Objectively speaking – Jersey confirms its stance on contractual formation

This question has significantly troubled the Jersey Courts since at least 2008, when the Jersey Court of Appeal in Marett v O’Brien [2008] JLR 384 departed from previous Jersey authorities in deciding not to apply an objective test to the analysis of contractual intent.  Marett contained an unambiguous statement that the “Jersey law of contract determines consent by use of the subjective theory of contract”.

Despite this apparently clear and unambiguous statement (which many regarded as being consistent with Jersey customary law) there has followed over the last decade or so extensive judicial debate with a number of conflicting authorities propounding either the subjective or objective test.  This has led to an uncertain and unsatisfactory state of affairs.

The debate had culminated in the recent Court of Appeal decision in Booth v Viscount [2019] JCA 122 with the unusual addition of a lengthy Excursus by one of the Judges, Martin JA.  The Excursus indicated that the Court in Marett had proceeded on the basis of uncontested argument as to the applicable principles and stated that;

“The case cannot be regarded as definitive authority that the subjective approach is to be taken to contractual issues in Jersey law” (thus taking a similar view as to Marett as expressed in Home Farm Developments v Le Sueur [2015] JCA 242 and Calligo Limited v Professional Business Systems CI Ltd [2017] (2) JLR 277).

The Excursus continued;

“The current state of the authorities in Jersey is, in my view, wholly unsatisfactory.  It should not be the case in a modern, developed jurisdiction such as Jersey that something as fundamental to its commercial law as the correct approach to the determination of contractual consent should be uncertain.  The uncertainty is made worse by the fact that the matter is controversial at the highest level of the local judiciary.”

It then concluded;

“There can be no doubt that the subjective approach to consent in the law of contract produces uncertainty.  The idea that contracts may fail because of a defect in consent of one party that is unknown to the other is on the face of it incompatible with a modern commercial jurisdiction.”

It is to be noted that Commissioner Bailhache (who sat on the Court of Appeal in Booth) did not consider that the court was in a position to reach a concluded view on the issue as it had not heard full argument.  He was also concerned that to depart from the subjective approach would be inconsistent with other fundamental principles of Jersey customary contact law, stating;

“The court in future will also in my view need to be satisfied that in declaring the law it maintains a coherent structure which does not destroy an essential building block of other parts of the structure”.

The Court in Booth agreed that it would be desirable for the uncertainty to be resolved by way of a suitable future court of Appeal case or a Restatement of the law.

The Court in Murray set out its position with some certainty in holding that;

“In our judgment there are a number of reasons that cause us to hold that the objective test is the test that applies in Jersey”.

The Court noted that the subjective approach had its roots in Roman or Civil Law and was consistent with the writings of Pothier (an 18^th Century French jurist and writer on both customary and civil law) who was very influential in Jersey contract law.  It, however, further noted that the law of Jersey had frequently adopted principles from other systems of law;

“Jersey law has chosen to follow principles of Pothier or modern French law in some areas (eg cause, penalties) and principles of English law in other areas” (eg remoteness and measure of damages).                                                                                               (Re Amy [2000] JLR 80.)

It then held that;

“The identification of French principles in determining the constituent parts of the Jersey law of contract does not mean that it is necessary to look to the same source for determining the methods by which these principles or constituent parts are established”.

It added that it was not essential that all of the Jersey law of contract be derived from the source of civil law, and noted that in many aspects of contract law (e.g. remoteness of damage, mitigation of loss and termination) the Jersey courts had regard not to civil law but to English law.

It concluded that the objective test produces certainty by way of an objective assessment of the factual matrix to determine what had been agreed between the parties, and avoided the risk (inherent in the subjective test) of a contract being subsequently held to be invalid because of some unknown subjective defect in the consent of the other party.

Conclusion

Murray is an important decision and has provided a degree of clarity and certainty as to the court’s approach to the difficult issue of consent, and will be welcomed by many practitioners for these reasons.

It will, however, be interesting to see whether its decision and reasoning will be accepted by a higher court in the near future or whether it may indeed prove necessary or desirable for there to be a Restatement of the Law of Contract, as suggested in Booth.