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ALL Cases BSL165
Foundations of Business Law (Murdoch University)
Studocu is not sponsored or endorsed by any college or university
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CONTRACT LAW CASES
Offer Distinguished from Statements of Information
If a statement merely provides information in the course of negotiations – it is not an offer.
Harvey v Facey [1893] AC 552
Harvey sent a telegram to Facey which stated: "Will you sell us Bumper Hall Pen? Telegraph lowest cash price"
Facey replied by telegram:-"Lowest price for Bumper Hall Pen £900.”
Harvey then replied:-"We agree to buy Bumper Hall Pen for the sum of nine hundred pounds
asked by you. Please send us your title deed in order that we may get early possession."
Held: No contract existed. Facey’s telegraph was not an offer but an answer to Harvey’s
request i.e. lowest price of Bumper Hall Pen if they were to sell. Harvey’s 3 rd telegraph was
thus an offer that Facey had not yet accepted.
Offer Distinguished from Invitation to Treat- ADVERTISMENTS
Gibson v Manchester City Council (CACL – 3.80)
Facts: Manchester City council adopted a policy of selling houses to its tenants. Gibson, one
of the tenants, applied for details of his house price. The Council sent a letter claiming that it
‘may be prepared to sell the house to you at the purchase price of £2,725 less 20% = £2,180
(freehold)… This letter should not be regarded as a firm offer of a mortgage. If you would like
to make formal application to buy your Council house please complete the enclosed
application form and return it to me as soon as possible.’
Gibson completed the application form and returned it to the council. However, before the
formal contracts were signed the Council changed policy and Gibson was told that he could
not complete the purchase. Gibson sued the Council claiming that the Council letter was an
offer and his response was acceptance and there was a binding contract.
Held: No offence committed – the Council letter was merely an invitation to treat. The words
‘may be prepared to sell’ and inviting Gibson ‘to make a formal application’ indicated that
the letter was setting out financial terms on which the Council would be prepared to
consider a sale. A statement that merely provides information is not an offer but an
invitation to treat.
Offer Distinguished from Invitation to Treat- ADVERTISMENTS
Carlill v Carbolic Smoke Ball (CACL – 3.40)
Facts: The Carbolic Smoke Ball Co. produced the 'Carbolic Smoke Ball' designed to prevent
users contracting influenza or similar diseases. The Co. advertised that they would pay £100
to anyone who caught the flu after using the ‘smoke ball’ 3 times a day for 2 weeks - to show
their sincerity they deposited £1000 in a bank. After seeing this advertisement Mrs. Carlill
bought one of the balls and used it as directed. She subsequently caught the flu and claimed
the reward. Defendants later argued that the advertisement was a "mere advertising puff"
and was not intended to create any legal relations.
Held: £1,000 deposited at the bank was a clear indication of the intention of the party to
create legal relations. Here advertisement was regarded an offer as it went beyond mere
enticement and showed a clear intention to be unilaterally bound by any positive response.
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Offer Distinguished from Invitation to Treat- SHOP DISPLAYS
Pharmaceutical Society of GB v Boots Cash Chemist (CACL – 3.100)
Facts: Law prohibited the sale of certain drugs unless it was under the "supervision of a
pharmacist”.
Boots had a self-service pharmacy. Customers would select items from the shelves and take
them to a cashier's desk at one of the exits where they were paid for.
Issue: Whether the goods on display amounted to an offer?
Held: Display of goods only an invitation to treat - customers "offered" to buy the goods
when they took the goods to the counter - contract made when that offer was accepted.
Keeping an offer open
Goldsbrough, Mort & Co Ltd v Quinn (CACL – 3.240)
Quinn offered to sell their land to Mort for a price. Mort wanted some time to think about
this offer and paid Quinn 5 shillings to keep the offer open (an option). Before the week
ended Quinn withdrew (revoked) their offer to sell the land, saying it was a mistake. Mort
accepted the offer within the week and sued Quinn for performance of the contract
agreement.
Held: The option having been given for value was not revocable, and the acceptance of the
offer by Mort was valid and there was a binding contract.
Lapse of offer- REQUEST FOR INFORMATION
Stevenson Jacques & Co. v McLean (CACL – 3.310)
Facts: Mclean offered to sell iron to Stevenson for 40/- per ton, offer open till Monday. At
9:42 am Monday, Stevenson telegraphed Mclean asking, ‘please wire whether you would
accept 40 for delivery over 2 months, if not, longest time limit."’ Receiving no reply,
Stevenson telegraphed acceptance of Mclean’s offer in the afternoon. However, by then
Mclean had sold the iron to another party without Stevenson’s knowledge.
