Contract Law Sem 1 Notes

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Contract Law
Lecture 1 - Offer and Acceptance I
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Module info
- Assessment
- Summative
- 75% exam in May
- 25% Essay/Coursework in term 2
- Formative
- Midsessional exam
- Formative essay in Term 1
Notes
- Definition of a contract
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An agreement → That gives rise to legal obligations → which are enforced
or recognised by law (Treitel)
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Offer vs invitation to treat
- An offer
- Make a clear, unequivocal statement that
- He will regard himself as legally bound to perform his
promise
- If the other party accepts his offer
- Different from an invitation to treat - Key is intention
- Case on this
- Gibson v. Manchester City Council [1979] 1 All ER 972
- May be prepared to sell - not an offer according to House
of Lords
- What was it?
- Invitation to Treat?
- An invitation to make an offer,
“Intention isnt necessarily to make
an offer, but negotiate with the other
party”
- Supply of Information
- What is the price of this car?
“£10000” - just a pure statement of
fact
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Statement of Intention
- “Im going to sell my house” shows
intent to end up in a contract but
does not supply the paticulars and
thus is not sufficient
- Storer v. Manchester City Council [1974] 1 WLR 1403 CA
- Was an offer
- Goods on display in a shop
- Generally treated as an invitation to treat
- “Pharmacuetical soc of GB Vs Boots [1953] QB 401
- Display of goods on a shelf is not an offer
- Practicality - would not be workable if this wasn’t the case
- The offer is made at the counter
- Fisher v. Bell
- Sale of a flick knife - Statute states that offer for sale is prohibited
- Just because the knife was on display, does not mean it was offered for
sale - because it being displayed is only an invitation to treat
- Advertisement
- Partridge v. Crittenden
- Birds being advertised for sale
- Amounts to an invitation to treat, not an offer
- Business sense if we treat them as invitations to treat
(CoA)
- Exceptions
- If the advertiser is also the manufacturer
- Because they can make an unlimited supply, so their
advertisements should be taken more seriously than they
were a distributor
- Display is not necessarily an invitation to treat
- Thornton v Shoe Lane parking
- When was the offer made?
- Because Mr Thornton had no choice after he put the
money in
- Was made by the car park after he’d put the money
in. Through the machine
- Only when the customer has no choice but to
accept, will the display be an offer not an invitation
to treat
Supply of information
- Sometimes a statement is just a statement
- Harvev Facey
- Will you sell by pen - by Telegram
- Reply - Lowest price £900
- Reply by Harvey - I’ll take it
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- Facey did not want to sell
- Court concluded that no offer was made in “lowest price £900”
- Pitt vs PHH Asset Management
- PHH would deal with any other parties once they had forwarded a draft
contract
- But still no offer made
Statements of intention
- Stronger than supplies of information
- But not offer
- Harris v Nickerson
- Advertisement for sale “Sale of a number of different things inc office
furniture”
- Harris went, but there was no office furniture - so sued
- The statement of intention to sell office furniture did not constitute an offer
for sale
Unilateral vs Bilateral contrats
- Bilateral - both parties have obligations
- Buying something in a shop. I have the obligation to pay, they have the
obligation to provide what I buy
- Unilateral - One party
- “Walk to York” If offer you £500 to walk to York, I have to give you £500 if
you walk to york, but you dont have to walk to york
- Carlill v Carbolic Smoke Ball
- Made an advertisement
- £100 to anyone that uses the ball for two weeks and still
becomes sticks
- Carlill did this, and still was sick
- Sued for £100 reward
- Just advertising, an inv to treat
- Court disagrees, sufficient evident of their intent because
they deposited money in the bank for payment of this.
- Offer made to all the world - nobody was obliged to accept it but if
they did then CSB had an obligation to pay
- Bowerman v, ABTA
- Notice on display in every travel agent
- Was this notice an offer?
- Court concluded it was, bc of sufficient seriousness and intent to
be bound
- “If you book through ABTA and something goes wrong,
you will get a full refund
- Soulsbury v Soulsbury
- Divorce - H was ordered to make maintenance payments
- Instead of him paying, agreed to be left £100,000 in his will
- W agreed
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Gets remarried on last day of his life
- Another marriage invalidates the will
- So First wife cant claim £100,000?
- Court of appeal disagrees
- Agreement between the two demonstrates
sufficient seriousness and intention to be
bound, and superceeds the normal stuff
rules of the will
- Termination of the offer
- Unless acceptance occurs, an offer can be revoked
- Acceptance must occur for it to be binding
- Payne v Cave
- A number of items up for auction
- Payne offers £40
- Revokes his offer after someone bids higher
- The winning bid falls through, Cave sues for £10
- Was decided the offer was not binding because it was
revoked before acceptance
- Communication of revocation
- Person must have recieved the letter, or answered the telephone call etc
- Cant accept an offer that has been revoked
- Dickinson v. Dodds
- Offer for property left open a couple days
- Acceptance was given by letter that Dodds never recieved
- Offer expired,
- Court decided it wasnt a contract
- 1: Offer letter posted by Def to Pl in NY
• 2: Before Pl replied Def posts letter
revoking offer
• 3: Pl telegraphs and posts letter of
acceptance before receipt of 2
• Held: contract made- Def’s purported
withdrawal ineffective because not
communicated before Pl had accepted
- Revocation of a unilateral contract
- Cant revoke after someone has started to accept
- Carlil - Couldnt revoke after she started using the ball
- Errington - Can be revoked up until perfomance begins
- Luxor v Cooper - Up to the point of complete performance
- Daulia - Revocation is possible until full perfomance, but the offeror can
not prevent performance
Rejection
- If rejected it goes away forever.
