Authorities Flashcards

Question

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > a) Define ‘offer’ – ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person whom it is addressed.

Answer 1

Treital, The Law of Contract. Confirmed in: Allied Marine Transport v Vale do Rio Doce Navegacao SA (The Leonidas)

Answer 2

An offer is different to an invitation to treat, which is made without intention to be bound by specific terms,

Answer 3

Example of an invitation to treat: Self Service display in a shop

Answer 4

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Answer 5

Example of an invitation to treat: Goods on display

Answer 6

Fisher v Bell

Answer 7

• Tenders, o unless it is a unilateral contract, in which case it will be am offer (Harvela Investments Ltd v Royal Trust Company of Canada Ltd)

Answer 8

Spencer v Harding; | Blackpool & Fyde Aero Club ltd. v Blackpool Borough Council

Answer 9

Harvela Investments Ltd v Royal Trust Company of Canada Ltd

Answer 10

Example of an invitation to treat: Tenders, unless unilateral contract, in which case it will be an offer.

Answer 11

Advertisements were an invitation to treat

Answer 12

Partridge v Crittenden

Answer 13

Advertisements are invitations to treat unless offering a reward

Answer 14

Williams v Cawardine

Answer 15

Advertisements are invitations to treat unless Unilateral contract, in which case acceptance need not be communicated

Answer 16

Carlil v Carbollic Smoke Company

Answer 17

With reserve price. (Contract between the seller and the bidder once the auctioneer (as agent) completes the sale; i.e. with the fall of the hammer

Answer 18

s.57 Sale of Goods Act

Answer 19

Without Reserve Price – unilateral contract between auctioneer and bidder that the auctioneer will accept the highest bid; if he doesn’t, the highest bidder can sue for damages

Answer 20

Barry v Davies

Answer 21

a) Define acceptance: ‘an unconditional expression of assent to the terms of the offer b) Acceptance must be communicated: GENERAL RULE – acceptance should be communicated and should be by offeree or authorised agent c) Acceptance or counteroffer? d) Battle of the forms e) Postal Rule exemption f) Has the offer been revoked before it was accepted? g) Has the offer lapsed?

Answer 22

an unconditional expression of assent to the terms of the offer

Answer 23

a) Acceptance must be communicated: GENERAL RULE – acceptance should be communicated and should be by: o Offeree (Entores); or o Authorised Agent (Powell v Lee)

Answer 24

Entores v Miles Far East Corp Ltd;

Answer 25

Powell v Lee

Answer 26

There is a unilateral contract

Answer 27

Carlil v Carbollic Smoke Ball Co

Answer 28

The contract states that silence constitutes acceptance – silence CANNOT constitute acceptance

Answer 29

Felthouse v Bindley

Answer 30

Silence cannot constitute acceptance UNLESS there is no reason for offeree not to bind themselves

Answer 31

Re Selectmove

Answer 32

GENERAL RULE: a counteroffer, i.e. a new provision entered, is implied rejection

Answer 33

Hyde v Wrench

Answer 34

QUALIFICATION: questions about an offer are not deemed as rejecting it, and may still be acceptance if it falls within definition o If the offeree responds to the offer by making an enquiry, this will not be acceptance, but neither will it be a counteroffer. It will be a request for further information, which does not destroy the original offer.

Answer 35

Stevenson Jacques & Co v McLean

Answer 36

Following an exchange of incompatible terms by the parties, performance of the contract (e.g. delivery of the product) might be taken to be acceptance of the ‘last shot’.

Answer 37

Brogden v Metropolitan Railway Co.

Answer 38

Not a true battle of forms, but an exchange of incompatible • Offer o Claimant makes an offer to the defendant o Offer contains clause that claimant’s terms prevail over the defendants • Counteroffer o Defendant sent ‘acceptance’ to the claimant o ‘Acceptance’ amended one of the claimant’s terms • Acceptance o Claimant signed and returned the defendant’s ‘acceptance’ to the defendant o ‘Acceptance’ provided the defendant’s terms prevail The claimant argued that the defendant accepted the original offer and tried to rely on the original terms. However, the court found that the defendant’s acceptance amounted to a counteroffer that was accepted by the claimant. Therefore, the defendant’s terms prevailed.