Issue: Whether Stevenson’s telegram on Monday morning was a counter-offer which
rejected Mclean’s offer?
Held: It was a request for further information that did not destroy the original offer and
therefore a contract was made between Stevenson and Mclean on Monday afternoon.
Stevenson’s acceptance was valid as Mclean had not yet communicated the revocation of his
offer.
Acceptance Must be Made in Reliance on Offer
R v Clarke (CACL 3.210)
Facts: The WA government had offered a reward of £1000 for information leading to the
arrest and conviction of people who had murdered two policemen.
C was arrested in connection with the murders, and in order to clear himself he made a
statement that led to the conviction of the real murderers. (He actually admitted he was
giving info to secure his release and not for the reward. He would not have provided the info
voluntarily if he had not been arrented)
C was released and later claimed for the reward.
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Issue: Whether C was entitled to the reward money?
Held: There was no acceptance as C gave information to clear himself and not in reliance
upon the reward. Acceptance can only be made in response to the offer and not
independently of it.
Communication of acceptance by conduct
Empirnall Holdings v Machon Paul (CACL 3.360)
Facts: E engaged M to do some construction work. After work commenced M submitted a
written contract to E (effectively an offer). E never signed the document, but M continued to
carry out work and E continued to make payments in accordance with the document. E went
bankrupt owing M considerable sums.
Issue: Was there acceptance of contract?
Held: Although E did not expressly accept the offer, it had impliedly accepted the offer by
conduct [i.e. E taking benefit of the offer knowing full well that they were to be paid for].
McHugh JA:
‘where an offeree with a reasonable opportunity to reject the offer of goods or services
takes the benefit of them under circumstances which indicate that they were to be paid for
in accordance with the offer, it is open to the tribunal of fact to hold that the offer was
accepted according to its terms. …’
Silence is not acceptance
Felthouse v Bindley (CACL 3.380)
Facts: Felthouse offered to buy a horse from his nephew and stated in a written offer “If I
hear no more about him, I consider him mine at £30 13s". Nephew did not reply. The horse
was later sold by an auctioneer Bindley. Felthouse sued Bindley for selling the horse, which
he stated belonged to him as his nephew accepted his offer by being silent.
Issue: If the nephew’s silence amounted to acceptance?
Held: For there to be an agreement, acceptance must be communicated. Acceptance cannot
be inferred from silence of inaction of offeree.
Communication of acceptance by agent must be authorised
Powell v Lee (CACL 3.480)
Facts: Powell had applied for a headmaster’s post and the school board appointed him at a
meeting. However, the school board resolution was not communicated to Powell officially.
One of the board members, without any authority, informed Powell about the decision. The
school board met later and rescinded their earlier decision. Powell sued for breach of
contract.
Issue: Was there an acceptance and hence a contract?
Held: No contract. Acceptance can only be made by an authorised person
Postal acceptance rule
Adams v Lindsell (1818) 106 ER 250
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Facts: offer posted on the 2nd September asking for a reply by post. The letter was
misdirected by the wrong address and reached offeree on the 5th of September. Acceptance
was posted on the 5th of September, received on the 9th September. Normally offeror would
have received answer by 7th of September – goods sold to a 3rd party on the 8th of
September.
Issue: when was the contract concluded?
Held: Contract concluded 5th September, when acceptance was posted. Postal acceptance
rule operates to benefit the offeree as the offeror assumes all the risk.
INTENTION TO CREATE LEGAL RELATIONS- DOMESTIC AGREEMENTS (HUSBAND AND WIFE)
Balfour v Balfour (CACL 4.60)
Facts: Mr. B promised to pay wife £30 per month as maintenance.
Mr. B returned to Sri Lanka. Mrs. B was to remain in England for medical reasons.
Couple later separate and Mrs. B claims the £30 per month as had been agreed.
Held: At the time of the agreement parties were in a domestic relationship – thus the parties
had never intended to create legal relations.
INTENTION TO CREATE LEGAL RELATIONS- DOMESTIC AGREEMENTS (HUSBAND AND WIFE)
Merritt v Merritt (CACL 4.80)
Facts: Husband and wife separated. There was £180 left owing on the house which was
jointly owned by the couple. The husband signed an agreement whereby he would pay the
wife £40 per month to enable her to meet the mortgage payments and if she paid off the
mortgage in full he would transfer his share of the house to her.
