Part - Elements of the law of Contract

• MINOR AND MAJOR UNDERTAKINGS
  
  A contractual term is a primary obligation and every breach of primary obligation gives rise to a secondary obligation to damages for the loss caused
  
  For a breach the injured party may be provided with the option to a) terminate and claim damages; b) affirm the breach, insist on continuous performance and claim damages. Classification is important to determine whether the breach or innominate term. Injured party is not given the right to terminate the contract for a breach that is a warranty.
  
  Rescinding for breach means the injured party is entitled to treat contract as breach.
  
  Rescission for misrepresentation means cancelling the contract from the very beginning
  
  Conditions – (most important conditions) breach of which gave right to refuse further performance
  
  Warranties – (less important conditions) for breach of which damages were the only remedy
  
  Parties rescinding need not show the breach has actually caused any loss Bowes v Shand (1877) Re Moore and Landawer (1921)
  
  At Common Law the ultimate test is intension, if intension is clearly expressed a term will be a condition, if not the court will have to draw “proper inference” Behn v Burnes (1868) Bettini v Gye (1876); Poussard v Spiers
  
  Court of Appeal in Hong Kong Fir case recognise a new category of terms that are neither conditions nor warranties and such unclassified terms are referred to as ‘innominate’ or ‘intermediate terms’
  
  For breach of ‘innominate’ or ‘intermediate terms’ the court will determine whether the injured party has right to rescind Cehave v Bremer HG (The Hansa North (1976)
  
  The Hong Kong Fir approach may make it less easy for a contract to be rescinded for breach on a mere technicality but it introduces greater uncertainty. Mihalis Angelos (1970): Bung v Tradax (1981); the Naxas (1990) Barber v NWS Bank (1996) contrast Torvald Klaveness v Arni Maritime Corp (the Gregos). House of Lords held that the obligation to re-deliver a time-chartered ship on due date was probably not a condition. Has not changed condition but have had a knock-on effect – Smith v Hansen-Tangen (1976) words identifying the yard where ship was to be built was no part of the description as to amount to condition to charter-party; L Schuler v Wickman Machine Tools Sales (1974)
  
  Lombard North Centra v Butterworth (1987) punctual was made a condition
  
  Union Eagle v Golden Achievement (1997) ALL ER 215 – a 10 minute delay was too much. Time was of essence as the time for performance has passed so too had the right to performance.
  
  Examination Advise – Determine the terms of the contract, expressed term, implied term (Sale of Goods Action 1979 s.14(2) a, b, and c. Unfair Contract Terms Act
  
  Reliance on Purchase where purchaser has great experience or expertise (Esso Petroleum Co. Ltd v Mardon); A seller of car/buyer Unfair contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999
  
  ‘Innocent of fault’ those whose is at fault should check the accuracy of their statement and will bear the responsibility for the failure
  
  B is the only manufacturer if there are other suppliers it might the necessary to imply them
  
  REGULATIONS OF THE TERMS OF THE CONTRACT – PAGE 89-110
  
  The traditional view of the common law is that it is up to the parties to decide on their respective obligations and that the court should not intervene.
  
  Onerous clauses attempting to exclude or limit liability for breach led the courts to develop fairly strict rules designed to limit their scope
  
  Efforts to protect the weaker party led to statutory intervention in form of Unfair contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999
  
  COMMON LAW CONTROLS
  
  Incorporation (is the clause a part of the contract) of clauses as means of controlling their effect
  
  Court develop a relating to fundamental breach – breach so serious that exclusion clause cannot apply
  
  Incorporation MCK C9 pp188-199 Poole C7 pp 279-295
  
  For exclusion clause to be effective it must have been incorporated L’Estrange v Graucob (1934). The party signing will be bound by the clause even if it has not been provided the other party did not make any misrepresentation. Curtis v Chemical Cleaning and Dyeing Co. (1951)
  
  The clause even if not in a document which has been signed it can be incorporated
  provided reasonable notice is given at or before the time of contracting
  Notice will not be reasonable after the contract has been made Olley v Marlborough Court Hotel (1949) contract made at Reception desk, exclusion clause displayed in the guest bedroom. Chapelton v Barry UDC (1940) and Thornton v Shoe Lane Parking (1971).
  
  Reasonableness was first put forward in Parker v South Eastern Rly (1877). It was to be decided in the light of all circumstances.
  
  It does not need to be in the document but indicate the existence of the document. It should be more than a receipt but a document where you will expect to find contractual terms or reference to them. Chapelton v Barry UDC, (1940). Cases Spurling v Bradshaw (1956) Thornton v Shoe Lane Parking (1971), Interfoto Picture Library v Stilleto Visual Programmes (not only to the content of consumer products); AEG (UK) Ltd v Logic Resource Ltd (1966)
  
  Another way for incorporation is course of dealing i.e. exclusion clause has been part of previous dealing – Kendall (Henry) & Sons v Lillico (William) & Sons Ltd (1969). Consistence in course of dealing McCutcheon v MacBrayne (1964) previous dealing but exclusion clause as not always used
  
  CONSTRUCTION nterpret ambiguity against the person trying to rely on the clause (contra proferentem rule) Andrew v Singer (1934); Wallis, son and Wells v Pratt & Haynes (1911) and Houghton v Trafalgar Insurance Co. Ltd (1954). You can extend exclusion for implied term to expressed term.
  
  Because consumer are generally protected by legislative provisions the courts have indicated there is less need to adopt strain construction of clauses and more relaxed view of clauses that limit liability rather than exclusion – Photo Production Ltd v Securicor Transport Ltd (1980) AC 827 p843 (1980) all ER 556 p561; Alan Craig Fishing Co. Ltd v Malvern Fishing Co. Ltd (1983) Not followed on Australia Darlington Futures Ltd v Delco Australia Pty Ltd (1987)
  
  In deciding whether a clause cover liability for negligence by contractor employee – Privy Council opinion in Canada Steamship Lines Ltd v The King (1952) laid the following four principles: if the clause exempt a person from negligence effect must be given to the clause; if there is no express reference to negligence the court will determine if the word use are wide enough to cover it; if the words used are wide enough the court will determine whether liability may be based on some other grounds other than negligence. This was applied in EE Caledonia Ltd v Orbit Valve Plc (1994); 2nd and 3rd rule white v John Warwick (1953). Howsoever caused in bicycle will be effective to exclude liability; Hollier v Rambler Motors (1972).
  
  FUNDAMENTAL BREACH MCK C11 PP 238-240. POOLE C8 PP 351-360
  
  Appeal Court once ruled exclusion clause(s) would not be effective against fundamental breach – obligation central to the performance of a contract e.g. Karsale (Harrow) Ltd v Wallis (1956) Car bought in good condition but delivered incapable of self propulsion. Consequences of breach exceptionally serious Harbutt Plastine Ltd v Wayne Tank and Pump Co. Ltd
  
  Approach to fundamental breach reviewed by the House of Lords in Suisse Atlantique Societe d’Armament Maritime SA v NV Rotterdamsche Kolen Central (1976) and Photo Production Ltd v Securicor Transport Ltd (1980). The house reject court of appeal’s assertion that that there was a rule of law preventing reliance on exclusion clause in case of fundamental breach. The question is that of construction.
  
  The effect of the Unfair Contract Terms Act 1977 is that in all consumer contracts an exclusion clause which attempts to exclude liability for a fundamental breach which attempts to exclude liability for a fundamental breach will either be automatically void or subject to a test reasonableness
  
  Contra proferentem rule – applied particularly strictly where the defendants alleges that liabilities for negligence has been excluded
  
  The Common Law controls the use of exclusion clauses by means of the rules of incorporation Anson pp 163-184
  THE UNFAIR CONTRACT TERMS ACT 1977
  
  Statutory framework for the regulation of exclusion clauses and operate alongside the common law
  
  UCTA is primarily concerned with exclusion and limitation clauses (regarding business liabilities s.1(3) private individual will rely on common law) rather than unfair term in general
  
  R & B Customs Brokers v UDT (firm selling of its old computer not a business contract
  
  Enforcement subject to restrictive or onerous conditions (all claims to be made within 24 hours of the conclusion of the contract)
  
  Smith v Eric Bush (1989) Bush 1989 – surveyor giving valuation without any acceptance of liability for its accuracy; Philips Products Ltd v Hyland (1987)
  
  UCTA does not apply to insurance, land, intellectual property, international supply contract – s.4, s.26 (Amiri Flight Authority v BAE Systems Plc (2003) ECWA Civ 1447 (2003) 2 Lloyd’s Rep. 767
  
  Negligence Liability – Negligence is defined as covering an obligation to take reasonable care in the performance of a contract; the tort of negligence; and liability under Occupiers Liability Act 1957;
  
  Any clause excluding negligence resulting in death or personal injury is null and void s.2(1)
  
  The section does not apply where the effect of the clause is to transfer liabilities between possible tortfeasors rather than preventing victim from recovering – Thomson v Lohan (Plant Hire) 1987
  
  In s.2 restriction of liability will only be effective if it satisfies the requirement of reasonableness
  
  Contractual liability - s.3 covers the exclusion of contractual liability other than through negligence where one party deals as consumer (does not hold himself out to make contract in the courses of business, where one of the party deal on others written standard terms of business. R & B Customs Brokers v UDT (1988) Export company bought cars for use in business and directors personal use. Stevenson v Rogers (1999) the CA took a different view.
  