Answer 39

A Letter of acceptance will become binding when posted if: o It was reasonable to use post as a method of communication o It was properly posted o The offeror did not exclude the postal rule impliedly/expressly

Answer 40

Adams v Lindsell

Answer 41

If all the above are satisfied, the letter need not actually arrive for acceptance to be valid

Answer 42

Household Fire and Carriage Accident Insurance v Grant

Answer 43

N.B. There is no authority on whether an acceptance can be retracted once posted

Answer 44

Countess of Dunmore v Alexander

Answer 45

1: When can the offer be revoked? 2: How must the offer be revoked?

Answer 46

GENERAL RULE: an offer can be revoked at anytime, even if the offeror has agreed to leave it open.

Answer 47

Routledge v Grant

Answer 48

Exception to the revocation rule (an offer can be revoked at anytime) • The offeror cannot revoke the offer if the offeree has given consideration for the offeror keeping the offer open

Answer 49

Mountford v Scott

Answer 50

Exception to the revocation rule (an offer can be revoked at anytime) • If it is a unilateral contract, revocation is not possible once the act of acceptance has begun

Answer 51

Errington v Errington & Woods

Answer 52

Revocation must be communicated

Answer 53

Revocation must be communicated: | • By offeror; [or by reliable third party]

Answer 54

Byrne v Van Tiernhoven

Answer 55

Revocation must be communicated: [• By offeror; or] • By reliable third party

Answer 56

Dickinson v Dodds

Answer 57

• By offeror (Byrne v Van Tiernhoven) or • By reliable third party (Dickinson v Dodds)

Answer 58

If the revocation was received, but not read, and it could reasonably be assumed that staff should be at work it will be deemed to have been communicated effectively

Answer 59

The Brimnes

Answer 60

If the offer was made to the public at large, revocation can be made through the same channel as the offer provided it has the same prominence.

Answer 61

Shuey v United Stated (N.B. US Law)

Answer 62

An example of the postal rule of acceptance vs. the revocation rule in action: Where the revocation of an offer posted at 12 noon did not reach the offeree until 5pm. However, since the offeree posted the acceptance at 3:50pm there was a binding contract from that time. This revocation must have been communicated in order for it to be effective.

Answer 63

Henthorn v Fraser

Answer 64

Offer will Lapse if there is an express condition; or in all other cases, the offer will lapse after a reasonable time period – what is reasonable depends on the facts.

Answer 65

1. Is there a contract? 2. Define consideration 3. Identify the consideration and problems (if any). Explain rules, exceptions and cases. Apply to facts. 4. Has there been any variation of terms? Is the variation agreed, and good consideration offered, or is there a problem? Explain rules/exceptions/cases/apply to the facts. 5. Conclude

Answer 66

1. Which party is alleging the contract? 2. State the 3 elements of a contract i. Agreement (offer and acceptance) ii. Intention to create legal relations; and, iii. Consideration 3. Show briefly that agreement and intention to create legal relations are satisfied; the issue concerns consideration

Answer 67

The price you pay for another’s promise

Answer 68

Consideration is, in short, reciprocity. For example, the defendant promises something to the claimant. The promise is not reciprocal unless the claimant has given or promised something in exchange for the defendants promise. That ‘something’ is consideration, and without it a contract is unenforceable.

Answer 69

1. Consideration need not be adequate, but must be sufficient 2. Consideration must have some economic value 3. Is forbearance, i.e. not doing something, good consideration?

Answer 70

1. Consideration need not be adequate, but must be sufficient

Answer 71

Chappell & Co. Ltd v Nestle Co Ltd

Answer 72

2. Consideration must have some economic value

Answer 73

Thomas v Thomas

Answer 74

3. Is forbearance, i.e. not doing something, good consideration? • GENERAL RULE: no, due to public policy issues (floodgate argument)

Answer 75

White v Bluett

Answer 76

3. Is forbearance, i.e. not doing something, good consideration? • POSSIBLE EXCEPTION: If it involves giving up ones legal rights

Answer 77

Hamer v Sidway (N.B. US Law)

