Further to my earlier note on Basil Rankine I thought I might offer an explanation as to why I feel there are no legs in any claims for compensation with regard to unenforceable contracts and the like.
A number of companies are now offering to help people write off credit card debts through legal technicalities. Let me offer an alternative opinion and back this up with some points of law.
First and foremost let us digest what these companies are offering - namely, to write off credit cards and credit agreements due to legal technicalities. These credit agreements must have been conducted under the regulations imposed by the Consumer Credit Act 1974 which was valid (for the purposes of these claims) until around April 2007 when new amended legislation was introduced.
The claims stem from a House of Lords decision in 2003 whereby it was held that any contractual agreement that was concluded incorrectly would be unenforceable in a court of law. For those of you who are unaware, a House of Lords decision is binding on all the lower courts and therefore a precedent is achieved.
Allow me to back-track slightly because I feel I need to clarify the legal status of contractual issues before I can carry on talking about this particular case.
There are 2 legal systems in operation which are:
- The Criminal Legal System; and
- The Civil Legal System
Criminal Law:
This is where you break the law, for example, the speeding limit is 30mph but you are travelling at 40mph. You are breaking the law and are therefore subject to the penalty imposed by the piece of legislation written to account for such a breach of law. Another example would be murder, there is written law that states you cannot commit murder - it is ‘illegal’ or ‘against the law’.
Civil Law:
This is where parties agree to something. For example, If I offer you £100 for cleaning my car and you accept my offer then we have an agreement (the agreement would be legally binding if concluded in the correct way). Therefore if you then clean my car and I only give you £20 I have materially breached my part of the deal and you could take me to court and sue me for the remaining £80. There is no written law for this and it isn’t a criminal act as there is no ‘peice’ of legislation that covers this event.
A civil agreement then, if disputed, would always need to be taken to court and decided on by a judge, and the evidence presented to him / her so that a decision can be made. If the decision itself is dubious then it can often be appealed to a higher court of law ( County Court -> High Court -> Civil Division -> Court of Appeal -> House of Lords -> ECHR (European Court on Human Rights) ).
As you can see, all Civil law cases begin life at the County Court and work their way up to the highest court which is the House of Lords (The ECHR is not a domestic court). All decisions from higher courts are binding on the lower courts, so a High Court decision would be binding on the County Court and so on.
Okay, so we can deduce from that, that when we took out our credit agreements they were Civil Agreements and are therefore not subject to any criminal proceedings? We can also deduce that any opinions expressed in the House of Lords will be binding on all lower courts, and this is why we now have these companies offering to write off our debts - because, in a House of Lords case it was said that if a regulated credit agreement has not been concluded in the correct way then it becomes ‘unenforceable’ in a court of law, in fact, if the discrepency is more than a minor breach then the entire contract itself may become ‘voidable’, which would mean that the parties should be put back into the position they would now be in, had the contract never have been in existence. (Note, this is the technicality that these companies are relying on in order to try and claim back any monies you’ve paid).
Okay so if a credit agreement hasn’t been drawn up exactly as the CCA1974 prescribes it should have been then it may become unenforceable or even voidable (as a result of a House of Lords decision). But lets consider this, was this the outcome that their Lordships would have intended? I’ll put one or two points to you:
- Would a reasonable person know that when he signed up to his credit agreement that this was a facility being offered to him for which his part of the deal was to repay the credit?
- Would it be morally right or wrong for a legal technicality be used to allow him to not pay it back?
- Would it be right that the floodgates open up and every other person who ever took out the same line of credit be able to stop paying the debt?
- Taking a credit card provider as an example, an obvious corporate entity, what might happen to the economy if it transpired that all their credit agreements were unenforceable?
- Is this what you think their lordships intended when they said if the precribed terms of the CCA1974 have not been complied with the agreement becomes unenforceable?
Common sense would indicate that the case law opinions expressed by the House of Lords did not intend such an outcome. But, I hear you say, the law is the law and you have already stated that the House of Lords decision is binding on all lower courts! This is true and for exactly this reasion is why these companies are popping up all over the show, but let me consider one or two other legal methods which I believe will bring this whole situation to a halt.
Breach of Major & Minor Terms in Contract Law
If I agree that you should clean my car on Wednesday, but in fact you clean it on Tuesday then am I able to claim a material breach has occurred and therefore withold payment from you? You would certainly hope not and there is case law that supports it.
Equitable Law
The law of equity will prevail over case and common law where the intended outcome would be absurd. Equitable law takes what is know as a ‘reasonable man’s’ opinion into consideration when making decisions. It is often used where there is no similar history to the situation at hand.
Rules of Interpretation
The judiciary have a number of tools available to them in order to ply their trade. In addition to the above, they have the three rules of interpretation which are:
- The Mischief Rule;
- The Literal Rule; and
- The Golden Rule
I’m not going to discuss these rules in detail but can offer you THIS LINK to acquaint yourself with the rules. What I would like to briefly mention is the Golden Rule which lends itself to almost any situation and allows a judge to use his very own opinion, providing of course that there is justification for whatever opinion he gives.
Conclusion:
So can these companies really get my debts written off and get me back a whole load of compensation because the contracts are illegal?
Firsly, the agreements themselves are Civil Law agreements and can therefore never be ‘illegal’ so the very nature of any purported claims to be able to write off illegal contracts is factually incorrect. Compensation isn’t possible because the legal remedy for a breach of contract is to be put back into the financial position you would have been in had the contract never have taken place. Thirdly, the legal tools of the trade will be used to prevent unintended and absurd outcomes such as allowing the whole country to write off their credit agreements due to a minor technicality.
So what can we do about our debts?
The truth is, large credit organisations could either pursue you for the money you owe either through the legal system or by selling or passing the debt on to a debt collection agency. The former isn’t very common but if they take this approach and obtain a County Court Judgement then they can take further steps to recover the money you owe.
Where the creditor decides to pass the debt over to the debt collection agency then it is unlikely that they themselves have any ‘legal’ right to chase you for the debt and a standard template letter accompanied by a £1 postal order will usually get them off your back.
Remember that any credit agreements you have are based upon the Civil Law system and are therefore not subject to criminal proceedings (ie you cannot go to prison for any breach of this nature), and also that any adverse credit entries will be held on your credit file for six years. If you would like specialist debt advice for your individual circumstances then speak to an advisor.
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