  The supply of goods – ss.6 and 7 of UCTA prohibits any exclusion of liabilities.
  In relation to the implied terms as to description or quality (Sales of Good Act ss.13 and 14) the position depends on whether the buyer is dealing as a consumer or not.
  
  In relation to s.2(6.23) with the additional requirement that the goods must be of a type ordinarily supplied for private consumption (s.12(1). R & B Customs Brokers v UDT (1988)
  
  The Test of reasonableness – looking at the clause at the time or the contract rather than in the light of any breach. Whether the clause was a reasonable one to include in the first place, rather than whether it would be reasonable to allow reliance on it in the circumstances which actually occurred – Steward Gill Ltd v Horatio Myer & Co. Ltd (1992).
  
  The Obiter suggestion to the contrary in Overseas Medical Supplies Ltd v Orient transport Services Ltd (1999) seems to go against the clear wording of s.11
  
  The more resources are available, and the greater the opportunity for insurance, the less likely the clause is to be reasonable.
  
  Schedule 2 contain list of factor
  
  Judicial consideration – Before UCTA House of Lord Gorge Mitchel v Finney Lock Seeds (1993). Sale of cabbage seed. The wrong seed for supplied and the seed failed entirely. Clause limit liability to the price of the seed. The seller could easily insured against the liability it was common not to rely but to negotiate settlement of claims on terms more favourable
  
  Post UCTA House of Lords Smith v Eric S Bush. Importance of balance of bargaining power, availability of alternative
  
  Court of Appeal
  
  
  Courts emphasised in general that the court should assume that business contractors will be the best judges of commercial fairness of their agreement. It is only if there is evidence that one party has taken unfair advantage of the other or the term is so unreasonable that the court should intervene
  
  UNFAIR TERMS IN CONSUMER CONTRACTS REGULATION 1999
  
  UTCCR result from implementation of European Directive (93/13/EC) 1994 and 1999.
  Difference between UTCCR and UCTA – UTCCR apply to consumer (natural person) contract;
  
  UCTA apply to all types of contractual clauses other than those individually negotiated
  Good faith test and significance imbalance in rights and obligation –Khatum v Newham
  LBS (2003) EWHC 2326
  
  Schedule 2 illustrative and non exhaustive list
  
  Regulation 7, all term of contract must be in plain, intelligible language
  
  UTCCR 1999 (reg. 10) also give a general supervisory power to the Office of Fair Trading
  
  The Capacity to Contract – minor – A minor is a person under the age of 18 and is not considered to have the same capacities as an adult one of which is ability to enter into a legal contract – Minors’ Contract Act 1987
  
  Issues – Contract of necessaries, beneficial contracts of service, voidable contract, the recovery of money paid or contract handed over in pursuance of non binding contract
  CONTRACT FOR NECESSARIES
  
  The rules regarding necessary good is now stated in s.3 of the Sales of Goods Act 1979
  
  The liability is to pay a reasonable price not contract price – Nash v Imman (1908) the supplier had to prove that the minor did not have sufficient suitable clothing, Peter v Fleming (1840) on effect on minor condition of life. Roberts v Gray (1913) minor was held liable for breach of an executed contract.
  
  At common law, minority was not a defence where the contract was for necessaries. Necessaries could either be goods or contract for services.
  
  BENEFICIAL CONTRACTS OF SERVICES
  
  A minor is generally bound by the contract of employment if its is beneficial to him.This excludes contract of apprenticeship, training or employment and professional engagement. Doyle v White City Stadium (1935) and Chaplin v Leslie Frewin (Publishers) 1966 De Francesco v Barum (1880).
  
  Voidable Contract MCK C16 pp 344-348 Poole C14 p 671. Anson pp 222-229
  
  Previously, at common law, all other contracts were not binding on the minor unless he ratified them after reaching maturity, but could be enforced if he chose.
  
  Infant Relief Act 1874 did away with ratification and made many of the contracts absolutely void and restores restitution (s.3) in favour of the other contracting party.
  
  The remedy is discretionary but cases such as Stocks v Wilson (1913) and Leslie v Sheill (1914) illustrate the factors to be taken into account
  Francois have been duly informed
  
  The answer would depend on whether the ticket is a contractual document or mere receipt Chapelton v Barry UDC (1940)
  
  If the clause is incorporated it will be considered in the light of UCTA 1977 and UTCCR 1999
  
  Vitiating elements in the formation of a contract
  
  Mistake
  
  We will consider mistakes of facts and not mistakes of laws
  
  Mistake can either be unilateral or bilateral
  Law only provide relief where the mistake is a bilateral mistake – although there are some exceptions to this point.
  
  
  At Common law, an operative mistake will render a contract void. In equity, a mistake renders the contract voidable. Equity seek to provide whatever remedy is just in the circumstances
  
  Claimant would claim that a misrepresentation has been made rather than a mistake.
  
  This is partly due to availability of damages for misrepresentation and changes to Misrepresentation Act 1967 which make a misrepresentation easier to prove
  Courts are reluctant to find an operative mistake, because it amounts to re-writing the contract or affecting the right of an innocent third party.
  
  At common law if the mistake is operative, the contract is void and there is no need to consider mistake in equity. Where a bilateral mistake is sufficiently fundamental to invalidate a contract.
  If a mistake is operative, it is said to result in what is best described as a paradox: a void contract
  
  Bilateral Mistake – Two types – In the first each of the party is mistaken, but they do no share their mistake. In the second part the two parties share their mistake.
  
  MCK C4 PP 69-75 POOLE C3 PP 75-77
  
  Absence of genuine agreement – each parties are mistaken but they do not share a mistake. They are at ‘cross-purposes’ and no ‘common ground’. Failed to create an agreement. Raffles v Wichelhaus (1864)
  
  The parties are said to be at ‘cross-purposes’ when the offer and acceptance do not correspond.
  
  Common Mistake occurs where both parties are mistaken about critical element of their contract. They share this mistaken assumption - Bell v Lever Brothers (1931). Cases where apparent consent of the parties is not present and consequently the contract is void ab initio (void from the outset)
  
  This approach is dependent upon consensual theory of contract i.e. if contract exists it is due to the consensus or agreement of the parties
  
  NON-EXISTENCE OF THE SUBJECT MATTER MCK C14 PP 302-305 POOLE C11 P. 473 ANSON 301-302, TRIETEL – 263-264
  
  Parties deal with subject matters that does not exist res extincta - Couturier v Hastie (1856) – Cargo of corn McRae v Commonwealth Disposal Commission (1951) failure of consideration
  Mistake as to ownership - know as res sua to sell to the owner which is impossible to sell to the owner of the property
  
  Mistake as to possibility of performance - case of physical impossibility – Sheikh Brothers Ltd v Oschsner (1957); Legal Impossibility – Cooper v Phibbs (1867); Commercial impossibility Griffith v Brymer
  
  If one party assume the risk of performance in a contract, the party will probably be in breach of a valid contract
  
  Contract is frustrated if performance becomes impossible because of supervening (or later) event
  
  MISTAKE AS TO THE QUALITY OF THE SUBJECT MATTER MCK C14 PP 306-309 POOLE C11 PP 471-486
  
  Very difficult area of the law of mistake. The difficulty arise out of House of Lords’ decision in Bell v Lever Brothers Ltd (1931). Two lever brothers subsidiary directors involving in cocoa trade on their own without harm to the company. Disengagement arose out of the merger of the subsidiary. Lord Atkin ruled that the mistake was not sufficient to render the contract of severance void. Further Reading Anson pp 302-304, JC Smith, C.A. McMillan
  FUNDAMENTAL MISTAKE GOING TO THE ROOT OF THE CONTRACT MCK C 14 PP 301-302, POOLE C11 PP 473-486
  Courts are generally reluctant to find a contract void at law for unilateral mistake unless the non-mistaken party is aware of the mistake and proceeds to contract; non-mistaken party induced mistaken party to contract (in most cases ‘mistaken identity’)
  
  Mistaken assumption or promises – MCK C2 pp 21-28 C4 pp 69-75 Poole C3 pp 77-79
  
  Smith v Hughes (1871) – two factors are required for the contract to be void; if the claimant had been mistaken as to the promise made to him and if the defendant knew about the claimant’s mistake as to the nature of the promise made to him by the defendant.
  
  MISTAKES AS TO IDENTITY MCK C4 PP 69-75 POOLE C3 PP 79-94
  
  Received recent clarification from the House of Lord in Shogun v Hudson (2004) UKHL 62. Prior to that rogue present himself as someone else bought goods, gives fake cheque, use or sell goods to innocent third party, the cheque bounced, seller willing to claim his money, discover who rogue is and approach innocent third party to claim
  
  Because a third party is involved the vendor must rescind the contract before the third party contract the rogue or losses the right to rescind the first contract if the rogue contract with the third party first.
  
