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Contract Law Credit | Free Contract Law Essay

A classic view of contract law is to establish rules and principles for contractual parties to understand how far their contractual obligations go and where their liability ends. Undoubtedly, fundamental principles of offer and acceptance, consideration, remedy, interpretation of contract and doctrines like promissory estoppel, privity, duress, frustration are all of great importance. However, I view that modern contract law is not restricted to develop new doctrines but have evolved in a macro way – to meet the needs of the contemporary society and form a basis for future expansion.

As Brownsword have said that “the leading doctrines of the English law of contract, whether in legislation or case law, reflect two principal ideologies, ‘market-individualism' and ‘consumer-welfarism' ”. For this paper, I am more eager to focus on broader and contemporary issues rather than classic cases establishing the aforementioned doctrines. The theme of this paper surrounds ‘consumer-welfarism' especially the use of credit cards; and towards the end I will touch lightly on globalization issues. The key case I will use is Office of Fair Trading v Lloyds TSB Bank plc and others.

Before going into the case, it is crucial to understand the background of a typical credit card contract and section 75 of the Consumer Credit Act 1974. The basics of a consumer credit agreement is a framework of a three-party structure which involved contracts between the card issuer, the cardholder and the retailer (whether goods or services). With the massive expansion of retailers, a fourth party, known as the ‘merchant acquirer' is added to this structure whose job is to acquire more merchants to accept the issuer's cards, rendering more convenience for consumers. Under s75(1) of the Act, “a cardholder having a claim against a supplier for misrepresentation or breach of contract could pursue the same claim against the lender, who would be jointly and severally liable with the supplier.”(Beale, 2004). This is known as the “connected lender liability” which is particularly useful, as Which? magazine points out, “if the retailer or trader has gone bust or it doesn't respond to your letters or phone calls”; this also meant that consumers no longer has to reach a stalemate with the retailer or trader before contacting the credit card company.

The issue of this case is whether s75(1) applies to overseas transactions. Both the Court of Appeal and House of Lords held that it does. Although much of the reasoning is based on construing section 75, an inference could be drawn from the judgments of Lord Hoffmann and Lord Mance that there is a tendency to protect cardholders by allowing them to a right to indemnity. In paragraph 7 of the judgment, the court stated that “card issuers choose to authorise the use of their cards by foreign suppliers or join four-party schemes under which their cards may be so used, they can be expected either to make their own arrangements about indemnity against liability under section 75(1) or accept that the commercial advantages of allowing foreign use outweigh the absence of a right of indemnity.”

This brings us back to the idea of consumer protection in contract law. It is definitely not a new ideology when it is evidenced in a myriad of statues enacted as early as the nineteen seventies: Unsolicited Goods and Services Act 1971, Sale of Goods Act 1979, Unfair Contract Terms Act 1977, Consumer Protection Act 1987, Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083), Consumer Protection (Distance Selling Regulations) 2000 (SI 2000/2334). The list is non-exhaustive and the indication is clear – there is an urging need to protect consumers who doesn't know the law, and who are in a weaker position to bargain with abundantly resourced companies. Indeed, the government is going to launch a review on over one hundred pieces of legislation concerning consumer protection.

This case not only affirms financial protection for consumers, it also has a broad implication on the purchasing behaviour of consumers. With the massive expansion of the world-wide-web, internet shopping has never been any easier; this is particularly true for the young sector.

Martyn Hocking, Editor of Which? Money says: “This positive ruling will remove the uncertainty surrounding purchases overseas and over the internet, and consumers will be able to shop with greater confidence.”

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