Husband later failed to transfer the house to wife, claiming that the agreement was of a
family nature and not intended to create legal relations.
Held: Court found this agreement was not a domestic arrangement, but rather, a valid
contract. This was because the agreement was (i) after their marriage (they had already
separated when Mr. M agreed to this); (ii) there was due consideration (re: Mrs. M paid the
mortgage of the house); (iii) the parties wrote down & signed the agreement indicating they
took the matter seriously.
INTENTION TO CREATE LEGAL RELATIONS- FAMILY OR SOCIAL AGREEMENTS
Todd v Nicol (CACL 4.100)
Facts: Mrs. N living in Adelaide, wrote a letter to her sister-in-law and niece (the Todd's), in
Scotland inviting them to come live with her.
Mrs. N promised free accommodation and that she would alter her will so that after she
died, her house would become theirs.
Mrs. T quit her job and she and her daughter moved to Australia.
Later Mrs. N and Mrs. T argued and Mrs. Mrs. N told the Todd's to leave the house.
Held: That although there was a presumption that in family arrangements of this kind there
would be no intention to create legal relationship, in this case the fact that Mrs.T had quit a
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job and incurred expenses in moving to Adelaide shows there was intention to create legal
obligation. Intention was implied in their agreement.
Exception to past consideration rule
Lampleigh v Braithwaite (1615) 80 ER 255
Facts: Braithwaite had killed a man and then requested Lampleigh seek a pardon for this
crime from the King. Lampleigh rode around the country at his own expenses to obtain this
pardon – finally found the king and obtained the pardon. Braithwaite afterwards promised
to pay Lampleigh £100 for his trouble, which he in fact never did.
Issue: Lampleigh claimed there was a contract.
Held: Although Lampleigh’s act of getting the King’s pardon was past consideration for the
£100 promise – because the act it was done at the request of Braithwaite and Lampleigh
could reasonably be expected to be paid for it – both parties would have contemplated that
payment would be due, and the later promise of £100 was evidence of this.
Performance of an existing legal duty- i. BY LAW
Collins v Godefroy (CACL 5.120)
Godefroy promised to pay Collins if Collins would attend court and give evidence for
Godefroy. Collins had been served with a subpoena (i.e., a court order telling someone they
must attend). Collins sued for payment.
Held: Collins was under a legal duty to attend court he had not provided consideration.
Performance of an existing legal duty- ii. UNDER EXISTING CONTRACT
Stilk v Myrick (CACL 5.140)
Two sailors deserted a ship on a voyage to the Baltic. Because the captain was unable to
replace the deserters, he promised the remaining crew that he would divide the deserters’
wages among them if they would sail the ship back to London. Captain later refused to pay.
Held: the sailors were already bound by their contract to sail back and to meet such
emergencies of the voyage, promising to sail back was not valid consideration. Captain did
not have to pay the extra money.
Exceptions to the Existing Legal Duty Rule- FRESH CONSIDERATION
Hartley v Ponsonby (CACL 5.160)
When half the crew of a ship deserted it making it dangerous to continue. The remaining
crew were under no obligation to go to sea under those conditions. Captain promised the
crew extra money to sail back, but later refused to pay claiming they were doing their
normal job which they were contracted to do.
Held: Sailing the ship back in such dangerous conditions was over and above their normal
duties and therefore amounted to good consideration.
Promissory Estoppel
Waltons Stores Ltd v Maher (CACL 5.270)
[Australian High Court decision]
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Walton stores (W) negotiated to lease land from Maher (M), on terms that required M to
demolish a building on their land and construct a new building to W’s specifications.
Agreement was reached on terms and rent & W' solicitors sent a draft lease to M's solicitors
in October. M revised lease & sent to W. In November M informed W that demolition had
commenced and it was important to conclude the lease quickly. Later that month W started
having reservations about the lease and instructed its solicitors to 'go slow'. In January M
commenced building & when approximately 40% of building work was completed, W
informed M that it did not wish to proceed. M brought action to enforce the agreement.
Issue: Whether W was estopped from denying that a contract had been made between the
parties?
Held: Promissory estoppels could arise between parties involved in pre-contractual
negotiations and could be used to support a cause of action in contract. M assumed that the
amendments were acceptable to W and that the signing of contracts was only a formality;
this assumption had been induced by W; M would suffer detriment as a result of relying on
the assumption; W was estopped from denying this assumption.
