Schroeder v Macaulay, [1974] 1 WLR 1298, HOL
Citation:Schroeder v Macaulay, [1974] 1 WLR 1298, HOL
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Rule of thumb:What happens if a contract with a person is too strict and stops a person from being able to be self-employed & trade? Any contract terms that overly restricts people’s right to work as a self-employed person and make money are unenforceable due to violating their right to trade which is contra bonos mores.
Background facts:
The facts of this case were that Macaulay was a largely unknown singer songwriter signed with Schroeder who were a music management company. The terms read that if more than £5,000 in royalties were recovered by Schroeder for the artist the agreement extended for 5 years for exclusive use of all of the artist's copyright. Schroeder on the other hand could terminate the agreement with one month’s notice.
Arguments:
Macaulay argued that this contract was invalid. He argued that it was a violation of his right to trade and the agreement was not fairly made as a result of inequality of bargaining power violating the human right to contract. Schroeder argued that this was indeed a fair agreement (£5,000 was worth more back then) that allowed Macaulay a decent living.
Judgment:
The Court upheld the arguments of Macaulay. They held that this contract was made under unfair bargaining positions and violated Macaulay's fundamental right to trade, with the inequality of bargaining power not sufficient to violate the right to freedom of contract but a factor that was considered in them making their decision.
Ratio-decidendi:
‘The same presumption, however, does not apply to the other kind of standard form of contract. This is of comparatively modern origin. It is the result of the concentration of particular kinds of business in relatively few hands. The ticket cases in the 19th century provide what are probably the first examples. The terms of this kind of standard form of contract have not been the subject of negotiation between the parties to it, or approved by any organisation representing the interests of the weaker party. They have been dictated by that party whose bargaining power, either exercised alone or in conjunction with others providing similar goods or services, enables him to say: “If you want these goods or services at all, these are the only terms on which they are obtainable. Take it or leave it.” To be in a position to adopt this attitude towards a party desirous of entering into a contract to obtain goods or services provides a classic instance of superior bargaining power. It is not without significance that on the evidence in the present case music publishers in negotiating with song writers whose success has been already established do not insist upon adhering to a contract in the standard form they offered to the respondent. The fact that the appellants' bargaining power vis-a-vis the respondent was strong enough to enable them to adopt this take-it-or-leave-it attitude raises no presumption that they used it to drive an unconscionable bargain with him, but in the field of restraint of trade it calls for vigilance on the part of the court to see that they did not’, Lord Diplock at 1316
'The terms of this kind of standard form of contract ... have been dictated by that party whose bargaining power ... enables him to say: '... these are the only terms... take it or leave it" ... they used it to drive an unconscionable bargain, but in the field of restraint of trade it calls for vigilance on the part of the Court', Lord Diplock
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