Thursday, 6 June 2013

Mix of Contract Cases

This is a 17 page document containing case summaries for a mixture of important cases for contract. Please do not solely rely on this for your exams, the list is non-exhaustive

Saturday, 18 May 2013

Wednesday, 15 May 2013

Socialist Planning

So Solow argues that the driver of growth is exogenous and that is technological progress and that the government, being endogenous, can do nothing.

Well the Soviet system of planning is totally different, the key difference is that they like to plan, specifically investment.

Economic planning can be defined as "a component of public policy that controls economic activities", inherent in this you can see the argument for an interventionist state. 

Klosterman argues that in general terms there are four key social functions of planning:

1. To allocate and provide public goods such as street lighting (a good which is non-excludable and non-rivarlrous). 

2. To manage social marginal costs i.e. externalities that the market does not take into account. 

3. To manage information asymmetries, another form of market failure and;

4. To ensure that growth and development is equitable, so practically managing the route of the surplus. 

The idea is that investment should be planned with a bias towards capital goods and machinery. The idea originates from the Fel'dman model and was used as the Soviet method of growth. This is crucial case study as the Soviet Union was looking to compete with the Western World and their alternative classical method of development.

For Fel'dman,

Y = aV,     a being the proportion of capital investment and V being productivity of capital.

The First Five Year Plan, which included strict quotas and soft budgets, was very much an application of the Fel'dman model. They allocated resources in the capital industry so as to ensure a steady stream of consumption. The First Five Year Plan, did not result in the results accepted and so it led to similar ad hoc plans before the Soviet Union declined in the 1970s and dissolved in 1991. 

How did the Soviet model decide how much to invest, Elleman lays at three methods that economic planner use:

1. Utility Maximisation i.e. you maximise utility u(x) by delaying consumption

The problem with this method is that it deals with what the planners face as opposed to answering the normative question of how much they should invest. 

2. Descriptive Approach

This suggests that moderate figures of investment are derived from negotiations between planners and politicians. 

This again does not answer the normative question.

3. The Growth Maximisation strategy. 

This was first suggested by Horvat and suggests that investment should happen where the "absorptive capacity of the economy" is met, and by this he means where the marginal productivity is equal to zero. 

The problem with this is that it directs investment towards wasteful means. 

When look at the method of how we should investment in the capital sector, then Dobb-Sen provide the answer, they argue for a capital instensive technique to be used as this is the way in which the surplus is going to get maximised.

A quick summary of the Dobb-Sen model;

In an economy where; the share of investment is sub-optimal and all profit is invested and all wage is consumed, investment should be invested should be invested in capital intensive projects as that is how the surplus can be maximised. 

In a capital intensive technique, the MP (of labour) = Wage, so surplus is maximised as wage is more accurate.

In a labour intensive technique, the MP (of labour) = 0 and so output is maximised as opposed to surplus.

Kalecki criticised this saying this capital intensive methods result in a loss of employment and output, in the shot-run, delaying the transition of the economy into a fully developed one.

Mao, despite China originally accepting the Soviet model, went on to criticism and differentiate their model of growth as they suggest the best way to grow is on "two legs" i.e. investing in both the light and heavy industry.

Furthermore, in developing countries, they often lack the technological capacities to do this and cannot delay consumption as the famine levels are so high. 

There are three main theories proposed for why the Soviet Union declined:

1. The extent of state planning did not forsee technological failure i.e. that there was a lack of competition and efficiency in the production, teamed with the autarkic nature of the model, the producitivity was not efficient and thus failed. Perhaps, this is an evidence for the Solow model?

2. The model assumed there was no diminshing returns to capital, this is unlike that what can be perceived in reality. 

3. There were errors in investment, e.g. was spending 15-17% of budget on defence sensible?

A Contrasting case study....

The journey of the Washington Consensus 

The WC is a neo-classical model which unlike the Soviet style of planning centres on free markets and interest rates. 

They believed the reason why countries are poor to be a lack of financial capital and consumption and thus trade liberalisation goes some way to deal with this. 