- Hyde v Wrench
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- Def offered to sell farm to plantiff for £1,000
- Plt offered £950
- Def said they’d accept the original offer £1000
- The counter offer killed the original offer
- Condition in the offer, not fufilled then terminates the offer
- Financings ltd v. Stinson
- Bought car on hire purchase
- Only became binding when signed by finance company
- Bc the agreement had never been fufilled, the offer was terminated and
Stinson did not own the car
Lapse and Death
- Offer may lapse for want of acceptance
- If no timings then it is open for a reasonable time
- Ramsgate victoria vs Montifore
- If offerer dies then the offer may lapse
- Death of an offeree terminates the offer
- Bradbury v Morgan
- Non-fufillment of the condition - financing ltd v stimson
Acceptance
- Has to be communicated
- Mirror image rule - Acceptance of the offer has to be a mirror image of the
offer made
- What does communicate mean?
- Acceptance has to been recieved by the offeror
- Can not be accepted by silence
- Felthouse v. Bindley
- “I want to buy your horse, give you £30, if i hear nothing more
from you then you accept”
- Heard nothing
- Court rules that that did not ammount to a contract
- Canbe accepted by conduct
- Brogden v Metropolitan Railway
- Behaved as though there was a contract even though the railway
had never signed a contract
- Claimed there wasnt a contract later,
- Court ruled that the railways conduct in acting as if there was a
contract, they had accepted
- Excecption - unilateral contracts
- Carlil - no requirement to communicate in accepting a unilateral
offer
- Acceptance has the be in response to an offer
- Knowledge is required
- R v Clarke
- Can not consent to an offer you dont know about
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Gibbons and Proctor
- Hard cases make bad law
- Policeman claimed a reward for providing info
- Deemed to be an offer
- Unaware of the reward when providing info
- Normally he would not be able to claim the reward
- The court allowed him
Postal acceptance rule - Adams v Lindsell
- In certain circumstances offers can be accepted by post
- Accepted when they’re put into the hands of the postal system
- Despatch rule
- Refering to acceptance NOT revocation
- Court will only apply the rule if the offer is reasonable to accepted
by post
- Household fire insurance v Grant
- Written application for shares, £500 for shares
- Letter notifing Grant that he got shares never arrived
- Company he had shares in sued grant for the shares after going into
liquidation
- Postal rule was applied, he had accepted and had to pay the shares
- Offeror takes the risk if the letter gets lost or delayed
Telegraph acceptance rule
- Where it is reasonable to use the telegraph, acceptance takes place when the
letter is given to the person authroised to take telegrams
Telexes
- Above rules not applicable to this, or instantaneous communication
Lecture 2 - Certainty and Intention to create legal
relations
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Intention to form legal relations
- No agreements will be enforced unless parties intended to create contractual
relations
- Balfour v. Balfour
- Agreements between spouses, parents and children etc is that
they are not contracts
- Mr Balfor was a civil servant
- Came to england for a bit on leave
- Went back to sri lanka but his wife stayed
- Agreed £30 maintenance a month
- Divorced her while they were apart
- She sued for the back pay of maintenance
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Court ruled they were null and void because the
promise was made while married
- Takeaway is that married people do not usually intend to be
bound in agreeements
- Edmonds v. Lawson
- Pupil barrister when pupilages were unapid
- Sued as he believed he was employee was to be paid
- Court ruled that he wasnt an employee or a worker, as the head of
the chambers had not intended to create relations for an
employment contract
More on social and domestic arrangements
- Jones v. Padavatton
- Mother and daughter. Daughter was a secretary in US, mother
convinced her to come to the Uk to become a barrister
- Mother paid for stuff to become a barrister ,inc a house
- Mother sued her for the house after a falling out
- The familial arrangement constituted a domestic arrangement not
a binding contract. Not enough evidence to show they had
intended to enter into contractual relations
- Parker v. Clark
- Clarks - elderly couple
- Parkers, younger couple who came to live with clarks, extended
family relations
- Parkers took action in relliance on the premise they were living
with the clarks
- Papertrail showing the discussion about this
- Parkers and Clarks fell out
- Parkers sued the clarks for breach of contract
- They had sold their house and changed their lives etc
- Clarks had breached their contracts with parkers
- The general presumption that familial agreements are
domestic and not contractual was overcome because
- Parkers had taken action
- Family ties were not as close
- Memorandum of the agreements
Test for intending into contract
- Objective test
- Reasonable person, looking at the situation, would believe there is
an intention to enter into contractual relations
- Carlil - applied this test
- Edmonds vs lawson
- Court fudged - Intention to enter into an arrangement but
not an employment arrangement
- Judges are all former barristers
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Ruling is coloured by the fact they were all unpaid
pupils themselves
Commercial agreement
- General presumption that there is an intention to enter into contractual
relations in commercial agreements
- Esso Petroleum v. Customs & Excise
- Esso ran promotion - 4 gallons of petrol, would get a special coin
- Was there an intention to enter into a contract with anyone who
buys the petrol to get the coins?
