Tailby v The Official Receiver, HOL (1888) 13 App Cas 523
Citation:Tailby v The Official Receiver, HOL (1888) 13 App Cas 523
Rule of thumb:Can you negotiate absolutely any term you want in a contract? People are allowed to negotiate any rights under contract they so desire, as long as these do not breach any statutes or regulations, or require anything grossly immoral to be done.
Background facts:
The bare facts were that Tailby had purchased from a company an option to purchase mortgage security contracts this company had set up. This company got into financial difficulty and an official receiver, different from an administrator/liquidator who are formally appointed by the Court, with a receiver having similar rights to them but having these under contract triggered by default on a payment. There was a debate between Tailby and the receiver over whether these future options to purchase securities were valid contracts or not.
Parties argued:
The Receiver argued that these were not standard contracts and had no legal grounding meaning that these were in breach of public policy and invalid. Tailby made the more fundamental argument that people in the UK are allowed to do anything that is not forbidden by the common law or statute, and this options contract was not, thereby making it valid.
Judgment:
The Court upheld the arguments of Tailby. The Court affirmed that people in the UK are allowed to anything the law does not forbid them from doing. The Court stated that there were no common law rights or statutory provisions were in breach of, therefore they were valid contracts that did not invoke the public policy or illegality principles. People in the UK also have freedom to negotiate any term in a contract that is not forbidden under statute and is not contra bonos moros. Options contracts are widely used in today's sport - most people commonly know of them in sport when clubs agree a term to be able to buy a certain player for a certain amount of money before a certain date in the future.
Ratio-decidendi:
‘It was admitted by the learned counsel for the respondent, that a trader may assign his future book debts in a specified business. Why should the line be drawn there? Between men of full age and competent understanding ought there to be any limit to the freedom of contract but that imposed by positive law or dictated by considerations of morality or public policy? The limit proposed is purely arbitrary, and I think meaningless and unreasonable’, Lord McNaghten
'Between men of full age and competent understanding ought there to be any limit to the freedom of contract but that imposed by positive law or dictated by considerations of morality or public policy?', Lord McNaghten
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.