The future of contractual freedom

The decision in the Belfast County Court ‘gay cake’ case has raised interesting points. The fundamental axiom in contract is parties can freely enter into legally binding arrangements, a doctrine eroded over the years by statutory provisions.

The court found the defendants had been discriminatory in refusing to produce a cake with a gay slogan. It heard arguments from the parties and found in favour of the claimant (or ‘plaintiff’ in Northern Ireland). Commentators suggest this judgment will force businesses to enter into contracts with anyone, without the right of refusal, lest it be viewed as discriminatory.

In the fallout, one important factor has been forgotten: the doctrine of contractual freedom. The claimant entered into a contract with the defendants, who later changed their minds because of their religious beliefs. Under contractual obligations, the defendants were in breach and the claimant was entitled to seek restitution.

It was at this point that the defendants gave grounds for an action of discrimination by expressly stating the reasons for refusal. Had they not, an action in discrimination would have been more difficult. Contracts are frequently breached for commercial reasons. If the defendants had merely stated they were too busy or ill, the only action the claimant could have sought would be under common law.

The court found it was not acceptable to breach a contract on the grounds of discrimination and, after analysis of statutory provisions and regulations, found the defendants had done so.

The judgment currently resides only in the Northern Ireland jurisdiction, but if it is reaffirmed in the Court of Appeal, could it mean traders will be compelled to undertake work against their free will in case it is seen as discriminatory?

Worryingly, on reading the judgment, I am not sure. A shop invites customers to enter into a contract to buy goods or services. It is at point of sale that the contract becomes binding, using the rules of contractual formation. There is no legal requirement, at present, that compels parties to agree.

It is perfectly acceptable for a business to refuse to enter into an agreement with a potential customer, based on a commercial decision. When this decision ventures into other areas, like discrimination, does this then transgress traditional rules of formation? If a decision not to proceed is based on discrimination, would courts award damages to an ‘injured party’ even though a contract did not exist?

Would the outcome be different if the discriminatory act had taken place pre-contract? The case does not test this. Surely this would represent a serious erosion of the freedom of individuals to do business? Was it the intention of the court to interfere with commercial decisions in such a draconian way? The judgment is contradictory and, for this reason, media reporting has voiced concerns.

The freedom to enter into a contract has not altered following this judgment, but it does demonstrate that demographic forces could lead to changes ahead. Jurisdictional issues aside, consequences will only flow if the judgment is upheld on appeal. SJ

Adrian Mason has spent 15 years in legal education, specialising in civil litigation