- Because they were advertised in a commercial context
- There was a contract
- As esso had intended to be legally bound
- Rose & Frank Co. v. J.R. Crompton & Bros
- Selling carbonised tissue
- To be the sole agents of them in the US until [date]
- Good will agreement
- Agreement will not be subject to courts in the UK or US
- Was this agreement binding?
- There was no intenton to contract
- Overcome the general presumption
- Applying the objective test - sufficient evidence that
they didnt intend to enter
- Kleinwort Benson Ltd. v. Malaysia Mining Corp. Bhd
Certainty
- It has to be clear looking at the contract, what the meaning of the contract is
- May & Butcher v. R [1945] 2 KB 17 – “The whole of the old tentage which may
become available…” “price to be agreed upon from time to time”: Held: no valid
contract
- Wartime case
- Contract was entered into before the war
- Govt decided not to sell the agreed tentage at the breakout of the war
- An agreement without a price is too uncertain
- Contract included an arbitration clause
- HoL didnt consider that it was intended to be used with respect to
to the price
- Only with respect ot other issues that may come up
- • Hillas v Arcos (1932) 147 LT 503 – Option to purchase “100,000 standards of
fair specification” Held: valid contract
- Two private commercial parties
- For the sale of timber
- Fair specification is vague, no indication of size, value etc
- But still sufficiently certain
- Referred to a reasonable standard
• Foley v Classique Coaches [1934] 2 KB 1 – Petrol supply contract. Price “to be
agreed by the parties in writing and from time to time.” Held: binding agreementimply that price to be reasonable and arbitrate
- Def was sold land, on condition that they agreed to buy all the petrol that
they needed from him
- Def ended up breaking it
- Sued claiming it was a valid and binding agreement
- Price was to be agreed by the parties from time time
- Arbitration clause gave implication that price should be reasonable
- May & Butcher v R distinguished from this
- Must be noted, the geopolitical context and the fact judges
cherrypick
- General rule is if a contract is too vague or uncertain it wont be enforced, but
what too vague or uncertain means will be decided by the judge there and then
Ambiguity, vagueness and incompleteness
- Scammell v. Ouston [1941] AC 251 – Car on Hire Purchase conditions
- Part exchange buying car, the rest on hire purchase
- Before contract could be negotiated, Scammell decided not to go ahead
- Agreement was vague, not an actual contract
- Hire purchase terms were too vague to constitute a contract
- • Nicolene v. Simmonds [1953] QB 543 – Severance of problematic term
- Diff approach to Scammell
- Sale of steel bars
- Terms of the agreement was pretty clear
- “Subject to the usual conditions of acceptance”
- Vague?
- Court agreed it was too vague, but simply striking it from the
contract and it is perfectly valid.
- So there is a valid contract that excludes “Usual conditions of
acceptance
- • Winn v. Bull Chancery Division (1877) 7 Ch.D 29, 26 WR 230
- Bull agreed to lease a house from winn
- Subject to the preparation and approval of a formal contract
- Was a written letter, but stated the above
- Parties made it clear that it wasnt a contract, so the letter can not
be enforced
- • Raffles v. Wichelhaus (1864) 2 Hurl & C 906, 159 ER 375
- Raffles had a contract for the sale cotton
- On a ship called the Piraelus
- Two ships bringing cotton called the Piraelus
- FIrst one arrived in october, second in december
- Def - buy cotton from october one
- Claimant - buy from december
- Is the contract valid? If so which one do they get from
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Court agreed it was too vague, because couldnt tell from looking at the
contract itself
- Could not be enforced
Agreements to negotiate
- Agreements to agree are unenforcable
- Too vague, too uncertain
- Walford v Miles [1992] 2 AC 128
- Miles agreed they would negotiate with Walford for sale of business, and
terminate with anyone else
- As long as Walford confirmed they were in a financial position
- Miles broke their promise and sold to another person
- Walford sued for breach of contract
- Successful at the intial court
- Miles Succeeded at the court of appeal
- Agreement to agree is too uncertain
- Lockout agreement
- Are enforceable if they are limited in time and
consideration is provided
- Problem was the indefinite length
- No implied duty to negotiate in good faith
- • Petromec Inc. v. Petroleo Brasileiro SA Petrobas
- Purchase charter and insurance of an oil platform
- Number of relevent clauses
- Transaction involved need to upgrade the plaform at some point
- Contract required the parties to negotiate in good faith in respect
to the cost of the upgrade
- Unenforcable
- Agreements to agree are always unenforcable
- If negotiations are broken off there is no way to tell if they
were conducted in good faith
- If the parties had broken off the negotiations, it is
impossible to know what the agreement would have been
had it been reached
- Impossible to calculate damages
Modern contractual approach
- Bear Stearns Bank v Forum
- Group of companies called parlap. Colapsed in italy
- Forum was owed money by the companies
- Sold the debt to bear stearns
- Made over the phone, for £2.9 Mil
- We’ll get the lawyers to sort it out, but we have an agreement in
principle
- They sold to another company though
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High court ruled they had a valid contract that forum was in breach off
Agreed the price, agreed what to be soled, which is enough certainty to
satisfy the court
Implied terms
- Agreement on all the important terms of the contract
- If there arent sufficient terms
- Can sometimes say that there are terms implied in the contract
- British Steel Corp. v. Cleveland Bridge & Engineering Co. Ltd.