  In most mistaken identity the policy arguments will favour the protection of innocent third party. House of Lords in Cundy v Lindsay (1879) . The House of Lords found that the contract was void because there was lack of consensus.
  
  The identity must be material to the formation of the contract Dennant v Skinner (1948)
  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)
  
  Inter praesentes – that is face-to-face – court have frequently said the rogue is identified by sight-and-hearing – Phillips v Brooks (1919) and Lewis v Averay (1972). A presumption arises that the mistaken/deceived party intended to contract with the person before him and a contract has arisen. House of Lord Shogun Finance v Hudson.
  
  There is a distinction between the parties face-to-face and contract formed at a distance and probably in some form of writing
  
  Where the contract is formed between the parties who appear before each other, a presumption arises that the mistaken party intends to contract with the person before him
  
  DOCUMENT SIGNED UNDER A MISAPPREHENSION AS TO THEIR CONTENTS
  
  A person must normally take full responsibility for his signature.
  
  However a document could be held to be void if the a person may have been so misled under the defence of non est factum (it is not his deed) Gallie v Lee (1971)
  
  The burden of proof is on the signer to show that he was not negligent.
  
  Mistake in Equity – there are four important questions – Whether the contract has allocated the particular risk in question. If it has not It there an operative mistake at common law (one which make the contract void). If there is no such mistake there is no room for application of principles of equity, but if the contract stands at common then the possibility of equitable relief must be considered. If there is no operative mistake at common law, does equity provide relief? Is there any substantive doctrine of mistake in equity
  
  Three forms of equitable relief –
  
  Rectification - remedy which is concerned with correcting a mistake which occurs not in the making but in the recording of the agreement only. The intension is clear but not properly recorded. Roberts v Leicestershire CG (1961), Thomas Bates and Sons v Wyndham’s (Lingerie) 1981, Commission for the new Towns v Cooper (1995), but contracts Riverplate Properties v Paul (1974).
  
  Where a mistake is present in the agreement itself rectification is not available F. E. Rose (London) Ltd v William Pin Jnr. & Co. (1953)
  
  Restriction – lapse of time, intervention of third party rights, conduct of third party, he who comes to equity must come with clean hands.
  
  Specific Performance – The principal characteristics of equitable relief is that it is discretionary i.e. flexible and responsive to the justice of the individual case. The remedy of specific performance may be refused in some cases. Denny v Hancock (1870) and Tamplin v James (1880)
  
  Rescission – surrounded by uncertainty at present.
  
  Equity historically could intervene to rescind the contract.
  
  Rescission in this context means the contract is voidable by the court and not by one of the parties
  
  The court can rescind the contract upon those terms which court considered just in the circumstances
  
  Equitable remedy will not be available where a party has made a unilateral mistake as to the commercial consequences rather than the terms. Clarion v National Provident Institution (2001) 1 WLR 1888
  
  Difficulty stems from working out whether or not equity has any ability to intervene in cases where there is a common mistake but one which is of sufficient importance to void the contract. Bell v Lever Bros and Solle v Butcher (1950)
  
  A court applying equitable doctrine of mistake is not faced with the all-or-nothing situation a court applying a legal doctrine of mistake is – the matter can be rearranged to try and suit the bargain the parties thought they were reaching in the first place
  
  The problem of mistake rarely arose in case law
  There was however an uneasy relationship between mistake at law and mistake in equity
  Great Peace 2002 - 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 by reason of mistake or the except cases of serious mislead know as res sua to sell to the owner which is impossible to sell to the owner of the property recognises comprehensive theory of mistake fication Francois have been duly informed
  
  The answer would depend on whether the ticket is a contractual document or mere receipt Chapelton v Barry UDC (1940)
  
  If the clause is incorporated it will be considered in the light of UCTA 1977 and UTCCR 1999
  
  François have been duly informed
  
  The answer would depend on whether the ticket is a contractual document or mere receipt Chapelton v Barry UDC (1940)
  If the clause is incorporated it will be considered in the light of UCTA 1977 and UTCCR 1999
  
  Francois have been duly informed
  
  The answer would depend on w
  
  Whether the ticket is a contractual document or mere receipt Chapelton v Barry UDC (1940)
  
  If the clause is incorporated it will be considered in the light of UCTA 1977 and UTCCR 1999
  
  MISTAKE
  
  It does matter if the rogue assumes the identity of a fictitious or real person but only if the identity is relevant to the contract
  
  
  
  If the identity becomes relevant at the point of payment, the contract would be voidable for misrepresentation and not mistake
  
  When the rogue pretended to be a real person, the contract is void - Cindy v Lindsley
  
  In Kings & Co. Ltd v Edvile , Merill & Co (1987) no firm by the name given by the rogue was in existence, thus there was contract with the rogue
  
  Great Peace - breaching the contract
  
  Court of appeal disprove Solle v Butcher
  
  MISRESENTATION
  
  the effect or pre-contractual statement on the contract
  
  Misrepresentation is false statement of existing fact which have induced the other party to whom it is addressed to enter into a contract. Reliance on falsehood. For misrepresentation to be actionable it must be a statement of existing fact inducing contract
  
  In a few situation, failture to disclose a fact me be treated as misrepresentation
  
  Remedies for misrepresentation are - rescission, damages
  
  Right to rescision my be lost and the level of damages may depend the type of misrepresentation i.e. innocent, fraudulent and negligent
  Attempts to exclude liability will be subject to reasonableness text under the Unfair Contract Terms Act 1977
  
  If misrepresentation is incorporated into the contract, the remedy of rescision is lost
  
  Misrepresentation Act of 1967 provided exhaustive remedies for misrepresentation
  
  If the pre-contractual statements is information of promises rather than a statement of fact, the remedy is likely to unavailable
  
  Claimant has to show that the statement had been a term of the contract
  
  A statement of opinion is not generally a misrepresentation - Bissel v Wilkinson (1927). Exception when the party expressing the is aware that based on fact the opinion could not be sustained. Smith v Land House Corporation (1884) Land who knew the tenant owed said he is the most desirable tenant.
  
  Where the person does not believe the opinion - Edginton v Fitalmance (19855). The state of mind is a much as much a fact of the state of his digestion.
  
  It can be used to turn intention to misrepresentation
  
  House of Lords said there is remedy for mistake of law (in Kleimonth Benson Ltd va Lincold City Council (1990)
  
  Pankhanisa v Hackney London Bureau Council (2002)
  
  Advertisement is a mere puff
  
  It does not matter if the person had opportunity to find out if the statement is true or not but does not take the opportunity Redgrave v Hud (1881) - misrepresentation of income from a legal practice being sold.
  
  Misrepresentation by silence. In certain circumstance conduct can be treated as statement Spice Girls Ltd v Aprilla World Service (2000)
  
  Where a statement which was true when made was false as a result of changing circumstance, keeping shut may be treated as misrepresentation - With v O'Flanagan (1926)
  
  Statement which is literarily true may be treated as misrepresentation if relevant information is not disclosed Dimmock v Hallet (1866). The statement that the flat was let was true, but the failure to disclose that the tenant had given notice to quit turned it into misrepresentation
  
  CATEGORIES OF MISREPRESENTATION -
  
  Fraudulent - no that the statement is untrue, but said to gain advantage
  
  Negligent at common law - maker of the statement and the person relying on it has special relationship giving rise to a duty of care under the principles of Heddly Byrne v Heller (1964)
  
  Negligent under statute - there is no reasonable ground believing the statement to be true. Misrepresentation Act 1967 s.2(11)
  
  Innocent the maker genuinely belief the statement to be true
  
  REMEDIES - Remedies will depend on whether the misrepresentation was made fraudulently, negligently or innocently
  
  Potential remedies at common law (contract and tort) and under statute (misrepresentation Act 1967)
  
  Categories of remedies are rescission and damages for loss
  
  Rescission is the principal common law remedy, setting the contract aside
  
  Remedy of rescission must be sought by the claimant. Until rescinded contract will continue to exist
  
  Misrepresentation renders contract voidable not void
  
  Claimant must give notice of rescission to other party
  
  One authority said notice can be given to a third party - Law and Universal Finance & Co. v Caldwell (1965)
  
  LIMITATION OF RESCISSION
  
  Where a party is aware of the misrepresentation and continue with the contract - Long v Lyod 1925
  
  Significant lapse of time between occurrences - Leaf v International Galleries (1950) 5 years.
  
  For fraudulent misrepresentation time does not start until the misrepresentations is discovered
  
  Where restitution is impossible. Used or consumed goods Clarke v Dickson (18508)
  The court can also award damages instead or rescission under s.2(2) of the Act
  
  DAMAGES
  
  Damages under common law requires claimant to present misrepresentation Derry v Pecks
  
  Took some time to recognise remedy for negligent statement causing loss.
  