There are two key defining features of the WC and those are (i) belief in individual freedoms - i.e. the role of state is to regulate exclusionary rights and uphold law and order not intervene otherwise and (ii) the strict manner in which the policies are dictated.

However, this is a questionable mode of development as South Korea believed to be an example of WC-led growth did not privatise or immediately open up to trade liberalisation. However, many economist including Buchanan still hold that government failure is by far still greater than market failure. 

Post-Washington Consensus, this is the New Institutional Economics

- Institutions as dictated by North are the "rule of the game" 
- For a market to operate properly there is a requirement that the right institutions exists e.g. a regime of property rights. 

Inclusive Growth 

- This is the notion that growth prescription to focus on strategies which reduce poverty not just the rate of industrialisation. 

Monday, 13 May 2013

Solow Model

What is it?

It is a neo-classical model developed in the 1950s by Nobel Laurette Robert Solow. The model is used to show that although capital and labour have diminishing returns induvidually, together they have constant returns to to scale with GDP. Thus, in the long run growth can only be achieved through exogenous technological progress i.e. the Solow Residual.


1. Labour grows constantly and exogenously at rate n.
2. Capital and llabour have diminshing returns to scale
3. S=I= sY
4. The economy only produces one good, although this can be extended


The Cobb-Douglas model

Y = A Kl ¹⁻ᵅ

A is the total factor productivity, it is exogenous and is determined by the S=I rate.
Labout is also exogenous but it is assumed to be constant too.

If we take b to be any positive real number then:

bY = F(Kb, Lb)

To write in labour form divide by 1/L:

Y/L = F (K/L , L/L)

Y/L = F (K/L)

Y = f(k)  (lower case k as when you divde labout you are looking at capital per worker now)

y = Ak , output per worker

The Solow equation gives the growth of the capital-labour ratio, k, and shows that growth of the ratio is dependant on savings , after allowing for the amount of capital required to service depriciation  and providing it can provide capital for any new growth in labour.

The further away an economy from its solow equilibrium, the faster it should be growing, this is because these economies tend to have higher capital labour ratios.

The Model depicts the economy tending to long-run equilibrium with capital, labour and output growing at same natural rate.

The (n +d)k rate is the demand for capital adjusted by labour growth and depriciation. 

Three main sources of growth.:

1. Disequibrium between sy and (n+d)k 
2. Changes in the savings rate, causing shifts in the sy curve, this does not however affect long-run growth rate as does not affect the y=f(k) curve 
3. Technical progress, this will affect the longrun steady state equilirbiurm as it will shift the y=f(k) curve 

The Solow model shows that both output per worker and capital per worker in an economy will converge to a particular steady state value in the long run and once this steady state value has been achieved, technological process alone can further increase any output. 

Policy Implications 

According to neoclassical growth theory, output growth results from investment:

1. Increases in the quality and quantity of labour 
2. Increase in capital (savings and investment) 
3. Technology 

Open economies experience income convergence at higher levels as capital flows from rich countries to  poor countries 


1. Technical progress is exogenous and what developing countries should be looking too, this is problematic when trying to apply the Solow model. 
2. Failure to take into account entreprenuership, strength of institutions etc
3. Does not explain why technological progress occurs 
4. All inputs are assumed to be independant of one another in the Solow model, this is a limitation because it mean investment and technological progress cannot be linked hence it is difficult to practically test this model. 
5. The model says technological progress is the only way for the economy to grow, whereas actually the government is too, as R&D is crucial for technological progress and this requires a government and a patent regulation system, 
6. Ignores the demand side of the economy 
7. Why care about the long run? We are all dead anyway - Keynes
8. Ronar like many economist argues that growth is actually to be found endogenously, he says long run growth comes through positive externalities from education etc 

Wednesday, 1 May 2013

UTCCR in a nutshell

Unfair Terms in Consumer Contracts Regulation 1999 in a nutshell...

