phone pictures and other digital evidence presented in court.

Taylor Wessing O: 7; L: 8; I: 8; Total: 23 In 2023, the firm launched a self-service platform, Outpace, designed to help start-up businesses and their investors. It aims to provide simplified tools to complete legal tasks, such as structuring funding rounds and monitoring investors’ shareholdings at a lower cost than traditional rival services. Outpace is now used by more than 20 clients, the firm reports.

Herbert Smith Freehills O: 6; L: 9; I: 7; Total: 22 The firm launched a service in June 2023 that helps clients identify where they may be failing to meet reporting requirements, under the EU’s Corporate Sustainability Directive. The directive, which was introduced last year, also applies, in part, to some UK companies. Responses to a short questionnaire are used to create a report assessing compliance with the reporting obligations.

McDermott Will & Emery O: 6; L: 7; I: 7; Total: 20 The firm designed a risk-profiling tool for its German clients that can be integrated into their in-house systems to help them comply with labour regulations when hiring freelance workers. Users of the tool answer simple questionnaires about the freelancers themselves and the roles they are applying for, which are used to generate a risk report on the contractual arrangement. One client reported that the app was used 1,400 times by their employees in 2023.

Osborne Clarke O: 7; L: 7; I: 6; Total: 20 In May 2023, the firm’s technology team launched a chatbot that answers questions from clients’ staff about internal policies regarding antitrust compliance and obligations. Questions that the chatbot cannot answer are dealt with by the firm’s lawyers, who can add their answers to the client’s policies, and to the chatbot service.

La Scala Società tra Avvocati O: 7; L: 7; I: 5; Total: 19 In 2024, the Italian firm struck a partnership with, and took a 25 per cent stake in, 3Ai — a data management consultancy. The venture aims to help clients improve how they manage their proprietary data.

Generative AI strategy

DLA Piper: Winner Originality: 9; Leadership: 9; Impact: 9; Total: 27 The firm has developed a comprehensive AI strategy for itself and its clients. An AI and data team — comprising more than 100 lawyers, data scientists, and professionals with backgrounds in policy and academia — introduced generative AI software within the firm, including Microsoft Copilot and CoCounsel and its own proprietary tool. The team advises clients on use of AI and has created apps, handbooks, and governance frameworks to help businesses remain compliant with evolving laws and regulations.

A&O Shearman O: 8; L: 10; I: 8; Total: 26 Allen & Overy, now merged with Shearman & Sterling, was a first mover in February 2023 in rolling out generative AI across its operations. This followed a partnership with legal generative AI software company Harvey in 2022, and a pilot involving 2,000 lawyers and staff. Harvey now has 3,500 daily users. The AI helps with routine legal tasks.

Addleshaw Goddard O: 8; L: 8; I: 8; Total: 24 The firm reviewed more than 50 generative AI tools and tested five in formal pilots before deciding to roll out its own proprietary generative AI tool, AGPT, in September 2023. The tool has processed an estimated 130,000 inquiries, at an average of 500 a day.

Ashurst O: 8; L: 8; I: 8; Total: 24 In January 2024, the firm published its findings from trying out the law-focused generative AI products Harvey, Copilot, and Wexler. Its aim was to promote transparency in the legal sector and showcase its approach to research and development. The firm has since rolled out Harvey to its 4,000 staff.

Cuatrecasas O: 7; L: 8; I: 7; Total: 22 In September 2023, the firm partnered with AI start-up Harvey to create CelIA. The system is trained specifically in Spanish law and is used for information retrieval, document drafting, and analysis.

NautaDutilh O: 7; L: 7; I: 8; Total: 22 In 2023, the Dutch firm partnered with AI developer Fledger to develop its proprietary generative AI tool, Ariel. The firm has offered formal training courses to encourage its use.

Macfarlanes O: 6; L: 7; I: 7; Total: 20 Having been among the first to sign up to Harvey’s AI tool, a group of Macfarlanes’ lawyers and technologists tracked staff behaviour to find the best ways to encourage its use, which turned out to be via workshops and formal knowledge sharing. Some 80 per cent of its 550 lawyers now use the tool.

Skills development

Garrigues: Winner Originality: 8; Leadership: 8; Impact: 8; Total: 24 The firm assigned 140 people across 18 offices as “digital ambassadors” to encourage the uptake of digital services at the firm. In 2023, nearly 90 per cent of staff received training — for a total of 14,000 hours.