  House of Lords in Hedlly Byrt
  
  Burden of Proof
  
  What the claimant has to do is to prove that there is misrepresentation
  
  Measures of damages - Most important authority is Rayshot Trust Ltd v Rogerson (1991) Court of appeal held that damages under s(2(1) should be calculated in the same way as if the statement had been made fraudulently
  S.21 requires the negligent misrepresentation to be treated in the same way as fraudulent ones
  
  The right to rescision must still subsist on order for damages to be awarded
  
  Exclusion of liabilities dealt with by S.3 of the Mis Act
  
  The clause which attempt to limit liability must satisfy the test of reasonableness of the UCTA - Walker v Boyle (1982) Thomas White v TBP Industries (1996) Hill Casualty & General insurance Ltd v Chase Manhattan Bank. Hill Causality & General insurance Ltd v Chase Manhattan Bank.
  
  House of Lords held that the right of the party to exclude damages caused by an innocent or negligent representation did not extend to fraudulent misrepresentation
  
  Assertion - No statement are made other than those contained in the contract itself.
  
  Statement of intentions cannot usually be treated as misrepresentation
  
  There is no direct authority in relation to change intention as opposed to change circumstance
  
  Termination for breach does not aim to undo the contract but simply to bring to an end for the future
  
  It is only obligation which are yet to be performed that re rescinded
  
  It is best to reserve rescission for misrepresentation and termination or repudiation when breach is being discussed
  
  Doye v Oligzy all direct loss was recoverable without any consideration for remoteness.
  
  UNDER INFLUENCE MCK C 17 pp 368-371 Poole C 13 pp 584-623
  
  The equitable doctrine of undue influence focuses upon the relationship between parties
  
  Common law doctrine of duress examines the procedures by which a contract was reached
  
  Lord Nicholls, in Royal Bank of Scotland v Etridge (No. 2) 2001, describes undue influence as ‘one of the grounds of relief developed by the courts of equity as a court of conscience. The objective is to ensure that influence of one person over another is not abused.
  
  House of Lords has definitive judgement on the doctrine of undue influence – Barclays Bank v O’Brien (1993) and Royal Bank of Scotland v Etridge (No. 2) 2001)
  
  In the past courts divided undue influence into actual undue influence and presumed undue influence based on decision in Allcard v Skinner (1887)
  
  For a period of time based on the decision in BCCI V Aboody, courts divided the cases of presumed undue influence into two sub-categories, Class 2A and Class 2B
  
  The House of Lords adopted the division in Barclays Bank v O’Brien (1993) but in Royal Bank of Scotland v Etridge (No. 2) 2001) disapproved the label
  
  On one had undue influence was presumed as a matter of law by reason of the type of relationship between parties. In the other instance, undue influence would not be presumed by law, but it was open to a party to establish an evidentiary presumption of undue influence.
  
  Actual Undue Influence – The claimant must proved that the wrongdoer had capacity to influence the other party, he did influence the other party, the exercise of influence was undue; and that it was because of the undue influence that the transaction was brought about.
  
  It is not necessary to show that the transaction was manifestly disadvantageous to the party subject to undue influence – Lloyds Bank v Bundy (1975): bank and elderly customer
  
  CIBS Mortgages v Pitt (1993); husband and wife. The case is also useful for the discussion of manifest advantage
  
  There need to be any actual threat by one party and undue influence is a much broader concept than common law duress.
  
  Presumed Undue Influence – The claimant need not prove that there was undue influence. According to Lord Nicholls in Royal Bank of Scotland v Etridge (No. 2) 2001) these situations may arise if the law makes a genuine presumption in relation to certain types of relationship and if there is a shift in the evidential burden of proof from the complainant to the other party to show that the transaction was made without proper influence
  
  The complainant reposed trust and confidence in the other party or the other party acquired ascendancy over the complainant; secondly the transaction is not readily explicable other than as resulting from undue influence.
  
  Genuine Presumptions – law automatically considers the parties to be in relationship of trust and confidence – doctor/patient, solicitor/client, trustee/beneficiary, religious adviser/disciple. The greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted’
  
  Evidential Presumptions – a relationship under which the complainant generally reposed trust in and confidence in the wrongdoer. The complainant establish the relationship and the burden of proof then shifts to the other party to disprove the presumption which is done by establishing that the complainant received independence advice before acting. See Royal Bank of Scotland v Etridge (No. 2) 2001)
  
  Undue influence and third parties – Where B enters into contract with C for the benefit of A. Husband/wife/Bank. The Transaction will be set aside if the bank has actual or constructive notice of the possibility of undue influence. The only way the bank can rebut the possibility of notice is to inform the spouse as to the nature of the transaction and advise them to seek legal advice. See Barclays v O’Brient (1993). This advice was modified by the House of Lord in their recent decisions in Royal Bank of Scotland v Etridge (No. 2) 2001) which carefully outlined the steps a financial institution must take to avoid taking a charge with notice of the surety’s claim to set it aside. The House of Lords also provide guidance to solicitors who advise in such transactions
  
  Overborne theory
  
  Evidential Presumptions – a relationship under which the complainant generally reposed trust in and confidence in the wrongdoer. The complainant establish the relationship and the burden of proof then shifts to the other party to disprove the presumption which is done by establishing that the complainant received independence advice before acting. See Royal Bank of Scotland v Etridge (No. 2) 2001)
  
  Evidential Presumptions – a relationship under which the complainant generally reposed trust in and confidence in the wrongdoer. The complainant establish the relationship and the burden of proof then shifts to the other party to disprove the presumption which is done by establishing that the complainant received independence advice before acting. See Royal Bank of Scotland v Etridge (No. 2) 2001)
  
  Royal Bank of Scotland v Etridge (No. 2) 2001) law automatically considers the parties to be in relationship of trust and confidence – doctor/patient, solicitor/client, trustee/beneficiary, religious adviser/disciple. The greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted’
  
  Wrongdoer had capacity to influence the other party, he did influence the other party, the exercise of influence was undue; and that it was because of the undue influence that the transaction was brought about.
  
  It is not necessary to show that the transaction was manifestly disadvantageous to the party subject to undue influence – Lloyds Bank v Bundy (1975): bank and elderly customer
  
  CIBS Mortgages v Pitt (1993); husband and wife. The case is also useful for the discussion of manifest advantage
  
  There need to be any actual threat by one party and undue influence is a much broader concept than common law duress.
  
  Who can enforce the terms of a contract
  
  Doctrine of privity, the Contracts (Rights or Third Parties) Act 1999, Rights conferred on third parties at common law, liability imposed upon third parties
  
  The doctrine of privity of contract is primarily concerned with the question of who can enforce a contract
  
  Only parties to a contract are bound by. A and B in contract cannot compel C to do something or refrain from doing it
  
  Only parties to a contract can derive rights and benefits from their contract. A&B cannot by their contract confer an enforceable benefit upon C even if it is their intention. This is objectionable as it would produce manifest injustice and commercial inconvenience.
  
  The Common law created a number of devices to overcome the rigorous application of the doctrine of privity
  
  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 Twedle v Atkinson (1861). This is unobjectionable. The circumstances in which justice calls for such a result are limited.
  
  Decisions of the House of Lords
  
  Dunlop Pneumatic Tyre v Selfridge & Co. (1915). Dunlop sold tyres to Dew with price maintenance contract. Dew sold to Selfridge & Co. Dunlop sued Selfridge for selling lower than the price. The Lords ruled that Dunlop has no contract with Selfridge. Consideration must be provided if a person is to be able to enforce a contract
  
  Scruttons v Midland Silicones (1962). House of Lords refused to allow stevedores the benefit of an exemption of a liability clause entered into between the carrier (who hire stevedores) and the owner of the goods. – A stranger to a contract cannot take advantage of its provision even when the provision were intended to benefit him
  
  Beswick v Beswick (1968). A nephew received an uncle coal business in exchange to pay weekly sum and upon death the uncle’s widow. After uncle’s death nephew refused to pay the aunt. House of Lords held that the aunt was not entitled to sue to enforce the obligation to make payment to her, The aunt however able to succeed in her capacity as the personal representative of her deceased husband’s estate.
  
  Following recommendation by the Law Commission the doctrine of privity undergo judicial reform which culminated in the enactment of Contracts (Rights of Third Parties) Act 1999. The Act allows the parties to contract to provide the third party with an enforceable benefit.
  
  benefit refirst contracted with his nephew whereby the Dunlop Pneumatic Tyre v Selfridge & Co. (1915). Dunlop sold tyres to Dew with price maintenance contract. Dew sold to Selfridge & Co. Dunlop sued Selfridge for selling lower than the price. The Lords ruled that Dunlop has no contract with Selfridge. Consideration must be provided if a person is to be Further reading – Anson pp 421-424, 427-429, Flannigan (1987) ‘Privity – the end of an era (error) 103 LQR564; Kincaid (1989) Third Parties: rationalising a right to sue (1989 CL/243
  
  Contracts (Rights of Third Parties) Act 1999
  
  The act reforms the doctrine but does abolish it.
  
  The primary reason for the Act was to give effect to the intention of the contracting parties.
  
  The act allows contracting party to provide an enforceable benefit (either positive or protection of an exclusion or limitation of liability clause s.16) to a third party, cannot impose liabilities.
  
