| Summary: | <p>In <i>Braganza v BP Shipping</i>, the Supreme Court confirmed that some powers under a contract were subject to an implied term which required them to be exercised in a manner compliant with the <i>Wednesbury</i> test familiar to all public lawyers. In particular, this meant that any use of such a power could only be made after considering all relevant factors and disregarding all irrelevant factors.</p>
<p>This paper first analyses the conceptual basis of the implied term in <i>Braganza</i>. It concludes that that the duty to act rationally is implied by law, regardless of party intention, where a discretion is limited to finding or evaluating facts, and implied in fact in all other cases. It then assesses the wisdom of transplanting <i>Wednesbury</i> wholesale into Contract Law, especially given the contextually flexible approach to the intensity of rationality review in modern Administrative Law. Two underlying points of difference between the systems require some adjustment to the <i>Wednesbury</i> test as applied to contractual cases: first, Contract Law’s general acceptance of a party acting in pure self-interest, and second, Contract Law’s preference for clear rules to govern parties’ primary obligations in contrast to Administrative Law’s use of flexible standards. Given these differences, the scope for variable intensity review in Contract Law should be limited to two categories of case: first, where an additional implied term exists that a contractual discretion only be exercised for a specific purpose, and secondly, where the power in question is a power to find or evaluate facts.</p>
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