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The Politics Of Contracts

General McClellan had talent. He was good at organization; his record as a railway executive had shown that. Events brought him back into the US army and made him commander of the Union armies, particularly in the east, at the beginning of the US civil war.

When President Lincoln visited him in the field, McClellan kept him waiting outside his tent. In discussion later about this slight, Lincoln said he would gladly hold McClellan’s horse [its reins] if it would assist him [McClellan] in the military effort.

McClellan was the weaker of these men and subsequent events showed this; but so too did that slight.

The US civil war was a political struggle first. The Dred Scott case showed this. With that case, in effect, the US Supreme court opened the way for the extension of slavery into the new western territories. The decision undermined what was a political settlement between the slave-owning states and the non-slave-owning states.

It was an aggressive move by the secessionists.

Judges of superior courts need to understand things like this. Consequently they need to be able to decline to adjudicate on a political question and/or underpin a political arrangement, depending on the circumstances.

Ireland subscribes to a major political arrangement, as nominally expressed in the law of contract; people should be and will be held to their agreements.

With exceptions.

We now know that ideas cast in this form and applied to Dred Scott were deficient. Nobody working for Dred Scott asserted his right as a person to be free; they pleaded the law of the Northern States and Territories and the US Constitution to establish his right to be free.

The mode of thought in the law of contract analogous to an appeal to a human right to be free is to distinguish between the form and the substance of an agreement. This is what we do when we speak of “predatory lending”.

It is not a good thing, always, to borrow money. The form of the borrowing arrangement may be, in substance, a plan to take what property the borrower already has, from him/her.

Businesses in the financial industry are obliged to expressly aver that the “product” is suitable for the “customer”. This is an old idea and is part of the law on the sale of goods.

What if a loan is spectacularly unsuitable to the customer? Who, but the lender, in that transaction is best able to know this?

Consequently, financial claims arising in contract do not all deserve to be heard in summary manner in the High court; some should go to plenary hearing with a full examination of the context in which the agreement was concluded.

One Comment

  1. You say:

    “Businesses in the financial industry are obliged to expressly aver that the “product” is suitable for the “customer”.”

    I agree with the overall burden of your post – very much, in fact – but I am struggling to think of where I might find the law on that obligation to expressly aver suitability in the case of loan products. The Consumer Credit legislation, maybe ? But does that extend to mortgages ?

    If it does, that’s an excellent point to ponder.