  The act applies generally to all contracts with few exceptions. Parties can enforce contract if a) the contract expressly provides that he may (s.1(1)(a); where the contract purport to confer benefit on him and nothing else denies that purported benefit (s.1(1)(b), s.1(2))
  
  The right of the third party to enforce a contract is subject to the terms of the contract s.1(4)
  
  The right of the third party is additional to any right that the promisee might have to enforce any term of the contract (s.4). It is possible on a true construction of the contract to rebut presumption of an enforceable benefit. This means that the parties to the contract can impose conditions upon the third party’s liability to exercise his right under the contract – stipulate the third party could only receive a benefit under the contract only if he applied within a certain period.
  
  Generally, the parties to a contract cannot rescind the contract or vary it in such a way as to either deny the right of the third party and alter the entitlement of third party once the third party has acquired a right to enforce a term of the contract
  
  To receive such protection the third party must have communicated his assent to the terms to the promisor or the promisor can reasonably be expected to have foreseen that third party would rely on the term.
  
  If the third party consents to the rescission or variation, the contract can be changes (s.2(1).
  
  Where a third party seeks to enforce his right and brings a claim against the promisor, the promisor can rely on any defence or set-off in the contract and relevant to the term being enforced as if the claim had been brought by the promisee (s.3(2)
  
  If the contracting parties intend the Act to apply, they may vary the extent of its application by a number of means. They could provide that the contract could be later varied or rescinded by the contracting parties (s.2(3)
  
  Secondly the contract could provide that the promisor could avail himself of any and all defences and set-offs available in any action
  
  Thirdly the promisor can limit or exclude any liability for negligence (other than death or personal injury) in the performance of his obligation to the third party (s.7(2)
  
  The Act provides an enforceable right to third parties which is given in addition to any right or remedy available at common law (s.7(1)
  
  The parties must bring themselves within the ambit of the Act.
  
  In addition the Act provides the parties with the ability to determine the extent of the benefit conferred upon the third party
  
  Rights conferred on third parties at common law MCK C7 pp 156-173, p 175, Poole C10 pp 408-449
  
  The Act also preserved any rights the third party would have at common law (s.7 (1)).
  
  Enforcement by the promisee. Beswick v Beswick. The estate of the promisee was able to enforce the promise. Thus, if A (the promisor) promises B (the promisee) to pay C (the third party) £100, B cans sue to enforce this promise. The 1999 Act retains the promisee’s right to enforce the contract (s.4). This method eliminated the many of the problems presented by the doctrine of privity, but it is not without difficulty
  
  Two difficulties can arise when the enforcement is to be made by the promisee – promisee may be unwilling, or unable to enforce the contract; find appropriate remedy for B.
  
  The general purpose of an award of damages is to put the party where they would have been but for the breach of contract. In these circumstances B is thus worse off when the contract is breached by A than if it were performed by A. B has performance interest in the contract and damages should be awarded to B because his interest has not been realised. Courts are reluctant to recognise such an interest (Panatown v Alfred McAlpine Construction Ltd (2000)
  
  The problem of an adequate remedy was considered by the House of Lords in Beswick v Beswick and it had difficulty in awarding damages. In that case an order was made for specific performance. This result was agreed, in orbiter, by the House of Lords in Woodar v Wimpey Construction (1980); in Radford v Defroberville (1977). However, the court held that B’s claim against for damages was not reduced by the fact that the contract between A and B also conferred a benefit upon C.
  
  Multiple bookings – In Jackson v Horizon Holidays (1975) Lord Denning recognised that a person who booked a holiday on behalf of himself and family members was able to recover damages on behalf of the family members where the contract was breached. The ambit of the decision was later restricted by the House of Lords in Woodar v Wimpey Construction (1980)
  Sellers’ contracts with carriers to take buyers’ goods for delivery – In the Albazero (1977), Lord Diplock recognised a limited ability on the part of one party to recover damages on behalf of another. A seller of goods contacts a carrier to deliver goods to a buyer. After the first contract the seller enter into another contract buyer has no contract with the courier, while the seller has. Albezero recognised that the seller can recover substantial damages on behalf of the buyers where goods are lost or damaged.
  
  Contracts where the subject matter will be acquired by a third party – The decision in Albazero (1977) was extended in Linden Gardens Trust v Lenesta Sludge (1993). 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 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.
  
  An order for the promisor to perform – In some instances it may be possible to make an order for specific performance as in Beswick v Beswick. It may be possible for a court to enforce promise not to do something A and B contract not to sue C, B Can asked the court to stay proceeding against C – Snelling v John G Snelling (1973). This approach is not without difficulty Gore v Van Der Lann (1976). B was said not to have an ‘interest’ unless he had a legal liability to C.
  
  AGENCY – If a cannot, or does not chose to, negotiate directly with C, he may authorise B to do so on his behalf. As a seller of goods contacts a carrier to deliver goods to a buyer. As a general principle the resulting contract creates privity between A and C, with B dropping out of the picture. See Shanklin Pier Ltd v Detel Products Ltd (1951). Occasionally legislation uses agency to avoid the difficulties caused by privity. Consumer Credit Act 1974, s.56
  
  Exemptions and limitations of liability – A (the owner of goods) contract with B (the carrier – trailer driver) to deliver goods from Port 1 to Port 2 with B performing part of the contract through C. C may sub-contract the unloading of the goods at Port 2 to a third party (the stevedores – Alarms). B has two contracts with A and C. It is common for B to limit or exclude his liability for breach through the inclusion of a clause to this effect. B may also seek to extend the benefit of this clause to C. It is at this point that problem arises because C is not a part to the contract. The lack of contract between A and C is not a bar to A suing a in tort should C damage A’s goods.
  
  The Agency concept has been stretched to provide the third party with the benefit of the exclusion clause – Euryymedon, New Zealand Shipping v Satterthwaite (1975) and applied in Port Jackson Stevedoring v Salmond and Spraggon (1980). The Privy Council established that it may be possible for B to contract with A as C’s agent the exemption clause given by A extending to C by performing the contract.
  
  An excellent summary of the development of law in this area is provided by Lord Goff in The Mahkutai (1996). Lord Goff makes the point that in the last twenty years, the pendulum of the law has swung award from Scruttons Ltd v Midland Silicones Ltd. The effect of the 1999 Act upon the pendulum is, as yet, uncertain.
  
  The third party can however take advantage of an exception clause in contract for carriage of goods by sea: s.6(5). It remained to be seen whether it would be possible to use the device in The Eurymedon to confer other benefits.
  
  Collateral Contract – A third party may be liable on the basis that he has made some promise in consideration of the promisee’s entry into the main contract – Andrews v Hopkinson (1957)
  
  Trusts - It is possible for the promise as the ‘owner’ of the promise to constitute a trust of the promise. B hold A’s promise on trust for C. B may recover from A the whole of the loss suffered by C because of A’s non-performance; Lloyd’s v Harper (1880) 16 Ch D 290. This negates privity altogether for the third party must simply assert that B is the trustee of the promise and the benefit of the promise is the third party.
  
  The device has not met with favour, few successful decisions Re. Schebsman (1944) Ch 43
  
  Legislation – In specific instances statutes (Third Parties (Right Against Insurers) Act 1930, Consumer Credit Act 1974, s.56, s.75 and Law Property Act 1925 s.56) may overcome the problems that would otherwise be posed by privity.
  
  The harshness caused by the strict application of privy led to the judicial development of a number of device and approaches to circumvent the application of privity
  
  Liability Imposed upon third parties
  
  The major question is the extend to which the burden of contract relating to things other than land can ‘run’ with them in the same way that the burden of restive covenants can run with land. See Lord Strathcoma Steamship v Dominion Coal (1926) which was not followed in Port Line v Ben Line Steamers (1958). See also Swiss Bank v Lloyds Bank (1979) at first instance. Pioneer Container (KH Enterprises v Pioneer Container) where the Privy Council applied principles of bailment to hold that the owner of the cargo was bound by the agreement between the bailee and sub-bailee, although the owner was not a party to the agreement.
  
  The number of situation in which liability is imposed upon third parties is limited and is usually dependent upon the knowledge or implied consent of the third party.
  
  after the first contract the seller enter into another contract buyer has no contract with the courier, while the seller has. Albezero recognised that the seller can recover substantial damages on behalf of the buyers where goods are lost or damaged. with the buyer and sell the goods to the buyer. The bo be would never have received any money o and that they can exclude the parties
  
  Therefore a contract
  
  Dunlop Pneumatic Tyre v Selfridge & Co. (1915). Dunlop sold tyres to Dew with price maintenance contract. Dew sold to Selfridge & Co. Dunlop sued Selfridge for selling lower than the price. The Lords ruled that Dunlop has no contract with Selfridge. Consideration must be provided if a person is to be able to enforce a contract
  
  Affirmation is continuing with the contract despite breach – Mile and Centre (Council) Ltd v McGregor (1962). The implication is he breaches, he will not be able to rely on the other party earlier breaches
  ILLEGALITY AND PUBLIC POLICY
  
  A contract affected by illegality is one that fails for the reasons external to the contract and the parties to it.
  
