Talk:Pillans v Van Mierop

Latest comment: 15 years ago by Alandavidson in topic Not a contract

Not a contract

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This is not a contract case. It has been mistakenly regarded as such. It is a letter of credit case (independent guarantee). In letters of credit and demand guarantees the central obligation of the "issuer" (guarantor) is not supported by consideration - but it is not a contract in any event. This case is a letter of credit case and any reference to consideration in contract is spurious. Per Lord Mansfield "All letters of credit relate to future credit; not to debts incurred before". Their Honours made the first statements regarding fraud as an exception to the letters of credit, albeit obiter. Lord Mansfield stated: "I was then of the opinion, that Van Mierop and Hopkins were bound by their letter; unless there was some fraud upon them. ... nor did I see any fraud" "Here, Pillans and Rose trusted to this undertaking: and there is no fraud." "(Counsel for the defendants) said, there was a fraudulent concealment of facts... this concealment of circumstances is sufficient to vitiate the contract." "If there be no fraud, it is a mere question of law.

Wilmont and Aston JJ made similar acknowledgements on the role of fraud in the transaction where the former observed, "I see no sort of fraud." Aston J stated, "if there be a turpitude or illegality in the consideration of a note, it will make it void, and may be given in evidence: but here nothing of that kind appears, nor any thing like fraud in the plaintiffs." Alan Davidson (talk) 03:03, 19 April 2009 (UTC)Reply

I suppose you could argue this, but it was included (and the reason why I put it up) in G McMeel, ch 2 in C Mitchell and P Mitchell, Landmark Cases in the Law of Contract (2008). Isn't any enforceable agreement a contract? Wikidea 15:27, 19 April 2009 (UTC)Reply
Mitchell is wrong. It is a mistake repeated in a number of Contract texts. But there are several works which point out the correct position. The view that the case was about a contract and consideration probably stems from two origins. First, it is a common law bias (and an absence of knowledge of the working of lex mercantoria - which the case discussed). Second, Mansfield did have a number of other cases about consideration, so this case was lumped in with them). To your question "Isn't any enforceable agreement a contract?" - first, no. Second, the case is about a letter of credit not contract.
I must be careful about what I say, because I see on your userpage you wrote a thesis in this! But I'm interested to know why you think that enforceable agreements aren't always contracts, because I'm not sure what a contract is, if not that! And surely a letter of credit can be separate from the main contract at hand in a contract, but isn't it a form of contract itself? If I promise that you are creditworthy to Jimbo, and Jimbo accepts my assurance, then that would seem to me to be an enforceable obligation - or agreement (minus consideration). Jimbo can sue me for a failure in his expectations when you turn out broke. Isn't the whole point of this case, and why Prof McMeel wanted to include it in the landmark contract case book, that consideration is unnecessary in the bag of enforceability badges? Looking forward to your reply - but I doubt anyone here is "wrong"! Wikidea 08:50, 20 April 2009 (UTC)Reply
I am tempted to provide the pages of research that I did on this case. But the main thing is to not trust others but to read the actual case. When I read it I was most surprised to see that it was not about contract. The judges kept saying that it is a mercantile instrument and that consideration is not required. Well, the mercantile instrument was a letter of credit and consideration is not required. When read in that light the case makes complete sense. When read as a contract case it appears to be saying something else. Someone unfamiliar with the letters of credit would easily make the mistake (which many have). The central obligation of an Issuing Bank in a letter of contract is enforceable by the Beneficiary, but not by contract law or consideration. All bankers would agree that once they inform the Beneficiary that they have issued a letter of credit in their favour, the bank is bound – notwithstanding that the Beneficiary makes no “acceptance” (unnecessary) or even acknowledges receipt. Alan Davidson (talk) 04:57, 21 April 2009 (UTC) Alan Davidson (talk) 06:21, 20 April 2009 (UTC)Reply
I suppose I am guilty at coming to this case from a contractual angle: if you think (like I do) that consideration is an arcane basis for contract, and should probably have been blown away by a side wind long ago, because all civil law countries do fine without it, then Pillans is very interesting. When I read the case, that's what I was thinking. That's a very good point about acceptance; let me ask you then, have you ever wondered why consideration is necessary for a contract, but not for a trust? :) Wikidea 09:16, 21 April 2009 (UTC)Reply
And surely you should provide all those pages of research!! Not because I want to see them to prove any points, but perhaps you have a lot that we could arrange in some analysis section, or a post-pillans history? McMeel's chapter is very good and has lots of this, but of course it's laborious to type up. If you've got something already in a word document, etc, could be interesting. Wikidea 09:19, 21 April 2009 (UTC)Reply
I have reread the case. And whilst points are made about consideration, they are made by way of example or in obiter; the case is a great mix of a bill of exchange and letter of credit. But less familiar terms are used like "confirmed credit" and "draught". This brings into play issues such as the virtual acceptance concept - something I like to call the virtual acceptance paradox. But, the case jumps about in a bit of an undisciplined way. First, several comments are made in the introduction, before the judges are quoted. The writer of this makes comments about past consideration. But again it is not about past consideration, but really the central obligation under a letter of credit which is enforceable independent of contract. The judges refer to the "law of merchants" stating "in commercial cases amongst merchants, the want of consideration is not an objection". But on the facts of the case, it is referring to the letter of credit. "It is a mercantile transaction". The bottom line is that one person before agreeing to becomes the "acceptor" on a bill of exchange required a confirmed credit with a "house of rank". Today, acceptance of a bill of exchange cannot be undone by want of consideration - and the central obligation to a letter of credit does noit require consideration. Other comments are obiter. Alan Davidson (talk) 05:21, 22 April 2009 (UTC)Reply
Well, you can argue anything is obiter if you try. The question is, is it right? Do alter the text to make it more accurate if you want. I've written it from my own understanding, and, as I say, from reading McMeel's article. I'd just be interested to know what you think about consideration though. Europe is fine without it. Why aren't we? The "virtual acceptance paradox" sounds interesting. But can't you accept things by conduct? Wikidea 15:27, 22 April 2009 (UTC)Reply
In answer to your question - yes - but acceptance on a Bill of Exchange should not be confused with acceptance of an offer under contract. it is not. The obligation to pay under a letter of contract arises by force of law, independent of contract. You cannot argue "anything is obiter if you try". Either it is or it is not. The judges were making comparative statements; but not statements which could be considered binding. Alan Davidson (talk) 23:18, 22 April 2009 (UTC)Reply