Answer 78

1. Is past consideration good consideration? 2. Is A’s performance of his existing contractual duties good consideration in exchange for a promise from B to pay more? 3. Is A’s performance of his existing contractual duties to a third party good consideration? 4. Is the performance of ones public/legal duties good consideration? 5. Is the part payment of undisputed debts good consideration for a promise by the creditor to forgo the balance? (promissory estoppel)

Answer 79

GENERAL RULE: No

Answer 80

Roscorla v Thomas

Answer 81

GENERAL RULE: No EXCEPTION: yes, if all three of the following conditions are satisfied: a. The act was carried out at the promisor’s request (Lampleigh v Brathwait) b. The parties understood from the beginning that the act was to be rewarded in some way (Re Casey’s Patents, Stewart v Casey); and c. All other requirements of a contract exist

Answer 82

Lampleigh v Brathwait

Answer 83

Exception: a. The act was carried out at the promisor’s request

Answer 84

Exception: b. The parties understood from the beginning that the act was to be rewarded in some way;

Answer 85

Re Casey’s Patents, Stewart v Casey

Answer 86

GENERAL RULE: No

Answer 87

Stilk v Myrick

Answer 88

EXCEPTION 1: Yes, if A exceeds his duties in some way, or confers extra benefit on B. However, this is a question of fact and degree; and public policy.

Answer 89

Hartley v Ponsonby

Answer 90

EXCEPTION 2: Yes, provided that all the following criteria, the (‘Glidewell Principles’) are satisfied: a. There is a contract for goods/services in return for payment; b. B doubts whether A will complete his obligations c. B promises additional payment if A completes his obligation on time d. As a result of giving this promise, B obtains a practical benefit or obviates a disbenefit; and e. B’s promise to pay extra is not given as a result of economic duress or fraud on the part of A (in which case the variation will be set aside)

Answer 91

Williams v Roffey Bros

Answer 92

YES: a promise to do something can amount to consideration even if the promisor is already bound to perform this obligation

Answer 93

Scotson v Pegg

Answer 94

GENERAL RULE: No

Answer 95

Collins v Godfrey

Answer 96

EXCEPTION – yes, if: | • Not contrary to public policy

Answer 97

Williams v Williams

Answer 98

EXCEPTION – yes, if: | • Public duty is exceeded

Answer 99

Glasbrook Bros Ltd v Glamorgan County Council

Answer 100

GENERAL RULE: No

Answer 101

Foakes v Beer

Answer 102

EXCEPTION 1: part payment is good consideration if the debtor: • Gives something different; or • Pays early

Answer 103

Pinnel’s Case

Answer 104

EXCEPTION 2: Promissory Estoppel

Answer 105

High Trees House Ltd

Answer 106

1. Define promissory estoppel 2. When will promissory estoppel apply? 3. Effect of promissory estoppel

Answer 107

Where a promisor has, by words or conduct, made a promise to the other party (the promisee) to forgo the legal right. Once the promisee has acted on this promise he will have a good defence to any claim brought by the promisor which is inconsistent with the promise.