Minors: Voidable Contracts
Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452
A minor applied for shares in a company and paid the amount due on application. The
shares were duly allotted to her, and she paid the further amounts due on allotment and on
the first call. Eighteen months after allotment, while still under age, she repudiated the
contract and sought: (a) To be free from liability for future calls; and (b) To recover the
money she had already paid.
Held: As a minor she could repudiate the contract & free herself from liability for future calls
on the shares.
However, her action to recover the money already paid failed. There had been no failure of
consideration. She had received the shares that she had contracted for and thus the money
was not recoverable
Minors: Contract for Necessaries
Scarborough v Sturzaker (1905) 1 Tas LR 117
Sturzaker, a minor, cycled 19 kilometres to work each day. He traded in his old bicycle to
Scarborough and made a part payment on a new one. Sturzaker later repudiated the
contract and refused to pay the outstanding amount.
Issue: was the trade-in contract for the new bicycle valid?
Held: The bike was a class of goods that could be classified as a necessary, and was in fact a
necessary to the minor as Sturzaker needed it to commute to work.
Minors: Beneficial Contract of Service
Hamilton v Lethbridge [CACL 6.60]
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Facts: The defendant, while a minor, entered into an article of clerkship with plaintiff. One of
the terms of agreement was that defendant would not practise as a solicitor within 50km of
Toowoomba where plaintiff had his practice. Within a year of qualifying, defendant started a
practise in Toowoomba. Plaintiff sought an injunction to stop defendant.
Held: The High Court was of the view that the contract as a whole was beneficial to the
defendant, and therefore was enforceable.
Unconscionable Contract
Commercial Bank of Australia v Amadio [CACL 7.540]
Mr and Mrs Amadio were approached by their son, Vincenzo, and his bank manager to
execute a guarantee & mortgage (as security) for the Vincenzo's business. The bank
manager, being much involved with the Vincenzo's activity, had strong reasons to believe
that Vincenzo had lied to the parents (who had little business experience and understanding
of the English language) about the solvency of his business. When Vincenzo's company went
under the bank proposed to exercise its power of sale under the mortgage. The Amadio
challenged the validity of the mortgage in the H.C.
Held: The Amadios were under special disability in dealing with the bank because of their
age, their limited grasp of written English and were under a misapprehension as to the
nature and implication of the transaction into which they were entering [they relied on their
son’s misleading advice]. The special disability of the Amadios was sufficiently evident to the
bank through its agent [bank manager] and the bank failed to put an inquiry as to whether
the Amadios fully appreciated the contract they were being aske
Representation v Terms
Oscar Chess Ltd v Williams (CACL_9.50)
Williams had offered his mother’s car to a car dealer as part payment for a new car. Williams
described the car as a 1948 model, the date shown in the car’s registration book. The dealer
paid William £290 for the car. It turned out that the car was a 1939 model and only worth
£175. The car dealer claimed damages representing the difference in value of £115, on the
ground that it was a term of the contract that the car was a 1948 model.
Held: The statement that the car was a 1948 model was not a term but an innocent
misrepresentation. It should have been obvious to the car dealer that Williams had no
personal knowledge of the year the car was made and was relying on the date in the
registration book.
IMPLIED TERMS
The Moorcock (CALC_9.560)
The Moorcock was a steamship whose owner entered into a contract with the owner of a
wharf, the defendant, in order to unload cargo. While the ship was docked, the tide went
out causing the hull of the ship to settle on a ridge of hard ground thereby ridge damaging
the ship. The owners of the wharf claimed that there were no terms in the contract to
ensure the ship’s safety nor could the owners have foreseen the damage caused to the ship.
Held: Although the contract was silent on this point, it was an implied term that the
defendant would take reasonable care to see that the berth was safe for the vessel during
low tide.
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CONDITION:
Associate Newspapers Ltd v Bancks (CACL_9.160)
Facts: Bancks made an agreement to furnish a full comic for plaintiff’s newspaper - agreed
that it would be presented on the front page for 10 years - after 2 years - presented on p.3
for three consecutive weeks - Bancks repudiated the agreement.
Issue: Whether the undertaking to publish the comic on the first page was a condition or
warranty?
Held: It was a breach of condition
Test to be Applied:
Does the term go to the root of the contract so that the failure to perform it would render
the performance of the rest of the contract by the plaintiff a thing different in substance
from what the defendant has stipulated, OR does it only partially affect the contract so that
it can be compensated for in damages?