  Illegality will affect all of the following contract - contract to commit a murder, promote immorality, performed illegality, contract not formed according to procedures prescribed by a statute
  
  Common law illegality (such as contract to commit murder)
  
  Statutory illegality (which requires the vendor of certain substances to possess a licence to sell the substance)
  
  Illegality as formed - void ab initio from the beginning (such as contract to commit murder, arson, robbery) Mahmoud v Ispahan (1921) and Mohammed v Alaga & Co. (a firm) 2002
  
  It might be possible to recover on quantum merit (a partial payment 'as much as he/it deserves)
  
  Illegality as performed - legal as formed but illegal as performed. St. John Shipping Corporation vs Joseph Rowe Ltd (1959) carriage of goods and overloading
  
  In general terms courts will not enforce a contract which involves an illegality nor will they allow recovery of benefits conferred by an illegal contract to: deter parties, punish wrongdoers, preserve dignity of the court and by reason of public policies
  
  Parliament could declare certain types of contract void e.g. s.18 of the Gaming Act 1835 - All gaming and wagering contracts are null and void and no action can be maintained to recover money or valuable won by wagerr
  
  Where a contract is illegal as performed, the court will determine the intention of the party
  
  Where a contract is illegal as formed and the statute prohibits the creation, the court will not allow the recovery of damages
  COMMON LAW ILLEGALITY
  Illegality is divided into two categories under common law i.e. contract involving commission of a legal wrong (Alexander v Rayson (1956) and Contract contrary to public policy (Beresford v Royal Exchange Assurance (1958) Pearce v Brooks (1866) to supply a carriage to the defendant to use in her trade as prostitution would now be considered illegal. Franvo v Bolton (1997) payment by a man to a woman to become his mistress;
  
  Contract which tries to restrain administration of justice - R v Andrews (1973) Elliot v Richardson (1870)
  
  EFFECT OF ILLEGALITY - MCK C15 pp 348-351 Poole C14 pp 657-668
  
  There is no one single form of illegality, thus contract may have both legal and illegal parts
  
  Where it is possible to remove an illegal clause, the court will severe the clause and leave the legal term
  
  Although a court will not enforce an illegal contract, it may be able to provide an innocent third party with some remedy in some other manner - Strongman (1945) Ltd va Sinnoce (1955), the parties were unable to sue but the court allowed them to recover the value of work done on the basis of collateral warranty. Shelley v Paddrock (1980) the innocent party was allowed damages for fraudulent misrepresentation
  
  Cases which illustrates methods by which recovery could be allowed.
  
  Where the parties are said to be in 'pari delicito' (unequally guilty) Kirin Cotton Co. Ltd v Dewani (1960). The innocent party to an illegal contract was able to recover money paid pursuant to the illegal contract. He was innocent because he was not aware that the contract was illegal.
  
  In other cases, the party has been allowed to recover a benefit where the withdrawal from the contract before the illegality has been committed - Taylor v Bowen 1876, Kearly v Thomson (1890) and Trits v Tris (1996)
  
  Where the party can do so without relying on the illegal nature of the contract Bowmaker Ltd v Barnet Instrument Ltd (1945)
  
  The principle has been extended by the House of Lords to equitable propriety claims in Twinsley 1996 Milligan (1994).
  
  The problem in this cases is that by allowing recovery, the court may in effect, enforce the contract or at least provide a remedy which is helpful to the claimant as in enforcing the contract
  
  in 1999 the Law Commission produced a consultation paper 'Illegal Transaction: The effect of illegality on Contract ant Trust.
  
  The most important recommendation is that the court should possess discretion to decide whether or not to enforce an illegal transaction, to recognise where property right has been transferred or created, allowed benefits conferred recovered. In just circumstances
  
  Locus poenitentiae
  
  In pari delicto . www.lawcom.gov.uk
  
  Restitutionary basis - recovery
  
  RESTRAINT OF TRADE
  
  General principle - An employer restraining a former employee for a certain number of years from working for a competitor or
  
  EMPLOYMENT CONTRAC MCK C15 pp 340-342 Poole C14 pp 636-639
  
  It is legitimate for an employer to stipulate that he or she requires the exclusive service of the employee.
  
  A term will be considered for its reasonableness when it seek to restraint after the employment relationship has ended – computer software
  
  Restraint must not be injurious to public policy – reasonableness in the interest of the public
  
  The courts are generally reluctant to find a clause which is reasonable between the parties is not reasonable in the interest of the public
  
  The clause must protect some legitimate interest of the employer. It must not be used to prevent competition
  
  Employee must be free to exercise general skills e.g. Herbert Morris Limited v Saxilby (1916)
  
  The restriction must be reasonable with regard to subject matter area and duration – Mason v Provident Clothing and Supply Company (1913)
  
  THE SALE OF BUSINESS MCK C15 pp 342-344 Poole 639-645
  
  Modern law in this area was established by Nordenfelt v Maxim Nordenfect (1894) – same criteria as contract of employment
  
  The House of Lords believed that a covenant not to compete in any future business was unreasonable because it sought to protect the future activities of the business,
  
  OTHER AGREEMENTS MCK 15 pp 342-344 Poole 639-645
  
  Doctrine extended to ‘solux’ or exclusive dealing agreement – Contract where one party undertake to purchase all of its supplies from certain suppliers
  
  Esse Petroleum Co. Ltd v Harper’s Garage (Stourport) Ltd (1968). The House of Lord rules that such an agreement was within the scope of the doctrine of restraint of trade (2 years is OK, 20 years is outrageous)
  
  It has also applied to exclusive service agreement – One party promises to provide their services only to the other party – Shroeder Music Publishing v Macaulay (1974) Court find it was a restraint of trade and unenforceable.
  
  THE DISCHARGE OF A CONTRACT
  
  PERFORMANCE AND BREACH
  
  Contract will be discharged by performance, breach and frustration
  PRINCIPLE OF SUBSTANTIAL PERFORMANCE
  
  General rule – a party cannot recover payment for the partial performance of an entire obligation – Cutler v Powell (1975)
  
  There is no partial payment for partial performance - Sumpter v Hedges (1998)
  
  To mitigate the harshness of the principle court may interpret contract as series of entire obligation, or substantial performance – Hoeing v Isaacs (1962)
  
  An innocent party may be liable to compensation for the performance of a partial contract Sumpter v Hedges (1998)
  WHEN A BREACH OF CONTRACT OCCURS
  A repudiatory breach is said to occur when one party refuses to continue performing the contract or ….. an act which prevents performance
  
  A party who alleges repudiatory breach must prove it
  
  Two conditions for repudiator breach are
  
  Standard Performance – different terms impose different standards of performance – subdivided into strict liability and stand of reasonable care
  
  Strict liability – either the performance measure up to what is demanded by contract or it does not. The fault for not measuring up is not a consideration
  
  A standard of reasonable performance care in contract impose a duty on the party to use reasonable care and skills in the performance of her contractual obligation. Contractual terms impose a lower standard performance. The fault of the party in breach is relevant – contract for the supply of services s.13 of the Sales of Goods Act 1979
  
  Contract for Supply of Goods impose strict liability (Aros v Ronaasen (1933) AC 470 – contract for the supply of barrel stave ½ inch tick. Various thicknesses is not strict performance
  
  It may be imposed by legislation e.g. Sales of Goods Act 1979 s.13-15 are strict
  
  WHAT OCCURS UPON BREACH
  
  A breach of contract does not automatically ends a contract no matter how serious – Decro Hall SA v International Practitioners in Marketing (1991) 1 WLR 361
  
  A breach gives the innocent party the option to terminate the contract and sue for damages
  
  Obligations are dependent when one party must be willing and able to perform an obligation
  
  It may be that the party in breach is unable to sue upon the contract if the obligations imposed are dependent - Employee who is to be paid weekly does not work and the employer is not expected to pay.
  
  Rescission for breach ends future obligation, while rescission for misrepresentation ends all obligation
  
  The innocent party must communicate to the party in breach that he has elected to terminate the contract Vitol SA v Worelf Ltd (1996)
  
  The nature of a breach is prospective i.e. future obligation are no longer binding and are discharged. Past obligations however remain. The contract has now future, it does have a past
  
  Those rights which have been unconditionally acquired are still binding – Hapman v Darwins Ltd (1942) AC 356 at 399 Johnson v Agner (1980) AC 367
  
  Where the innocent party elect to not to terminate a contract in spite of anticipatory breach, she has affirmed the contract
  
  ANTICIPATORY BREACH
  
  Anticipatory breach occurs when before a performance is due, a party either renounces the contract or disable himself from performance
  
  A renunciation must amounts to absolute refusal to perform
  
  Inability to perform must involve the breach of a contractual obligation but does not have to be the fault of the party in breach – Universal Cargo Carriers Corp v Cilate. The chartered breach because of a third party failed to provide him the cargo
  
  Anticipatory breach gives right to immediate action
  
  TERMINATION – How does an injured party knows when to terminate
  
  The renunciation must be such as to prove that the party in breach has acted in such a way as to lead to a reasonable person to conclude
  
  The Court examines the nature of the refusal to determine reasonableness
  
  Prospective inability – where the party is alleged to have committed a breach by disabling himself from performance. Termination will depend on seriousness and consequences of the breach
  FRUSTRATION MCK
  
  is one of the ways in which contractual obligations come to an end.
  
