Equity also plays a role mainly in the area of remedies for breaches of

Equity also plays a role mainly in the area of

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decisions and the law develops over time. Equity also plays a role, mainly in the area of remedies for breaches of contract, to ensure that justice can be done when a simple award of damages (a sum of money paid to compensate the innocent party) would not be enough. Statute also has an increasingly important role — especially in consumer contracts where it provides some protection for consumers where the common law would not do so. In other countries, such as in the civil law countries and in other countries such as China, contract law is very codified and the role of the court is much more limited. Courts tend to interpret the code and then enforce it. 3.1.2 Philosophy of contract law The philosophy underlying the law of contract in different countries, while similar, will always be influenced by a range of factors — including local political, social, economic and other considerations. The specific laws will therefore differ but there will always be some underlying philosophy on which the individual rules are based and on which the idea of enforceable obligation can be justified. In the common law world the dominant theory on which the law of contract is built is called “classical contract theory”. It is based on the “will theory” of contract which starts from the Christian idea that, because God created men with a free will, if individuals contract on particular terms, they must have done so deliberately — knowing and accepting what they were doing. In other words, liability in contract is self-imposed — if you agreed you must have intended to be legally bound to do what you promised to do (because, otherwise, why would you have agreed to do it). Therefore the courts and governments should not interfere except with very good cause. Their role is limited to providing a framework within which the parties’ agreement will be legally enforced and the courts really only interpret and enforce what the parties have agreed. The classical theory was heavily influenced by the laissez faire economic philosophy that was dominant during the 19 th century. It assumed that agreements would always be entered into by self-interested individuals who would always try to maximise their own personal benefit. In this way agreements would only occur if both parties were satisfied that they would gain — so all agreements would be “win-win”. However, this thinking did not take into account the fact that the parties were not always in equal bargaining positions. In fact, the parties were often in very different bargaining positions with one party able to demand terms that the other party simply had to agree to. So, for example, in employment contracts the employer (who often had a choice of a large number of potential employees) could dictate how much he was prepared to pay, what the
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© Stephen Graw 2012 4 employees’ hours of work would be and all other conditions and the potential employee had no choice but to accept those conditions or remain unemployed.
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