ISSUES IN 2004-2006 LAW OF CONTRACT EXAMINATIONS
S/N
Offence/Defences
Principles & Authorities
GENERAL COMMENTS:
Inability to recognise that certain areas of law were involved in an hypothetical question; candidates did not fully consider the fact, specific issues. Shopping list of cases. It is often hard to for intermediate student to discern the relevant. Citation and discussion of case which are irrelevant to the question serves to highlight candidate’s uncertainty as to which issues are involved in the question. Chaotic presentations. The aim of the course is to provide student with something more that the information within i.e. ability to analyse, argue and research …
The answer should show that you can think, you can answer the question, that you have analysed the words of the question, that you have read the materials, that you understand contrasting position in the literature; familiarity with the knowledge or detailed, specific arguments in that area of study
On Monday, Andrew advertised (invitation to threat …….) in a local newspaper, the ‘Mudgeborough Gazettee’, the he would pay a reward of £10,000 to the person who found his collie dog, Buddy (unilateral offer). Andrew had lost buddy when they were rounding up a sheep on a nearby hillside. On Wednesday, Charles bought a tracking device costing £500 to attempt to locate Buddy (attempt to perform). On Thursday, Darwin, a shepherd, found Buddy rounding up his sheep (is he aware of the offer, performance without awareness of the offer). Also on Thursday, Andrew placed a notice in the Mudgeborough grocery shop stating that the reward would no longer be claimed (withdrawal of offer – is the communication adequate). On Friday Darwin brought the Buddy into Mudgeborough (after the offer has been withdrawn). He read the advertisement in the Gazette and brought the Buddy to Andrew (since he is only aware of the offer and unaware of the withdrawal, is he entitled to the reward). Andrew while delighted with the return of Buddy refused to pay Darwin anything (Is Andrew withdrawal effective? Does he have a contract with Darwin? Is he required to keep his promise?
If Darwin was the local dog catcher (Did he found the dog in the performance of his duties? Did he put in any extra effort to justify the reward?
ISSUES IN THE FORMATION OF A CONTRACT:
OFFER
COMMUNICATION OF AN OFFER
UNILATERAL OFFER
ACCEPTANCE
IGNORANCE OF AN OFFER
EFFECTIVE REVOCATION
CONSIDERATION
EXISTING DUTY
Ø The nature of an offer and legal requirements necessary to establish one through cases such as (Storer v Manchester City Council (1974) offer to sell council flats to sitting tenants – the court of appeal found a binding contract – All Storer has to do was to sign the document and return because all elements of the contract has been agreed.
Ø Gibson v Manchester City Council (1979) The Council made an offer to Gibson that it might be prepared to sell. Gibson signed it and returned. The Court ruled that there had not been contract concluded because the Council has not made an offer capable of being accepted.
Ø Generally advertisement are consider invitation to threat, rather than offers because of commercial difficulties that would attend any other sort of construction (Partridge v Crittenden (1968)
Ø In a case of unilateral offer of contract, the advertisement can be the offer (Carlill v Carbolic Smoke Ball Co. (1893), Bowerman v ABTA (1995).
Ø Unilateral offer is accepted by performing the required act.
Ø No communication of acceptance is required for unilateral offer (Carlill v Carbolic Smoke Ball Co. (1893)
Ø Charles has not accepted the offer by purchasing tracking equipment
Ø Can there be acceptance in ignorance of an offer. The law is ambiguous (Williams v Cardawardine (1833),
Ø Gibbons v Proctor (1891), the plaintiff was entitled to the reward of £25 for information on those who committed a crime.
Ø Knowledge of the reward is not necessary in reward type case but should be required in the case of bilateral contract (Hudson 1968)
Ø R v Clarke (1927) – It is possible to accept unilateral offer of reward only if you know it has been made and accept in response to it
Ø On balance, performance in ignorance of an offer is not acceptance.
Ø Revocation of an offer must be communicated to be effective (Byrne v Van Tienhoven (1880), Henthorn v Fraser (1892)
Ø Shuey v USA (1875) revocation of an offer in a newspaper advert must reach substantially the same audience as the offer. (is pasting the notice on the village shop does reach the same audience?). On balance it’s better to assume that the revocation was not adequate
Ø If a contract has been formed Andrew cannot refused the offer. If Andrew has successfully revoked his offer, Darwin cannot accept it as it has been revoked.
Ø Is there any consideration to support a contract if Darwin’s public duty is to find dogs (Glasbrook Bros Ltd v Glamorgan C.C. (1925); Ward v Byham (1956).
Ø If Darwin has none more than perform his pre-existing duty, no consideration is provided to support a contract and no reward (……………..)
Ø If Darwin has gone an extra length outside his pre-existing duty, there is consideration to support a contract and entitled to reward (……………..)
Ø Apple Corps Limited v Apple Computer Inc (2004) EWHC 768: CA held that in principle it was possible for a contract to be simultaneously formed in two or more places in considering whether a trade mark contract had been completed in a telephone conversation between and party in America and a party in London. (Apple Corps v Apple Computer 2006)The decisions in Brinkibon v Strabag (1993) and Entores v Miles Far East Corporation (1955) were considered.
Ø Debenhans Retail Plc v Custom and Excise Commissioners (2004) EWHC 1570: Attempt by Debenhams to minimise the amount of VAT payable when customers used credit card. They introduced two contracts price paid for goods and the others for card handling charge with adequate notice to their customers. The CA held that there was no separate contracts and contract could not be made by assertion, because price displayed, singly till slip and difficulty in identifying any consideration passing from the card holding company to the customer. (Debenhams 2006)
Ø South Caribbean Trading Ltd (SCT) v Trafigura Beeter BV (2004) EWHC 2676 Colman J doubted the correctness of decision in Williams v Roffrey Bros (1991) – He noted that the decision was inconsistent with the long standing tradition that consideration must move from the promisee. The reasoning in a tripartite agreement (Pao On v Lau Yiu Long (1980)) was used in a to a bipartite agreement
Ø Pao On v Lau Yiu Long (1980): The threat to renege on an agreement with a former shareholder not to sell 60% shares within a year unless given an indemnity that against the faill in the price of the share below certain level. It was held that the indemnity given by the new shareholder is enforceable
Ø West Bromwish Albion Football Club Ltd v El-Safty (2006) – CA declined to find any express contract between WBA and orthopaedic surgeon (E) regarding the medical treatment of one of WBA’s player (A). Any contract would be between A and E. FACT. WBA arranged a medical insurance for all its players and also arranged for A, an injured player, to have consultation with E. E negligently advised surgery. The surgery was performed and as a result A was never able to play again. WBA sued for damages under contract and tort for financial loss of not having the services of A due to E negligent conduct. (WBA 2005)
Ø Sadler v Reynolds (2005) It was held that the onus was on the claimant to establish an intention to create a legal relationship when agreement was reached to ghost write a book but the onus was no as heavy as in purely social relationship. (Sadler 2005)
Ø Gow v Tui UK Ltd (t/a Crystal Holidays (2006) It was held that the industry practice was to hold that there was no contract when the agent provisionally accepted the customer’s offer and the agent’s invoice was the contractual document. Notice on the terms and conditions was sufficient to incorporate them into the contract as the customer was aware of them. (Gow 2006)
Ø Bramhill v Edwards (2004) CA held that there was no implied term by reason of s.14(2) and there was no breach. Had there been an implied term there would have been a defence under s.14(2c) as the vehicle was bough ‘as seen’. In addition, there would be no damages because the purchaser were unable to establish if the extra two inches made any difference in value. FACT. A caravan was 102 inch instead of the 100 inches permitted in UK. The claimant argued that there was an implied term that the vehicle must be of satisfactory quality. (Bramhill 2004).
VALIDITY OF CONTRACT
- VARIATION OF EXISTING CONTRACT
- SUFFICIENT CERTAINTY OF THE TERMS OF AN AGREEMENT TO BE LEGALLY ENFORCEABLE CONTRACT
- PRIVITY OF CONTRACT
Ø To receive extra amount there must be consideration – Stilk v Myrick (1809). On voyage to London two crewmen deserted and the capital promised the remaining crew that he would divide the wage of the two amongst them. The court held that they have not done extra to demand additional payment. Public policy.
Ø Practical Benefit must be established to receive extra benefit – Williams v Roffey Bros & Nicholls (1991) the Court of appeal held that although the plaintiff was doing no more than he was already obliged to as the defendant had obtained a benefit(completion of the work and inconvenience of getting another contractor to complete the building) in making the promise (in the absence of economic duress, there was variation in contractual terms and more structured benefit) The CA stated that the this did not overruled or contravene the principle in Stilk and Myrick (1809)
Ø and doubts on the case Re.
Ø Selectmove Ltd (1995) – the promised to pay an existing tax debt was not considered a good consideration.
Ø South Caribbean Trading Ltd (SCT) v Trafigura Beeher BV 2004
Ø To determine whether or not terms are certain, the principles established in such cases as Scammel v Ouston (1941) and Hillas v Arcos 1932. The higher purchase contract. It was held that there was no enforceable contract because the terms of the agreement are vague and there will need to be further contract before an agreement could be reached
Ø It is necessary to consider whether or not Cruisers was estopped from claiming the full amount by reason enunciated by Lord Denning in Central London Property Trust Ltd v High Street House Ltd (1947). The request to revert to old rent at the end of the way which was reduced by half during the WWII was held to be enforceable.
Ø Can it be said that a promise intended to be binding was made and that Donald acted upon this promise (Donald has not opened the letter)
Ø Is it possible that Donald has attempted a variation of the contract by paying only half the price –Foakes v Beer (1884) where no consideration is provided for a promise not to take any proceedings on a debt judgement, the promise was unenforceable and the total debts is payable. The debtor had only done what he is legally bound to do.
Ø Pinnel’s (1602) a promise to accept less under seal even where no consideration is provided was considered enforceable.
Ø Edwina had already sent three-quarters of the fee by the time she receives cruisers’ letter. Can it be said she has acted upon Cruisers’ promise or on her own behalf
Ø In the case of Fiona, Cruisers initially fulfils the criteria necessary to bring the situation within the ambit of the principles established in Central London Property Trust Ltd v High Street House Ltd (1947)
Ø How can Cruisers end the arrangements – The Post Chaser (1982)
SALE OF GOODS
Sale of Goods Act 1979 only applies to sales of goods (ss.1(1), 2(1), 6(1) and not land
FORMATIONOF A VALID CONTRACT, VITIATION BY MISTAKE OR MISREPRESENTATION AND POTENTIAL CLAIM AGAINST JEN OR LEWIS
Ø Required elements of actionable misrepresentation. Did the offeror say anything to induce the contract?
Ø Implicit statement – Spice Girls Ltd v Aprila World Service BV (2002) In certain circumstance conduct can be treated as statement Spice Girls Ltd v Aprilla World Service (2002) when they claim the group did not know and had no reasonable ground to belief that any member of the group had an intention to leave before a sponsorship agreement with motor scooter manufacture ended. The judge found evidence that a member of the group had indicated willingness to leave.
Ø Operative mistake has the effect of vitiating a contract (Smith v Hughes (1871): The direction from the judge to the jury on new and the old oats case. The buyer relied on his judgement and did not make the age of the oak part of the contract. A party will not be easily relieved of a bad bargin.
Ø Affirmation of a contract in which bars rescission
Ø Is the statement of an agent a misrepresentation? Bisset v Wilkonson (1927); a statement by a seller that a piece of land could hold about 400 sheep was held an honest believe since he has never used the farm for ship.
Ø Smith v Land House Corporation: it was held that a statement by a seller that the tenant in hotel he was offering for sales was a most desirable tenant, whereas he was in arrears, was held an containing an implied assertion, since he was aware of the fact
Ø If Lewis is John’s Agent he can take action under Misrepresentation Act 1967 (but no ken as the Act applies only to another party to the contract)
Ø Lewis statement may also be actionable as a negligent misstatement within the ambit of Hedley Byrne v Heller (1964): The statement made by Easipower without liability that the company was good for its ordinary business engagement. HL held that such statement could give rise to damages for financial loss under tort (since there is no contractual arrangement between the parties, but the duty of care has been expressly excluded by the disclaimer.