You might begin by questioning what is the need for this legislation if we already have UCTA? Well the answer lies in that the regulations were an EU directive and thus were not an active choice for the judiciary to make when deciding to incorporate them within the system. So it will become clear that there are quite a number of similarities and overlap with the Unfair Terms in Contracts Act.

R3 -> This sets out what it means to be a consumer and a supplier or seller,  this is absolutely crucial for utilising the act because the act specifically states that it can only apply to consumer contracts (Reg 4)

R8-> This states that should any term in a contract be found unfair then the courts have power to strike it out. 

So what is an unfair term and how do we define it?

We most of the guidance can be found in R5, terms may be found unfair if:

- They have not been individually negotiated 
- Are part of a standard form contract 
- And that the  onus is on the seller to prove they are fair
- Sch 2 is mentioned here as it gives a non-exhaustive list of terms that may qualify as unfair but do note the classification of unfairness is not limited to this 

R6, goes on to provide more guidance on how a term can be assessed:

- It shall take into consideration the nature of the contract and circumstances within which it was formed
- If the language is plain and intelligible it is important to note that courts will not interfere in pricing issues (as good faith is not assumed within the English Legal System) and the adaquacy of the bargain (OFT v Abbey National, bank charges were not found to be unfair). 


(1)(a) - most important part as it suggests that exemption and limited liability clauses can be found to unfair. 


Director General of Fair Trading v First National Bank

-> This case is important as Lord Bingham discusses good faith and defines what it means in our legal system, stating that it is good standards of commercial morality and practice, so nuances with the civil law system can be demonstrated here

Friday, 26 April 2013

Express and Implied Terms

Express and Implied Terms

Distinction between Express & Implied Terms

  • Terms may be express or implied, they must be incorporated to be a term.
  • If the terms are not fulfilled there is a breach of a contract
  • In L’Estrange v Graucob, the party was still bound by terms event though she did not read the contract.

Is it a binding term, has it been incorporated?

  1. Is it a mere puff or an invitation to treat such as Fisher v Bell.
  2. Why was the promise in Carlill held to be of legal significance? 
  3. Or was it an expression of an opinion? Bisset v Wilkinson [sheep case] or Esso Petroleum v Mardon

  • Parole Evidence rule 

  • Where there is agreement in writing, presence of other alleged terms of the agreed cannot be abducted.
  • The only ways to avoid this role are:
    • Part of contract: J Evans v Andrea Merzario, transportation case involving an oral promise suggesting how the machines would be carried
    • Collateral Contracts (rarely used):  This is where the first contract is say oral and second is written, the first one is called a collateral contract
    • Entire Agreement Clauses: To avoid having other terms looked at; Inntrepreneur Pub v East Crown

  • Importance of the term 
  • Couchman v Hill [calf case]
  • Bannerman v White [beer case]

  • Knowledge of the statement maker

  • Dick Bentley Productions v Harold Smith [car dealer + miles]
  • Esso Petroleum v Mardon - buying a petrol station site where petrol station would be build, was made on the assumption that cars could enter from the main road.

  • Was reasonable notice of the term given?

  • Parker v South Eastern Ry [Clockroom case + objective test]
  • Chapelton v Barry UDC [beach chair case]

  • Is the term onerous?

  • Interphoto Picture Library v Stiletto Visual Programmes [holding charge]
  • Denning in Speerling v Bradshaw, the more onerous the term the more notice you have to give.
  • AEG v Logic Resources

  • Timing?

