This blog post was published under the same name in the latest edition of the Newsletter of the Trinity Law Association. The subject of this post is dealt with in much greater detail in a manuscript on rights and powers in commercial law that I’ve been working on over the past year at Trinity under the supervision of Trinity Fellow, Professor Sarah Worthington QC, and I do that larger a work an injustice by, in a few hundred words, speaking of one of the central issues in it.
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The meaning of terms, principles, and concepts is assumed when we speak to one another. But, the meaning of fundamental legal relations – of rights, powers, privileges, immunities, and their respective jural correlatives – is surprisingly poorly understood and the importance of the differences between these legal relations is commonly overlooked. So, for example, we speak of “termination rights” in contracts rather than “termination powers” and “rights” of free speech, even though there is no correlative duty to that right, rather than “privileges” of free speech.
Wesley Newcomb Hohfeld propounded an influential taxonomy of legal relations more than a century ago in his ‘Some Fundamental Legal Conceptions as Applied in Judicial Reasoning’. This taxonomy has been critiqued, challenged, and partly amended, but has held firm in the common law world. Indeed, it occasionally crops up expressly in judicial reasoning (see, e.g., [2009] EWHC 503 (QB) at [1] per Plender J). Yet, depending on which electives are taken on the Tripos, students may pass on from Cambridge without encountering Hohfeld or understanding the fundamental legal relations that are assumed, but not interrogated, during their degrees. Indeed, in the discussion that follows, it is clear that courts have forgotten Hohfeld and stripped terms such as “rights” of much of their meaning.
Your first thought may be that this short article will be somewhat niche; more interesting for the legal theorist or the linguist than the practitioner or academic. But an appreciation of fundamental legal concepts has a practical relevance in all areas of the law. Without a shared understanding of legal relations, conceptual and legal uncertainty is allowed to permeate into legal reasoning. If you bear with me, I’ll (succinctly) explain why using contractual powers as an example (although there are quite a number that could be drawn on).
In recent years, courts have frequently been concerned with the limitations that are implied to legal powers in contracts. The limitations that are implied to powers must be fashioned in the context of the particular contract, but general conclusion may be drawn that extend across common forms of legal powers in different contracts. The jurisprudence in this area draws a distinction between two types of powers. On one hand are discretionary powers such as a power to amend the terms of the contract or to determine how a duty is discharged. These powers are required, by an implied term, to be exercised in good faith, for a proper purpose and rationally (taking in either the second limb of rationality or, in some circumstances, both limbs). On the other hand are non-discretionary powers such as a power to terminate a contract and a power to give or withhold consent. These powers may be limited, but the scope of the limitation on these powers has not been settled.
Since the judgment of the Court of Appeal in Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd [2013] EWCA Civ 200, courts have described non-discretionary powers as “absolute contractual right[s]” and, on a number of occasions, opined that such “absolute contractual rights” are not limited (at least, not limited by the terms sought by counsel): see, e.g., [2014] 2 BCLC 486, [2016] 1 BCLC 719 and [2016] EWHC 3342 (Ch). However, by mischaracterising non-discretionary powers as rights, the court is able to too-easily reject the implication of a limitation on such powers and to avoid identifying a principled reason why non-discretionary powers may not be limited.
The importance of properly characterising rights and powers is a consequence of the fundamental difference between the two legal relations and the legal consequences that follow from that difference. The difference is clear to anyone well-versed in Hohfeld’s taxonomy. If A has a right and B has a present duty correlative to the right, there is no need for, or reason why, that right should be limited. If A has a power and B therefore has a liability to have a duty created, the risk of abuse of that power justifies the implication of a limitation on the power because the power is, by definition, duty- or right-creating. The content of the limitation on the power differs, however, depending on whether the power is non-discretionary or discretionary (a matter that I don’t intend to go into here). In neither case, however, is that power an “absolute contractual right” (as the Court of Appeal has suggested).
The point of this short article has been to encourage recourse to Hohfeld. This is an uphill battle in the face of a broader usage of the term “rights” that has no discernible content, but it is an important one. As Oliver Wendell Holmes, Jnr. remarked in ‘The Path of the Law’:
“If a man goes into law it pays to be a master of it, and to be a master of it means to look straight through all the dramatic incidents and to discern the true basis for prophecy. Therefore, it is well to have an accurate notion of what you mean by law, by a right, by a duty, by malice, intent, and negligence, by ownership, by possession, and so forth. I have in my mind cases in which the highest courts seem to me to have floundered because they had no clear ideas on some of these themes.”[1]
[1] Oliver Wendell Holmes, Jnr., ‘The Path of the Law’ (1897) 10 Harvard Law Review 457, 475.
Ryan J. Turner 