  The termination is not the result of the wrongful action of one of the parties.
  
  The courts decide when a contract has been frustrated and if they decide it has, then all future obligations cease
  
  The consequences are deal with by both common law rules and statute (Law Reform (Frustrated Contract Act 1943)
  
  The Basis of the Doctrine of Frustration
  
  If the continued performance of a contract becomes impossible, the question arises as to where the losses which result should fall a strict freedom of Contract approach might lead to the answer that a person who has undertaken to perform an obligation has also undertaken that performance of them will be impossible
  
  Failure to perform should be treated in same way whether that failure is due to a deliberate action or arises from impossibility caused by some supervening event after the contract has been formed – Paradine v Jane (1647)
  
  The strict approach was modified in 19 century Taylor v Caldwell (1863) – music hall hired for series of contract was destroyed by fire. The court discharged both parties. Implied terms of continued existence
  
  Lord Reid and Viscount Radcliffee in Davis Contractors Ltd v Fareham Urban District Council (1956) – 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.
  
  THE NATURE OF ‘FRUSTRATING EVENT
  
  It is the effect of an event rather than an event itself which is determining factor in the frustration of a contract.
  
  Importantly the event must have made the contract impossible or radically different – it is not enough that the contract has simply become more difficult or expensive for one party – Tsakiroglou & Co. V. Noblee and Thorl (1962) – transport of good from Port Sudan to Hamburg the fact that alternative route, via cape of good hope would take much longer was not sufficient to frustrate the contract
  
  Destruction of the Subject Matter – If something central to the performance of the contract no longer exist – Taylor v Caldwell (1963). Full destruction may not be necessary. In Asfar v Blundell (1896) where the contamination of a perishable goods render them unusable was held to be equivalent of destruction (see also Sales of Goods Act 1979, s.7)
  
  Personal Incapacity – where a particular individual agreed to perform a contract dies of too ill to perform a contracted is frustrated - Condor v Barron Knights (1966) – drummer in a pop group)
  
  Non-occurrence of offence – Cancellation of King Edward VII coronation in 1903. Krell v Henry (1903) led to the decision that the contract was frustrated. Also Chandler v Webster (1904). It is however important to be clear as to the precise obligation. Herne Bay Steam Boat Co. v Hutton (1904) 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.
  
  Effects of War – In times of war government may make trading with companies based in enemy territory illegal. Contracts with companies prior to this action will be frustrated – Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943).
  
  Requisition of property which had been allocated to contract may lead to frustration – Metropolitan Water Board v Dick Kerr (1918) and FA Tamplin v Anglo-American Petroleum (1916) (requisition of a ship as troop ship was not of sufficient length to defeat the whole purpose of the contract).
  
  Frustration need not result from direct government action – Finelvet AG v Vnawa Shipping Co. Ltd (1983). In the continuing war between Iran and Iraq trapped certain ships in the Gulf for a lengthy period. Contract relating to the charter of these ships were held as frustrated.
  
  Other government action – Government action not related to war including industrial action can frustrate a contract (The Nema (1981) and the accidental running aground of a ship (Jackson v Union Marine Insurance Co. Ltd (1874)
  
  LIMITATION OF THE DOCTRINE MCK C15 PP 319-323 POOLE PP 458-465
  
  There are two principal limitation i.e. where the frustration is foreseen and provided for and where the alleged frustration is self-induced by one of the party. The event must be a surprise
  
  Force Majeure and similar clauses may well in commercial area replace the common law and statutory rules on frustration
  
  The courts have tended to interpret such rules narrowly, however in Jackson v Union Marine Insurance Co Ltd (1874)
  
  THE EFFECT OF FRUSTRATION MCK C14 PP323-327, POOLE C11 PP 493-502
  
  The rules under the common law and law reform affect relates to the effect of frustration
  
  Common law effects – a frustrating event terminates a contract automatically without any need for action by either party. Any action to affirm a contract after the frustration will be ineffective. This was confirmed by Privy Council in Hirji Mulji v Cheong Yeong Steamship Co Ltd (1926)
  
  The Common law held that all future obligations were discharged but obligation incurred prior to the frustrating event survived.
  
  Where the loss fell will depend on what payment terms of the contract
  
  The Law Reform (Frustrated Contracts) Act 1943 – There are some contracts to which the Act does not apply s.2(5) – insurance, charters of ships particular voyage, carriage of goods by sea – this was because there are special rules under shipping law which deals with the situation
  
  Specific goods are those which are identifiable at the time of the contract as opposed to unascertained good, which are simply sold by description. A contract to by all the grains in x warehouse is specific, a contract to buy 5 tons of grain is unascertained goods Some contract for specific goods are rendered void by s.7 of the SGA 1979 if the goods perish.
  
  Section 1 (2): Money paid or payable prior to frustration – money paid should be returned (less expenses) or cease to be payable (but expenses could be recovered)
  
  Section 1 (3): Compensation for a ‘valuable benefit’ – party could receive compensation for a benefit enjoyed before the frustration. BP Exploration Co (Libya)n Ltd v Hunt (No. 2) 1979 Goff J held the purpose of the Act was the prevention of unjust enrichment rather than the apportionment of losses, the value of any alleged benefit must be assessed in the light of the frustrating effect. Where the frustrating effecting has destroyed the benefit nothing will be recoverable.
  
  The act has been criticised for its poor drafting.
  
  REMEDIES FOR BREACH OF CONTRACT
  
  Every breach of contract entitles the injured party to claim damages for the loss. The purpose of an award of damages is to put the injured party in the position where they would have been but for the breach of contract
  
  The difficulty lies in how the loss is measured.
  
  The law employed two measures: one protects expectation interest and the other reliance interests
  
  Usually the expectation interest is sought and in some cases injured party seeks award based on restitutionary interest (latest development)
  
  Restitutionary interest differs from a reliance interest or expectation interest.
  
  The Restitutionary interest is calculated with reference to the gain made by the defendant rather than loss incurred by the claimant, secondly the circumstances in which a claimant is bale to protect his restitutionary interest are narrowly prescribed
  
  Not matter the measure employed not all loses will be recoverable
  
  Law employs two devices to limit an award of damages
  
  Remoteness – there can be no recovery of losses which are too remove i.e. nor foreceable.
  
  Mitigation it is said that a party cannot recover damages for a loss which he could have reasonably avoided. It was held that a party cannot recover damages for non financial loss i.e. distress
  
  The purpose of an Award of Damages MCK C20 pp 407-409 Poole C9 pp 324-332
  
  The purpose of an award is to compensate the inured party, not to punish the party in breach – Ruxley Electronics and Construction v Forsyth (1995)
  
  Punitive damages are not available for breach of contract, even where the defendant deliberately breached
  
  The claimant will however receive damages where the breach has left him no worse off C and P Haulage v Middleton (1983) and St. abans v ICL (1996)
  
  Two Measures of Damages MCK C 20 pp 409-415, 422-424 Poole C9 pp 332-349
  
  Expectation loss: Where a party sustains loss by reason of a breach of contract, he to be placed, is as far as money is concerned, in the same situation with respect to damages, as if the contract had been performed – Robinson v Harman (1848)
  
  A situation where defendant does not perform or perform badly the claimant is entitled to ‘cost of cure’ i.e. the amount required to pay a third party to perform what was stipulated in the contract Watts v Morrow (1991)
  
  Where there is little difference between the value of thing contracted for and the thing received court will award damages for the loess of amenity: Ruxley Electronics and Construction v Forsyth (1995) and Tito v Waddell No. 2 (1977)
  
  Reliance loss – loss of expenditure where it is impossoble to calculate expectation Anglia Television v Reed (1972)
  
  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)
  
  When is restitution available MCK C1 pp 6-7. c4, pp 67-60 C15 pp 345-351 C20 pp 415-442 Poole C9 401-404 C14 pp 657-668
  
  The circumstances for restitution are limited
  
  This will occur only when they can established that the defendant was enriched at the claimant expenses and that it is unjust to allow the defendant retain his profit without compensating the claimant.
  
  The purpose of restitution is to disgorge the profit obtained as a result of his wrongdoing
  
  The claimant may seek a restitution remedy where there has been a total failure of consideration - Whincup v Hughes (1871). To succeed the claimant need to establish total failure of consideration. If any part of the contract is performed or the claimant has received any consideration the restitution claim is barred.
  
  The claimant may seek a restitution remedy where the defendant has received unjust benefit
  
  Unjust benefit - ge or cease to be payable (but expenses could be recovered)
  
  if not paid frustrating event terminates a contract automatically without any need for action by either party. Any action to affirm a contract after the frustration will be ineffective. This was confirmed by Privy Council in Hirji Mulji v Cheong Yeong Steamship Co Ltd (1926)
  
  The Common law held that all future obligations were discharged but obligation incurred prior to the frustrating event survived.
  