Kennedys O: 8; L: 7; I: 8; Total: 23 In 2023, the firm’s 120 global equity partners attended a three-day leadership programme at Oxford university’s Saïd Business School to enhance their strategic skills, such as improving collaboration and working on non-billable hours of business development.

Mills & Reeve O: 8; L: 8; I: 7; Total: 23 The firm introduced discussion forums based on the Balint Method, originally designed to improve doctors’ dealings with patients, their own mental health, and clinical outcomes. The lawyers meet in groups of 12 with two supervisors once a month for a year to share experiences and discuss client relationships.

PwC Legal Business Solutions O: 7; L: 8; I: 7; Total: 22 Working with King’s College London’s Dickson Poon law school, the firm has helped develop a course to provide practical skills in generative AI, aimed at legal and tax professionals. Some 25 managers and directors have completed it.

Shoosmiths O: 8; L: 7; I: 7; Total: 22 Sherif Malak, head of privacy and data, created the UK-based Junior Privacy Advisers’ Club in August 2023. The JPA, which now has 200 members, provides mentoring from senior lawyers, general counsel, and others in their practice area.

Dentons O: 6; L: 7; I: 7; Total: 20 In February 2023, the firm and O-Shaped Lawyer, a legal consultancy, conducted relationship-building workshops with key clients. Staff undertook problem-solving exercises to understand clients’ needs and priorities better.

Vieira de Almeida O: 6; L: 7; I: 7; Total: 20 Last year, the firm launched a system to help staff manage their career development and learning schedule. Human resources staff ensure it is suitable and properly planned.

RPC O: 6; L: 7; I: 6; Total: 19 The firm introduced a nine-month training programme involving psychometric testing, workshops and online resources. Workshops include role-playing sessions to help partners develop skills and build better relationships with colleagues. Some 37 partners, just over a quarter of the total, have completed it.

Improving client experience

Ashurst: Winner Originality: 9; Leadership: 9; Impact: 7; Total: 25 The firm is investing in new digital products to deliver services to clients. As part of this drive, it launched Ashurst Origin and XB Adviser in June 2023. The first service allows banking clients to securely extend their staff’s access to the range of the firm’s digital services. The second, XB Adviser, is an updated digital service offering clients advice culled from local experts across Ashurst’s international network on cross-border bank licensing.

Clyde & Co O: 8; L: 8; I: 8; Total: 24 The firm consolidated its services dealing with risks of cyber breaches. If the service flags that a client is operating in high-threat locations, a partner at the firm will automatically receive a briefing pack to deal with potential dangers of any cyber attacks. It also notifies clients of regulatory obligations and potential fines for involvement in the event of any data privacy breaches.

PwC Tax & Legal, Spain O: 8; L: 8; I: 7; Total: 23 A 40-strong team at the Spanish legal arm of global professional services firm PwC launched a service that processes data from contracts, litigation and due diligence documents to provide headline assessment of relevant business risks. For example, the team created a tool for French multinational retailer Carrefour to analyse and present risks across its property contracts.

Bird & Bird O: 7; L: 7; I: 8; Total: 22 The firm helped build a compliance platform to assist an Asian computer gaming company as it develops and launches new games. This ensures that its games comply with EU and US data protection laws without the client’s legal team needing familiarity with those jurisdictions.

Ecija O: 8; L: 8; I: 5; Total: 21 The firm worked with data protection software company OneTrust to analyse how a food and drink manufacturer client was using AI, and to advise it on legal and ethical considerations and compliance with EU rules.

Freshfields Bruckhaus Deringer O: 7; L: 8; I: 6; Total: 21 In January 2022, the firm launched a unit in Germany for managing mass claims. It has offices in Hanover, Münster and Nuremberg, and defends clients against independent parallel lawsuits — such as the emissions scandal lawsuits faced by German carmaker Volkswagen. Since being set up, the unit has attempted to act as sole defender in mass claims that were previously too large for one firm to handle.

Cleary Gottlieb Steen & Hamilton O: 6; L: 7; I: 7; Total: 20 The firm’s legal technology division, ClearyX, developed two AI-powered discovery tools for lawyers at semiconductor group Broadcom, to help in its acquisition of cloud software company VMware. This deal, for $69bn including debt, was announced in May 2022. One of the tools analysed and categorised 10mn documents sent to international competition watchdogs, while the other reduced the number of documents requiring human review to determine legal privilege.