Ø The The new judicial appointment commission was established under the constitution Reform Act 2005 and commenced operation in April 2006.
Ø A mistake as to the quality made by both parties does not render performance as originally agreed impossible – Bell v Lever Bros (1932) The Chairman and Vice Chairman of Bell subsidiary who signed a disengagement compensation contract with Bell. Bell tried to annul the contract after discovering that they breach their employment contract by engaging in speculation for personal benefit. The HL held that a mistake as to the quality made by both parties does not render performance as originally agreed impossible
Ø Whether mutual mistake in equity still exists was also relevant to the resolution of the problem (Sole v Butcher (1950) – The plaintiff and defendant agreed a rent of £250 for a flat. The plaintiff later discover that based on rent control the rent could not be raised more than £140 and sued for a refund. It was held that the party had conclude the agreement under common law mistake of fact and the contract is to be set aside to give the tenant the option of substituting it for one at the full rent which the law permitted
Ø Associated Japanese Bank v Credit du Nord (1989) – the guarantee in respect of non-existence four machines leased to Mr Benett. It was held that non-existence of the main contract rendered the accessory contract void ‘ab inito’
Ø The Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002) – Initial mistake is likely to be less common than the supervening impossibility and that the contract would have allocated the risk to one of the contract parties. The doctrine of mistake is of limited scope and the court will not easily grant relief in such cases.
Ø Galloway v Galloway (1914): The court held that a divorce settlement under the assumption that the parties were made was enforceable. This was because the man wife who was thought to be dead was still alive.
Ø The Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002) – Mistake as to quality of the subject matter - Great Peace was hired to salvage Cape Providence. The two ships were 410 miles apart, but thought to be 35 miles. This was discovered after. After procuring a closer substitute ship the defendant refused to perform their contract with claimant asserting that the contract was void for mistake at law and voidable at equity. The CA held that the mistake was not fundamental and the difference could be covered in 22 hours.
Ø The Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002) – Mistake as to quality of the subject matter - Great Peace was hired to salvage Cape Providence. The two ships were 410 miles apart, but thought to be 35 miles. This was discovered after. After procuring a closer substitute ship the defendant refused to perform their contract with claimant asserting that the contract was void for mistake at law and voidable at equity. The CA held that the mistake was not fundamental and the difference could be covered in 22 hours.
Ø Initial mistake is likely to be less common than the supervening impossibility and that the contract would have allocated the risk to one of the contract parties. The doctrine of mistake is of limited scope and the court will not easily grant relief in such cases.
Ø Has the performance of the contract been frustrated and is the contract discharged) or was it mere frustration or increase expenses Davis Contractors Ltd v Fareharm Urban District Council (1956) The contract to build 78 houses in 8 months which extended to 20 months due to shortage of labour. It was held that the contract has not been frustrated but increased expenses.
Ø Doctrine of mistake and frustration
PRIVITY OF CONTRACT AND RIGHTS OF THIRD PARIES
Ø Linden Gardens v Lenesta Sludge Disposal (1994) 1 AC 85 A & B contract that property may at sometime be acquired by C on the footing that B should be able to enforce the contract to its full extent to for the benefit of C. The HL held found that the assignment of the benefit of the contract was invalid since it was in breach of a valid prohibition on assignment. As owner of the property it was the assignee who suffered damage as a result of breach of building contract, but technically contractual rights remained with the assignor who no longer owned the property and therefore suffer no loss.
Ø The approach was accepted initially and subsequently limited by House of Lords’ decision in Punatown v Alfred McAlpine Construction Ltd (2000). Following this decision the third party has a remedy of some sort against the promisor, the exception will not apply.
Ø Does Gorgon has performance interest in the contract which will be recognised by the courts (Panatown v Alfred McAlpine Construction Ltd (2000):
Ø Radford v DeFroberviller (19977)
Ø Common law exception to privity of contract (Darlington B.C. v Wiltshier) and Contract (Rights of Third Parties) Act 1999. s.1 expressly provided damages and it could be inferred that there is no intent to provide other benefits (Panatown v Alfred McAlpine Construction Ltd (2000) HL:
Ø Third party apparently suffering from a contract they were not a party to.
Ø If a loss is not too remote is recoverable (Hadley v Badendale and Jackson v Royal Bank of Scotland (2005) UKHL 3)
Ø Contract between Gongorn and Iffy to absolve iffy of any liability under the building contract. Can Heracles the third party maintain action against iffy. If the right exist in 1999 Act, the ability to vary the contract is determined by the original contract
Ø If Gongor and Iffy agreed in the original contract that this was possible without agreement to Heracles they can modify this contract by subsequent agreement in such a way as to remove any claim by Heracles. If the contract was silent s.2 of the 1999 act will apply
Ø Tweddle v Atkinson (1861) - Tweddle and Gay agreed to pay a sum of money to the plaintiff (tweddle son) in consideration of his marrying Guy’s daughter. Guys failed to pay and the plaintiff sought to enforce his promise after his death on his executor. The son could not enforce the contract despite the fact that the contract was for his benefit. At common law the parties to a contract cannot impose a burden on a third party, nor can they confer a benefit on a third party Twedlle v Atkinson (1861). This is unobjectionable. The circumstances in which justice calls for such a result are limited.
TERMS OF CONTRACT – EXPRESS AND IMPLIED
BREACH OF CONTRACT DOES EXPRESS TERM COVERED THE BREACH THAT OCCURRED
EFFECT OF STATUTORY REGULATION
RECOVERABLE LOSS
Ø Incorporation of terms into a contract –
Ø Olley v Marlborough Court Hotel (1949) the CA held that since a contract was made at the reception desk, the notice in the bedroom came too late and were not incorporated
Ø Chapleton v Barry UDC (1940); HL held that the ticket was a mere voucher. Only the notice was capable of containing conditions and that made no mention of an exemption. The pile of deck was held to constitute a standing order and a contract was formed when a chair (which eventually gave way and injured the plaintiff) removed from pile.
Ø Thorton v Shoe Lane Parking (1971): CA held that the notice came too late since the contract was concluded the moment the car drove up the machine at the defendant’s automatic garage.
Ø Parker v South Eastern Rly (1987): CA held that the judge misdirected the jury as he did not ask whether the defendant has taken reasonable steps to give the defendant notice of the condition. Notice at the back of a receipt after payment was considered inadequate.
Ø Terms are also implied into contract by reason of s.14 of the Sale of Goods Act 1979 (goods sold in the course of business should be of satisfactory quality
Ø Breach of implied terms and whether express terms cover the breach
Ø Unfair Terms in Consumers Contract Act 1977 (UCTA) [s.1 applies where one party deals in the course of a business or where the parties deal on one party’s standard written terms s.2) and Unfair Terms in Consumers Contract Regulations Act 1999 (UTCCR)
Ø Applications of ss. 6 and 12 of UCTAA 1997 and the relevant case law.
Ø A business cannot exclude the implied terms arising by operation of SOGA 1979 as against a consumer
Ø Application of ss.2(2), 3, 11, 13, 24, Sch. 2 and the case laws interpreting the sections
Ø 1999 (UTCCR) applied to unfair terms between a seller and supplier on the one hand and consumer on the other s.4(1)
Ø Unfair terms principles in Director-General of Fair trading v First National Bank Plc (2002) HL; UTCCR 1999 ss.4-6, Sch.2) – The HL held that a term of a loan agreement which provided for interest to be paid at the contractual rate on sums owing both and after judgement did not fall within reg. 3(3)(b). It was an incidental term setting out the consequences of default by the borrower
Ø Unfair terms are of no effect against a consumer s.8
Ø For a consumer UTCCR 1999 is preferable, because express term are of no effect if unfair to UCTA 1997 which would allow the express terms to the extent that they are reasonable
Ø Because Mary deals as a consumer, the express will not survive the scrutiny and cannot be used by the seller to bring action
Ø Meaning of condition (e.g. Schuler v Wickman Machine Tool Sales (1974)
Ø Lombard North Central Finance v Butterworth (1987) – CA held that clause 2(a) of a computer lease agreement made prompt payment a condition of the contract so that non-compliance entitles the plaintiff to terminate the contract and recover damages for loss of the transaction even breach itself was not regarded as giving rise to serious consequences.
Ø If the term is a condition, the perfect produce can terminate the contract for breach the fact that they have not suffered is irrelevant
Ø If the terms is a warranty or innominate, breach of it will only sound in damages and not damages
Ø Term is an innominate term within the decision in Hong Kong Fir Shipping v Kawasaki (1962): CA held that although there was a breach of the charterparty becayse the ship was unseaworthy, seaworthiness was not a condition entitling the charter to terminate. The delay caused by the breakdowns and repairs was no so great as to frustrate the commercial purpose of the charter. Ship chartered for 24 months, the chief engineer was not competent and with 17 month left of the original contract, attempt being made to terminate.
Ø Cehave v Bremer HG (The Hansa Nord) 1976: CA held that the term shipment in good condition did not give a rise to reject unless the breach went to the root of the contract since the entire cargo was used for the intended purposes as animal feed. Though entitled to damages, but not entitled to rejection. German seller and Dutch buyer of 12,000 tons of US Citrus pulp pellets. innominate terms it appears the consequences are not sufficiently serious for termination of the contract
Ø Crossley v Faithfully & Gould Holdings Ltd (2004) ECWA Civ 293 The CA declined to find that there was an implied term with the contract of employment which provided that an employer ought to take care of an employee’s economic well-being. The introduction of such term would place an intolerable burden upon employer. The employer lost long-term sickness benefit when he retired on his own (Crossley 2004)
Ø Paragon Finance Plc v Pender (2005) EWCA Civ 760 The CA applied the decision in Paragon Finance Plc v Nash (2001) that there was an implied term in fact that interest rate were not to be set dishonestly, for an improper purpose, capriciously or arbitrarily) to a term which allowed the financed company to vary interest rates. On the fact of the case, there was no breach of the term so implied. (Paragon 20005)
Ø Keen v Commerzbank AG (2006) EWCA Civ 1536 The CA held that a term of an employment contract relating to the payment of discretionary bonus did not fail within s.3 of the UCTA 1977. (Keen (2006)
Ø Re. Cape Plc (2006) EWHC 1313 The Court held that a scheme of arrangement enter into under s.235(1)(a) of the Companies Act 1975 was not a contract or notice within s.2(1) of UCTA. (Re Cape 2006)
Ø Balmord Group Ltd v Borealis (UK) Ltd (2006) EWHC The Court found that contract to supply first a Norwegian company and a Danish one were international contract and thus outside the ambit of UCTA 1977. (Balmord 2006)
Ø Fleet Mobile Tyres Ltd v Stone (2006) EWHC) The Court held that the reasonable requirement s.11 of UCTA 1977 did not apply to entire agreement and waiver clauses as the section was only applicable where there had been actionable misrepresentation. Fleet Mobile Tyres (2006)
Ø IFE Fund SA v Goldman Sachs International (2006) EWHC 2887 It was held that where a party had sent an information memorandum to another party stating that they had not verified the accuracy or completeness of the information in the information memorandum. This statement went to the scope of misrepresentation and does not constitute exclusion of liability under Misrepresentation Act 1967. (IFE Fund SA 2006)
Ø Baybul v Ecole Riggs County Park (2006) The court held that UTCCR 1999 did not apply to terms implied at common law (Baybul 2006).
