The Fundamental Aims Of The Law Of Contract

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A contract, simply and popularly defined, is an agreement voluntarily entered into by two or more parties who have the intention to create legal relations. It can be said that one of the fundamental aims of the law of contract is to provide a fair framework within which the parties are free to contract. Lord Steyn has, extra-judicially, raised this point: “A thread runs through our contract law that effect must be given to the reasonable expectations of honest men… Although the hypothetical reasonable man pursues his own commercial self-interest he is by definition not dishonest. The proposition can therefore be re-defined simply to say that the law must respect the reasonable expectations of the contracting parties”. As contracts are characterised by having legal consequences, the law of contract seeks to find a way of interpreting the actions and utterances of the parties in such circumstances. In establishing the legal position in a given contractual dispute, it is a general rule that the courts do not ask what it is that the parties had actually intended. The parties are depersonalised and the courts take an objective approach based on what the parties have perceivably done. The question is often asked of what a person of ordinary sensibilities, ‘the reasonable person’, in the position of the parties would have understood from their dealings and not what they subjectively reckoned. As Lord Hoffmann reasoned in Investors Compensation Scheme Ltd v West Bromwich
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