Applicability of 'Doctrine of legitimate expectation' in Law of Contracts

The 'Doctrine of legitimate expectation' means an expectation of a benefit, relief or remedy, that may ordinarily flow from a promise or established practice. This Doctrine has its origin in Administrative Law and continues to apply in field of administrative law. Even in India, this Doctrine has its application in the field of administrative Law (subject to correction). This doctrine is a stranger to Law of Contracts. Reference can be made the Judgement of the Hon'ble Calcutta High Court in D. Wren International Ltd. Vs Engineers India Ltd. Per Contra, the Hon'ble Supreme Court of Seychelles in Allen Jean & another Vs Wellington Felix & another extended this Doctrine to even Private Law of Contracts and held as follows;

  "[19] At the outset, I note that the instant case breaks a new ground in our contract law. The Court is called upon to determine in this matter, whether a “legitimate expectation” of a party based on fairness/reasonableness and to an extent, based on an implied consensus ad idem would give rise to an implied term in a private contract and vice versa. This new question is an inevitable development in the evolution of contract law. This development though seemingly a new vista in contract law, is necessary for the advancement of justice in this time and age, especially when we are embarking on the voyage of revising our Civil Code and to meet the changing and challenging needs of time and society. Indeed, all social contracts governing the individual interactions in society eventually metamorphose into legal contracts or relationships such as marriage, family, trade unions, associations, government (vide Rousseau's - 1712-1778 - social contract theory), etc. Hence, Contract Law has to evolve as society progressively evolves more and more from Status to Contract as Henry Sumner Maine observed in his book Ancient Law (1861) thus “we may say that the movement of the progressive societies has hitherto been a movement from Status to Contract.

[20] The concept of legitimate expectations originally developed in English law. It is generally applied only in matters of Judicial Review and falls within the domain of public law. It is truism that this concept is not traditionally applied in matters of contracts, which entirely falls within the domain of private contract law. This concept cannot on its own constitute a valid cause of action in contract; and the courts cannot directly apply this concept to do justice in contracts invoking the principle of fairness or reasonableness. 

[21] However, now time has come to rethink, remold and extend its application to other branches of law such as Contract, as it constantly evolves. In my considered view, a legitimate expectation of a party to a contract and a breach thereof shall constitute a valid cause of action in law provided that

(i) the said expectation is based on an implied term of the contract;

(ii) such terms are implied on the ground of fairness or reasonableness; or an implied consensus ad idem;

(iii)the aggrieved party to that contract had relied and acted upon that implied term (as has allegedly happened in this matter); and

(iv) There had been a breach thereof, by the other party to the contract

The Courts of the 21st Century cannot deny justice to anyone for lack of precedents or case law in a particular branch of jurisprudence due to stagnancy in adaptation and advancement. We cannot afford our civil law to remain stagnant in the statute-books; simply because our jurisprudence is not advancing with the rest of the legal world. As judges, we cannot simply fold our hands on the bench to say that no case has been found in which it has been done before on the ground of legitimate expectations in contract law.

[22] This reminds me of the great remark once Lord Denning LJ made in Packer v Packer [1954] P 15 at 22, which runs thus:

“What is the argument on the other side? Only this: that no case has been found in which it has been done before. That argument does not appeal to me in the least. If we never do anything which has not been done before, we shall never get anywhere. The law will stand still whilst the rest of the world goes on: and that will be bad for both”

[23] In English law, the concept of legitimate expectation undoubtedly arises from administrative law, a branch of public law. The phrase “legitimate expectation” first emerged in its modern public law context in the judgment of Lord Denning in Schmidt v Secretary of State for Home Affairs [1969] 2 Ch 149. The fundamental idea behind this concept - especially in matters of Judicial Review - is the application of the principles of fairness and reasonableness to the situation (vide Wednesbury Principles of Reasonableness) where a person has an expectation or interest in a public body retaining a long-standing practice or keeping a promise.

[24] It is well established that if a public body has led an individual to believe that he will have a particular procedural right, over and above that generally required by the principles of fairness and natural justice, then he is said to have procedural legitimate expectations that can be protected; in modern times, it appears that the Courts in the UK do not hesitate to extend this concept further to protect the substantive legitimate expectations of the individuals vide Coughlan Case [2001] QB 213.

[25] However, the concept of legitimate expectations in the private law of contract as claimed by the plaintiffs in the instant case, presents some difficulty in tailoring it to suit our needs, jurisprudence and to accord with our civil code. This concept as such is unknown to our jurisprudence. It is nowhere to be seen in the Civil Code of Seychelles. Our judges by and large  do not apply or use the language of „legitimate expectations‟ in the context of  any private law of contract particularly, in breach of contracts.

[26] This is not, however, the end of the story. Once we have understood the purpose and the role played by the concept of legitimate expectations in other jurisdictions, where it was conceived and developed, we will be able to circumvent the difficulty in our jurisdiction and deliver justice by applying the underlying principles of fairness and reasonableness to the situation where a person had an expectation or interest in his or her dealings or interactions with others in pursuance of any contractual or other legal relationships. The underlying principles or ideas behind this concept can indeed be found as a hidden-treasure in our law of contract, particularly, in our Civil Code though it appears in different names and forms and using a different language of description.

[27] In fact, Article 1135 of the Civil Code articulates this principle that “terms in a contract may be implied inter alia, for fairness/reasonableness” and a party to that contract may legitimately expect, rely and act upon that implied term, in respect of all consequences and in accordance with its  nature. The Courts have unfettered jurisdiction to impute or imply a term which is reasonable and necessary - as suggested by Scrutton LJ in Reigate v Union Manufacturing [1918] 2 KB 592 at 605 - in the interest of justice and fairness and grant remedies accordingly. This Article reads in clear terms thus:

“Agreements shall be binding not only in respect of what is expressed therein but also in respect of all the consequences which fairness, practice or the law imply into the obligation in accordance with its nature” 

It is also pertinent to note that Article 1160 of the Civil Code reads thus:

“Usual clauses shall be implied in the contract even if they are not expressly stated”

[28] Therefore, it goes without saying that in our jurisdiction it is lawful for a party to have legitimate expectation that in the absence of expressed terms in a contract, fairness would come in rescue, in respect of all the consequences and give rise to the necessary implied terms in the contract in accordance with its nature, and so I hold.”