Ø Taylor v Rive Drorte Music Ltd (2005) EWCA 1200 CA observed that it was correct in the circumstances of the case , for the trial judge to phrase the implied terms in the contract to a prohibition of the forbidden positive acts. An implied term which prohibits negative act would be onerous as it would require a positive action by a party. It was not possible to conclude that a reasonable person would agree to be bound by a potentially onerous term (Taylor 2005)
Ø Munkenbeck & Marshall v Harold (20005) Judge Harvey QC held that the terms were unfair (onerous and unusual) and not enforceable despite the fact that they formed part of profession-wiide standard term (UTCCR 1999) (Munkenbeck 2005)
Ø Bryen & Langley Ltd v Boston (2005) The CA found that a consumer could not complain about the term of a building contractor when the consumer’s agent had asked the contract to tender on those very terms. Lack of openness, fair dealing and good faith made claim under reg, 5 failed. (Bryen & Langley 2005)
Ø Feldaroll Foundary Plc V Hernes Leasing London Ltd (2004) The CA held that R&B was concerned with meaning of ‘deals as a consumer’ with UCTA 1977 while Stevenson & Rogers was concerned with seller in the course of Business within the Sale of Goods Act 1979. The purpose of the Act was consumer protection and R&B was in harmony with the position because it sought to further the protection available to the buyers. (Feldaroll 2004)
Ø Bairstow Eves London Central Ltd v Smith (2004) An agreement to pay estate agent commission of 3% was redudeced to 1.5% if paid within 10 days of completion. CA applied DG of Fair Trading v First National Bank 2001 and held that the clause was not within Reg. 6 (2) of UTCCRR 1999 (the term deals with the core of a contract and not adequacy of price). The term could be scrutinised under reg. 5. Reg. 6 should be restrictive, while liberal interpretation would erode the interpretation (Bairstow 2004)
Ø Khatun & Ors v Newham LBC (2004) The CA held where a local council was statutorily obliged to provide accommodation UTCCR 1999 applied to the terms on which the council let the flats. European Court of Justice had ruled that only national court can determine whether a particular term was fair (Khatun & Ors 2005)
Ø Commission of the European Communities v Kingdom of Spain (2004) The court considered whether Spain had implemented Art 5 by the directive that where there is a doubt as to the meaning of a term the most favourable term to the consumer will prevail. The court ruled that directive did not fully implement the regulation. It is restrictive E Fund SA 2006)
Ø Proform Sports Management Ltd v Proactive Sport Management Ltd (2001) It was footballer contract (minor) was not binding because it was not analogues to a contract of necessaries or employment contract of general benefits. (Proform Sports Management 2001)
Ø Halpen v Halpern (2006) – A mistake in Jewish law was found to be capable of being that that would avoid a contract. (Halpen 2006)
Ø Kyle Bay Ltd (t/a/ Aston Night Club) v Underwriters (2006) Where one party made mistake, did not communicate the mistake to the other party, there was no common intention for reactivation, the mistake had not made the performance of the contract impossible, or radically different, rectification by the mistaken party was denied. (Kyle Bay 2006)
Ø George Wimpey UK Ltd v VI Components Ltd (2005) Sale of land based on a complex formular. VIC redrafted the formular and ommited price for enhancement costing Wimpey £800,00. The court ruled that the mistake was not VICs who had no experience but corporate neglect by Wimpey for which VIC bore no legal responsibility and it was not inequitable to allow VIC to resist the claim of rectification. (George Wimpex 2005)
Ø Brennan v Bolt Burdon (2004) CA held that the contractual promise of a legal claim could be void as a result of common mistake of law. It was a question of construction as to whether or not the mistake made the compromise impossible (Great Peace) where there was a doubt as to the law concerned, there was no doubt as to the law sufficient to render the contract void. (Brennan 2004)
Ø GMAC Commercial Credit Development Ltd v Sandhu (2004) The court held that a written guarantee rendered meaningless by a mistake could be rectified. (GMAC 2004)
Ø Conlon v Simms (2006) The court found that where there was a duty to disclose, as between prospective partner, and failure to disclose was fraudulent misrepresentation and damages would be available (Conlon 2006)
Ø Six Continents Hotels Inc v Event Hotels GMBH (2006) The court held that misrepresentation which were not fraudulent were defeated by contractual term baring claims or proceedings based on discussions and agreement which occurred before the contract had been entered into. Because it did not cover fraudulent misrepresentation, it did not fall foul of Misrepresentation Act 1967. (Six Continents Hotels Inc 2006)
Ø
PRINCIPLES FOR AWARD OF DAMAGES FOR BREACH OF CONTRACT
Ø The basic measure of loss is the expectation loss Robinson v Harman (1884). The law seeks to compensate the claimant for his disappointment expectation; it is compensation for loss of a bargain
Ø The English courts have begun to expand the kind of loss to include non-pecuniary matters such as loss of amenity, pain, distress and so forth (e.g. Ruxley Electronics and Contruction v Forsyth (1995) – This has to do with the construction of a swimming pool that was not built to specification. He asked for the cost of constructing a new one, but the court award something.
Ø Farley v Skinner (2001) : The defendant suing for damages for the valuer not advising whether the property close to Gatwick airport was on flight part. CA held that since the client specifically asked for confirmation on this matter it was a major part of the contract and restored £10,000 damages awarded by the trial judge which the CA said the object f the contract was valuation and not provision of pleasure.
Ø Hamilton Jones v David & Snape (2003) (CASE NOT FOUND)
Ø Alternative basis for measuring damages on the reliance loss or loss of expenditure basis (e.g. Anglia Television v Reed (1972) – CA held that the since the plaintiff had elected to claim their wasted expenditure instead of loss of profit, they could also recover pre contract expenditure as long as it was reasonable in the contemplation of the parties as the likely to be wasted if the contract was broken. An American actor who repudiated a contract for a leading role in a television appearance
Ø The claimant cannot seek to recover his reliance losses where this would have the effect of allowing him to escape the consequence of a bad bargain: C & P Haulage v Middleton (1983)
Ø Award for restitutionary losses e.g. an account of profit following House of Lords decision in Attorney General v Blake (2001). The former member of the intelligence services who became an agent for Moscow. Court allow account of profit for the book published on the account of his experience which was published in London
Ø Controversy in Experience Hendrix LLC v PPX Enterprises Inc. 2003
Ø The extent to which the recognition of restitutionary loss threatens to erode the traditional losses measured in terms of expectation and reliance.
Ø Nature of award of damages under s.2(1) of the Misrepresentation Act 1967 in the light of decision in Royscot Trust Ltd v Rogerson (1991): Measure of damages under s.2(1) is tortuous in that the measure had to be the same as for fraudulent misrepresentation because of fiction of fraud. Car seller who inflated the prices for the financiers and the buyer fraudulently sold the car to another person. in terms of removal of possibility of claim of either negligent misstatement or fraudulent misrepresentation at common law
Ø S.2(1) the claimant need only to establish that a misrepresentation has occurred and the burden of proof shifts to the defendant to establish that they had reasonable ground to believe that the statement was true up to the point of contracting
Ø It is easier to establish a claim of misstatement under Hedley Byrne v Heller, which requires either a duty of care or an assumption of responsibility to be established by the claimant.
Ø The comparative ease is assisted by the decision in Royscot Trust v Rogersn which allows a claimant to receive damages measure as if the tort of deceit had been committed.
Ø There are reservations about an apparent generousity in the award express in a number of case since Royscot, but a recent decision in Forest International Gaskets Limited v Foster Marketing Limited (2005) the CA refused permission for the issue to be sent on appeal to the House of Lords
DISCHARGE OF CONTRACTS
Ø Discharge of contracts
Ø Frustrating events
Ø Clarity of organisation requires a) to consider each of the issues in relation to each of the particular contract or consider each of the contracts in the light of the issues
Ø Relevant criteria established for the frustration of a contract by the case law (e.g. Davs Contractors Ltd v Fureham Urban District Council and National Carriers Ltd v Panalpina (Northern) Ltd [1981] - C– preferred analysis is that in certain situations, where there is a change in circumstance (not attributable to the fault of either party) which make performance of contract from original intention impossible, justice requires that the court should treat the contract as having come to an end – see National Carriers Ltd v Panalpina (Northern) Ltd (1981). The fact that the court will in some circumstance bring a contract to an end on the basis of frustration does not mean that the party original agreement will be ignored. It is possible for the parties to make provisions for this through ‘force majeure’ which the court will give effect to.
Ø Taylor v Caldwell (1863) - Destruction of the subject matter. The contract for the hire of a Hall for series of music concert and the destruction of the hall by fire. The contract was discharge by frustration and it was subject to an implied condition that the party would be excused if the subject matter was destroyed.
Ø Herne Bay Steam Boat Co v Hutton (1903): boat hired to tour the fleet and watch the King’s review was held not to be frustrated when the review was cancelled due to the King’s illness because the tour was still possible. it is still possible to perform a significant element of the contracts and that they are therefore not frustrated
Ø For Sam contract, the likelihood is frustration
Ø If the viewing of the multimedia exhibition is an essential element of the overall experience within the meaning of Bay Steam Boat Co v Hutton then the contract with Q, R and 400 customers will not be frustrated. If viewing is only an ancillary element to the view of the island then the contracts will be frustrated.
Ø Contract with same is frustrated and it is necessary to examine the application of s.1(1), s.2(5) and the consequence of s.1.
Ø It seems the sum are payable to Sam
Ø S.1(2) must be applied to determine the result of frustration. Gamerco SA v ICM/Fair Warning Agency (1995) would be appropriate
Ø S.1(2) may be applied in the case if Q, R and 400 customers if the contracts have been frustrated
Ø If the contracts have not been frustrated, the candidates will need to consider the consequences of a breach of contract, which will sound in damages.
CATEGORISATION OF TERMS IN CONTRACT: WARRANTIES, CONDITIONS OR INNOMINATE TERMS AND THE CONSEQUENCES FROM THE TERMS
Ø Can the contract be terminated or does the breach sound only in damages)
Ø The extent to which candidates can establish that a particular term is so important that breach of them entitles the injured party to repudiate the contract (L Schulter v Wickman Machine Tool Sale (1974); Condition that the sole distributor for the German panel press in UK must visit each of the motor manufacturer once a week. Failure to make a number of visits was considered by the House of Lords as not a condition in the sense that a single breach however, trivial would entitle the innocent party to terminate the contract.
Ø Lombard North Central v Butterworth [1987) CA (Computer lease and area of payment)
Ø Extend to which victim of a breach would not end a contract following the breach of or sufficiently serious innominate term – practical consideration will usually be of commercial nature [expectation of future business in other contracts, long-term relationship or an unwillingness to impede supply)
Ø Legal consideration will generally be considered with the claimant’s duty to mitigate his losses (British Westinghouse Electric Co. Ltd v Underground Electric Rys Co of London Ltd (1912) The injured party is prevented from recovering losses if he failed to take steps to mitigate his losses
Ø Payzu v Saunders (1919) – The contract for the supply of crepe de chime that was terminated for failure to pay as accept advance cash payment option following the failure to pay for supply within the stipulated period. Sometime the duty to mitigate will require the injured party to re-contract with the party in breach on slightly different terms
Ø person is guilty of theft contrary to s.1 of the Theft Act 1968
Ø s.9(1)(a) – Conditional intention
Ø The question of intention to permanently deprive is a question for the jury to determine. s.6 generally applied to borrowing.
REMEDIES FOR BREACH CONTRACT
Ø Generally it is only damages that is available for a breach of contract
Ø Nature of damages available
Ø Equitable remedies – order of specific performance or an injunction (granted only in exceptional circumstance
ISSUES IN 2005 LAW OF CONTRACT EXAMINATION
S/N
Offence/Defences
Principles & Authorities
On Monday, Andrew advertised (invitation to threat …….) in a local newspaper, the ‘Mudgeborough Gazettee’ , the he would pay a reward of £10,000 to the person who found his collie dog, Buddy (unilateral offer). Andrew had lost buddy when they were rounding up a sheep on a nearby hillside. On Wednesday, Charles bought a tracking device costing £500 to attempt to locate Buddy (attempt to perform). On Thursday, Darwin, a shepherd, found Buddy rounding up his sheep (is he aware of the offer, performance without awareness of the offer). Also on Thursday, Andrew placed a notice in the Mudgeborough grocery shop stating that the reward would no longer be claimed (withdrawal of offer – is the communication adequate). On Friday Darwin brought the Buddy into Mudgeborough (after the offer has been withdrawn). He read the advertisement in the Gazette and brought the Buddy to Andrew (since he is only aware of the offer and unaware of the withdrawal, is he entitled to the reward). Andrew while delighted with the return of Buddy refused to pay Darwin anything (Is Andrew withdrawal effective? Does he have a contract with Darwin? Is he required to keep his promise?