- Contract to supply steel
- Parties negotiated between themselves, but never actually agreed
the contract
- Only had the letter of intent to go on
- British steel provided, but delayed delivery. Cleveland did not pay
- British Steel sued, sayin there was a contract in the letter of intent
- Arguement into the alternative
- quantum meruit - Supplied something to the value of x,
and deserve to be paid for htat
- Cleveland counter sued, damages for it being delivered late.
Losing contract, delayed construction etc, far in excess of the
price of steel
- No binding contract, its just a letter of intention
- Accepted the quantum meruit arguement
- The contract did not specifiy, or contract was silent on”
- Is a red flag on certainty issues in exams
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Tutorial 2
Norman lost his favourite dog. He advertised in the local paper an offer of £5,000 for the return
of his dog. Julian believed the dog had returned to the town Norman used to live in. Julian
travelled there by train and stayed for a week in a B&B while he searched for the dog. Julian
incurred certain expenses as a result of this search. However, three days after Norman placed
his advertisement he learned that he could not keep dogs in his new flat. Accordingly, he
revoked his offer by placing a small notice in the local news agent's window. When Julian
returned the dog, Norman refused to pay him the £5,000. Advise Julian.
Unilateral contract
Revocation?
- Acceptance completed after revocation occured
- So Errington - He started performing before it was revoked
- Plus, his advertisement of the revocation is invalid because it was not
projected in the same way of the advertisement
Lecture 3
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Consideration
- No promise will be enforced without consideration
- To avoid enforcement of gratiuitous promises
- Unless made in a deed
- Definition of consideration
- Currie v. Misa (1875) 10 LR Ex 153
• “A valuable consideration, in the sense of
the law, may consist either of some right,
interest, profit, or benefit accruing to the
one party, or some forbearance, detriment,
loss or responsibility, given suffered or
undertaken by the other”
How does consideration work
- Executed consideration
- Exchange of money for car
- I provide money, they provide car
- Transaction done
- Consideration is actioned
- Executory consideration
- Exchange of promises
- I sign a contract saying that after paying the money they will provide me
with car
- Consideration must move promisee, but not necessarily to the promisor
- Offord v Davies
- In vast majority it will.
- Car example
- I pay money for the car, consideration moves from me, to the car
dealership
- Times when it does
- Asking for a loan
- Guarantor for a loan
- Money moves from the bank to me
- But the promisor is the guarantor. So consideration has
moved from the promisee (the bank - as recipient of the
guarantee promise) but not to the promisor (the guarantor)
- Issues with consideration
- Economic value?
- General value is yes but exceptions
- Some value in the eyes of the law
- • Bret v J.S. (1600) Cro. Eliz. 756
- Son trained with bret
- Father promised to pay bret for the son training
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But died that year
Widow said she’d still pay
But widow remarried, and Bret brought an action against
the new husband, for the money
- Affection for the step son was not enough to act as
consideration in eyes of the law. No economic value
- White v Bluett (1853) 23 L.J. Ex. 36
- Bluett’s son owed money to Bluett
- White was executor
- Sued Bluetts son for money
- Bluetts son said no, because father sent a letter saying if
you would stop complaining, would write off the debt
- Son still had to pay back the debt. No econmic value
- Thomas v Thomas (1842) 2 Q.B. 851
- Widow Ms Thomasx
- Brought action against executor
- On day of his death, says to Ms Thomas “I would like you
to have one of my houses for your lifetime
- Executor agreed that she should get a house, in
consideration of Johns desires
- Not good enough for consideration
- Also £1 a year rent
- Is enough consideration, even though no
where near market value
- And keeping premises in good order
- Not good enough
Sufficiency vs Adequacy
- Consideration must be sufficient but need not be adequate
- Has to be sufficient in that it ticks all the boxes
- But need not be adequate, £1 for rent in Thomas v
Thomas
- If it has some value it is sufficient
- Pitt v PHH Asset Management [1993] 4 All ER 961
- Lockout agreement was limited in time
- PHH didnt have to offer the lockout agreement
- Public policy implications
Motive distinguished from consideration
- Thomas v Thomas
- Consideration of johns desires
- But thats not consideration
- The £1 was
Trivial things can be sufficient
- Chappell & Co v Nestle [1961] AC 87
- Promotion was run by nestle
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If you sent in 3 chocolate bar wrappers and postal order for
a shilling
- You’d be sent a record
- Ordinary price was 4 shillings, so cheaper
- The chocolate bar wrappers were valid consideration,
representing something of value
Request required?