  • Term must not come too late 
  • Olley v Marlborough Court [hotel]
  • Thorton v Shoe Lane Parking

  • Incorporation by course of dealings

  • McCutcheon v David MacBrayne
  • Petrotrade v Taxaco

  • Incorporation by common understanding

  • British Crane  Hire v Ipswich Plant Hire [contract sent after crane]

Finder's Title

Costello v Chief Constable of Derbyshire Constabularly 2001
Facts: The defendant seized a car from the plaintiff under statute as they believe the car to be stolen because the true owner was unknown. However, the defendant never brought criminal proceedings and neither did they return the car.  
The Court of Appeal ruled that police under statute had a possessionary title to the car for a specified statutory period which had ended, and the plaintiff whether he was the owner or not had a superior possessor claim to the car than the defendant as he demonstrated intention to possession and control of the car.
In the English legal systems even the paper owners and those who acquire land through possession hold relative titles. If no one else, our titles will always be relative to the crown. In Australia, the British Crown had got ‘Radical Title. This title was relative and that is why at the time it could exist alongside ‘Native Title’. However, the Crown transformed this into a full-beneficial title by mixing their labour and thus extinguishing ‘Native Title’

Re Cohen 1953
Facts: A husband and wife lived in the property of the wife. After both died (at different occasions) banknotes in unusual places such as kitchen cabinets were found. 
The courts said that this money should go to the wife’s estate as she is the landowner, exercised control over the property even when the husband past away.
This case established the legal principle that the landowner, the person who possessed the land is also the owners of chattels found on it, subject to the condition that possession and control can be demonstrated. 
Waverly BC v Fletcher 1996
Facts: The defendant was using a metal detector in a park owned by the claimant council and found a broach. He reported the broach and the Corner decided that the broach was not a treasure trove. The issue then was who did he broach belong to?
The Court of Appeal held that the claimant had a better right to the broach as it was found within the land, it was attached to the land rather than on the surface. It belonged to the party who owned the soil.
This and the Parker case are cases which show that possession of a good is not sufficient, whether the owner has exercised contract and the positioning of chattels is important too. They are a good cases to compare adverse possession too. 

Parker v British Airways Board 1982
Facts: An air passenger found a gold bracelet in the international executive lounge of an airport. The lounge was leased to the defendants. When the gold bracelet was handed in, the plaintiff requested that it be returned to him had the true owner not been found.The defendants sold the bracelet for £850 as the true owner was not found and kept the returns. The plaintiff appealed.
The court of appeal said that the air passenger had a better right to the gold bracelet than the occupiers - British Airways Board, because it was found that the Board did not have a policy of searching for lost articles. The plaintiff was awarded £850 in damages and £50 in interest.
The plaintiff in taking the bracelet into his care and control acquired possession which was against everyone but the true owner. By handing it in he acted honestly discharging his duties of a finder. The only way the defendants could demonstrate an interest is if they showed such care and control over the things in the lounge which looking at their policy they did not.

Thursday, 25 April 2013

The Procedure for Adverse Possession

  1. The future rights of an adverse possessor arise out of the Limitation Act 1980 s.15 (1) “No action shall be brought by any person to recover any land after the expiration of twelve years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person.”
  2. First adverse possession must be established via factual possession and animus possidenti.
  3. Then identify if the land is registered or unregistered
  4. Then identify is the adverse possession is a case pre-2003 or post 2003
  5. If it is pre-2003 and unregistered, after 12 years the land automatically becomes the adverse possessors under s17 of The Limitation Act.
  6. If it is pre-2003 and registered, after 12 years, the land is held on trust under s75 Land Registration Act, an extra three years is required for procedural reasons and after 15 years  the possessory title is changed.
  7. If the 12 years end after 2003, the unregistered rules do not change.
  8. If the 12 years end after 2003 and the land is registered, after 10 years the adverse possessor can apply to the land registry and the paper owner is given 65 working days to respond. If he does not respond, then the land becomes the squatters otherwise the owner is given two years to chuck the squatters out. 
  9. In September 2012, criminalization of adverse possession in residential areas can into form.
  10. Also note that under LRA 2006 Sch 6  para 8(2)  no application for adverse possession can be made where the registered propriatrator is mentally disabled, ill or abroad does not matter. 