If Darwin was the local dog catcher (Did he found the dog in the performance of his duties? Did he put in any extra effort to justify the reward?
ISSUES IN THE FORMATION OF A CONTRACT:
OFFER
COMMUNICATION OF AN OFFER
UNILATERAL OFFER
ACCEPTANCE
IGNORANCE OF AN OFFER
EFFECTIVE REVOCATION
CONSIDERATION
EXISTING DUTY
Ø If the advertisement is silent on how one is to be the first come, consideration need to be given to what is reasonable in the circumstance.
Ø If a telephone number or e-mail are given, it seems likely that these are appropriate method as either system allow a person to determine with certainty who has communicated first in time, it should be clear who has accepted the offer first. In this instance the person is A and a contract is concluded with him before C.
Ø B needs to be advised that the resolution of the problem is determined by the wording of her advertisement, in particular, has she included her telephone number and e-mail address and thus held herself out as capable of communication on these grounds?
Ø If the China is worth more than three times the advertised price, this should not affect a concluded contract with A or C.
Ø The only possible ground for setting aside the contract here would be that there is some fundamental mistake which goes to the root of the contract: here the sale concerns the same china and the only possible misapprehension is the value of the china.
Ø Who should succeed in an action for breach of contract?
Ø On balance it seems likely that a court will not allow that B’s advertisement is an offer capable of acceptance unless it is clearly worded as such and clearly worded that presentation may occur by e-mail of telephone message because of the commercial inconvenience which can attend a determination that advertisement is an offer. Consequent A will be disappointed in his action because the contract was formed with C and A responded to an advertisement knowing that he might not be the first to come forward. A would not in any event, recover damages for disappointment on the basis of Addis v Gramophone Co. (1909) represent the applicable the law that damages for distress will not be available in connection with the manner of a dismissal. Boardman v Copeland London Bureau Council (2001); Eastwood v Magnox Electric Plc
Ø although candidates would want to consider the line of authorities decided since Malik v BCCI (1998); it was held that the claims for damages to reputation by former employees of BCCI which was run fraudulently by the employer are recoverable because their was an implied term that the employ would run his business so as not to jeopardise the future employment prospects of the employees.
EQUITY
DEVELOPMENT OF PROMISSORY ESTOPPEL
Ø Look if there is an intention to create legal relations
Ø Did the parties intend a binding contract or arise of was their arrangement a merely social one
Ø Application of the rule in Balfour v Balfour (1919), Jones v Padavatton (1969), Coward v MIB (1962), Simpkins v Pays (1955) and Edmonds v Lawson (2000)Formation of contract – Jeremiah and Familial)
Ø Hermione – probably a social arrangement on the basis of Coward v MIB
Ø It can be argued that the parties require to be contractual bound and that this situation is thus within the exception to the general rule considered by Upjohn LJ in Coward Case
Ø The evidence is that Hermione and Getrude had stipulated a definite amount an Hermione had indicated that disruption any change will cause and asked to be given notice. The approach of the court of appeals in Edmonds v Lawson in considering the context in which agreement was reached would also support this argument.
Ø In relation to Ivan, Getrude will wand advice pertaining to two matters, first can she recover his arrears of payment; and secondly is she obliged to continue with the arrangement. Both matters are resolved on the basis of whether there is a contract between them.
Ø The same consideration about intention need to be applied
Ø Ivan’s case is slightly different than Hermione’s in that there is less certainty and definiteness in the arrangement. Coward v MIB
Ø Problems with consideration – offer to make payment after the arrangement has commenced: Roscorla v Thomas (1842), Re McArdle (1951), Pao On v Lau Yiu Long (1980)
Ø It appear there is no contract with Ian
Ø Jeremiah is her brother with – Balfour v Balfour and Jones v Padavatton in which intention was excluded within a family relationship
Ø Is Jeremiah is a minor and lacks capacity to contract.
Ø Northstar Land Ltd v Brooks (2006) ECWA Civ 756 - The CA of appeal rejected a claim that a promissory estoppel or agreement had arisen when the solicitor to the buyer contacted the solicitor to the seller on the day for the completion of the transaction and sought and extension. The solicitor for the seller said he would have to seek instructions from his clients and revert back to him. He never did. It was held that an agreement to extend time had not arisen, nor was there such a clear, unequivocal an unambiguous representation that was intended to affect the relation between the parties such that promissory estoppel arose.
Ø
FORMATIONOF A VALID CONTRACT, VITIATION BY MISTAKE OR MISREPRESENTATION AND POTENTIAL CLAIM AGAINST JEN OR LEWIS
Ø Consider each book separately
Ø Required elements of actionable misrepresentation and different form of misrepresentation
Ø If there was unilateral mistake the contract is food unless is within Smith v Hughes (1871)
Ø Bilateral or common mistake – Bell v Lever Bros (1931); Great Peace (2002)
Ø A purchase by Yoric is an impossibility as he already owns the book Cooper v Phibbs (1987)
Ø Destroyed book- Financings Ltd v Stimson (1962)
Ø Misrepresentation of warranty Heillbut, Symons & Co. v Buckleton (1913)
Ø Type of misrepresentation within Hedly, Byrne v Heller (1964) and s.2(1) of the Misrepresentation Act 1967
Ø
Ø
ELEMENTS THAT COULD VITIATE AN APPARENT CONTRACT
Ø Legal doctrine of economic duress and equitable doctrine of undue influence
Ø As a matter of practicability and commercial reality, most transactions were affected by some form of duress or undue influence
Ø Are the principles upon which courts intervene very clear and whether the case which established this principles were in conflict.
ISSUES IN THE FORMATION OF A CONTRACT:
OFFER
COMMUNICATION OF AN OFFER
UNILATERAL OFFER
ACCEPTANCE
IGNORANCE OF AN OFFER
EFFECTIVE REVOCATION
CONSIDERATION
EXISTING DUTY
Ø Misrepresentation in entering into a contract on the basis of an implied statement about an existing state of facts (Spice Girls Ltd v Aprilia World Services BV (2000)
Ø Has there been a supervening event which renders the performance of contract impossible - Davis Contractors Ltd v Fareham Urban District Council (1956), National Carriers Ltd v Panalpina (Northern) Ltd (1981), Tsakiroglou & Co. v Noblee and Thorl (1962) and so forth
Ø Breach of contract – principles in Marine National Fish v Ocean Trawlers (1935) and the Super Servant Two (1990)
Ø Law reform (Frustrated contracts) Act 1943
Ø
INCORPORATION OF TERMS INTO A CONTRACT
Ø What were the terms incorporated into the contract – L’Estrange v Graucon
Ø Unfair Contract Terms Act 1977 and Unfair tems in Consumer Contract Regulation Act 1999
Ø % & B Customs Brokers v UDT
Ø Central London properties v High tress Houses
CONTRACTUAL TERMS AND THEIR
REGULATIONS
Ø One of the express terms in the contract is that Ultraclean will use certain types of soap powder
Ø The law will imply a term into a contract that a contract for services is discharge with reasonable skill
Ø Has Ultraclean succeeded in this endeavour by printing the terms on the reverse side of the collection slip. Such notice must be given before the time of the contract (Olley v Marlborough Court (1949) and it must be embodied in a document of ‘contractual force’ (Chapelton v Barry Urban District Council (1940) and appropriate notice of exclusion clause must be given (Parker v South Eastern Railway (1877)
Ø Extra notice must be given of onerous or unusual terms (Spurling v Bradshaw (1956) and Interfoto Ltd v Stiletto Visual Programmes Ltd (1989) (terms iii and iv)
Ø It seems the exclusion clauses are incorporated into the contract
Ø The law regulates contractual terms through Unfair Contract Terms Act (UCTA) 1977 and Unfair Terms in Consumer Contracts Regulation (UTCCA) 1999
Ø The 1977 Act applies where a party attempts to exclude liabilities arising in the context of a business s.1. Term (i) cannot extend to personal injury or death caused by negligence by reason of s.2(1) and in the case of other loss or damage caused by negligence, liability can only be restricted to the extent that it is reasonable s.2(2)
Ø Term (i) contravenes Unfair Terms in Consumer Contracts Regulation (UTCCA) 1999 (which apply by reason of regulation 4 and 5 the interpretation place upon this by the House of Lords in Director-General of Fair Trading v First National Bank Plc (2002). The term is listed in the blacklist in Schedule 2, 1(a) in relation to death or personal or personal injury.
Ø The term is of no effect (Reg. 8)
Ø Term (ii), also is in apparent contravention of both the 1997 Act and 1999 Regulations. The term reserves right to Ultraclean to alter pick up time without notice - S.3(2) imposes a requirement of reasonableness on this term is also likely within 1(k) of the 1999 regulation thus not binding on the consumer
Ø Term (iii) is similar in purpose to clause (ii); attempt to provide a different service that the one contracted for) and is covered by the same provision in the 1977 Act and 1999 regulations
Ø Term (iv) would be valid under the 1997 Act only to the extent that it satisfies the requirement of reasonableness and fits within the list of unfair terms in Schedule 2, notably 1(1) and this not being upon a consumer.
Ø If Thomas has engaged Ultraclean to remove the laundry of his Dental Practice then the 1999 regulations would not apply because Thomas is no longer a consumer but a business (Reg. 4(1) and Reg. 3(1)
Ø The 1997 Act would still apply if the court determines that Thomas still deals as a consumer in regard to the clauses potentially within s.3(and the situation is not entirely clear here, see R&B Customs Brokers Co. Ltd v United Dominions Trust Ltd (1988); HL held that they had dealt as consumer since the use of the car in their business was not sufficient regularity. It was a third car. And clause 2(a) of SoGA 1979 did not apply
Ø Stevenson v Rogers, (1999) CA A transaction would be made in the course of a business unless it was a purely private transaction
Ø Feldaroll Foundry Plc v Hermes Leasing (London) Ltd (2004) – Lamborghini car bought for the use of a director, it was held that the company was dealing as a consumer or if the parties deals on Ultraclean’s written standard terms of business (
Ø St. Albans City District Council v International Computers Ltd (1995). Limitation of £100,000 placed on contract for the supply of software to produce data for poll tax candidates was held to be unreasonable when the software contained an error which cost the local council a lot of money. It was a standard term, the company has already insured the loss, and the company has the expertise, while the local council and its citizen would loose if held otherwise.
PERFORMANCE AND BREACH OF CONTRACT
Ø Candidates need to established that Zesty has breached the contract by failing to deal with the subterranean rivers and springs on Wendy’s property
Ø Once the breach is establish, there is need to establish remedies available to Wendy and the extent to which the aw will recompense Wendy with damages
Ø Wendy’s losses are twofold – the first set are those related to her annual garden party.
Ø Two sub-problem arise: these are non-financial losses arising from loss of enjoyment and this irrecoverable or can they be recovered (cases such as Addis v Gramophone Co. Ltd (1909),
Ø Jarvis v Swans Tour (1973), Ruxley Electronics and Construction Ltd v Forsyth (1996),
Ø Malik v BCCI (1991), and Hamilton Jones V David & Snape (2003). This concerns non-financial losses i.e. loss caused anxiety, mental distress and hurt feeling. House of Lords’ decision in Addis v Gramaphone Co. Ltd (1909). The plaintiff was not allowed damages to cover the indignity he suffered because of the manner in which he was dismissed by the defendant. The House of Lords held that injured feelings were not compensatable for a breach of contract if the purpose of the contract was to alleviate distress – Heywood v Wellers (1976);
Ø The second sub-problem is whether some of the losses pertaining to the garden party are too remote to be recovered (Hadley v Baxendale (1854), If the loss is too remote the claimant cannot recover damages for them. The basic rule was established by the Court of Exchange in the case of Hadley v Baxendale (1954) 9 Exch 341. Repair of shaft through a delivery company. The court held ability to use the shaft during the period of delay was not a damage reasonably foreseeable by the carriers. It was not within the normal contemplation of the carriers that the owner would be unable to operate the mill without that particular shaft. There are two limbs to the test of remoteness in Hadley v Baxendale – first is damages that will be foreseeable i.e. arising naturally. House of Lords held that what will determine which the damages will depend on the knowledge the parties are presumed to possess and the scope of the contractual duty
Ø Victoria Laundry (Windsor) v Newman Industries (1949) – Supply of boiler for laundry business which was delayed. CA held that the loss of normal business profit was foreseeable but the loss of a lucrative dyeing contract was considered remote.
