The attorney-general's contract reform

Recently, our new Attorney-General – Nicola Roxon – has been getting around spruiking reform on a subject decidedly less 'sexy' than terrorism offences, constitutional amendment or a Bill of Rights. She's talking contract law. It may not get as much attention, but it's a subject that's far more likely to affect us, day-to-day, than any of the above. Roxon's floated discussion proposal/s, if implemented, would be a welcome step towards simplifying the law for its users, and potentially to updating it for an internationalised and online world.

Here's the basic problem: If you wanted to know what the rules are for making or enforcing contracts, you'd be hard pressed to find them. Imagine you've hired a builder and they're not the 'quality tradesperson' you were promised – you want to know whether you can leave the contract, or if you have to keep paying them. Where do you start? You could furnish yourself with the wisdom of a few hefty textbooks. But most likely you don't have the time and wouldn't want to risk it. Solution? Hire a lawyer.

The reason is that most of the rules are found scattered in law reports, in the judgments of innumerable cases. Finding the 'answer' to your legal dispute means finding a well-established line of reasoning or authority from previous decisions. It's called the 'common law' system, and we inherited it from the British. Most of the time the answers are there, but it involves, as one commentator describes it, the reading of "tons of verbal pulp that must be squeezed to obtain an ounce of pure judicial law."

The floated proposals – currently open for public submissions - outlined in Roxon's recently launched discussion paper on the topic are largely concerned with doing some of the squeezing for us. The most basic proposal would involve distilling the principles of contract law into a piece of legislation (a code); to whittle down hundreds of judicial precedents into pithy and concise statements of principle – perhaps you wouldn't need that lawyer after all! But other proposals in the paper discuss the possibility of more radical reform and cobweb cleaning.

For instance, the application of certain rules to do with contractual acceptance, particularly in relation to email, are unclear in the digital age. This needs urgent clearing up. But further, we should be seeking to tailor our laws for a globalized world.

Today, our top four trading partners are China, Japan, The United States and Korea, and they all have a fundamentally different system of contract law. Namely, they have codes. Those differences may mean that some trade is priced out. One OECD study found that – after controlling for other factors – countries with legal systems of a common origin had, on average, 40 per cent larger trade flows than countries with unrelated legal systems. A codified and internationalised contract law, then, could potentially boost trade.

Australia would hardly be unique in choosing to codify its contract law. The United States – a common law country like us - did it with their Uniform Commercial Code. India and Malaysia have done it too. And let's not forget the dozens of countries who have had it that way since time immemorial; almost all European countries, and our Asian neighbours (including Japan). It can be done, and in fact the wealth of experience to draw on would make it rather easy.

Empirical work by Professors of Law Fred Ellinghaus and Ted Wright shows that codified contract law is more accessible, more efficient and increases predictability; it invariably achieves greater consensus on the proper resolution of legal problems and those resolutions are reached more quickly.

It's unlikely that many law firms will be loudly advocating codification of contract law. The current system suits them well; it ensures that we need to seek their advice. In the 18^th century the British legal reformer Jeremy Bentham riled against case law, and the influence of 'Judge & Co' who conspired to keep it. "The power of the lawyer," Bentham said, "is in the uncertainty of the law."

Perhaps Bentham over-egged the pudding. Lawyers will still be necessary and helpful for many transactions. But the rules of contract are important to you and I, and non-lawyers should have access to their basics. Contract law forms the foundation of successful commerce and business, and it's essential we make it clear and accessible. As former High Court Justice Michael Kirby has written, "The economy eventually shakes off serious inefficiency. The current law is inefficient. Concepts not cases should prevail."