Rix LJ considered the restraints operating a party to a contract in exercising any discretion gien under it, preferring the use of the term ‘irrationality’ to ‘unreasonableness’: ‘It is plain from these authorities that a decision-maker’s discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time. In the latter class of case, the concept of reasonableness is intended to be entirely mutual and thus guided by objective criteria . . Laws LJ in the course of argument put the matter accurately, if I may respectfully agree, when he said that pursuant to the Wednesbury rationality test, the decision remains that of the decision-maker, whereas on entirely objective criteria of reasonableness the decision-maker becomes the court itself.’
Rix LJ, Laws LJ, Lloyd LJ
 EWCA Civ 116,  Bus LR 1304
England and Wales
Appeal from – Socimer International Bank Ltd v Standard Bank London Ltd ComC 17-Nov-2006
Cited – CVG Siderurgicia del Orinoco SA v London Steamship Owners’ Mutual Insurance Association Limited ‘The Vainqueur Jose’ 1979
The plaintiff sought to claim under the rules of the P and I club of which it was a member. After defining the risks in respect of which members were to be indemnified, the rules made the following proviso in Rule 8(k): ‘A member shall at the . .
Cited – Abu Dhabi National Tanker Co v Product Star Shipping Ltd (No 2) CA 1993
Where parties enter into a contract which confers a discretion on one of them, the discretion must be exercised honestly and in good faith, and not ‘arbitrarily, capriciously or unreasonably’. The owner had acted unreasonably in that there was no . .
Cited – Ludgate Insurance Company Limited v Citibank NA CA 26-Jan-1998
Brooke LJ said that the circumstances in which the court will interfere with the exercise by a party to a contract of a contractual discretion given to it by another party are extremely limited. The courts will not intervene where the discretion is . .
Cited – Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd CA 3-Jul-2001
A reinsurance contract which contained a clause which provided that no settlement or compromise of a claim could be made or liability admitted by the insured without the prior approval of the reinsurers. The court considered how the discretion to . .
Cited – Paragon Finance plc v Nash etc CA 15-Oct-2001
The court was asked to consider whether there was any implied term limiting the power of a mortgagee to set interest rates under a variable rate mortgage.
Held: A loan arrangement which allowed a lender to vary the implied rate of interest, . .
Cited – Office of Fair Trading v Abbey National Plc and seven Others ComC 24-Apr-2008
The Office sought a declaration that the respondent and other banks were subject to the provisions of the Regulations in their imposition of bank charges to customer accounts, and in particular as to the imposition of penalties or charges for the . .
Cited – Hayes v Willoughby SC 20-Mar-2013
The claimant and appellant had been employer and employee who had fallen out, with a settlement in 2005. The appellant then began an unpleasant and obsessive personal vendetta against Mr Hayes, complaining to public bodies with allegations of tax . .
Cited – Braganza v BP Shipping Ltd SC 18-Mar-2015
The claimant’s husband had been lost from the defendant’s ship at sea. The defendant had contracted to pay compensation unless the loss was by suicide. They so determined. The court was now asked whether that was a permissible conclusion in the . .
Lists of cited by and citing cases may be incomplete.
Updated: 13 July 2022; Ref: scu.265925