Ø The Heron II (1969) and
Ø H Parsons (Livestock) v Uttley Ingham (1978) - Supply of storage hopper for storing pig nuts, the hopper was not properly installed and some pigs died from illness due to e coli resulting from eating foods spoilt by the hopper. It was held that the loss was not too remote.
Ø It is also useful to mention whether contract between Wendy and Zesty conferred an enforceable benefit upon Wendy’s party guests under the Contracts (Right of Third Parties) Act 1999 or the principle of Jackson v Horizon Holidays
Ø The second problem Wendy faces is the measures of damages recoverable with regard to the repairs of her property. It may be that she lost an amenity within the meaning of Ruxley Electronics and Construction Ltd v Forsyth (1996) but that she is unable to recover the cost of the repairs
CONTRACTUAL VARIATIONS, RIGHT OF THIRD PARTIES TO ENFORCE CERTAIN CONTRACTUAL TERMS.
Ø To receive extra amount there must be consideration – Stilk v Myrick (1809). On voyage to London two crewmen deserted and the capital promised the remaining crew that he would divide the wage of the two amongst them. The court held that they have not done extra to demand additional payment. Public policy.
Ø Practical Benefit must be established to receive extra benefit – Williams v Roffey Bros & Nicholls (1991) the Court of appeal held that although the plaintiff was doing no more than he was already obliged to as the defendant had obtained a benefit(completion of the work and inconvenience of getting another contractor to complete the building) in making the promise (in the absence of economic duress, there was variation in contractual terms and more structured benefit) The CA stated that the this did not overruled or contravene the principle in Stilk and Myrick (1809)
Ø and doubts on the case Re.
Ø Selectmove Ltd (1995) – the promised to pay an existing tax debt was not considered a good consideration.
Ø South Caribbean Trading Ltd (SCT) v Trafigura Beeher BV 2004
Ø To determine whether or not terms are certain, the principles established in such cases as Scammel v Ouston (1941) and Hillas v Arcos 1932. The higher purchase contract. It was held that there was no enforceable contract because the terms of the agreement are vague and there will need to be further contract before an agreement could be reached
Ø It is necessary to consider whether or not Cruisers was estopped from claiming the full amount by reason enunciated by Lord Denning in Central London Property Trust Ltd v High Street House Ltd (1947). The request to revert to old rent at the end of the way which was reduced by half during the WWII was held to be enforceable.
Ø Can it be said that a promise intended to be binding was made and that Donald acted upon this promise (Donald has not opened the letter)
Ø Is it possible that Donald has attempted a variation of the contract by paying only half the price –Foakes v Beer (1884) where no consideration is provided for a promise not to take any proceedings on a debt judgement, the promise was unenforceable and the total debts is payable. The debtor had only done what he is legally bound to do.
Ø Pinnel’s (1602) a promise to accept less under seal even where no consideration is provided was considered enforceable.
Ø Edwina had already sent three-quarters of the fee by the time she receives cruisers’ letter. Can it be said she has acted upon Cruisers’ promise or on her own behalf
Ø In the case of Fiona, Cruisers initially fulfils the criteria necessary to bring the situation within the ambit of the principles established in Central London Property Trust Ltd v High Street House Ltd (1947)
How can Cruisers end the arrangements – The Post Chaser (1982)
Ø Can Quickbites enforce the contract between Jade and Megafoods as to the supply of foods to Quickbites at a discount. Such right could arise under s.1(2) of the Contracts (Right of Third Parties) Act 1999.
Ø Contract between Jade and Quickbites to supply sandwich to Perfect Petroleum in exchange for no reduction of rent. Consideration provided for one party can serve as good consideration to a second party in a separate contract Pao On v Lau Yiu Long (1980): Yes contract for the sale of shares, the agreement not to sell the shares for a year was considered a good consideration for the indemnity since it was made at the request of the defendant.
Ø Best route for Perfect Petrol to assert its right
Ø The effect of Quickbytes purporting to end its contract with perfect petrol to supply sandwitches.
QUESTION 3:
V
VITIATING ELEMENTS IN THE FORMATION OF A CONTRACT –
CREDIT CARDS, CCTV, ETC
Ø Jack impersonates Karl Klop and enters into agreement with Luxury, Megaman and Nanobyte
Ø Effect of mistake of identify upon contractual formation
Ø Does the mistake (if it exists) render the resulting contract void of voidable
Ø Deal with each agreement in turn
Ø All involve the application of House of Lords’ decision in Shogun Finance v Hudson (20004) – the way in which the contract was formed (particularly whether it was made face to face) was critical in determining, whether the resulting contract was voidable or void. In most cases of mistaken identity the policy arguments will favour the protection of innocent third party.
Ø House of Lords in Cundy v Lindsay (1879) The House of Lords found that the contract was void because there was lack of consensus.
Ø The identity must be material to the formation of the contract Dennant v Skinner (1948)
Ø A mistake as to the attributes of identity (such as creditworthiness) will generally be insufficient to render contract void Kings Norton Metal Co. v Edridge (1897)
Ø In the first contract he enters details into a machine and is simultaneously monitored on close circuit television: is this face to face transaction? Has jack contracted for hotel room and, critically is the contract for the purchase of the jewellery void or voidable. If it is voidable, has luxury taken steps to avoid the contract before jack ‘sell’ the jewellery to Owen. Car and Universal Finance Co. v Caldwell
Ø Contract with Megaman – Are his action sufficient to raise the face to face presumption of Philips v Brooks? Has the presumption been rebuted. Has a void or voidable contract been formed.
Ø If the contract is voidable has Megaman taken steps to avoid the contract before Jack ‘sells’ the items to Owen (Car and Universal Finance Co. v Caldwell (1965) (CANNOT FIND CONTRAC)
SUBSEQUENT EFFECT UPON A VALIDLY FORMED CONTRACT
Ø Simon entered a contract with 25 people for accommodation and certain viewing privileges at a wedding and celebration of the marriage Percival.
Ø Wedding procession is cancelled and entrance to Oodle’s estate could not be arranged.
Ø Arrange accommodation and entry to the parties in Ooodleborough
Ø Has the contract been frustrated by supervening events?
Ø Nature of frustration – Davis Contractors Ltd v Fareham Urban District Council (1956) and National Carriers Ltd v Panalpina (Northern) Ltd (1981)
Ø The coronation case were of particular use in determining these – Harne Bay Steamboat Company v Hutton (1903) and Krell v Henry (1903)
Ø Relief under Law Reform (Frustrated Contract) Act 1943
CLASSIFICATION OF DIFFERENT CONTRACTUAL TERMS INTO DIFFERENT CATEGORIES AND CONSEQUENCES FOR BREACH OF PARTICULAR TERM
Ø A break occurs when one party, without lawful excuse, does not perform what is required from him under the contract, or performs it defectively
Ø The problem faced by the innocent party is whether or not the breach is such as to justify termination of the agreement
Ø If the breach is not enough to justify termination of the agreement and the innocent party does so, he may himself be have breached the contract (Decro-Wall International SA v Practitioners in Marketing Ltd 1971
Ø Classification of contractual terms into conditions, warranties and intermediate and innominate terms (Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd (1962)
Ø The difficulty is for the innocent party to determine in which of these categories the breached terms should be placed. This is particularly serious where the breached term is an innominate term and the party must determine whether the breach has been sufficiently serious.
Ø A good answer should establish the basic framework of the law in this area and explore what is required and what could be done to improve the situation
Ø Would legislation clearly defining the right to terminate assist (or would it impose unnecessary rigidity)? Should courts attempts to give greater effect to the manner in which the parties themselves classify terms?
Ø Should party take greater care in specifying the consequences of breaches of certain terms?
DIFFERENT TYPES OF MISREPRESENTATION AND REMEDIES AVAILABLE FOR EACH
Ø Case law decided in relation to the Misrepresentation Act 1967 and the views expressed by courts on the decision in Royscot v Rogerson (1991)
PURPOSES BEHIND AWARD OF DAMAGES FOR BREACH OF CONTRACT
Ø Recent cases of damages which has moved from Addis v Gramaphone & Co. such as Jarvis v Swan Tours (1973); Ruxlyy Electronics and Construction Ltd v Forsyth (1996); Malik v BCCI (1997); Farly v Skinner (2001), Watts v Morrow (1991) and Hamilton Jones v David & Snape (2003)
Ø Analysis of the central problem of whether or not the law of contract should, as a matter of principle, compensate for losses which were not commercial one in the context of non-commercial contract.
Ø Contracts Regulation (UTCCA) 1999 (which apply by reason of regulation 4 and 5 the interpretation place upon this by the House of Lords in Director-General of Fair Trading v First National Bank Plc (2002). The term is listed in the blacklist in Schedule 2, 1(a) in relation to death or personal or personal injury.
Ø The term is of no effect (Reg. 8)
Ø Term (ii), also is in apparent contravention of both the 1997 Act and 1999 Regulations. The term reserves right to Ultraclean to alter pick up time without notice - S.3(2) imposes a requirement of reasonableness on this term is also likely within 1(k) of the 1999 regulation thus not binding on the consumer
Ø Term (iii) is similar in purpose to clause (ii); attempt to provide a different service that the one contracted for) and is covered by the same provision in the 1977 Act and 1999 regulations
Ø Term (iv) would be valid under the 1997 Act only to the extent that it satisfies the requirement of reasonableness and fits within the list of unfair terms in Schedule 2, notably 1(1) and this not being upon a consumer.
Ø If Thomas has engaged Ultraclean to remove the laundry of his Dental Practice then the 1999 regulations would not apply because Thomas is no longer a consumer but a business (Reg. 4(1) and Reg. 3(1)
Ø The 1997 Act would still apply if the court determines that Thomas still deals as a consumer in regard to the clauses potentially within s.3(and the situation is not entirely clear here, see R&B Customs Brokers, Stevenson v Rogers, and Feldaroll Foundry Plc v Hermes Leasing (London) Ltd (2004) or if the parties deals on Ultraclean’s written standard terms of business (St. Albans City District Council v International Computers Ltd (1996).
CLASSIFICATION OF DIFFERENT CONTRACTUAL TERMS INTO DIFFERENT CATEGORIES AND CONSEQUENCES FOR BREACH OF PARTICULAR TERM
Ø One of the express terms in the contract is that Ultraclean will use certain types of soap powder
Ø The law will imply a term into a contract that a contract for services is discharge with reasonable skill
Ø Has Ultraclean succeeded in this endeavour by printing the terms on the reverse side of the collection slip. Such notice must be given before the time of the contract (Olley v Marlborough Court (1949) and it must be embodied in a document of ‘contractual force’ (Chapelton v Barry Urban District Council (1940) and appropriate notice of exclusion clause must be given (Parker v South Eastern Railway (1877)
Ø Extra notice must be given of onerous or unusual terms (Spurling v Bradshaw (1956) and Interfoto Ltd v Stiletto Visual Programmes Ltd (1989) (terms iii and iv)
Ø It seems the exclusion clauses are incorporated into the contract
Ø The law regulates contractual terms through Unfair Contract Terms Act (UCTA) 1977 and Unfair Terms in Consumer Contracts Regulation (UTCCA) 1999
Ø The 1977 Act applies where a party attempts to exclude liabilities arising in the context of a business s.1. Term (i) cannot extend to personal injury or death caused by negligence by reason of s.2(1) and in the case of other loss or damage caused by negligence, liability can only be restricted to the extent that it is reasonable s.2(2)
Ø Term (i) contravenes Unfair Terms in Consumer Contracts Regulation (UTCCA) 1999 (which apply by reason of regulation 4 and 5 the interpretation place upon this by the House of Lords in Director-General of Fair Trading v First National Bank Plc (2002). The term is listed in the blacklist in Schedule 2, 1(a) in relation to death or personal or personal injury.