- Not always
Third Parties
- Sometimes
Consideration in the past
- General rule is no, but exceptions
- New transaction requires new consideration
- Pao on Existing duty
- Legal duty
- Going beyond legal duty is consideration
- Contractual duties to a third party
- Pao On v Lau Yiu Long - existing promise or duty to a third
party can be good consideration
- Mismatch with the disagreements
- Two companies. Wholey owned and publicly traded
- Main agreeemnt between the two companies
- Subsidiary agreeement between the two parties
- Said that defendant had the option of buying back
shares for $2.50
- No consideration
- Past consideration from the main
agreement to initally sell the shares, acts as
consideration?
- Court says there was consideration
- Benefit to the defendent for making this
guarantee
- Shares could have gone up rather than
down, could have got their money back and
then some
- Another benefit - Promised not to sell any
shares for a year. Implicitly made in the side
agreement from the main agreement
- Mismatch of the parties was a benefit
- Right of action against the family as
opposed to their company
- No good policy reason not to enforce says
lord Scarman
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Criticism - defendents were coerced,
which translates to economic duress
- The main agreement was entered into for the
benefit of the parties of the side agreement
- Contractual duties to the promisor
- Silk v Myrick
- Promise to complete journey was not consideration
for the promise of extra money
- Sailor owed all of his duty to the captain
- Going beyond existing previous duty is good considertaion
- Generally not good consideration but can be in certain
circumstances
Glidewell test
- Goods and services contract
- B must doubt that A can or will complete his obligations
Forebareance
- Agreements not to sue are of value, good consideration
- Agreement not to complain is not good consideration
Nominal consideration
Tutorial 3
Problems
- Fuziness problem - too uncertain renders no enforcable contract
- Scammellv and Nephew ltd v ouston
- Gap problem - Silent/incomplete on material points
- One more step problem - expressly states the need for further agreement (agreement to
agree)
- Winn V Bull
- Exception - if the clause can be severed because nothing left to negotiate, and
no need for further contract (richards properties ltd v corp of wardens of st
saviours parish
- Futher exception - clear intention to be bound, and conduct amounts to a
waiver of stipulated step. Flexible systems v molkerei alois muller
Is English law too willing to hold that a contract is insufficiently certain to be enforced?
- There is a bias towards curing uncertainty
- Hillas & Co vs Arcos
- “Necessary to exclude as impossible all reasonable meanings which
would give certainty to the words before enforcement would be denied
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Theres a general imprecesion in business practice that has to be accounted for
Necssary to build in flexibility, which may consequently lead to uncetainty
Hesitant to strike down a contract when it is clear that there was an intention and
parties have begun a perfomance
- Unmeritorious reasons
Factors to determine certainty
- Any Previous dealings
- The technique of severance
- Nature of the undetaking - negotiate or not
- Workability, or substitutability of any agreed but defunct method fo ascertaining material
terms. How much can the judge fudge it basically
No shouldnt
- Lockin would put the party in breach if they walk away - thats not good. Should always
be able to walk away from negotiations
- Should always be entitled to operate selfinterestedly
Yes it was inconsistent
- How can a court be expected to decide whether subjectively a proper reason existed for
termination of negotiations
- Conflicts with Lord Ackner,
- Watford v Miles - enforced an obligation to make best endeavours
Yes
- If done by the parties its assumingly comparatively easy to assertain the value of
damges, if done by valuers it is indiactive that is a much more complex valuation
process and likely harder to assertain damages?