  Where the loss fell will depend on what payment terms of the contract
  
  Unjust Benefit The second set of circumstance occurs where the claimant seeks a restitutionary remedy on the ground that the defendant has obtained an unjust benefit.
  
  The court of appeal in Surrey County Council v Bredeco Homes Ltd (1993) held that gain-based remedy are not generally available for breach of contract
  
  There has been a total failure of consideration - Whincup v Hughes (1871). To succeed the claimant need to establish total failure of consideration. If any part of the contract is performed or the claimant has received any consideration the restitution claim is barred.
  
  The House of Lords held that the court would order an account of profit s where specific performance or an injunction would not provide a sufficient remedy to the claimant nor would an award of damages based upon financially assessed measure of damages
  
  This would only occur in exceptional cases where there are no other effective means of protecting the claimants performance interest. The house of lord did not provide answer as to when this would occur
  
  Attorney General v Blake (2000) A traitor would sought profit by publishing his memoirs
  
  In Experience Hendrix LLC v PRX Enterprises Inc (2003) ECWA Civ 323 the confine an account of profit to exceptional circumstances
  
  REMOTENESS OF DAMAGES MCK C20 pp 427-430 Poole CP 338-375
  
  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
  
  The second leg is exceptional situation i.e. if the contract is breached the consequences of breach will be particularly severe for example a lucrative contract will be lost
  
  Damages will occur if the special circumstances are reasonably within the contemplation of the parties at the time they made the contract as likely to occur if the contract is breached.
  
  Court has struggled to define what is within the ‘reasonable contemplation’ of the party – Victoria Laundry (Windsor) v Newman Industries (1949), the Heron II (1969 and H, Parsons (Livestock) v Uttley Ingham (1978)
  
  MITIGATION OF DAMAGE MCK C20 pp 425-427 Poole C9 pp 375-377
  
  Causation and remoteness are two factors which seek to limit the possible damage which can be awarded to a claimant
  
  Another is ‘duty to mitigate’ Firstly to avoid increasing loss and act reasonably to reduce. Stated by Viscount Haldane in British Westinghouse Electric Co. LTd v Underground Electric Railways Company of London Ltd (1912) AC 673
  
  Sometime the duty to mitigate will require the injured party to re-contract with the party in breach on slightly different terms – Payzu v Saunders (1919)
  
  NON-FINANCIAL LOSS MCK C20 pp 432-435 Poole C9 pp 349-368
  
  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.
  
  The rule was subject to certain recognised exceptions – primary this occur when the purpose of the contract was to provide pleasure – Javis v Swan Tours (1973) and Jackson v Horizon Holidays (1975) or if the purpose of the contract was to alleviate distress – Heywood v Wellers (1976)
  
  The House of Lords held that an employee has no right to damages arising from unfair manner of dismissal for a breach of contract
  
  The claim for non-pecuniary damages was not defeated by the fact that the defendant has only promised to exercise reasonable care in the performance of his obligation as opposed to guaranteeing a certain results – Watts v Morrow (1991) 4 All ER 937
  
  Liquidated damages MCK 21 pp 441-453 Poole C9 pp 381-393
  
  Because the claimant has the burden of proving the amount of his loss, it is great convenient for him if the contract can simply state the sum payable by consultant. However such system is open to abuse. The sum might be far higher than the loss actually suffered.
  
  The House of Lord in Dunlop Pneumatic Tyre v New Garage and Motor (1915) confirmed that a ‘liquidated damages’ clause is enforceable provide that the amount is a genuine pre-estimate of the damage and not unconscionable.
  
  Liquidate damages is not penalty because it is a factual or descriptive meaning and commonly referred to as penalties
  
  A penalty as a matter of legal interpretation is an invalid because the sum is penal
  
  There is difference in what parties called provision (as a matter of fact) and how the court will categorise a provision (as a matter of law) – Ford v Armstrong (1915) and Bridge v Campbell Discount (1962)
  
  For a contrast see Lambard North Central v Butterworth (1987) where the claim was successfully framed as one of the damages on breach of condition
  
  In practice the importance of penalty clauses is much reduced by the ease with which similar results can be achieved by other (unobjectionable) devices
  
  Three devices for Evading the Penalty Clause Rule are:
  The penalty clause rule does not apply to a clause which accelerates an existing liability
  Because penalty clause rule only applies to breaches of contract, the parties can legitimately stipulate that an amount shall be payable on an event which is not a breach of the contract
  The parties can stipulate that a terms is a condition which of essence to the contract with the effect that breach of the term allows the injured party to terminate the contract and claim damages
  
  
  Another is ‘duty to mitigate’ Firstly to avoid increasing loss and act reasonably to reduce. Stated by Viscount Haldane in British Westinghouse Electric Co. Lrd v Underground Electric Railways Company of London Ltd (1912) AC 673
  
  Sometime the duty to mitigate will require the injured party to re-contract with the party in breach on slightly different terms – Payzu v Saunders (1919)
  
  EQUITABLE REMEDIES MCK C21 pp 453-458 Poole 393-401
  
  In common law damages are the principal remedy for a breach of contract i.e. remedy given to the injured party
  
  The common law possesses different remedies
  
  These remedies seek the performance of the contract rather than damages to rectify the breach
  
  Performance may be through an order of specific performance – positive order
  
  Another equitable remedy is an injunction – an order which prohibits a party from certain actions
  
  An order for the specific performance of a contract is an exceptional remedy
  
  The use of specific performance of a contract is an exceptional remedy
  
  The use of specific performance appeared to be on increase following House of Lords decision in Beswick v Beswick (1968) because that appeared to the only remedy
  
  Co-operative Insurance Society Ltd v Argyll Stores (Holding) Ltd (1997) – House of Lords clung to the old restriction in its application.
  
  Order for specific performance was only made when damages were inadequate remedy, but where damages are adequate it would not be made. Cohen v Rache (1927), Land (where damages are inadequate. Ordinary goods (damages adequate – these are replaceable)
  
  Where it is extremely difficult or impossible to quantify the claimants loss - Decro-wall International SA v Practitioners in Marketing Ltd (1971
  
  Where claimant would not be able to perform specific performance – Evans Marshal & Co. Ltd v Bertola SA (1973)
  
  Restriction on order of specific performance
  
  Since an other of specific performance is equitable remedy, it is also discretionary
  
  It does not follow as a matter of right, it is left to the courts to decide
  
  Decision is exercised carefully and not in arbitrary fashion but in accordance with rules and practices. Cooperative insurance Society Ltd Argyl Stores (Holding) Ltd 1998 sets the following conditions:
  The claimant conducts must be beyond question – he who comes to equity must come with clean hands
  If the claiming party has performed the contract in an unfair manner court may refuse
  When it would result in hardship for the defendant or the cost will outweigh the benefit to the claimant – Tito v Waddel (No. 2 ) 1971
  Where it is impossible for the defendant to comply – offer to sell land he does not owe
  There must be mutuality of remedy – court will not order specific performance at the request of a party if it could not order it at the request of other party – one records v Britton (1968)
  Courts will not make the order with regards to certain contract e.g. personal services (or employment) it is undesirable that parties are forced into an employment contract – Giles va Morris firmly bottomed on human nature, who could say whether imperfection are natural or self induced. Court drew difference between an order to enter into a contract or extend existing contract
  Contract which require constant supervision of the court are unlikely to be the subject of an order for specific performance House of lord on Cooperative insurance Society Ltd Argyl Stores (Holding) Ltd 1997 – continuous appearance for further orders
  
  Damage in lieu OF specific Performance – MCK C21 pp 458
  
  The court has power to award damages in addition to or in substitution for specific performance by reason of supreme court act 1981 s.50. It cannot make such an award where the ability to seek specific relief has been lost (through lapse of time)
  
  Claims for damages can be combined with claims for specific performance or injunction although it is generally unnecessary to resort to special power to award damages in lieu of these remedies (Supreme Court Act 1981 s.49)
  
  Wroth v Tyler (1974) Ch 30 – it was said that damages are made in substitution for specific performance must ‘constitute a true substitute for specific performance’
  
  In Johnson v Agnew (1980) AC 367 the House of Lords accepted that damages must be assessed by the same principles whether claimed in law or equity.
  
  INJUCTIONS – MCK C21 pp 446 Poole C9 pp 393-401
  
  Injunction is a negative obligations i.e. when a party promises not to do something or refrain from doing something.
  
  Equity offers the possibility of an injunction by the court prohibiting some form of conduct – the court is enforcing a negative stipulation
  
  An injunction is also a discretionary remedy and court will order it as a matter of course
  
  They would not order it when its would cause such a particular hardship to a defendant as to be oppressive to him Insurance Co. v Lloyd’s Syndicate (1995) 1 Loyld’s Rep 273 at 276
  
  Court will not order grant an injunction where to do so would be indirectly order specific performance. Page one Records v Britton (1968)