How would a court treat a breach of the coalition agreement were it a binding contract?

Some Liberal Democrat spokespeople have over recent days come to favour the analogy of the coalition agreement as a contract between the Conservatives and Liberal Democrats, deeming the Conservative failure to support Lords reform as the first breach of the contract.

Which got me thinking: how would a court treat such a breach (if indeed it is a breach) if the agreement actually were a binding contract?

First off, the coalition agreement is not a binding contract (because the formalities needed to make a contract are not present) so a court would throw out the case on this basis. But let’s assume for now that it is.

The claim that the Lib Dems would bring against the Conservatives would be for breach of contract, so as you might expect the court would usually, after deciding that there is indeed a contract, go onto consider whether a party has breached it.

In many cases this is a fairly straightforward process: if you agree to buy 10 tomatoes but are only given 5 then the supplier has breached the contract and you are entitled to be compensated for that breach.

But in other cases things are not so straightforward, primarily because there is a disagreement between the parties about what exactly each of them was promising to do. It looks likely that this would be the case here.

In their defence to the claim, the Conservatives would be likely to say that in the clause on Lords reform they did not promise to ensure the legislation was passed. They only agreed to “bring forward proposals”.

The court has now got a different question to consider: what obligations does the clause that has alleged to have been breached actually impose on the parties.

In deciding what a clause in a contract means, the court will take an objective view. That is, they will consider what a reasonable person, having all the background knowledge of the parties, would take the clause to mean.

But there is another complication. The courts have long taken the stance that “background knowledge” does not include the pre-contractual negotiations of the parties. This is a decision taken by the courts for reasons of pragmatism: it provides a level of certainty to contracting parties that the agreement they have entered into actually does constitute the whole agreement, so the other party can’t, in the event of any minor breach, run off to court clutching a load of evidence that a different interpretation was intended before the contract was signed.

Unfortunately, then, we couldn’t have David Laws, Andrew Stunnell, Chris Huhne, Danny Alexander, George Osborne, William Hague, Oliver Letwin and Ed Llewellyn on the stand giving evidence of what was intended by this clause when they negotiated it.

However, there’s plenty of evidence to be considered. There’s the parties’ manifestos, the last three of which for the Conservatives at the very least spoke positively of democratic Lords reform and arguably committed them to it. There’s public statements: by the prime minister in the TV debates, by the Conservative’s former shadow home secretary chastising Labour for their woeful progress.

The “background knowledge”, then, is arguably this: unwavering Liberal Democrat support for Lords reform and a series of pretty unambiguous statements from Conservative documents and individuals expressing support for a democratic Lords over a long period of time.

Given this, would a court really be convinced that the clause on Lords reform in the coalition agreement wasn’t an intention to legislate? I’m not so sure.

And if the court decided that it was intended that legislation would be passed, the Tories would almost certainly have breached the contract.

But now the equally important question: what remedy would the Lib Dems seek?

The usual remedy for breach of contract is damages. The court would order a sum of money to be paid by the party in breach to, so far as possible, place the innocent party in the position they would have been had the contract not been breached but had been properly performed.

A fundamental breach of a contract – one that essentially renders it worthless – allows the innocent party to ‘repudiate’ the contract – ie treat themselves as discharged from any further obligations. This would clearly not be such a breach.

Money damages would clearly be a pretty inadequate remedy in this case, so the remedy I would be pushing for on behalf of the Lib Dems would be what is termed ‘specific performance’ of the contractual term. In other words the court would order that the Conservatives do what they promised to do in the contract and vote through Lords reform.

A failure to comply with such an order for specific performance would be held to be contempt of court and might see the Conservative rebels end up with a jail sentence.

And however attractive that solution might seem at times, I think we can all agree that it’s probably best that politics and contract law stay well and truly separate.

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6 responses to “How would a court treat a breach of the coalition agreement were it a binding contract?

  1. Never mind that the Tories did this and Liberal Democrats expected that, but it isn’t legally binding. Both parties have broken their non-legally binding contract with the people.