WARRANTY:
Bettini v Gye (CACL_9.180)
Facts: A singer signed a contract to sing & to be in London at least 6 days before
commencement of the engagements for rehearsals - singer fell ill and arrived 4 days late promoter cancelled the contract
Issue: Was the term requiring rehearsals a condition or warranty?
Held: It did not go to the root of the contract - only a breach of warranty.
The failure to attend rehearsal could only affect theatrical performance of the main
engagement, which was to sing at various venues for 15 weeks.
INNOMINATE TERM:
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (CACL_9.200)
Fact: H chartered a ship to K for 2 years. The contract contained a seaworthy term that
required that the ship be ‘in every way fitted for ordinary service’. The ship had many serious
breakdowns & spent 20 of the first 30 weeks under repair.
Held: The seaworthy term was an innominate term, the breach of which could entitle K to
terminate if its consequences were so serious as to frustrate the commercial purpose of the
venture.
However, the 20 week delay caused by the breach, in the context of a 2 year charter, was not
great enough to deprive K of the substantial benefit of the contract & therefore they could
not repudiate the contract.
EXCLUSION CLAUSE: SIGNED DOCUMENTS
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (CACL_9.250)
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Facts: A company manager signed, without reading, an ‘Application for Credit’ that
contained the following words: “Please read ‘Conditions of Contract’ (Overleaf) prior to
signing”. Those conditions contained an exclusion clause that exempted the other party from
liability in respect for goods damaged during transportation. Goods were later damaged
during transport.
Issue: Whether the manager was bound by the conditions of the contract which he did not
read, & which were not otherwise mentioned by the other party?
Held: The exemption clause had become part of the contract and the party was bound by
them. By signing a person makes a representation that have either read & approved the
contents of the document or are willing to take the chance of being bound by those
EXCLUSION CLAUSE: ABSENCE OF SIGNED DOCUMENTS
Thornton v Shoe Lane Parking (CACL_9.340)
Facts: T went to park at a new automated car park. Outside the car park there was a notice:
"all cars parked at owner's risk". An automatic ticketing machine dispensed a ticket on which
was another clause printed in small print at the bottom left corner stating: "...Issued subject
to the conditions...Displayed on the premises". In the garage on a pillar opposite were a set
of conditions that provided that the management was not liable for any personal injuries
howsoever caused. T was injured when he returned to collect his car.
Held: The writing on the ticket was not visible until after the contract had been formed,
therefore the contract was not subject to the exclusion clause and other conditions.
EXCLUSION CLAUSE: ABSENCE OF SIGNED DOCUMENTS
Olley v Marlborough Court Ltd (CACL_9.320)
Facts: Plaintiff & her husband took a room at the defendant’s hotel. In their room, attached
to the back of the door, was a notice that the hotel was not liable for the safety of any
articles left in the guests' rooms. Plaintiff’s Room was burgled & defendant relied on the
exclusion clause.
Held: Exclusion clause was not part of the contract. The contract had already been made
before the plaintiff & her husband went to the room and so the notice could not thereafter
affect her rights.
EXCLUSION CLAUSE: NON-CONTRACTUAL DOCUMENTS
Causer v Browne (CACL_9.300)
C left her dress with B for dry cleaning and received at the time of deposit a docket which
had printed conditions purportedly exempting B from liability for any loss of or damage to
clothing. When dress was returned to C, it was found to be damaged.
Held: B was liable and could not rely on exemption clause because:
 The docket was one which could reasonably be understood to be only a voucher to
be produced when collecting goods, & not something containing conditions
exempting B from liability of negligence.
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 Onus was on B to prove that person receiving the docket was aware that it was
delivered not merely as a voucher, but was intended to convey to him the knowledge
of the special conditions upon which B intended to modify the effect of the contract.
EXCLUSION CLAUSE: NON-CONTRACTUAL DOCUMENTS
Council of the City of Sydney v West (CACL_9.440)
Facts: West parked his car at defendant's car-park. He received a ticket that exempted
defendants from loss and damage to the car ‘however caused’. It also stated that the ticket
must be presented when paying or leaving the car park. Later a thief claiming to have lost his
ticket was issued with a duplicate ticket that did not match West’s car and was able to enter
West’s car & drive it out of the car park without any inquiry. West sued.
