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.