Answer 108

``` Promissory Estoppel will apply if all the following conditions are fulfilled: P.R.I.D.E Promise Reliance Inequitable Defence Effect ```

Answer 109

PROMISE: there must be a promise to waive a legal right, which must be intended to be acted upon by the other party.

Answer 110

Hughes v Metropolitan Railway Company

Answer 111

RELIANCE: The promisee must act upon the promise, but he need not have acted to his detriment, only have altered his behaviour.

Answer 112

Emanual Ajayi v RT Briscoe (Nigeria) Ltd

Answer 113

INEQUITABLE: It must be inequitable/unjust for the promisor to go back on his promise and insist full legal rights.

Answer 114

D&C Builders v Rees

Answer 115

DEFENCE: promissory estoppel will not give rise to a cause of action – it is a shield not a sword.

Answer 116

Combe v Combe

Answer 117

EFFECT: The effect is to extinguish or suspend legal rights

Answer 118

Usually operates to suspend promisor’s legal rights. In such cases the promisor may resume these rights by giving the promisee reasonable notice.

Answer 119

Tool Metal Manufacturing Co v Tungsten Electric Co Ltd

Answer 120

In cases where the promisee cannot resume his original position, promissory estoppel may operate to permanently extinguish the promisor’s legal rights

Answer 121

Emanual Ajayi v RT Briscoe (Nigeria) Ltd

Answer 122

Effects in one-off debts is uncertain. May possibly operate to waive payment

Answer 123

D&C Builders v Rees

Answer 124

N.B. The rule in Williams and Roffey cannot be extended to cases involving the part-payment of undisputed debts (Re Selectmove). This was challenged by the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising, where the creditor was said to have obtained a practical benefit beyond simply accommodating the debtor and not having to enforce the debt (the commercial benefit of its tenant remaining in occupation of the premises). However, this interpretation was not upheld when the case was appealed in the Supreme Court (as Rock Advertising v MWB), and the Court declined to tackle the issue. It was not relevant to the outcome in that case, and any decision would be likely to involve re-examination of the decision in Foakes v Beer. As Lord Simpson stated, “It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.” This is an area of law that may well evolve with coming cases.

Answer 125

N.B. The rule in Williams and Roffey cannot be extended to cases involving the part-payment of undisputed debts (Re Selectmove). This was challenged by the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising, where the creditor was said to have obtained a practical benefit beyond simply accommodating the debtor and not having to enforce the debt (the commercial benefit of its tenant remaining in occupation of the premises). However, this interpretation was not upheld when the case was appealed in the Supreme Court (as Rock Advertising v MWB), and the Court declined to tackle the issue. It was not relevant to the outcome in that case, and any decision would be likely to involve re-examination of the decision in Foakes v Beer. As Lord Simpson stated, “It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.” This is an area of law that may well evolve with coming cases.

Answer 126

Step One: Define Step Two: Apply Step Three: Effect

Answer 127

Agency is the relationship that arises where one person (agent) acts on behalf of another (principal), and has the power to effect the principal’s legal position with regard to a third party.

Answer 128

Agency is created in one of two ways: 1. Actual Authority – legal relationship between principal and agent created by express appointment, i.e. consensual agreement to which they alone are the parties; or, 2. Apparent Authority – legal relationship between the principal and the third party created when: • A representation (words or conduct) is made by the principal to the third party that the agent had authority; • The representation is relied upon by the third party, believing that the agent had authority; and • In reliance of the representation, the third party altered their position e.g. by entering the contract.

Answer 129

Freeman and Lockyer v Buckhurst Park Properties

Answer 130

1. Where the agent has authority, whether actual or apparent, there is a valid contract between the principal and third party. The agent, ‘drops out’. 2. Where the agent has no authority, the principal cannot sue or be sued by the third party. However, the third party may sue the agent in: • The tort of deceit, if the agent knew he had no authority; or • Breach of an implied warranty of authority

Answer 131

If the agent exceeds his authority, then there is no authority

Answer 132

Step 1: Who are the parties in the contract? Step 2: Identify the possible causes of action, i.e. have any express or implied terms been breached? Step 3: is the exemption clause INCORPORATED into the contract? Step 4: Does the clause cover the breach and damage alleged (‘construction’)? Step 5: Consider the Unfair Contract Terms Act 1977 Step 6: The REASONABLENESS TEST (N.B. A lot of emphasis should be put on this section) Step 7: Consider the Consumer Rights Act 2015 ?? Step 8: Claims against third parties Step 9: Conclusion and Remedies

Answer 133

1. Express terms: terms specifically agreed by the parties, either orally or in writing 2. Implied terms- terms may be implied by the courts: > Based on local customs or trade > Based on a previous course of dealings between the parties > Based on presumed intention of the parties; and/or • Consider the business efficacy test; and • The officious bystander test 4. Due to the type of contract