Requirements of Adverse Possession

What is adverse possession
  1. Adverse possession can be explained as the process of possession that changes the ownership of land from the paper owner to the possessor.
  2. It arises out of the s.15 (1) Limitation Act 1980. 
  3. What is needed to establish adverse possession?
  • Factual Possession - where there is strong physical evidence that somebody is in possession of the land e.g. that may include fencing and locking the land. 
  • In Powell v McFarlane, Slade J provides an in-depth explanation on what factual possession means.
  • This explanation was accepted by the House of Lords in Pye v Graham, here the judges reinforced the need for appropriate degree of physical control to count as factual possession.
  • Contrast this to Tecblid v Chamberlin Ltd where children playing on the land and tethering of ponies was not sufficient. 
  • Important to ask is the land being possessed or merely used for profits as in Powell v McFarlane. 
  • Animus Possidendi - an intention to possess . How do we prove this?
    • The actions by which the owner has made the intention clear, Buckinghamshire CC v Morgan 1990 and Powell v McFarlane 1977
    • Affirmation that outward conduct is demonstration of intent, Prudential Assurance Co Ltd v Waterloo Real Estate Inc [1999]
    • Land must be used for the squatter’s advantage and locking/blocking access to land is an indefinite evidence for the intention to possess and factual possess, Buckinghamshire CC  v Morgan 1990, Pye v Graham 2003 and Powell v McFarlane 1977
    • Key is intention to possess not acquire, in Lodge v Wakefield 1995, the mistaken belief that you own the land combined with factual possession was sufficient to prove that adverse possession had taken place. 
    • Furthermore, in Pye v Graham it is made clear that if the possessor offers to pay rent or agrees (so long as he actually hasn’t given it), is  fine for adverse possession because it is an intention to possess not acquire.
    • Often, intention is intertwined with factual possession but in Pye v Graham, the distinction is made clear between the two. An example is provided; X is in occupation of a locked house which he has agreed to look after for a friend, whilst friend is away. He may have factual possession but the intention which is very much linked to the third requirement is missing and thus cannot be adverse possession. 
  • (Possession must be adverse as with consent that would not be adverse possession)
  1. If however, the paper owner forced you off the land, or decides to enter into a licensing agreement then adverse possession is no longer possible. This is because in the first case the squatter fails to assert a better claim and in the second the possession will no longer be adverse.
  2. It was actually the case of Leigh v Jack which was held in Beaulane Properties Ltd v Palmer  that the old doctrine stated the use must be different to the paper owner’s. This was of course rejected in Pye v Graham where the notion of an implied license was too.
  3. The justification for adverse possession lied in the Lockean principle that if you mix your labour with resources then the end product should become yours.
  4. It is important to note that, even derivative title at some point came from an original source which was ‘possession’ so adverse possessors aren’t some distasteful sect of society we should shun, so some argue. Lord Brown-Wilkinson, makes this point clear in Pye v Graham 2002. He says that much confusion would be avoided if we didn’t refer to adverse possessors as those who behave badly - it is just possession and the process of possession creating title. It is similar to a licensee where temporary possession is given not future rights. 
  5. From a Human Rights prospectus it was found that adverse possession does not infringe human rights in Pye v Graham, as adverse possession was justified control of use of land than a deprivation  of possession and was within margin of appreciation. Another point is that under Article 8 of ECHR sometimes arguments can be made that English law breaches the right to respect for home and family by not allowing adverse possession.
  6. In registered land, any rights in the course of being acquired by adverse possession count as overriding interests which means that any third party purchaser say, is also bound by the rights of the possessor.

Thursday, 18 April 2013

Undue Influence

Remedies of Duress and Undue Influence

  • The contract is voidable
  • The court may order rescission ( repeal of an agreement).
  • However, rescission may be lost through 
    • Affirmation of the contract
    • Lapse of time
    • Where rescission would prejudice third parties
    • Damages may be awarded in lieu of recession.

Exogenous Theory of Money

What is it?

  • Idea that money is a neutral thing which is not determined by the real economy and thus can be controlled and manipulated by central banks. 

  • This idea was greatly ties to the Quantity Theory of Money which is believed and used in the 70/80s when there was an inflation crisis. 