DWF Group O: 6; L: 6; I: 8; Total: 20 Last year, ahead of Sir Jim Ratcliffe’s formal purchase of a controlling minority stake in Manchester United, the firm reviewed the workings of the football club’s in-house legal team, identifying ways to improve to routine tasks. For example, the lawyers redrafted non-disclosure agreement precedent documents to reduce the proportion that required extra negotiation from 69 per cent to 3 per cent, according to the firm. It also developed a digital “workspace” to triage legal tasks and track ongoing matters.

Pinsent Masons O: 6; L: 7; I: 7; Total: 20 In 2023, the firm’s flexible resourcing arm, Vario, arranged for 24 lawyers to work on demand for consumer goods group Unilever, on its supplier contracts. The Vario lawyers, Pinsent Masons, and Unilever piloted new legal technology to help automate Unilever’s contract review, summarisation, and drafting.

Deloitte Legal O: 6; L: 6; I: 7; Total: 19 In September 2023, the firm launched a tool to automate aspects of mergers by extracting information needed from the client’s records, then sorting and loading it into documents required for concluding the deal. According to the firm, the platform reduces the time spent on these processes by between 25 and 35 per cent.

Withersworldwide O: 7; L: 7; I: 5; Total: 19 In late 2023, the firm’s tech team developed a system to help software provider Diligent extract and organise information across its own 45,000 contracts with customers, using its corporate governance applications with minimal human intervention.

Matheson O: 5; L: 7; I: 6; Total: 18 Matheson provided carmaker Volkswagen with a suite of tools to increase the legal team’s efficiency and facilitate better collaboration with the law firm. Systems include trackers for monitoring litigation and environment, social and governance obligations.

Talent management

Cuatrecasas: Winner Originality: 8; Leadership: 9; Impact: 8; Total: 25 In 2023, the firm introduced a new system for allocating work to its lawyers. Optimal Team Assistant matches individuals’ expertise, availability, professional interests, and relevant previous client contact to new projects.

The system aims to improve career development for young lawyers. It also alerts the firm to any lack of capacity in specific fields, so it can adjust its training and recruitment accordingly.

Shoosmiths O: 7; L: 9; I: 8; Total: 24 The firm has worked with social mobility campaign group Purpose Coalition since 2018. Since then, in addition to supporting outside charities, it has introduced new policies to broaden recruitment and support alternative career paths at the firm. A senior firm member is briefed to oversee these initiatives and evaluate their progress.

Vieira de Almeida O: 8; L: 8; I: 8; Total: 24 The Portuguese firm introduced a Partners’ Professional Planning platform, which provides partners with information about the firm’s pay structure and personal performance measures.

PwC Tax & Legal, Spain O: 7; L: 8; I: 7; Total: 22 PwC Spain launched a programme last November that allows staff to earn expert diplomas and a masters degree in professional services, from Madrid’s CEU San Pablo University. Experience that legal staff gain in their day-to-day work earns credits towards the qualifications. The business expects 4,500 staff, including those at its tax and legal division, to obtain a degree in the next four years.

Hogan Lovells O: 7; L: 8; I: 6; Total: 21 Since 2022, the firm has worked with external advisers to help it identify ways to improve ethnic diversity and inclusion at an office-by-office level. Responses from the majority of staff have helped inform the firm’s continuing racial equity plan.

Linklaters O: 7; L: 6; I: 8; Total: 21 The firm played a leading role, along with five others, in the formation last year of the City Century apprenticeship scheme. This aims to expand the number of recruits to a six-year solicitor apprenticeship programme in London, designed for candidates who do not wish to pursue the traditional route of full-time university degree study.

Slaughter and May O: 8; L: 8; I: 5; Total: 21 The firm introduced a “switch on-switch off” flexible working scheme, in an attempt to counter potential burnout that affects many law firms. It allows associates with sufficient experience to cut working hours by up to a fifth, by taking blocks of leave in exchange for a salary reduction. After a two-year pilot, the firm made the scheme permanent in January, and 5 per cent of associates have taken up the offer.