Answer 134

2. Implied terms- terms may be implied by the courts: | 1. Based on local customs or trade

Answer 135

Hutton v Warren

Answer 136

2. Implied terms- terms may be implied by the courts: | 2. Based on a previous course of dealings between the parties

Answer 137

Spurling (J) Ltd v Bradshaw

Answer 138

• Consider the business efficacy test

Answer 139

The Moorcock

Answer 140

The officious bystander test

Answer 141

Shirlaw v Southern FoundariesLtd

Answer 142

Liverpool City Council v Irwin and Another

Answer 143

4. Due to the type of the contract

Answer 144

Terms may also be implied by the Sale of Goods Act 1979 (SGA), the Supply of Goods and Services Act 1982 (SGSA), and the Consumer Right Act 2015 (CRA)

Answer 145

In the absence of an express term, a reasonable price should be paid

Answer 146

* Where there is a contract for the sale of goods by description, the goods must correspond with the description * Buyer must reasonably rely on the description * May still apply where the goods have been inspected

Answer 147

• Buyer must reasonably rely on the description (s.13 SGA)

Answer 148

Harlington and Leinster Enterprises Ltd

Answer 149

• May still apply where the goods have been inspected (s.13 SGA)

Answer 150

Beale v Taylor

Answer 151

- The goods are of satisfactory quality (14(2)) - The goods are reasonably fit for the purpose that the buyer expressly or by implication makes known to the seller (14(3)) - Seller must be in the course of business to a commercial buyer

Answer 152

Same as s.13 SGA but applies to the services/goods in service contracts: • Where there is a contract for the sale of goods by description, the goods must correspond with the description

Answer 153

Same as s.14 SGA but applies to the services/goods in service contracts: - The goods are of satisfactory quality (14(2)) - The goods are reasonably fit for the purpose that the buyer expressly or by implication makes known to the seller (14(3)) - Seller must be in the course of business to a commercial buyer

Answer 154

Where the supplier of a service is acting in the course of business, the supplier will carry out the service with reasonable care and skill

Answer 155

* In the absence of an express term, the service will be carried out within a reasonable time. * Will not apply if contract includes time for carrying out service * Only applies if contract is silent on point

Answer 156

Same as s.8 SGA but applies to the services/goods in service contracts

Answer 157

The Goods are of satisfactory quality

Answer 158

The goods are fit for purpose

Answer 159

The goods are as described

Answer 160

Service/work will be carried out with reasonable care and skill

Answer 161

Reasonable price will be paid for service/work | Applies only where no price has otherwise been fixed

Answer 162

Service/work will be performed in reasonable time | Applies only where no time has been set

Answer 163

The exemption clause can be incorporated into the contract in one of three ways: 1. Signature; 2. Notice; or 3. Course of Dealings

Answer 164

The clause will be incorporated by signature if: • The clause is legible and signed by the claimant; and • The document is a contractual document

Answer 165

L’Estrange v Graucob Ltd

Answer 166

However if the clause is misrepresented, it will be invalid.

Answer 167

Curtis v Chemical Cleaning and Dyeing Co.

Answer 168

In the absence of misrepresentation (Curtis v Chemical Cleaning and Dyeing Co.) if signed, the principal is bound by the terms of the contract (L’Estrange)

Answer 169

The document containing the clause must be contractual in nature

Answer 170

Chapelton v Barry Urban District Council

Answer 171

There must be either: • Actual notice, i.e. the innocent party must know of the clause; or • Constructive notice, i.e. the party relying on the clause must have taken ‘reasonable steps’ to bring it to the other’s notice. The person relying on the exemption clause must show that reasonable steps were taken to bring them to the attention of the other party.

Answer 172

Parker v South Eastern Railway

Answer 173

Factors that determine whether steps were reasonable include: • Position; • Prominence; and • Type of Clause

Answer 174

Parker v South Eastern Railway

Answer 175

Onerous clauses must be explicitly drawn to the attention of the other party (red hand pointing to it in red ink)

Answer 176

Thornton v Shoe Lane Parking Ltd

Answer 177

Onerous clause printed on the foot of a delivery note does not amount to reasonable steps to bring to the other’s attention

Answer 178

The reasonable steps to incorporate the term must occur before the contract is finalised

Answer 179

Olley v Marlborough Court Ltd

Answer 180

A course of dealings can provide notice, after a contract is finalised. However, the course of dealings must be consistent in both frequency and terms

Answer 181

Spurling (J) Ltd v Bradshaw

Answer 182

Three to Four times per month over three years amounted to course of dealings

Answer 183

Kendall (Henry) and Sons v Lillico and Sons Ltd

Answer 184

Three to Four times in 5 years did not amount to a course of dealings

Answer 185

Hollier v Rambler Motors

Answer 186

If the signing of the contract is not consistent, i.e. sometimes a signature is included, sometimes it isn’t, the course of dealings is not sufficiently consistent.

Answer 187

McCutcheon v MacBrayne

Answer 188

1. Contra proferentem rule 2. Exemption clause for negligence 3. Very serious breaches

Answer 189