Ø The term is of no effect (Reg. 8)
Ø Term (ii), also is in apparent contravention of both the 1997 Act and 1999 Regulations. The term reserves right to Ultraclean to alter pick up time without notice - S.3(2) imposes a requirement of reasonableness on this term is also likely within 1(k) of the 1999 regulation thus not binding on the consumer
Ø Term (iii) is similar in purpose to clause (ii); attempt to provide a different service that the one contracted for) and is covered by the same provision in the 1977 Act and 1999 regulations
Ø Term (iv) would be valid under the 1997 Act only to the extent that it satisfies the requirement of reasonableness and fits within the list of unfair terms in Schedule 2, notably 1(1) and this not being upon a consumer.
Ø If Thomas has engaged Ultraclean to remove the laundry of his Dental Practice then the 1999 regulations would not apply because Thomas is no longer a consumer but a business (Reg. 4(1) and Reg. 3(1)
Ø The 1997 Act would still apply if the court determines that Thomas still deals as a consumer in regard to the clauses potentially within s.3(and the situation is not entirely clear here, see R&B Customs Brokers, Stevenson v Rogers, and Feldaroll Foundry Plc v Hermes Leasing (London) Ltd (2004) or if the parties deals on Ultraclean’s written standard terms of business (St. Albans City District Council v International Computers Ltd (1996).
ISSUES IN 2004 LAW OF CONTRACT EXAMINATION
S/N
Offence/Defences
Principles & Authorities
Remarks
GENERAL COMMENTS
Ø Inability to recognise that certain areas of law was involved in an hypothetical question; candidates did not fully consider the fact, specific issues. Shopping list of cases.
Ø It is often hard to for intermediate student to discern the relevant. Citation and discussion of case which are irrelevant to the question serves to highlight candidates uncertainty as to which issues are involved in the question. Chaotic presentations.
Ø The aim of the course is to provide student with something more that the information within i.e. ability to analyse, argue and research …
Ø The answer should show that you can think, you can answer the question, have analysed the words of the question, have read the materials, understand contrasting position in the literature; familiarity with the knowledge or detailed, specific arguments in that area of study
Ø A successful answer identify the issues and applies the relevant laws to them
On Monday, A posted a letter to B asking if she would sell her large and well known collection of 1,000 pieces of crest ware china. A who was an enthusiastic collector, suggested that £4 per item would be an acceptable price to him. Due to a delay in the postal system the letter was not delivered until Wednesday. Also on Monday, B advertised in the local newspaper that a collection of crest ware china was for sale for £5 per item. The advertisement stated “One thousand items of crest were for sale. They are all in good condition. First Come, First Served’ On Tuesday, A saw the advertisement and telephone B and left a message on B’s answering machine saying ‘The deal is on at £5 per item”. He confirmed this by sending the same message by e-mail. On Wednesday, C saw B in the street and said that he had seen the advertisement and he would buy the items at £5 per items provided they were all in good condition. B who had been away overnight on business, agreed to the sale. When B returned home she played back the message and read her e-mails. She contacted A and said the items had been sold to C. Subsequently, it was discovered that the items were valued at £15 each. A and C each claimed that they have purchased the items and claim damages from B. In addition A claim damages for disappointment.
Advice B who is still in possession of the collection.
ISSUES IN THE FORMATION OF A CONTRACT:
OFFER
COMMUNICATION OF AN OFFER
UNILATERAL OFFER
ACCEPTANCE
IGNORANCE OF AN OFFER
EFFECTIVE REVOCATION
CONSIDERATION
EXISTING DUTY
Ø Formation of contract
Ø Whether an offer – an expression of a willingness to contract upon certain terms without further negotiation had been made – The nature of an offer and legal requirements necessary to establish one through cases such as (Storer v Manchester City Council (1974) and Gibson v Manchester City Council (1979)
Ø Is A letter an offer a request for information (Harvey v Facey (1993) and Clifton v Palumbo (1944) – Whatever it is it cannot take effect until Wednesday, the point at which it is delivered and communication takes place. At this point the other actions have occurred
Ø Generally advertisement are consider invitation to threat, rather than offers because of commercial difficulties that would attend any other sort of construction (Partridge v Crittenden (1968)
Ø First come, first serve –
Ø A wishes to buy and B wishes to sell at the same price
Ø On Monday – No offer between them because there is no offer matched by corresponding acceptance – R v Clarke (1927) – Contrary authority Gibbons v Proctor (1891)
Ø Effects of A’s telephone and e-mail message of Tuesday. On the basis of Partridge v Crittenden, B’s advertisement is an invitation to threat and there is no contract unless and until B accepts these offers.
Ø Consequently when C offers to buy the china on Wednesday and B accepts this offer, a binding contract has arisen with C.
Ø If B advertisement is to offer to contact with the first person to come forward. If it is a presentation in person C will succeed because A has not presented himself.
Ø If however the communication can be made over the phone or e-mail (something which will turn on the wording of the advertisement itself) then A should succeed in communicating his acceptance first and creating a binding contract before C’s communication has occurred. Manchester Diocesan Council for Education v Commercial and General Investments (1970)
Ø If the advertisement is silent on how one is to be the first come, consideration need to be given to what is reasonable in the circumstance.
Ø If a telephone number or e-mail are given, it seems likely that these are appropriate method as either system allow a person to determine with certainty who has communicated first in time, it should be clear who has accepted the offer first. In this instance the person is A and a contract is concluded with him before C.
Ø B needs to be advised that the resolution of the problem is determined by the wording of her advertisement, in particular, has she included her telephone number and e-mail address and thus held herself out as capable of communication on these grounds?
Ø If the China is worth more than three times the advertised price, this should not affect a concluded contract with A or C.
Ø The only possible ground for setting aside the contract here would be that there is some fundamental mistake which goes to the root of the contract: here the sale concerns the same china and the only possible misapprehension is the value of the china.
Ø Who should succeed in an action for breach of contract?
Ø On balance it seems likely that a court will not allow that B’s advertisement is an offer capable of acceptance unless it is clearly worded as such and clearly worded that presentation may occur by e-mail of telephone message because of the commercial inconvenience which can attend a determination that advertisement is an offer. Consequent A will be disappointed in his action because the contract was formed with C and A responded to an advertisement knowing that he might not be the first to come forward. A would not in any event, recover damages for disappointment on the basis of Addis v Gramophone Co. (1909) although candidates would want to consider the line of authorities decided since Malik v BCCI (1997).
Gertrude drives to work each day. She is in habit of giving two of her co-workers, Hermione and Ivan, a ride to work. At the onset of this arrangement, Hermione told Getrude that she would pay her £100 per month towards the cost of petrol and vehicle maintenance. Hermione told Getrude that it would be difficult for her to arrange an alternate method of transport, she would need a month’s notice if Getrude could not take her. Ivan did not offer Getrude any money for the journey, but at the end of the first month, told her she would give her £65 for the inconvenience of calling by his house early in the morning. Jerimiah is Gertrude’s younger brother and he promises to keep the car clean and mechanically sound if she will give him a lift to school each day.
Ivan fails to pay anything and Jeremiah never does clean or maintain the car. Gertrude has to pay £20 a month for cleaning and maintenance. Six months later, Gertrude decided to begin cycling to work each, believing that the exercise will do her good. That evening she informs her three passengers that she will no longer be driving to work.
Advice Gertrude.
EQUITY
DEVELOPMENT OF PROMISSORY ESTOPPEL
Ø Look if there is an intention to create legal relations
Ø Did the parties intend a binding contract or arise of was their arrangement a merely social one
Ø Application of the rule in Balfour v Balfour (1919) It was held that agreement to pay £30 a month while husband and wife were married was not intended as a binding contract
Ø Jones v Padavatton (1969); the attempt by a daughter to use the promise that the rent from the house would be used to finance her education to prevent her mother to claiming possession of a house. The agreement was held as not legally binding
Ø Coward v MIB (1962): Both Coward, who was passenger on Cole motorbike were killed and the wife tried to claim insurance damages. It was held that the agreement was not intended to be legally binding.
Ø Simpkins v Pays (1955)
Ø and Edmonds v Lawson (2000): A pupil barrister claim that her unpaid 12 month pupilage contract constitute a contract of employment so that she was a worker within the meaning of National Minimum Wage Act 1998. CA held there was a binding contract but she did not qualify as a worker under the provision of the Act . Formation of contract – Jeremiah and Familial)
Ø Hermione – probably a social arrangement on the basis of Coward v MIB
Ø It can be argued that the parties require to be contractual bound and that this situation is thus within the exception to the general rule considered by Upjohn LJ in coward case
Ø The evidence is that Hermione and Getrude had stipulated a definite amount and Hermione had indicated that disruption any change will cause and asked to be given notice. The approach of the court of appeals in Edmonds v Lawson in considering the context in which agreement was reached would also support this argument.
Ø In relation to Ivan, Getrude will want advice pertaining to two matters, first can she recover his arrears of payment; and secondly is she obliged to continue with the arrangement. Both matters are resolved on the basis of whether there is a contract between them.
Ø The same consideration about intention need to be applied
Ø Ivan’s case is slightly different than Hermione’s in that there is less certainty and definiteness in the arrangement. Coward v MIB
Ø Problems with consideration – offer to make payment after the arrangement has commenced: Roscorla v Thomas (1842), Re McArdle (1951), Pao On v Lau Yiu Long (1980)
Ø It appear there is no contract with Ivan
Ø Jeremiah is her brother with – Balfour v Balfour and Jones v Padavatton in which intention was excluded within a family relationship
Is Jeremiah is a minor and lacks capacity to contract.
On Monday, Zachary placed for sale on the internet a number of rare books for sale by auction. Each book was individually described and the initial bidding price given for the books being autioned which was to close three days later. On Thursday, Yoric was the highest bidder for each book at £35.
Book A was described by Zachary as a ‘first edition in fine condition’. In fact, it was a first edition but a second impression of the book and worth only £10. It was in fine condition. Had it been a first edition, first impression it would have been worth $45
Book B, it subsequently established, had been bought by Zachary from a rogue who had stolen it Yoric though neither Zachary nor Yoric knew this when he acquired it. The book was worth £2,500
Book C, at the time the auction came to close had been destroyed in a fire which had been caused by lightening. The book was worth £200.
Book D was described by Zachary as formerly owned by Lord Meredith. This was not true. Even if it had been true the book would have been worth only £10. In fact it was worth only £8.
Advise Zachary.
FORMATIONOF A VALID CONTRACT, VITIATION BY MISTAKE OR MISREPRESENTATION AND POTENTIAL CLAIM AGAINST JEN OR LEWIS
Ø Consider each book separately
Ø Required elements of actionable misrepresentation and different form of misrepresentation
Ø If there was unilateral mistake the contract is void unless is within Smith v Hughes (1871)
Ø Bilateral or common mistake – Bell v Lever Bros (1931); Great Peace (2002)
Ø A purchase by Yoric is an impossibility as he already owns the book Cooper v Phibbs (1987)
Ø Destroyed book - Financings Ltd v Stimson (1962)
Ø Misrepresentation of warranty Heillbut, Symons & Co. v Buckleton (1913)
Type of misrepresentation within Hedly, Byrne v Heller (1964) and s.2(1) of the Misrepresentation Act 1967
‘While the Contracts (Right of Third Parties) Act 1999 was necessary piece of legislation, it allows the contracting parties many unnecessary freedoms to determine the right of third parties and consequently fails adequately to protect the expectations of a third party.’
Discuss.
PRIVITY OF CONTRACT
THIRD PARTY BENEFIT
EXCEPTIONS TO THE PRIVITY OF CONTRACT
CONTRACT (RIGHT OF THIRD PARTIES ACT) 1999
Ø Why contracts (Right of Third Parties) Act 1999 was necessary
Ø Examine the problems presented by Privity of contract
Ø Candidate could agree that the problems created by privity were resolved by various common law devices and exceptions
Ø With respect to the legislation itself, candidates needed to consider how it operated to provide a ‘super exception to privity rule’
Ø The focus of the question lays in how the legislation gave the contracting parties the ability to determine the exact nature of the benefit, or right, provided to the third party.