Burges Salmon O: 7; L: 7; I: 6; Total: 20 Last year, the firm won accreditation as a “disability confident” employer under a UK government scheme aimed at encouraging recruitment and retention of people with a range of disabilities. The firm interviewed staff to identify areas for improvement and says the number of staff reporting a disability has increased from 4 per cent to 9 per cent in the past four years.

Herbert Smith Freehills O: 7; L: 7; I: 6; Total: 20 The employment, pensions, and incentives team worked with the Living Wage Foundation to implement the campaigner’s “Living Pension” commitment in 2023 and was among the first to subscribe to it. Accreditation demands an employer pension contribution of 7 per cent of staff salary.

Dentons O: 7; L: 6; I: 6; Total: 19 In April 2022, Dentons launched a programme sponsoring paralegals and other staff to study for the Solicitors Qualifying Examination. The scheme offers up to 10 candidates financial support through two years of study.

Regulatory solutions

Freshfields Bruckhaus Deringer: Winner Originality: 8; Leadership: 8; Impact: 8; Total: 24 The firm collated legal advice about regulations across 100 jurisdictions to train a chatbot for its client Cariad, the troubled software subsidiary of carmaker Volkswagen.

The tool uses generative artificial intelligence and aims to reduce the time spent by the in-house legal team dealing with inquiries from the business’s 10,000 staff by helping them get quicker answers.

Hogan Lovells O: 7; L: 8; I: 7; Total: 22 The firm’s legal tech division subsidiary, Eltemate, designed a tool for BMW to monitor regulatory changes affecting carmakers across different jurisdictions. The in-house system uses AI to identify the most relevant information to the client every month.

Cleary Gottlieb Steen & Hamilton O: 6; L: 8; I: 7; Total: 21 The firm’s antitrust team and its tech subsidiary, ClearyX, developed a database that stores client documentation on mergers, acquisitions and public procurement deals relevant to EU regulation and reporting requirements. The subscription service helps clients demonstrate compliance.

White & Case O: 6; L: 8; I: 7; Total: 21 The firm developed an app-based tool to help clients report on the EU’s Foreign Subsidies Regulation, adopted in 2023, to prevent companies subsidised by foreign governments from gaining an unfair advantage in the trading bloc.

The app asks questions and guides clients through the compliance process by automating the preparation of reports required by the European Commission.

Addleshaw Goddard O: 6; L: 8; I: 6; Total: 20 The firm developed a suite of tools to prepare smaller businesses for the UK’s new Procurement Act, which comes into force in October and governs how public bodies purchase goods.

The platform provides updates and helps clients to ensure they comply with the new rules, making contract renewals with public entities easier.

Osborne Clarke O: 7; L: 7; I: 6; Total: 20 The firm created a tool for monitoring packaging regulations for the global coffee chain Starbucks. Users can check their legal obligations across 42 jurisdictions and take any necessary action to comply.

This system helps in-house lawyers at Starbucks to deal with compliance questions quicker and reduces the queries sent to its outside law firm.

TLT O: 7; L: 7; I: 6; Total: 20 The firm created a database of regulatory updates for financial services, airline and retail clients. It alerts them to forthcoming deadlines for implementing new compliance measures. It also features a system for clients to track progress in responding to regulatory change.

Abreu Advogados O: 6; L: 6; I: 7; Total: 19 To help smaller Portuguese companies comply with the EU’s new Corporate Sustainability Reporting Directive, the firm created an online compliance training series. The service helps legal teams at exporting companies improve their reporting on environmental, social and governance standards. The lawyers delivered the training to more than 400 companies at the request of Portuguese trade agency AICEP.

Mayer Brown O: 6; L: 7; I: 6; Total: 19 The firm’s pensions team created a regulation tracker for trustees of UK occupational pension schemes. Clients that subscribe receive updates on the staggered implementation of new standards released in March by the UK’s pensions regulator. These standards require trustees to ensure effective governance requirements, risk assessments and remuneration policies.

Simmons & Simmons O: 6; L: 7; I: 6; Total: 19 The firm created a tracker to help clients stay informed about global cryptocurrency regulation. It currently covers around 60 jurisdictions. Users pay a subscription to access and receive automated updates.

Data-enhanced knowledge

Herbert Smith Freehills: Winner Originality: 8; Leadership: 8; Impact: 8; Total: 24 The firm collected data from more than 1,000 arbitration cases to build a database, called Genesis, that can predict the length and price of future cases, after clients called for greater predictability of legal costs in disputes. The information allows lawyers to bill clients using fixed fees or other charging arrangements, instead of hourly rates. The firm is expanding the model into more practice areas.

