An obligation can be defined as a legal bond which binds us to the necessity of performing an act according to the rules and laws that have been laid down. The law of obligation is applied in several areas. For the purposes of this essay, the law of obligation will be examined under a contract. A contract can be defined as an agreement that legally binds two or more people or parties. In the agreement, there are rights and obligations which are created. These rights and obligations have the capability of being enforced in a court of law. The most common method in which the terms in the agreement are enforced is an action for damages for breaching of the contract. This means that the party which has defaulted in keeping their end of the bargain is ordered to compensate the other party for losses experienced as a result of breaching the contract, in monetary terms. In other cases, the court may order performance by the party in default; the party that has breached the contract is ordered to perform the duty, as stated in the agreement, which they had neglected (Andrews 2011, p. 2).
According to Patrick Atiyah, a victim should not receive compensation if fault cannot be attributed, and there can be no attribution of liability. In simple terms, what Atiyah was advocating for was the exemption of obligation of compensation where the cause of an accident or default in a contract cannot be intentional. Atiyah described the law of obligation under contracts to operate on the principle of fault. According to this principle, the liability in personal claims was focused on the relationship between the claimant and the defendant rather than the two parties and society. In their book (Atiya & Cane 1987), Atiyah used road traffic accidents as examples to criticise the fault principle on obligations.
The first fault that Atiyah pointed out was the fact that it gives very little attention to the conduct and needs of the claimant. What he simply meant was that finding more emphasis was put on finding a liable defendant as opposed to giving equal attention to compensating a victim. If for example a liable defendant was not found, and the claimant was found to be free of any blame, then they would not be entitled to any compensation. However, if a claimant was found blameless only to a certain extent, he would be compensated partly but that was entirely dependent on whether or not there was another party that was to blame. Another fault that Atiyah established with the fault principle was the fact that its main focus was to punish the offender but it gave room for negligence on the part of the defendant.
Vicarious liability and liability insurance are provisions under law which grant a defendant an indirect right to neglect compensation of the victim. Atiyah described the fault principle not to be a moral principle simply because it gave the defendant an option of being negligent without being morally guilty of it. Another thing that Atiyah pointed out is the fact that in the fault principle, one of the parties to the case has to be found guilty. He however pointed out that determining which party is at fault is difficult because of the unreliability of the evidence given by the witnesses. His main argument on this point was that society was exempted from any liability when a party was found to be guilty. In simple terms, what he meant was that fault is not a sufficient variable for determining liability (Atiyah& Cane 1987).
The Moorcock (1889) 14 PD 64 case is an English contract law case that will be analysed for the purposes of having a better understanding of the law of obligation. The case involved two parties. One of the parties was the owners of Moorcock, a ship and the other was the owner of a wharf. The two parties had signed an agreement in which the Moorcock owners had rented a space in the wharf for the purposes of unloading the cargo of the ship. While the ship was in the wharf, the tide went down and this resulted to damage of the ship. The damage came about because when the tide went down, the hull of the ship got damaged. When the case was presented in court, the main issue was whether or not, under the circumstances, there could be any implied warranty. In this case, the terms and business efficacy were implied. In a business transaction, what the law aims at is to ensure that the risks or perils which are likely to occur during the transaction are not imposed on the one side only. In other words, one side should not be entirely exempted from the probability of failure. In the Moorcock case, the wharf owner argued that the contract did not have any provisions that ensured the safety of the vessel. Furthermore, they had no way of predicting the damage that was inflicted on the vessel. The damage was unforeseen and therefore the wharf owner did not have the provisions for avoiding it.
The main reason for an implied warranty in a business transaction contract is to ensure that there is business efficacy in the transaction. The implied warranty holds the parties to the agreement to maintaining their initial intentions. On the issue of misrepresentation, the wharf owner was on the receiving end. According to the court, the wharf owner was under obligation to ensure that the ship’s safety was catered for. Though the provisions for the ships safety and any compensation for damage(s) incurred on the ship during the time that it was docked were not laid down in the contract, the law held the wharf owner at fault (Oughton& Davis 2000, p.228). According to Atiyah when a person is bound to a promise without their actual intent or knowledge, then the liability is not on the basis of a voluntary assumption of obligation but that of implied terms (Atiyah, et.al 1987).
In concluding this essay, it is essential that reference is drawn from Atiyah’s quote where he stated that when a person is bound to a promise without their actual intent or knowledge, then the liability is not on the basis of a voluntary assumption of obligation but that of implied terms (Atiyah, et.al 1987). When signing a contract, an individual commits him/herself to two kinds of promises: those that are laid down in the contract in writing and those that are implied by the contract. According to Stone (2011, p. 203), in the Moorcock sense, it may be difficult for a court to determine liability because it can be rather difficult to establish what the parties would have agreed on at the time of contract.