Lecture 4
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Consideration recap
Estoppel
- Doctrine of law
- Part of law of equity
- Means fairness
- You are prevented from doing under it
- Promissory - Stopped from going back on your promise
- Alternative to consideration
- Collier - Should not be allowed to go back on his promise that he can pay
£200 a month
- Can promises be legally binding when there isnt any consideration
- Based on the doctrine of reliance
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If you make a promise, and promisees take actions, spend money, refrain
from spending money etc that they would not have done if the promise
isnt present
Rules for it
- Previous agreement between A and B
- A is not able to perfom
- B allows A to perform differently
- A performs differently
- B decides to sue A for not performing
- Must be inequitable
Only be used as a defence, can not be a cause of action
Centeral london property trusts v hightrees house 1947
- Block of flats let for £25,00 ground rent
- 1250 ground rent reduce to
- No consideration
- Requirements for promissory estoppel were met
- Inequitable to mandate the owners to recover the full amount of
ground rent
- Denning accused of making the precedent up
- Ratio - Lower rent apply only while flats not let- so arrears in 1945
were payable. Rent goes back to full amount
- Promissory suspends obligations, does not terminate them
- Problems
- Original promise wasnt clear
- Must it be inequitable to enforce strict legal right
- Can it extinguish instead of suspend
- Shield not a sword
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MWB v rock
- Oral variation clause, stating its not possible
- Inital Agreement was oral - for payment of an existing debt by installments
- Consideration was present - Creditor recieves a practical benefit beyond
accommodating the debtor
Pinnel
- General rule that part payment of a debt is not good consideration for a promise
to discharge the entire debt
- Unless something additional is provided
- Promissory Estoppel
- If the debt arises from the provision of services
- If the creditor recieves a practical benefit
Lecture 5
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Duress
- Can render a contract unenforceable through viciating it
- Difference between void and voidable
- Voidable - perfectly valid contract, but because of the actions of one
parties the other party may terminate it
- Void of initio - unenforable and void on its face
- Three types of duress
- Physical
- Hold a gun to their head and make them sign the contract
- Barton v Armstrong (PC 1978)
- Barton threatened armstrong wtih murder if they didnt sign the
deed
- Violent doesnt have to be actual to be actionable
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Duress of goods
- Threatening someones goods, holding them to ransom
Economic
- Due to illegitimate economic pressure, the person subject to the
duress had no choice but to enter into the contract
- North Ocean shipping v Hyundai Construction (the Atlantic Baron)
- Contract for a ship to be built
- US dollar tanked
- Contract had no provision for currency variation
- “We need an extra 3 Million dollars or youre not getting the
tanker
- Return letter of credit acts as consideration,
increased by $100,000
- Economic duress - was ilegimate for hyundai to force North
Ocean shipping to take the blame for their failure to include
a currency variation provision
- And North Ocean shipping had no real choice to
not pay the $3,000,000
- R v Attorney General for England and Wales
- Confidentiality agreements introduced for patrols in the
SAS
- R, a member of the SAS, was compelled to sign an
agreement without speaking to a lawyer
- R made a book
- MoD sued though AG
- R says he was under economic duress, saying they were
putting illegitimate pressure
-
-
-
Court says not illegitimate, he had a choice. An
unpaletable choice but a choice none the less
- Context matters
Requirements
- Illegitimate pressure
- Compulsion of the will (no other choice)
- Found from universe tankships
Objective test for duress
- • Did the person claiming to be coerced protest?
- • Did that person have any other available course of
action?
- • Were they independently advised?
- • After entering into the contract, did they take steps to
avoid it?
Tutorial 5
1. What danger is Stilk v Myrick trying to avoid and why were the Courts in Williams v Roffey
Bros and North Ocean Shipping v Hyundai not concerned with that danger? Is the Court of
Appeal in Re Selectmove concerned with this danger?
- Making gratuitous promises legally enforceable
- and allowing people to ask more for carrying out a duty they were already
contracted to do for a given sum
- Duress
- There was valid consideration present with William and Roffey, in that they were getting
a benefit by avoiding the penalty clause. He didnt ask for the money, but they offered it,
and he accepted.
- There was economic duress in North Ocean Shipping, so wasnt relevent
- Estoppel wasnt even brought up in the case either
- No because it was a debt, not a provision of goods or services
2.
-
Disagree
Folks v Beer is about a debt
Willams v Roffey bros is about provision of goods and services. That distinction can be
applied quite generally to reconcile the two
3.
-
Economic duress,
But disregarding that, there is consideration along the same lines of Williams and Roffey
because they asked for it, it wasnt a promise but an agreement
- Not sure re devaluation
4. Its a gratuitious promise, theres no consideration
5.
His rent is £300 for the two months and then the normal price after. Estoppel
She cant do that, estoppel will be a sucessful defence, but his rent will go back up to £200
Not too sure, Estoppel usually only suspends and is based on specified circumstances, so she
may be estopped from claiming those arreas, but because he’s not getting better there may be
a point where its accepted that hes not going to and his rent is raised because he’s not in
financial difficulty. At that point some backdated arrears could be claimed.
Lecture 6
Misrepresentation
is a false statement of fact or law made by one party to another, which, whilst not being
a term of the contract, induces the other party to enter the contract
- Renders the contract voidable
- Does the statement form part of the contract?