  • It is based on the notion that banks will only lend what is in reserves that is the only factor that determines lending . Thus to grow deposits can be increased through open market operations which essentially gives the public money to deposit. 

- It is a market led understanding as they state that banks are the best allocator of capital and the government has minimal role in stabilization, mainly there for open market operations. 

How is this different to Neo-Keynesianism and the endogenous theory of money?

In endogenous theory of money, money supply is determined by money demand not some monetary aggregate set by the bank and this is essentially because neoclassicist do not believe money is demanded as an asset too.



  1. It is justified on the basis of a theory of bank behavior. The theory is generally known as the deposit multiplier or the bank credit multiplier. The theory does not necessarily yield the conclusion the money supply is exogenous, but it will do so if we assume that (i) bank reserves are exogenously determined and (ii) there is a rigid link between bank reserves and money supply. Obviously, these are far-retching assumptions but that is what the theory states. In this theory, idea is that government puts money into the hands of the public through open market operations and they reserve the excess money in deposits which the bank can lend out.
  2. Controlling money supply did tame inflation in 70s/80s so although the unemployment that was resulted provides evidence for endogenous growth money, it cannot be denied that some level of control can be made. 

Economic Duress

In this video I explain economic duress by looking at different cases.

Introduction to Duress

In this video I introduce the notion of duress.


Wednesday, 17 April 2013

Exogenous Theory of Money

Exogenous Theory of Money

What is it?

  • Idea that money is a neutral thing which is not determined by the real economy and thus can be controlled and manipulated by central banks. 

  • This idea was greatly ties to the Quantity Theory of Money which is believed and used in the 70/80s when there was an inflation crisis. 

  • It is based on the notion that banks will only lend what is in reserves that is the only factor that determines lending . Thus to grow deposits can be increased through open market operations which essentially gives the public money to deposit. 

- It is a market led understanding as they state that banks are the best allocator of capital and the government has minimal role in stabilization, mainly there for open market operations. 

How is this different to Neo-Keynesianism and the endogenous theory of money?

In endogenous theory of money, money supply is determined by money demand not some monetary aggregate set by the bank and this is essentially because neoclassicist do not believe money is demanded as an asset too.



  1. It is justified on the basis of a theory of bank behavior. The theory is generally known as the deposit multiplier or the bank credit multiplier. The theory does not necessarily yield the conclusion the money supply is exogenous, but it will do so if we assume that (i) bank reserves are exogenously determined and (ii) there is a rigid link between bank reserves and money supply. Obviously, these are far-retching assumptions but that is what the theory states. In this theory, idea is that government puts money into the hands of the public through open market operations and they reserve the excess money in deposits which the bank can lend out.
  2. Controlling money supply did tame inflation in 70s/80s so although the unemployment that was resulted provides evidence for endogenous growth money, it cannot be denied that some level of control can be made. 

Tuesday, 9 April 2013

Assumptions of the Harrod Domar Model

  1. There is a direct relationship between size of total capital stock, k, and total GDP Y, it follows that any net additions to the capital stock in the form of new investment will bring about corresponding increases in the form of national output. 
  2. Assume unemployed labor, so there is no constraint on the supply of labor. 
  3. Production is proportional to the stock of machinery. 
  4. The Harrod-Domar model assumes that savings and investment are all that is needed to generate growth. In reality, several complementary factors are required – for example, a healthy and educated workforce, growth in infrastructure (roads, water, electricity etc) to support growth in production, political stability, and the existence of financial institutions such as banks to channel savings into investment. Institutional factors have been assumed to be given in these models. But the reality is that economic development is not possible without institutional changes in such countries. Therefore, these models fail to apply in underdeveloped countries.
  5. An implicit assumption of the Harrod-Domar model is that there are no diminishing returns to capital.
  6. These models start with the full employment level of income but such a level is not found in underdeveloped countries. There exists disguised unemployment in such countries which cannot be removed by the methods suggested by Harrod-Domar. Thus the main assumption of the Harrod-Domar models being absent in underdeveloped countries, these models are not applicable to them.
  7. The Harrod-Domar models are based on the assumption that there is no government intervention in economic activities. This assumption in not applicable to underdeveloped countries because they cannot develop without government help in such countries the role of the state as a 'pioneer entrepreneur' in starting large industries and in regulating and directing private enterprise has been increasingly recognized.
  8. The Harrod-Domar models are based on the assumption of a closed economy. But underdeveloped countries are open rather than closed economies where foreign trade and aid play very crucial roles in their economic development. Both these factors are the bases of their economic progress.
  9. These models are based on the unrealistic assumption of a constant price level. But in underdeveloped countries price changes are inevitable with development
  10. Capital depreciation and gestation lags break the equation : S=I.
  11. Difficulty to define the determinants of the saving rate. No perfect policy to raise it. 