    Which set me to thinking; it’s about time we made election manifesto’s legally binding as a contract with the British people

  2. Man on the Bus

    One problem is that neither the Lib Dems nor the Tories accepted the recommendations of the committee on Lords Reform – in particular the recommendation that there should be a referendum.

    If there was deemed to be any implication in the Coalition Agreement that the recommendations would actually be enacted, a court would have to conclude that there was common consent not to do what the Coalition Agreement implied, but to come up with a modified set of proposals and enact those instead. That being the case, the failure to enact the modified proposals couldn’t be viewed as a breach of the Coalition Agreement.

  3. @Smiling Carcass: How would your proposal work? The formalities needed to make a legally binding contract are not present in an election, any more than they are in a coalition agreement. Who would represent the “British people” in the contract? How is this contract signed? If the election result is inconclusive (as in 2010) how can any of the parties be said to be in a contract to fulfill *their* manifesto? And would it really be desirable for the legislative process to be held up by multiple legal challenges of newly passed laws based on various interpretations of the ruling party’s manifesto?
    Making manifestos legally binding is one of those ideas that looks nice at first glance, but on further investigation can be shown to be simply unworkable. I agree with Nick (this one): “it’s probably best that politics and contract law stay well and truly separate”.

  4. “And however attractive that solution might seem at times, I think we can all agree that it’s probably best that politics and contract law stay well and truly separate.” what do you mean by that? Why are the LibDems afraid of showing some mettle? They are meant to represent the people who voted for them, it’s not that hard to grasp.

    The irony of the LibDem ship being dashed on the rocks of failures in democratic reform (Lords , AV) , when that is the most identifiable/symbolic policy of the party since its inception and before, is both a farce and an unhappy one for the whole country.

    I also think politically as a facet of attraction & values you are underestimating why voters voted LibDems so many seats in the first place – so doesn’t make sense in purely cold, pragmatic terms either.

    I reckon if the LibDems cannot put up a serious protest to this double-cross then one wonders what would ever get some resistance going? This failure will be like a red rag to the tory backbenchers on future policy directions. It’s David Cameron’s problem, not the Lib Dems, if he cannot control his backbenchers. ( I actually think it is a lot more sinister than that but that’s moot). It’s not even a policy that many tories couldnt live with (as your excellent article points out ) .

    I do not understand why the ambitions are so low for the Lib Dem party? You probably will not be wiped out entirely at the next election but just avoiding the worst scenario is a bit of a low, weak strategy and I am surprised more confidence is not drawn from the several low-scoring polls of certain Tory aspects – they can and should be challenged.

  5. It may be true that all the major parties promised Lords reform; but where did that leave the voter who did not want it. Unable to vote for a major party? Make that legally binding and you would deny people a democratic right, not enhance it. Why do I not want to vote in peers? Because I want MPs to be fully accountable to me the voter at the general election, not able to say “not me guv, the Lords did it”.

  6. L: The blog article is NOT saying that the Lib Dems should not retaliate against the Tories over Lords reform (or anything else): it just analyzes what might happen if the Coalition Agreement could be enforced in a court of law, and concludes that such a situation would be undesirable. So the rest of your comment is irrelevant. The Lib Dems do have tools to protest against the Tories’ double-crossing over Lords reform, and indeed Clegg has already indicated that the Lib Dems will now vote down the proposed boundary changes. As a Lib Dem I think the party has been too weak in facing down the Tories in the past, but that has nothing to do with the subject of the original article.

    The principle reaosn that making manifestos or programmes for government legally binding would be undesirable is that it would undermine the principle of representative democracy, in which we elect representatives who then have a mandate to vote as they see fit. How can any MPs perform their duty as representatives if they could face jail-time for *voting according to their consciences*? It would officially reduce MPs to the status of party delegates, and give legal backing to the demands of party machines and whips’ offices. In this country we elect MPs as individuals, and it would be wrong to formalise the idea that they are merely party or government representatives, however much they may seem to be in practice.

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