- Kleinwort Benson v Malaysia Mining Corp
- Dfference between term and reprsentation
- Hierarchy - Promises, representations, other (opinion, puff)
- Can meet the requirements for term and representation
- Requirements for misrepresentation
- Unambiguously false statement of existing fact or law
- Addressed to the party mislead
- Intended to be acted upon
- Materlial which induces the making of the contract
- Dimmok vHallet
- Land was fertile and improvable
- Mere puff
- Sales talk
- Land was already let out to paying tenants
- Tenants had actually given notice to quit. A half truth
- Carlil v Carbolic Smoke Ball
- If you inhale the smoke from the carbolic smoke ball for x days and get the flu
you will be paid x amount of money
- A term
- Gordon v Selico
- Gordon in a contract to buy a lease owned by selico
- Flat in poor condition
- Dry rot
- Didnt make statements re dry rot
- Painted over it to conceal it
-
-
- Was the act of painting misrepresentation - yes
- Statement doesnt have to be oral. Misrepresentation by action is a thing
Peekay intermark v Australia and New Zealand Banking group
- Term sheet for investment products
- Final documents drawn from it become different
- Does not amount to misrepresentation
- Investers should not just be looking at the term sheet, they should be
smarter than that
- Parties had every opportunity to discover the truth
The representation must be false
- Unambiguously false
- Not a mere puff, Dimmock and Hallet
- With v O’flanagan
- There will be a misrepresentation if the statement was true when it was
made but becomes false and it is not corrected
- Doctors practice brought in an income of £2,000 a year
- This statement was no longer true at completion
- Only worth about £250 a year when signed
- Seller had a responsibility to correct it
- The misrepresentation act 1967, section 2.1 and 2.2
- Has to be a false statement
- Conlon v Simms
- Simms got struck off the solicitors role
- Convinced Conlon he was innocent
- He would be given back security payments if he was not be able to return
as a solicitor
- Sued for specific performance of this
- Misrepresentation - that he was honest, and innocent
- Buuuut, didnt induce him to make a contract
- Non discolsure
- Fraudently misrepresented his position by not telling conlon
- This is very unusual
- Statements of opinion or belief are not misrepresentations
- Bisset v Wilkinson
- This amount of land can support 2000 sheep
- It could not
- Neither knew anything about sheep farming
- Sued for misrepresentation
- Statement of opinion tho
- So not actionable
- If the seller had worked the farm before then it might be
different
- Esso Petroleum v Marden
- This station can sell 200,000 gallons of petrol each year
-
-
-
-
-
Esso rep misstated - only 60-70k
Just an opinion
Not good enough, esso is in the business of selling petrol,
ought to know
- That badly wrong isnt an opinion
- Smith v land and house property
- Let to a most desirable tenant
- False statement of fact not an opinion
- Tenant was bankrupt, clearly not desirable
- When one party has more knowledge than the other they have a particular
responsibility and the court is less likely to treat it as an opinion
Fact not intention
- Can not be a statement of planning to do something
- Wales v Wadham
- Husband left his wife and lived with another woman
- Wife made a promise never remarry and got more money in divorce
- She married again
- Ex husband sued
- Fraudlent misrepresentation
- No, it was an intention not a fact
- Edgington v Fitzmaurice
- Prospectus for loans
- Intention for company was to use the money to bolster the business
- Less sympathetic than Wales
- Statement of intention amounted to a statement of fact
- Cause they paid off their loans not made the ventures
Representation of law
- Misrepresentations of law used not to be misrepresentations
- Kleinwort Benson ltd v Lincoln city council
- Tort based statement rose to the level of misrepresentation
- Pankhania v Hackney LBC applied this to contract law
Addressed to the mislead party
- Doesnt need to be made by the other party to the contract tho
- Third party misrepresentation
- Commercial banking co of sydney v R.H Brown and co
- RH brown selling sonething
- Asked for credit check by Sydney,
- They said ok credit, had bad credit
- Actionable misrepresentation even though Sydney werent a party
to the contract
Intended to be acted upon
- Peek v Gurney
- Prospectus for sale of shares
- Bought shares in company based on false statements
-
-
Passed on to those it hadnt been addressed to
No misrepresentation because prospectus was only intended to be acted
upon by the inital recipients
Andrews v Mockford
- Issued shares
- ‘Expert’ to SA mine, comes back chatting shit about it being great
- Sold loads of shares
- Sued for misrepresentation
- Bought the shares in SA
- Court said he could sue regardless of where he bought the shares
Inducement
- Misled party has to actually rely on the misrepresentation when deciding to enter
into the contract
- An inducement suffices when it is one of many reason, doesnt have to be the
sole one
- Smith v Eric S Bush
- Smith bought a house
- Eric S Bush surveyed the house
- Sent to the building society and entered the morgage
- Contract between the building society and the surveyors
- Exclusion clause
- Limits the liability of the surveyor
- The surveryors did a shit job
- Missed a significant problem
- Was the presence of this survey a sufficent inducement for mrs smith to
enter into the contract
- Museprime properties v Adhil properties
- Sale of 3 properties at auction
- Particulars of sale states the rents would be open to negotiation
- This was not true, rents were already agreed with two tenants
- Not an important reason was argument
- Court says no
- Fact that the rents were misreprentation was AN inducement, and
that was enough
- If you dont know about the misrepresentation its not actionable
- If you know its false its not actionable
- If you dont allow it to affect your decision its not actionable
- Horsfall v Thomas
- Concealment of a defect in the gun sold
- Sued for misrepresentation