Implications of the Harrod-Domar Model

What are the implications for developing countries?

  • The main obstacle to development according to HD is the relatively low level of new capital formation in most poor countries. 
  • To grow we must increase savings and the productivity of investment e.g. via technological changes.
  • The “savings gap” can be facilitated through foreign aid or private foreign investment. 
  • Similar to the rationale behind the Marshall Plan, the MP was the American program to aid Europe in which the US gave economic support to help rebuild European economies of WW2 to prevent the spread of soviet communism . The plan was in operation for four years beginning in April 1948. The goals of the USA were to rebuild a war devastated region, remove trade barriers, modernize industry and make Europe prosperous again.
  • The model implies, therefore, that the promotion of investment by government planning and command is needed to accelerate economic growth in low-income economies. Infact, the Harrod-Domar model provided a framework for economic planning in developing economies, such as India's Five Year Plan.

The Harrod Domar Model in 7mins

 What is HD model?

 The Harrod Domar Growth model is a model not a growth strategy. A model helps to explain how growth has occurred and how it may occur again in the future. Growth strategies are the things a government should be doing to try and replicate the outcome suggested by the model. The model, developed in the late 1930s states that the rate of growth of GDP is determined by the savings ratio (the marginal propensity to save) in the economy and the capital output ratio (the amount that has to be spent on capital to produce £1 worth of national output (productivity of investment)

There are 10 assumptions of the HD, which also provide the main criticisms of the HD model. 

1. There exists a relationship between capital and growth, the evidence on this is mixed and questionable. 

2. There is unlimited supply of unemployed labour, this assumption fails to take into consideration the informal sector. 

3. That production is proportional to the amount of machinery 

4. The model discuss the need for savings and investments for growth, this implicitly assumed the existence of institutions. 

5. Capital has no diminishing returns, what about depreciation identified in the Solow model. 

6. No government intervention. 

7. There is a closed economy. 

8. Price levels are constant

9. Due to depreciation and gestation lags, this is not necessarily true that savings is equal to investment 

10. Savings is no way define, making it problematic to apply. 


 Rate of Growth of GDP = Savings ratio/Capital output ratio

 S = sY - savings is a function of national income

 I = ∆k - net investment is defined as changes in capital stock

 but as we assume direct relationship between k and y, we get the ratio of k/y = c 

 c is the capital output ratio thus ∆k/∆y or ∆k= c ∆y I= S, S=sy , ∆k= c ∆y so we get sy= c ∆y

 divide by c and y ; s/c = ∆y/ y 

 changes in growth = savings ratio/capital ratio (affect of investment on national productivity) 

 It concluded that: 

Economic growth depends on the amount of labour and capital. 

As LDCs often have an abundant supply of labour it is a lack of physical capital that holds back economic growth and development.

More physical capital generates economic growth. 

Net investment leads to more capital accumulation, which generates higher output and income. 

Higher income allows higher levels of saving

Policy Implications 

In order to increase savings: 

1. Aid can be used

2. FDI 

3. This is similar to the Marshall Plan, where the US gave specifically for the redevelopment of Europe after the war and the aid was used via investment.