Ø A detailed consideration of the statutory provision was desirable
Ø It is necessary to consider if the expectation of a third party were protected
The legitimate expectations that a third party could be expected.
Rarely will parties to a contract be in a position of equal bargaining power or entirely free from undue influence. To allow a contract to be set aside on this basis would be to fail to deal with commercial realities. However, in extreme cases the courts can intervene, though the principles on which they can do so have not always been clearly laid down.
ELEMENTS THAT COULD VITIATE AN APPARENT CONTRACT
Ø Legal doctrine of economic duress and equitable doctrine of undue influence
Ø As a matter of practicability and commercial reality, most transactions were affected by some form of duress or undue influence
Ø Are the principles upon which courts intervene very clear and whether the case which established this principles were in conflict.
Hach rented a computer from Ida for two years. He needed to use the computer to access the web. Hack carried out a business of buying and selling items on the web. It was agreed that the payment was to be $30 a month. The agreement contained the following clauses:
i) It is understood that Ida undertakes no responsibility for the condition of the computer and software supplied
ii) Ida takes no responsibility for financial looses arising out of any failure by the computer; and
iii) Hack must continue to pay the agreed rent even if the computer or software are out of commission for whatever reason.
After three months, Hack was ill and Ida agreed to accept £20 a month until he recovered. During the period Hack was unwell he did not have access to the computer. He paid the reduced sum for four months even though he had recovered by the end of the third month. Six months later the computer failed and was out of commission for a month before Ida came to fix it. It was estimated that he had lost £1,000 of profit from selling on the web. A week later after Ida had repaired the computer it failed again and Hack refused to pay the agreed rend and he asked Ida to take the computer back. Ida refused to do so and she required Hack to return the computer to her business premises. This he refused to do and the computer was stolen from Hack’s House.
Ø
CONTRACT FORMATION
VARIATION
TERMINATION
Ø The nature of contract entered between Hack and Ida
Ø Were the terms set out in the question incorporated into the contract? On the basis of L’Estrange v Graucob, the answer appear to be yes
Ø Were the terms relevant to the problem that later arose?
Ø If they are relevant were the term permitted under the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulation 1999
Ø The later would be inapplicable because Hack seems to be acting in the course of a business
Ø Is the unfair the Unfair Contract Terms Act 1977 applicable? Candidates need to consider the particular terms to establish this.
Ø Clause (i) appear incompatible with s.6 of UCTA and raises the question of whether Hack deals as a consumer or not – R & B Customs Brokers v UDT and Stevenson v Rogers
Ø If Hacks deals as a consumer, the act is not permissible
Ø If he is not dealing as a consumer, the clause is valid if reasonable
Ø Clause (ii) needs to be scrutinised for possible non-compliance with s.2(2)
Ø Clause (iii) may be incompatible with s.3
Ø Candidates needs assure themselves that either Hacks deals as a consumer or that the parties deals on Ida’s standard written terms of business and that clause is reasonable in the circumstances.
Ø
Marvin plans an elaborate party to celebrate his fiftieth birthday on 1 April. He invites 300 of his closest friends to travel with him to an exotic Indian Ocean Island to hear a private performance by the enormously popular pop group, the Noughts. Marvin Contracts with the Noughts to perform on 1 April for a fee of £150,000. He also agrees to fly them to the island and to provide them with a week’s deluxe accommodation whilst they are there. Marvin also contracts with Openair Ltd to charter one of their jets to take him, his guests and Noughts to the island for a fee of £300,000. Marvin makes both set of arrangements in January. At the beginning of February, the Noughts informed him that they have received a better offer for April 1, appearing at a televised pop concert to be held in honour of crown prince or Ruritania. Marvin tells them he expects to see them at the airport on the date set for departure to the island. Just in case Noughts do no show up, Marvin engages a little know band, the Pops, for a fee of £5,000.
At the end of end of February, the (fictitious) World Aviation Authority issues a strict code of anti-terrorism measures to be complied with by all airlines hiring out planes for private purposes. Although the code is issues on a temporary basis, there is no date given for its expiry. Openair Ltd inform Marvin that they cannot operate the aeroplane without complying with the code and that such compliance will cost Marvin an extra £1,000,000.
Advice Marvin.
Ø
FRUSTRATION OF A CONTRACT
RPORATION OF TERMS IN1TO A CONTRACT
Ø Marvin enter into two contracts in January and both were disrupted by events in February
Ø The nature of events present fundamental different issues in contract law
Ø Has the first contract been breached by them (e.g. Universal Cargo Carriers Corp v Cittati).
Ø If it has been breached what rights is Marvin entitled to – Damages for loss of employment because the purpose of the contract was employment (Jarvis v Swan Tours (1973); Jacksons vs Horizon Holidays (1975); Farley v Skinner (2001)
Ø Can Marvin recover damages on behalf of his guest (Pantown v Alfred McAlpine Construction Ltd (2002)
Ø Interaction of Marvin’s contract with the Noughts and his contract with Opeair Ltd
Ø If the second contract has been frustrated, the first contract has to be frustrated because Noughts had to be flown to the Island on Openair flight. Principle relating to frustration (Davis Contractors Ltd v Fareham Urban District Council (1956); National Carriers Ltd V Panalpina (Northern Ltd (1981)
Ø Mere increase expense does not amount to frustration
Ø But the increase is three times the original cost and the code is not in place at the required time
Ø What were the right in the event that the contract would not be frustrated – are Openair action a form of economic duress (Pao On v Lau Yiu Long, North Ocean Shipping Co. Ltd v Hyndai Construction Co. Ltd, North Ocean Shipping Co. Ltd v Hyndai Construction Co. Ltd)
Ø If they refused to fly because of increase cost, this is breach of contract
Ø The better view is to whether the contract is frustrated or not is that is that wit is or will be frustrated – Law Reform (Frustrated Contract) Act 1943
iv)
In considering the consequences of illegality the courts have emphasised the distinction between illegal contract as formed and contract illegal as performed. This was and remains a crucial distinction.
v)
ILLEGAL CONTRACTS
Ø Different treat to contract illegal as formed (which are unenforceable)
Ø Illegal as performed (which may be enforceable in some circumstances)
Ø The importance is, thus, as to the potential enforceability of the contract as to recover money or benefits conferred upon another pursuant to an illegal contract
vi)
ZONE B:
vii)
On Monday, Arnold placed an advertisement in ‘The Daily Muck’ which read £10,000 Reward – for the safe return of Bessy, a prize winning Holstein cow’. A description of Bessy was given which included the fact that she was wearing a collar bearing her name and that she had left Arnold’s field with her sister cow, Clara. On Tuesday Daniel, having read the advertisement, set off to the countryside to search for Bassey and Clara. Daniel spend £100 on his railway ticket and £250 on a week’s accommodation. On Wednesday, Edwin, a neighbour or Arnold’s found Bessy and wrote to Arnold that “£10,000 is not nearly a sufficient reward for a cow of this value – would you pay £15,000?”. Later that day Bessy broke out of Edwin’s barn. Frank found her and took her to his farm. On Friday, Friday found Clara and returned her to Arnold. Arnold refused to pay Daniel anything and decided to cancel his reward advertisement. He place a small note on the door of the village shop announcing no moneys were payable for the return of Bessy. Frank noticing Bessy’s address on her collar, took her to Arnold on Saturday. As Arnold was not it, he left her in Arnold’s field and returned home. Edwin, noticing Frank’s actions, left a note at Arnold’s house claiming the reward.
viii) b
ISSUES IN THE FORMATION OF A CONTRACT:
OFFER
COMMUNICATION OF AN OFFER
UNILATERAL OFFER
ACCEPTANCE
IGNORANCE OF AN OFFER
EFFECTIVE REVOCATION
CONSIDERATION
EXISTING DUTY
Ø Formation of contract
Ø Advertisement as a unilateral contract – Carlill v Carbolic Smoke Ball Company
Ø Finding Clara is an acceptance of performance of the contract
Ø Edwin request is a counter offer (Hyde v Wrench and Edwin has rejected Arnold’s offer or is it a request for information - Harvey v Facey (1893); Clifton v Palumbo (1944)
Ø Frank return Bassey but does not appear to be doing so on Arnolds offer. On this basis no contract is formed – R v Clarke and Contrary authority Gibbons v Proctor
Ø Can a unilateral offer he rejected by counter offer be r
Ø Whether an offer – an expression of a willingness to contract upon certain terms without further negotiation had been made – The nature of an offer and legal requirements necessary to establish one through cases such as (Storer v Manchester City Council (1974) and Gibson v Manchester City Council (1979)
Ø To revoke a unilateral over – Shuey v USA
Ø If this is sufficient in the circumstance, nobody can accept the reward
Ø It seem unlikely that Edwin would be found to have accepted Arnold’s offer by his opportunistic leavin a note
Ø While frank has performed the act of acceptance he is unaware that he has done so and it would seem just to similar deny Edwin claim, while Edwin is aware of the offer, he has not performed the act of acceptance.
ix)
‘While the so-called doctrine of promissory estoppel was developed to alleviate the unfair effect of the requirement for consideration, the doctrine has now appear well placed as an alternative to consideration. Discuss.
x)
PROMISORY ESTOPPEL
Ø Circumstances in which promissory estoppel was developed (attempts at contractual variation or promises given which were intended to be relied upon but were given in absence of consideration)
Ø A rigid insistence upon consideration can lead to harsh result, promissory estoppel is designed to alleviate such injustice
Ø In English law promissory estoppel may be poised as alternative to consideration, that situation has not yet been realised – Baird Textile Holdings v Marks and Spencer (2001)
xi)
Fred is a support of his local cricket club, the Gorton Wanderers (an incorporated charitable society). Due to shortfall in the Wanderers’ finances, they are unable to maintain their grounds. The must travel by hired vehicles to another grounds some distance away. Fred decides to benefit the Wanderers by hiring a deluxe coach to take the Wanderers to these grounds. He contracts Horrendous Journeys Plc for this purpose. Horrendous is to supply a coach three times weekly at a designated time and to return at another designated time (Term i). The contract is for the duration of the cricket season (ii). The coach is to be a deluxe standard (iii). Horrendous also agrees to compensate the Wanderers in the event that the coach is delayed on any occasion (iv). Although there is no delay in service, half way through the cricket season, Fred decides to reduces the services to twice weekly (variation 1) and the coach is to be of regular rather than deluxe standard (variation 2). Horrendous agreed to this and the contract is varied accordingly.
Advise the Wanderers as to what legal action, if any, they can take. To what extent, would your advice differ if performance of the contract had not yet begun?
xii) V
PRIVITY OF CONTRACT
THIRD PARTY BENEFIT
EXCEPTIONS TO THE PRIVITY OF CONTRACT
CONTRACT (RIGHT OF THIRD PARTIES ACT) 1999
Ø Determine if Wanderer could take any action when Fred and Horrendous vary their contract
Ø Privity of contract bars them from enforcing this contract or claiming damages pursuant to it
Ø Do they fit within any of the exception to the doctrine of privity.
Ø They may fall within the limited class of exception discussed by Lord Denning in Jackson v Horizon (1975) Holiday ad still generally recognised. The contract for the first class holiday for £1,200 which turn out to be awful. The court held that the husband is entitled to recover damages on behalf of himself and his wife.
Ø Because Fred has acted to vary the contract, it seems unlike that he will initiate a legal action on their behalf.
Ø The contracts (Right of Third Parties) Act 1999 seems a more successful course of action
Ø Could Wanderers enforce the term of s.1. Even if they are not able to bring themselves within s.1(1), they should be within s.1(2) as regards the provision of bus service – Nisshin Shipping Co. Ltd v Cleaves & Co. Ltd.
Ø If they are within the Act, they have a right to enforce a term of contract s.4
Ø The contracting parties have purported to vary the contract and issues become whether or not they can do this to the detriment of Wanderers. S.2(1) provides that the contract party cannot vary a contract without the permission of a third party, where inter alia, the third party has relied upon the term or the promisor can reasonably be expected to have foreseen that the third party would rely on any express term and the third party has in fact relied on it. The right is subject to any express term to the contrary in the contract (s.2(3) and it remain to be seen whether or not such a term exists in the contract between Fred and Horrendous.