Held: The clause did not protect the defendant’s as their action fell outside the scope of the
contract. The act of issuing the thief with a duplicate ticket was not authorised by the
contract and therefore fell outside the scope of acts that were envisaged by the exclusion
clause.
EXCLUSION CLAUSE: OTHER RULES (CONTRA PROFERENTUM)
Insight Vacations Pty Ltd v Young (CACL_9.390)
The plaintiff was travelling on the defendant’s tour bus. The agreement contained a clause
stating: “Where the passenger occupies a motorcoach seat fitted with a safety belt, neither
the Operators nor their agents or co-operating organisation will be liable for any injury,
illness. . . Whatsoever arising from any accident or incident, if safety belt is not being worn
at the time of such accident or incident”. The plaintiff was injured when the bus driver
braked suddenly while the plaintiff had gotten out of her seat to get something from her
bag.
Issue: Whether the exclusion clause applied?
Held: the exemption clause itself would have no application to Mrs Young's claim. The
exemption clause could only apply when a passenger actually occupied a seat on the motor
coach, not when the passenger had left her seat to move about the coach (as passengers
were permitted to under contract). Because she was not sitting in her seat when she fell, the
exclusion clause could
DISCHARGE OF CONTRACT: TERMINATION BY BREACH (CONDUCT AMOUNTING TO
REPUDIATION)
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (CACL_11.170)
Capalaba Park agreed to lease premises in a shopping centre it was developing to Laurinda.
Under the Contract, it undertook to ensure that the executed lease was registered before
Laurinda went into possession. Laurinda went into possession in Dec 1985 and made
repeated requests (in March & Aug 1986) for Capalaba to provide a registered lease but it
failed to do so. Finally, Laurinda wrote requiring it “to complete registration within fourteen
days”. The registration was not completed & in September 1986 Laurinda terminated.
Held: Capalaba’s conduct was repudiatory and that entitled Laurinda to terminate. Ct
considered that Capalaba’s conduct viewed as a whole indicated that they were not
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prepared to perform the contract. Capalaba had not only delayed in fulfilling its obligation
to procure a registered lease, but had also not given adequate response to the lessee’s
inquiry of the matter.
Illustrations when contract may be frustrated
Taylor v Caldwell (CACL_11.300)
Facts: The defendant had granted the plaintiffs a licence to use the Surrey Gardens and
Music Hall for a series of concerts. After the agreement was made, but before the first
concert was held, the Hall burnt down accidentally. The plaintiffs, alleging that the
defendants were in breach of their obligation to provide the Hall, sought to recover the
expenditure they had incurred by way of advertising.
Held: Contract had been frustrated. Destruction of the Hall had occurred without fault of
either party, which made the contract impossible to perform without existence of the Hall
(the subject matter). Both parties were excused from future performance.
Illustrations when contract may be frustrated: DISSAPERANCE OF THE BASIS OF THE
CONTRACT
Krell v Henry (CACL_11.320)
Henry entered into a contract for the hire of Krell’s apartment for two days – Henry’s
intended use for the apartment was to view the Coronation procession of Edward VII –
Though this objective was not stated in the agreement both parties were aware that many
other flats in the area had been rented for the same purpose - The coronation was
postponed due to the King’s illness – Henry declined to pay for apartment
Held: performance of a contract will be excused when the purpose of the contract is
frustrated by unforeseeable supervening events. Whether the substance of the contract had
disappeared is to be determined not solely by reference from the terms of the contract but
from surrounding circumstances.
In this case the sole purpose of the contract was to allow Henry to view the coronation. This
objective was not expressed in the contract but was inferred from surrounding
circumstances, and both parties understood this. Performance of the contract was not
rendered impossible, since Henry could remain in the flat even though the coronation
procession did not take place. However, Henry would not receive any benefit from staying in
the flat, therefore he must be excused from performing.
Limits to the doctrine of Frustration
Tsakiroglou v Noblee Thorl (CACL_11.430)
Where a contract for the sale of peanuts to be shipped from Sudan through the Suez Canal
to Hamburg. The Canal was closed to navigation, and the alternative route was round the
Cape of Good Hope which made it four times longer and more expensive. The sellers failed
to ship the goods claiming that the closure of the canal had frustrated the contract.
Held: The contract was not frustrated by the closure of the Suez Canal. Going round the
Cape of Good was more expensive but not fundamentally different as it was still possible to
perform the contract without any damage to the peanuts.