Deloitte Legal O: 7; L: 8; I: 8; Total: 23 The firm integrated artificial intelligence capabilities from systems provided by software partner Emérita Legal into its proprietary case management system, ValerIA. The platform, trained in Spanish law, manages documentation, provides relevant regulation and legislation, and automatically assigns tasks to lawyers.

Orrick, Herrington & Sutcliffe O: 7; L: 8; I: 8; Total: 23 The firm launched an updated version of its Deal Flow survey that analyses the scale and terms of venture capital investment in European start-ups. The report, covering 350 equity deals, suggests investors are imposing more stringent “consent rights” to tighten their control over these companies.

Kennedys O: 7; L: 8; I: 7; Total: 22 Lawyers from the firm’s motor insurance practice and its technology subsidiary, Kennedys iQ, developed a platform that helps insurer clients manage motor accident and injury claims. It analyses medical evidence and recommends whether claims should be accepted or contested.

Linklaters O: 6; L: 8; I: 8; Total: 22 In May 2023, the firm rolled out its due diligence management platform, ReportIQ. It aims to make each stage of a deal process more efficient and consistent. Since launch, it has been used on high-value transactions including a €12bn deal, for which about 300 lawyers collaborated via the platform . Commended individual: Timo Engelhardt

Eversheds Sutherland O: 6; L: 8; I: 7; Total: 21 The firm has worked to manage due diligence on client transactions more consistently. Its legal services subsidiary, Konexo, helped to select the best technologies for each stage of the process. The firm is now rolling out more standardised processes, guidance notes, and wording for its due diligence work.

Norton Rose Fulbright O: 6; L: 7; I: 7; Total: 20 In 2022, the firm developed a tool called NRF Litigation Manager. This service has helped property group ECE manage its portfolio of retail spaces at shopping centres across Europe, by tracking the state of legal claims. The system has since been rolled out to two other clients.

Shoosmiths O: 6; L: 7; I: 7; Total: 20 The firm created a searchable database of UK merger and acquisitions deals that it has advised on. This can provide lawyers and clients with an overview of common terms applied in UK acquisitions, to help them evaluate the likelihood of the other party accepting an offer.

Cuatrecasas O: 5; L: 7; I: 7; Total: 19 In 2023, the Spanish firm developed a tool to help its lawyers track stages of arbitration proceedings across different jurisdictions, backed up by precedent documents drawn from about 600 sources. The system has been used in 194 international arbitrations, supporting the disputes team across six countries.

Morais Leitão O: 6; L: 7; I: 6; Total: 19 The Portuguese firm expanded its due diligence service for takeovers to include an initial assessment of documents and make more informed decisions in deals that have complicated contractual and compliance requirements.

Arthur Cox O: 5; L: 7; I: 6; Total: 18 In 2023, the Irish firm launched a revamped cyber incident management team made up of lawyers, consultants, and former law enforcement personnel. It aims to help clients take preventive action and provides post-attack support, identifying compromised data and offering legal advice on how to proceed.

Littler O: 5; L: 7; I: 6; Total: 18 In November 2023, the firm — which advises businesses on labour issues — published its latest European Employer Survey. The report, now in its sixth year, draws on information supplied by 780 human resources executives, in-house lawyers, and business leaders across 15 European countries.

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The Legaltech Rundown: SimplyConvert Launches CaseHQ, Kira Spinoff Zuva Announces Contract Tool and More

An update on the legal tech market's past week, from product launches to new partnerships.

September 13, 2024 at 04:50 PM

5 minute read

Isha Marathe

Legal Tech Reporter

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The fast-paced legal tech world is constantly evolving. At Legaltech News, we always try to bring you the latest news on hirings, product and feature releases, new integrations, legal tech mergers and acquisitions, and more. The Legaltech Rundown is a weekly update of legal tech happenings that might have gone under the radar.

CARET: On Thursday, legal practice management platform CARET Legal announced the launch of CARET Analytics. The new feature will transform various data points into interactive dashboards for small and midsized law firms to work off of. CARET Analytics also lets users generate custom reports, monitor aging accounts receivable and accounts payable, glean analysis of billed and collected data, and more, in an effort to streamline cashflow management, according to a news release.

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