In order to increase the capital output ratio: 

1. Government planning should be used to facilitate savings 

2. HD would support the idea of economic investment planning as it ensures that capital can be used for investment , an example of this would be India's 5 year plan

1.  The Marshall Plan worked for Europe because Europe possessed the necessary structural, institutional and attitudal conditions e.g. a well integrated money market in order to convert capital into output. 

2. In some countries it is inappropriate to suggest increasing savings when people are struggling to get enough food. 

3. Later on, Harrod repudiated the model as he did not see it fit with the idea of Long Run growth. 

4. Ignores labour productivity, technological innovation and levels of consumption. 

5. Thailand is a case study which experienced rapid growth despite the lack of savings. 

Monday, 8 April 2013

UTCCR - Unfair Terms in Consumer Contracts Regulations 1999

- This regulation came into force on 1st October 1999,  there was an implemented EU directive on this, it seeks to regulate unfair contracts alongside the Unfair Contract Terms Act 1977. Please note, as you will see there is overlap between the two as well.

Outcome of the legislation

- Any term that is deemed to be unfair will be ineffective at binding the consumer and this can be found in regulation 8.

Effect of unfair term

8.—(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.

What is a consumer?

- Someone who is acting for their own private interests as opposed to commercial reasons, see R3

“consumer” means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession;

 Case Example: Standard Bank London Ltd v Apostolakis

Facts: A wealthy couple from Greece (civil engineer & lawyer), made financial investments in order to make a profit. The question for the courts was whether they could be deemed to be consumers. 

Judgement: The courts found regardless of the profit motive they were consumers as they were acting for their own private interests and not within their own respective professions. 

What is a seller or supplier?

- Again  this can be found in R3, anybody who is selling or supplying for  the purposes of his own profession or trade
- This includes the sale or letting of land.  

“seller or supplier” means any natural or legal person who, in contracts covered by these Regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned; 

What is an unfair term?

- This can be found in regulation 5; 

—(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.
(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.

(1) It will be deemed unfair if the term is not individually negotiated, and does not have good faith causing an imbalance of rights to the detriment of the consumer. 

(2) If  the contract was drafted in advance,  then it will be deemed to be individually negotiated 

(3) If most of the contract is standard form then just because one term is individually negotiated doesn't mean that these regulations won't apply to it. 

(4) Burden of proof lies with the seller to show the contract is not standard form. 

(5) Schedule two gives a 'grey list' of examples of terms that would be deemed to be unfair under these regulations. 


If there is a doubt of what a term means it should be interpreted in favour of the consumer, following the contra preferendem common law rule, see R7 (2).

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12. 
How can these regulations be enforced? 

They can be brought forward in court. 

Or through the OFT ( Office for Fair Trading ), this is given in R10 , it is the duty of the OFT to look into complaints and they have the power to obtain an injunction, none of this is given in UCTA. 

Complaints – consideration by Director

10.—(1) It shall be the duty of the Director to consider any complaint made to him that any contract term drawn up for general use is unfair, unless–
(a)the complaint appears to the Director to be frivolous or vexatious; or
(b)a qualifying body has notified the Director that it agrees to consider the complaint.
(2) The Director shall give reasons for his decision to apply or not to apply, as the case may be, for an injunction under regulation 12 in relation to any complaint which these Regulations require him to consider.
(3) In deciding whether or not to apply for an injunction in respect of a term which the Director considers to be unfair, he may, if he considers it appropriate to do so, have regard to any undertakings given to him by or on behalf of any person as to the continued use of such a term in contracts concluded with consumers.

Core Terms 

- Some terms are not regulated and those are called "core terms" , see R6(2)
- Courts will not intervene in the market practices and not for the substance of the contract. This is because it is intended to preserve market forces 
- The only way unfair pricing would be subject to modification is if it not written in 'plain intelligent language'
- Intelligibility  is to be measured by reference to ordinary members of the public; e.g. legal words and phrases should be avoided, long sentences and cross referencing within a document should be avoided and some long contracts may require a summary 

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate–
(a)to the definition of the main subject matter of the contract, or
(b)to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.