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Limits to the doctrine of Frustration
The Eugenia [1964] 1 All ER 161 at 166
Facts: The Eugenia was chartered for a trip from genoa to India – a "war clause" in the
contract forbade the charterers from entering a "dangerous zone" – charterers entered the
Suez canal when it was a dangerous zone and were trapped in the canal when war broke out
Held: The contract was not frustrated because the Eugenia was trapped in the canal – being
at fault, the charterers couldn’t rely on self-induced frustration
Consequences of Frustration
Fibrosa Spolka Akcyjna v Fairbairn, Lawson, Combe, Barbour, Ltd [1942] 2 All ER 122
Fibrosa (Polish firm) agreed to purchase several machinery from Fairbairn (English firm) – on
18 July 1939: Fibrosa paid £1,000 deposit - On 1 Sept: Germany invaded Poland – On 3 Sept:
Britain declared war on Germany and the law made it illegal for any English Company to
Trade with the enemy– On 7 Sept: Fibrosa wrote to Fairbairn claiming the return of the
£1,000 – Fairbairn refused to comply with the request claiming that considerable work had
been done on the machinery, & argued that the contract had been frustrated by war and the
losses must lie where they fell.
Held: the deposit was recoverable as Fibrosa had not received any machinery, there was a
total failure of consideration. ‘A man who pays money in advance on a contract which is
frustrated and receives nothing for his payment is entitled to recover it back.’
DAMAGES: REMOTENESS
Victoria Laundry ltd v Newman Industries ltd (CACL_12.110)
The contract was for the sale of a boiler by the defendant to the plaintiff for use in the
plaintiff’s laundry and dyeing business. The boiler was delivered 20 weeks after the time
fixed by the contract. The plaintiff claimed damages for the loss of a large number of
customers and the loss of a highly lucrative ‘special contract’ with the Ministry of Supply.
Issue: Could the plaintiff recover the loss of ‘ordinary business’ and also for the lucrative
‘special contract’?
Held: the plaintiffs could recover a general sum for the loss of ‘ordinary business’. The
defendant knew that the plaintiffs needed the boiler for immediate use in their business.
The Ct held that the defendants must reasonably be presumed to foresee the loss of
business if the boiler was not delivered on time (loss arising naturally). However, the
plaintiffs were not able to recover losses relating to the highly lucrative ‘special contract’. For
the plaintiff to recover the profits expected on the ‘special contract’, the defendants would
have had to know of the prospect of such contracts.
TORT LAW CASES
DUTY OF CARE
Donoghue v Stevenson [CACL 14.70]
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Mrs. Donoghue went to a cafe with a friend. The friend brought her a bottle of ginger beer
and an ice cream. The ginger beer came in an opaque bottle so that the contents could not
be seen. Mrs. Donoghue poured half the contents of the bottle over her ice cream and also
drank some from the bottle. After eating part of the ice cream, her friend poured the
remaining contents of the bottle over the ice cream and a decomposed snail dropped from
the bottle. Mrs. Donoghue suffered personal injury and shock as a result. She sued the
manufacturer of the ginger beer - Stevenson.
Held: Mrs. Donoghue was entitled to recover damages from Stevenson for negligence…
STANDARD OF CARE: PROBABILITY OF RISK OF INJURY
Bolton v Stone [CACL_14.530]
Plaintiff lived on a side street next to a cricket club, and was injured after being struck on the
head by a cricket ball. The ball that hit Plaintiff was one of the longest balls that had ever
been hit at the grounds during the last forty years. The cricket ground was large and
surrounded by a twelve-foot high fence. Witnesses testified that over a thirty-year period
about six to ten balls had been hit onto Plaintiff’s side street. Plaintiff sued the cricket club
for negligence.
Held: No breach of duty. A defendant may be justified in disregarding a foreseeable risk of
injury where the probability of that risk is small and such that a reasonable man would think
it right to ignore. Here the chances of being hit by a ball on the side street was so remote
that a reasonable person would think highly unlikely to occur and would ignore.
STANDARD OF CARE: SERIOUSNESS OF THE HARM
Paris v Stepney Borough Council [CACL_14.570]
Paris, who was blind on one eye, worked as a garage hand for the defendant. He was hitting
bolts at work when a piece of metal pierced his good eye, rendering him completely blind.
He sued the defendant for negligence claiming that they did not maintain the right standard
of care by failing to provide him with safety goggles. The defendant argued they did not
provide goggles to other workers with good vision and it was not standard practice to do so.
