Three Issues in the Law of Contractual Discretion

Abstract

The new law of contractual discretion is developing apace. This article addresses three major issues in this dynamic field. First, the article propounds an analytical framework for understanding the nature and practice of reasonableness review in the contractual setting, based on doctrinal exegesis of the full run of cases on contractual discretion. Significantly, the analysis demonstrates that review of contractual discretion is characterised by a 'variable intensity' approach: the intensity with which courts scrutinise exercises of discretion is dependent on a series of contextual factors. Second, the article analyses the genus of the implied term, which imposes legal constraints on contractual decision-makers, arguing that the term is properly conceptualised as a term implied in law. Third, the article addresses the remedial consequences of non-compliance with implied fetters, identifying three different remedial models in the case law. The article challenges the common assertion that damages are the invariable remedy, arguing that an impugned exercise of discretion may be void or voidable.