- Buyer hadnt examined the gun before buying it
- Did not know of it when buying it, so suit failed
- Atwood v Small
-
-
Buying a mine, sellers had made statements about the capacity of the
mine
- Buyers had their own expert
- Expert told them the sellers were wrong in what they were saying but they
bought the mine anwyays
- Knew the misrepresentation wasnt true before they entered into the
contract
- Redgrave v Hurt
- Solicitor put out an advert selling his residence
- Said bringing in £300 a year
- Showed his recipets
- Showed an income of £200 a year
- Went ahead with the transaction
- Court says no
- Despite the claims, they showed evidence to the contrary
Types of misrepresentation
- Fraudulent
- Derry v Peek
- Prospectus for tramway, raising money for it
- CLaimed there had been special permission for it to be moved by
steam power
- No special permission
- Company failed, and was wounded up
- Made knowingly
- Without belief in its truth, recklessly or carelessly
- No fradulent misrepresentation
- It was a careless statement but they were
- Doyle v Olby
- Can not have liability for a statement as both a term and a
misrepresentation
- Damages
- Presence of fradulent misrepresentation
- Issued in the tort of deceit
- Innocent
- Honestly believed in the truth of the statement at time time it was made
- Cant have recision of the contract as well as money damages
- Section 2.2 of the misrepresentation act
- negligent
- Hedly Byrne and heller
- Duty of care
- Establish a duty of care and negligent misrepresentation
- Bank has a duty of care to speak truthfully and have a knowledge
of their clients
- Howard Marine v Ogden
-
-
-
Quote for hiring barges
1600 tons carrying capacity, which is what the lloyds register said. But
Llyods actually said 1,800
- Misrepresentation did occur, should have known the correct carrying
capacity of the barges
- Royscot trust ltd v rogerson
- Car deal and finance company
- Car dealer induced the finance company to the agreement
- Amount of the deposit was misrepresentation
- Customer defaulted
- Sold the car
- Finance sued and claimed damages under 2.1
- Question was Could the claimant claim for all the losses, or
only those reasonably forseeable
- Same as liability for fraudlent misrepresentation
- Able to claim for all the losses
- SpiceGirls v Aprillia world service bv
- Ginger spice leaves group
- Aprillia makes motor cycles, spice girls advertised
- Did the group know ginger was leaving
- Denyed misrepresentation
- They didnt bellieve that she was leaving even she told them
- So there was misrepresentation
- No statement had ever been made that there would be 5 members of the
group
- Misrepresentation made by conduct, all 5 in commercial photoshoot
implies there will continue to be 5 of them.
Remedies for misrepresentation
- Found in the tort of deceit
- Damages
- Recession of the contract
- Sometimes is better to claim for a breach of contract, assuming the statement is
a term instead of a misrepresentation
Fradulent you use tort of deceit
Neglient you use tort of negligence
Innocent you use statute s2.1/S2.2
Aim is to put the victim in the position they would be had the tort not occured
Tutorial 6 Link between Duress and consideration
- Economic duress is present when one threatens to breach a contract unless the other
party pays more or accept less
-
No additional consideration would be supporting the promise to pay more/accept less, so
there is no valid contract
- But Williams v Roffey Bros enlarges consideration to the point where that might
not be the case
Unless performance isn't
- Economically viable without renegotiation
- Williams v Roffey Bros
- Less economically efficient than would be with negotiations
Or
- Circumstances are significantly changed from the time of formation but not sufficient to
frustrate the contract
To affirm the presence of illegitimate pressure. If there was a viable option open to them then
illegitimate pressure would be less likely
Problem Q\k
Objective test for Duress
- Did the person claiming to be coerced protest?
- Extremely angry, called others. Assume protest
- • Did that person have any other available course of action?
- Was the blue marquis an acceptable course of action? Yes. It was an
unpalatable alternative but an alternative nonetheless
- • Were they independently advised?
- Yeah he was independently advised
- • After entering into the contract, did they take steps to avoid it?
- Yeah, instantly initiated legal proceedings
Lecture 7 - Mistake
-
3 types of mistake
- Unilateral - One party is very seriously mistaken
- Parties are entirely at cross purposes
- Mutual mistakes
- Parties at cross purposes
- Bilateral Mistakes
- Parties make the same mistake
- Must be a fundamental mistake
- Bell v Lever Bros
- Mistake of quality
- Both under the mistaken impression mr bell was entitled to
redundancy payments, but he wasnt because he was defrauding
the company
-
-
-
Was the redundancy agreement entered into on the basis
of mistake
Mistake was NOT fundamental enough to invalidate the
agreement
Very very high bar to establish mistake
Types
- Existence
- Galloway v Galloway
- Parties had mistakenly believed they were married
when they entered into the deed of sepearation
- Fundemental mistaken belief renders the contract
void
- Sale of goods act
- Goods perished without the knowledge of the
selling party (often at sea) renders the contract
formed for their sale void by mistake
- Couturier v. Hastie
- Because when the plaintif made the contract the
corn was fine, there was no mistake and could not
be a recovery
- Mistake as to the existance of the subject
matter always makes the contract void
- Alternatively - Implied term in every contract that
the goods for sale are in existance when the
contract is made
- Identity
- Possibility of perfomance
- Quality of the subject matter
- First three simple, last one much more nunanced
Mistake at Equity
- Solle v Butcher
- Denning LJ
- Renders the contract voidable not necessarily void
- “Implied condition precedent that the contract is
perfomable
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