1. Contra proferentem rule – if the clause is unclear, the courts will interpret it against the party relying on it

Answer 190

Houghton v Trafalgar Insurance

Answer 191

2. Exemption clause for negligence Clause must clearly relate to negligence. This can be either because the clause: • Expressly exempts liability for negligence; or • Contain words that are wide enough to exclude liability for negligence, provided that, should the wording cover liability other than negligence, the court doesn’t restrict liability to that other liability.

Answer 192

Canada Steamship Lines v The King

Answer 193

3. Very serious breaches – If the exemption is clearly worded, very serious breaches can be covered

Answer 194

Photo productions Ltd v Securicor Transport Ltd

Answer 195

If the clause applies under common law, you must consider the Unfair Contract Terms Act 1977.

Answer 196

Does not apply to exemption clauses if trader --> consumer contract, as these are governed by CRA. If such a contract, move to Step 7.

Answer 197

Things done in the course of business, not otherwise

Answer 198

s.1(3) UCTA

Answer 199

Breach of the SGA

Answer 200

s.6 (s.6(1)(a)) UCTA

Answer 201

Breach of the SGSA

Answer 202

Negligence and negligent breach of contract

Answer 203

Breaches of express terms

Answer 204

If UCTA applies it either: • Renders the exemption clause void; or • Subjects it to the REASONABLENESS TEST

Answer 205

Subject to reasonableness

Answer 206

Subject to reasonableness (if dealing on standard terms of business)

Answer 207

Subject to reasonableness

Answer 208

Subject to reasonableness

Answer 209

The reasonableness test – it must have been fair and reasonable to include the exemption clause having regard to circumstances that: • Were known; • Ought to reasonably have been known; or • Were within the contemplation of other parties when the contract was made.

Answer 210

* Relative Strength of bargaining position of the parties * Was there an inducement (for example, did the customer have an opportunity to enter a similar contract with someone else, but without the exemption clause?) * Incorporated? Did the customer know/reasonably should have known about the clause? * Was it reasonable to expect that compliance with the clause would have been practicable?

Answer 211

The resources that the defendant could expect to be available to him for the purpose of meeting the liability

Answer 212

s.11(4) UCTA

Answer 213

It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does

Answer 214

s.11(5) UCTA

Answer 215

In the case of advice: • Where the parties of equal bargaining power? • Would it be reasonably practicable to obtain the advice from an alternative source? • How difficult is the task? • What are the practical consequences?

Answer 216

Smith v Eric Bush

Answer 217

For limitation clauses: • Experienced commercial bodies free to make their own bargain? • Was there awareness of limitation clause at time of contract? • Is the type of clause common for the industry in question? • Does the defendant have ample resources to the liability? • Given the defendants insurance, is the amount in the limitation clause reasonable? (E.g. where insurance cover is £1m, why limit liability to £10k?)

Answer 218

St Albans City and District Council v International Comupters Ltd

Answer 219

Standard Industry terms are generally reasonable

Answer 220

Schenkers Ltd v Overland Shoes Ltd

Answer 221

When deciding whether a clause is reasonable, the clause must be considered as a whole

Answer 222

Stewart Gill Ltd v Horatio Myer & Co Ltd

Answer 223

If a term has separate parts, their reasonableness should be considered separately

Answer 224

Watford Electronics v Sanderson CFL Ltd

Answer 225

A clause that excludes liability for misrepresentation, could be read to include exclusion for fraudulent misrepresentation.

Answer 226

Thomas Witter v TBP Industries

Answer 227

A clause that was so wide that it could potentially exclude liability for death/injury (which is prohibited by UCTA) was void, even though, the actual possibility of death/injury was very small

Answer 228

Phillips v Hyland

Answer 229

‘the court should not be too ready to focus on remote possibilities,’ when deciding whether a clause fails

Answer 230

Skipskredittforeningen v Emperor Navigation

Answer 231

In this 2018 case, the Court of Appeal did not strike out the whole of a clause that excluded loss caused to, “property, goods, persons or the like, directly or indirectly resulting from our negligence.” The Court emphasised the fact that the parties were of equal bargaining power and that the party agreeing to the exemption clause was best placed to obtain the relevant insurance.

Answer 232

Goodlife Foods v Hall Fire Protection Ltd

Answer 233

GENERAL RULE: An exemption clause cannot protect a third party as the privity of the contract rule provides that only a party to a contract can rely on the clause.

Answer 234

Alder v Dickinson

Answer 235

1. Contracts (Rights of Third Parties) Act 1999 | 2. Negligence

Answer 236

1. Contracts (Rights of Third Parties) Act 1999 – a third party can acquire rights if: • The contract expressly provides that he may acquire a benefit

Answer 237

1. Contracts (Rights of Third Parties) Act 1999 – a third party can acquire rights if: • The term purports to confer a benefit on him

Answer 238

The third party does not have to be specifically named if he falls within an identified class for example employee

Answer 239

a third party may claim in the tort of negligence if they can establish duty, breach and causation

Answer 240