Ø If the performance of the contract has not commenced yet, it may be that the Wanderers had not relied upon the term or that Horrendous would not reasonably have foreseen them to have relied upon the term. In this circumstances the Wanderers would not be able to take legal action
Ø An interesting – and generally unexplored – issue is whether the Wanderers could commence an action against Fred for varying the contract against their interest.
xiii)
‘It seems anomalous that a mistake which is induced by fraud should have a less vitiating effect than one which is not; and it is difficult to see why a mistake induced by fraud should make a contract altogether void if it is a mistake as to the offeror’s identity (whatever that may mean) and not if it is a mistake as to some of the attribute of his such as creditworthiness which may be equally or more material’ {Per Lord Millet, Shogun Finance Limited v Hudson).
Is this anomalous situation? If it is not how can it be rationalised?
xiv)
MISTAKE INDUCED BY FRAUD
THE EFFECT ON CONTRACT
MISTAKE AS TO IDENTITY AND ATTRIBUTES
Ø The situation required candidates to explore, analyse and attempt to reconcile the growing body of case law on the issue of mistake as to identity of one of the contracting parties brought about by the fraud of that party
Ø The law is difficult to reconcile in this area.
Ø The judgement of the House of Lords in Shogun Finance Limited afforded ample materials to discuss in answering this question.
xv)
Ivana places a sign in the window of her red Ford Transit Van which reads, in part, ‘for sale – £10,000 – low mileage – great shape – 1999 model – full service history available, In response to this notice, James speaks to Ivana about the van. He tells her that he needs a van to deliver flowers to his customers and asked her if the van would be suitable. Ivana who has been using the van to transport kitchen appliances, states that ‘it would be perfect’. After examining the van and its services history, James agrees to buy it and pay £10,000 for it. He spends £1000 and fits the inside of the van with a sophisticated shelving system with water tanks to keep his flower fresh on their way to his customers. Three months after he purchases the van, he sees a picture of it displayed in a local newspaper in connection with the story of a serial murderer. It transpires that the previous owner of the van had used it to hide the bodies of his victims and the van in a 2001 model. Once the background to James’ van is made public, he finds that no one wishes to receive flowers delivered in this vehicle. While Ivana knew of the van’s previous history and use, she had said nothing of this to James.
Advise James.
xvi)
MISREPRESENTATION
FALSE/FRAUDULENT
Ø The nature of the statements and advertising given by Ivana to James. Were they warranties of representation: The distinction between terms and representations rests upon the intention of the parties as objectively ascertained i.e. did the parties intend that the statement maker was making a binding promise as to the truth of the statement. Lord Moulton said the intention of the parties can only be deduced from the totality of evidence and no secondary principle of such kind can be universally true - Heilbut, Symons &Co. v Buckelton (1913).
Ø If they were warranties of breach of them sounds in damages
Ø If they were misrepresentation liability attached to them only in the event that they were misrepresentations
Ø Two matters of concern – the van is a 1999 model when it is in fact a 2001 (it is a newer model that Ivana advertised it as. If the advertisement is a warranty (and the balance of authority is against such a finding) it is unlikely that the damages attached to such a breach would be greater or that this would constitute a fundamental breach. If the advertisement is a representation, is it an actionable misrepresentation? Here it is a false statement of act, but there is no indication that it induced James to contract Ivana.
Ø The same issues attend to Ivana’s statement that the van is perfect for James’s use. If the advertisement is a warranty, there has been a breach of the contract. Difficulties attend a conclusion that the statement was misrepresentation. The statement is one of opinion – or possibly sakes puff – and not fact: Bisset v Wilkinson (1927)
Ø Statements of opinion can be misrepresentation: Esso Petroleum v Mardon (1976). Ivana is not in the business selling vans but of transporting kitchen appliances.
Ø It may be possible to argue that Ivana is uniquely in possession of knowledge which implies a set of fact particularly within her knowledge: Smith v Land and House Property Corp (1884); BG Plc v Nelson Group Services (Maintenance) Ltd (2002)
Ø The statement may be actionable on the above basis
Ø The difficulty lies in overcoming the relevance of the van’s previous use to James’ use. It may prove difficult to establish that Ivana’s statement was intended to cover such matters.
Ø There is no duty upon Ivana to disclose the previous use of the vehicle to James and she does not appear to have misled him on this point.
Ø Indeed she appears to have provided him with such documentation as pertains to the van
Ø If Ivana’s statement is a misrepresentation, it would not appear to be a negligent within Hedly, Byrne v Heller
Ø An innocent misrepresentation would only entitle James to rescind the contract, for this reason it is likely to be of limited appeal to him
Ø Ivana’s statement does not appear to have met the standard set in Derry v Peek for fraud.
Ø There is a possible action under Misrepresentation Act 1967
Ø Recent case law.
Ø James modification of the van may make rescission impossible and would prevent relief under the Act – Floods of Queensferry Ltd v Shand Construction Ltd (2000); Government of Zanzibar v British Aerospace (Lancaster House) Ltd (2000).
Ø Contrary authority in Thomas Witter Ltd v TBP Industries (1996).
Ø Finally, has there been a lapse of time that bars rescission?
xvii)
Lag went to Morgan’ garage where he saw a red car on the forecourt with notice on the windscreen reading, ‘Piper Saloon 1988, £11,000. Low mileage, One previous lady owner.’ Lag took the car for test drive and agreed to buy it when he returned to Morgan’s garage. Lag signed an agreement which contained the following clauses:
i) No statements, descriptions or representations made before this contract was concluded by Lag and Morgan’s garage are to be considered to be part of the contract of sale
ii) Any statements concerning the mileage of the car are not guaranteed and the buyer should satisfy himself about the likely mileage of the car
iii) No liability shall result from the condition of the car which is sold as seen
iv) There is no liability to be attributed to Morgan’s garage for injury or damage resulting from the use of the car;
v) Any consequential losses resulting from condition of the car are to be limited to a maximum of £200
Two weeks after Lag took delivery of the car the brakes fails, the car which has travelled 200,000 miles, was destroyed, the content of the car were damaged and the car ran into a group of school children who were crossing the road. Later it was discovered that the car had had two previous owners. Both were ladies.
Advise Morgan who is facing a claim for damages from Lag in respect of the car, contents and the children. What difference, if any, would it make to your advise if Lag had bought the car in the course of his business.
xviii)
MISREPRESENTATION
FALSE/FRAUDULENT
Ø Consideration of terms of contract between Lag and Morgan and the permissibility of these terms under the law.
Ø The nature of the statements and advertising given by Ivana to James. Were they warranties of representation: Heilbut, Symons &Co. v Buckelton (1913)
Ø If they were warranties of breach of them sounds in damages
Ø If they were misrepresentation liability attached to them only in the event that they were misrepresentations
Ø Morgan ahs sought to exclude liability for any misrepresentation by clause (i). In this case s.3 of the Misrepresentation Act 1967 is applicable and such an exemption can only be made to the extent that is reasonable. Similar consideration to clause (ii)
Ø Clause (iii) appears to seek to exclude liability for any implied terms as to the condition of the vehicle. Because Morgan sells the car in the course of a business, s.14 of the Sale of Goods Act 1979 applies. By reasons of s.6(2) of the Unfair Contract Terms Act 1977, Morgan cannot exclude or restrict s.14 of the s.14 of the Sale of Goods Act 1979
Ø Clause (iv) would not appear to be effective because it contravenes s.2(1) of the UCTA 1977 to the extent that it seek to exclude liability for personal injury or death.
Ø In the event that it seek to exclude liability for damage to property, this is permissible to the extent that the clause is reasonable: s.2(2)
Ø Clause (v) meets with the same conditions.
Ø While some of these clauses may withstand scrutiny under the UCTA 1977, they are unlikely, given the House of Lords’ decision in Director-General of Fair Trading v First National Bank Plc (2002), to withstand a challenge under the Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999.
Ø If Lag dealt in the course of business, the 1999 regulation would not apply.
Ø Under the UCTA 1977, the matters covered in s.6(2) can only be excluded to the extent that they are reasonable
Ø S.6(3) consideration as to the requirements of reasonability are thus necessary.
xix)
Where frustration ends breach begins. It is a crucial interface. On one side the claimant has no effective remedy, whereas on the other side damages can be recovered. The rules establishing this vital boundary are far from clear.
Discuss.
xx)
FRUSTRATION AND BREACH
Ø The question calls for a consideration of the nature of frustration and of breach.
Ø Comparison between the two needs to be made especially with the remedial consequences of each and the reasons behind the different consequences
Ø The question invited challenge to the statement that where frustration as occurred, there is no effective remedy
Ø A further focus for challenge and analysis lies in the statement that is difficult to establish the boundary between frustration and breach.
Ø To deal with both challenges a carefully review of the established cases and their principles needs to be undertaken.
xxi)
Monty conducted a business registered in accordance with the (fictitious) Supply of Bricks Act 2004. The purpose of the Act was to regulate the brick trade where there was evidence of considerable mis-selling. The Act required suppliers to be licenced under the Act and to supply a delivery invoice with each supply of bricks. It had to state the quantity and type of bricks supplied. The following evens occurred:
a) Monty supplied 800 bricks to Norman without providing the statutory invoice. Norman refused to pay;
b) Monty supplied 2,000 Berkhamsted type bricks to Orlando accompanied by an invoice which had described the bricks as Hemel Hempstead type bricks. Orlando refused to pay;
c) Monty supplied 2,400 Berkhamsted type bricks to Paul but failed to provide an invoice after Paul had said. ‘You don’t need to supply an invoice. After all we are friends.’ Paul refused to pay;
d) Monty failed to provide an invoice when he delivered 3000 Berkhamsted bricks to Quinn. The Bricks were not satisfactory and Quinn wish to return them and recover the price he had paid; and
e) After Monty’s licence expired, he agreed to supply 1,000 Boxmore type bricks to Roger for which Roger paid in advance.
Advise Monty.
xxii)
ILLEGALITY IN THE FORMATION AND PERFORMANCE OF A CONTRACT
Ø Various issues of illegality in the formation of a contract and the extent to which courts will enforce a contract despite the taint of illegality
Ø Illegality is created by statute
Ø Consider the purpose behind the statutory requirement
Ø Following John Shipping v Rank, the issue to be considered in the purpose behind the statute
Ø Is the statute intended to penalise conduct or prohibit contract? Definitely not to prohibit contract!
Ø The requirement to provide an invoice appears to regulate the conduct of business rather than the legality if business
Ø The above will indicated that contracts which do not comply with this requirement are illegal as performed rather than as formed.
Ø Parts a & b deals with similar situations. Monty may be innocent of wrongdoing in that he inadvertently failed to supply Norman with the statutory invoice and was unaware of the illegality. In some circumstances, courts have allowed such contract to be enforced (cf Archbolds (Freightage) v Spanglett); in other cases, courts have not allowed the contract to be enforced (cf Re Mahmoud and Ispahani)
Ø Where statute does not specify the consequences of illegality on contract, the better view is that the effect should be determined by reference to the statute
Ø Here it is arguable that the purposes of the statute would not be further by denying Monty the remuneration due under his agreement with Norman
Ø Monty would be able to recover on a quantum valebat basis for the goods supplied (Mohammed v Alaga) but not if public policy would prevent such a restitutionary recovery (Awwad v Geraghty & Co.). Similar situation prevail upon the situation in part B.
Ø Part c raises a subtle difference because both parties appear to be aware of the need to supply an invoice and have agreed not to in this instanced. Both Paul and Monty are aware that the contract is illegal because it lacks the statutory invoice. Both are assenting to a performance that they know is illegal. The parties are in pari delicto and neither can sue on the contract. Monty cannot obtain the remuneration stipulated in the agreement.
Ø In part d: Quinn is apparently unaware that he invoice is required by law. The consideration in a) and b) are relevant. In this instance, Quinn appears to be an innocent party to the illegal contract
Ø In part (e), Monty licence as expired and the contract is illegal as formed and thus unenforceable by either party.
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