Held: There was a breach of duty. Where the risk is so serious then a reasonable person
would be required to exercise a higher degree of care. Also where the plaintiff is vulnerable
to an extent that increases the gravity of the risk then a reasonable person would exercise a
higher degree of care. Here the plaintiff should have provided goggles to Paris because the
seriousness of harm to him would have been greater than that experienced by workers with
sight in both eyes.
STANDARD OF CARE: BURDEN OF ELIMINATING RISK
Woods v Multi-Sport Holding [CACL_14.600]
Where a plaintiff who suffered an eye injury in an indoor cricket game sued the defendant
for failing to provide protective helmets. The court held there was no breach of duty for
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failing to provide helmets when such protective gear had not yet been designed and
manufactured, and the rules of the game did not allow for such helmets at the
HAS PLAINTIFF SUFFERED DAMAGE: CAUSATION
Strong v Woolworths Ltd [CACL_14.700]
Ms. Strong was an amputee and walked with the aid of crutches. On 24 Sept 2004, she was
walking on a ‘sidewalk sales’ area controlled by Woolworths when the tip of her crutch
slipped on a greasy potato chip and she fell and suffered serious spinal injury. She sued
Woolworths for her injuries.
Held: Woolworths owed a duty of care to persons using their ‘sidewalk sales’ area and the
reasonable standard of care required Woolworths to inspect and remove slipping hazards
from the area in intervals of not more than 20 minutes. The court found that Woolworths
breached their duty of care by failing to clean the area for more than 20 minutes and Ms.
Strong would not have fallen & suffered spinal injury ‘but for’ Woolworths’ negligence.
[Woolworths’ failure to adopt a reasonable cleaning system was the effective cause of injury
resulting from Ms. Strong’s fall]
HAS PLAINTIFF SUFFERED DAMAGE: REMOTENESS
Oversees Tankship (UK) LTD v Morts Docks & Engineering Co Ltd {The Wagon Mound No 1}
[CACL_14.770]
The crew of the Wagon Mound leaked furnace oil at a Wharf in Sydney Harbour. Some
cotton debris became embroiled in the oil and sparks from some welding works on nearby
docks ignited the oil. The fire spread rapidly causing destruction to the plaintiff’s wharf.
Plaintiff sued for the damage caused by the fire that destroyed their wharf.
Held: The particular type of oil did not easily ignite and would not normally have ignited on
water. The test was whether the kind if damage suffered by the plaintiff was reasonably
foreseeable at the time the breach occurred? It was held that the contamination damage
caused by the oil was reasonably foreseeable, but that damage caused by fire was not
foreseeable to a reasonable person given that the type of oil would not normally ignite on
water. Thus, the damage to the plaintiff's wharf, though directly caused by the defendant’s
negligence, was too remote for recovery.
HAS PLAINTIFF SUFFERED DAMAGE: EGG-SHELL SKULL RULE
Smith v Leech Brain [1962] 2 QB 405
Mr. Smith worked for Leech Brian (LB). As a result of LB’s negligence Smith suffered a burnt
lip. The lip contained pre-cancerous cells which were triggered by the injury. Smith died from
cancer three years later and his widow sued LB to recover damages for his death.
Held: Lord Parker CJ said: “The test is not whether these employers could reasonably have
foreseen that a burn would cause cancer and that [the victim] would die. The question is
whether these employers could reasonably foresee the type of injury he suffered, namely,
the burn. What, in the particular case, is the amount of damage which he suffers as a result
of that burn, depends upon the characteristics and constitution of the victim.”
The court allowed Smith’s widow to recover damages for his death regardless of the fact that
the fatal cancer was unforeseeable; it was sufficient that the burn was reasonably
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foreseeable. The egg-shell skull rule applies and the defendant must take his victim as he
finds him. The type of damage must be foreseeable NOT the extent.
POSSIBLE DEFENCES: VOLUNTARY ASSUMPTION OF RISK
Smith v Baker & Sons [1891] AC 325
Facts: The plaintiff was employed by the defendant as a building worker. Next to where the
plaintiff was working another set of workers were engaged in taking out stones and putting
them into a steam crane which occasionally swung over the place where the plaintiff was
working. The plaintiff was injured when a stone fell out of the crane and struck him on the
head. The defendant raised the defence of volenti non fit injuria in that the plaintiff knew
about the risk and had complained that it was dangerous but nevertheless continued
working.
Held: Plaintiff was entitled to recover damages even though he knew of the risk. Volenti
required defendant to show that plaintiff had freely
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