Can the innocent party recover for the loss/damage they have suffered? if yes consider the remedies where the term is a condition, the buyer can terminate or affirm the contract and Sue for damages.

Answer 241

are conditions. all other terms are innominate

Answer 242

ss.3-4 SGSA, s.14 SGA, ss.9-11 CRA

Answer 243

The buyer: • Is not obliged to perform further contractual duty; • Can recover the money paid; • Must return goods; and • Can sue for damages for any further loss

Answer 244

The buyer can: • keep the goods and • sue for damages for any loss suffered

Answer 245

Under the SGA, the right to terminate is lost if: • The breach is so slight that it would be unreasonable for him to reject goods or is contrary to the requirement of good faith (s.15) and • buyer has accepted goods (11(4)) o i.e. retained goods beyond a reasonable time (s.35)

Answer 246

Under the SGA, the right to terminate is lost if: • The breach is so slight that it would be unreasonable for him to reject goods or is contrary to the requirement of good faith and

Answer 247

Under the SGA, the right to terminate is lost if: | • buyer has accepted goods

Answer 248

s.11(4) SGA

Answer 249

Under the SGA, the right to terminate is lost if: [the buyer has accepted the goods] o i.e. retained goods beyond a reasonable time

Answer 250

Under the CRA consumer cannot repudiate (treat contract as at an end) for breaching sections 9-11 by exercising their right to reject the goods this overrides common law right to terminate for breach of these terms

Answer 251

Step One: What’s the problem? Step Two: How was the contract discharged? Consider (1)doctrine of breach (2)doctrine of complete performance (3)discharge by agreement Step Three: If there has been a breach of contract; are remedies available? Step Four: Conclusion. What can the innocent party claim?

Answer 252

1. Identify the type of contract: SGA / SGSA / CRA 2. Identify the term in dispute. The term will be a condition, warranty or an innominate term: 3. Identified the monies paid/owed

Answer 253

Term going to the root of the contract

Answer 254

Less Important Term

Answer 255

An Innominate term is ‘neither condition nor warranty.’

Answer 256

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

Answer 257

Generally, if the effect of a breach of the term deprives the innocent party of the whole benefit of the contract, the term is a condition; if not it is a warranty.

Answer 258

To determine whether the term is a condition, warranty or innominate term, the court will take into account: • Circumstances surrounding the making of a contract • The contract as a whole; and • Whether the parties described the term as a condition or warranty (N.B. This can be rebutted)

Answer 259

Schuler v Wickman

Answer 260

A contract can be discharged by : | 1. Doctrine of Breach 2. Doctrine of Complete Performance 3. Discharge by agreement 4. Frustration

Answer 261

Can terminate future performances and sue for damages

Answer 262

Can sue for damages for loss suffered

Answer 263

If the breach deprives the innocent party of substantially the whole benefit of contract, the innocent party can: • Terminate the contract and sue for damages (Hong Kong Fir Shipping Co); or • Affirm the contract and sue for damages … Unless Parliament (e.g. SGA and CRA) or the parties have made their intention to do otherwise, clear.

Answer 264

[innominate terms] If the breach deprives the innocent party of substantially the whole benefit of contract, the innocent party can: • Terminate the contract and sue for damages

Answer 265

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

Answer 266

GENERAL RULE: a party only has to perform their obligations when the other party has performed their part of the contract. Performance must be precise and exact.

Answer 267

Cutter v Powell

Answer 268

* Wrongful prevention of performance by the other party * Voluntary acceptance of partial performance by the other party * Substantial performance * Divisible obligations: parties have agreed payments for a distinct part or stage of the work.

Answer 269

o Can recover damages including lost profit (Robinson v Harman) o Quantum Meruit i.e. a reasonable amount for the work done (Planché v Colburn) o Quantum Valebrant i.e. a reasonable sum for goods supplied

Answer 270

Can recover damages including lost profit

Answer 271

Robinson v Harman

Answer 272

Quantum Meruit i.e. a reasonable amount for the work done

Answer 273

Planché v Colburn

Answer 274

Sumpter v Hedges

Answer 275

• Voluntary acceptance of partial performance by the other party o The defendant must have the option to take or not take the work done o Can claim Quantum Meruit i.e. a reasonable amount for the work done (Planché v Colburn)

Answer 276

• Substantial performance o Work is finished but defective o Consider the nature and extent of the defects (Hoenig v Isaacs and Bolton v Mahadeva)

Answer 277

Where the defects are slight, contract will be substantially performed (remedy will be cost of cure); consider the cost of cure in relation to the overall cost.

Answer 278

Hoenig v Isaacs – cost of cure was 1/14 of total contract price

Answer 279

Where defects are extensive, contract will not be substantially performed

Answer 280

Bolton v Mahadeva – cost of cure was 1/3 of total contract price

Answer 281

The parties to a contract may agree to release one another from outstanding obligations, thus ending the contract. To be binding, the three elements of a contract must be present: intention to create legal relations, agreement and consideration.

Answer 282

``` 1. Damages • Remoteness • Mitigation • Contributory Negligence • Time Assessment for damages • Specified damages/penalty clauses 2. Restitution 3. Restitutionary Damages 4. Action for an agreed sum 5. Equitable Remedies (Specific Performance and Injunction) ```

Answer 283

BROAD ETHOS = compensatory: the goal is to compensate the claimant, not punish the defendant; the claimant must have sustained loss, or the claimant may have to pay the defendant’s costs

Answer 284

Obagi v Stanborough (Developments) Ltd

Answer 285

a) EXPECTATION LOSS: aim is to put the claimant in the position he would have been in had the contract been properly performed

Answer 286

Robinson v Harman

Answer 287

The following are taken into account when quantifying the damage: • Difference in value (goods) • Cost of cure (services) • Loss of Amenity • Loss of Opportunity • Loss of Pleasure: usually cannot claim for loss of pleasure. o However, if the contracts purpose was the claimants enjoyment; you can claim for loss of enjoyment o N.B. The claimant’s enjoyment need not be the sole purpose of the contract, just important

Answer 288

• Loss of Amenity: pool was only nine inches too shallow. The difference in market value was £0, whereas the cost of cure was £21,000.00. Damages of £2,500.00 were awarded for loss of amenity

Answer 289

Ruxley Electronics and Construction v Forsyth

Answer 290

Loss of Opportunity

Answer 291

Chaplin v Hicks

Answer 292

Loss of Pleasure: usually cannot claim for loss of pleasure

Answer 293

Addis v Gramophone Co Ltd

Answer 294

However, if the contracts purpose was the claimants enjoyment; you can claim for loss of enjoyment

Answer 295

Jarvis v Swans Tours

Answer 296

N.B. The claimant’s enjoyment need not be the sole purpose of the contract, just important

Answer 297

Farley v Skinner

Answer 298

RELIANCE LOSS: aim is to put the claimant in the position he would have been in had the contract never been entered into

Answer 299

Anglia Television v Reed

Answer 300

Loss must be within the reasonable contemplation of the parties. This will be the case where: • It arises from the ordinary course of things; or • The special circumstances causing the loss are known to the parties at the time the contract is made

Answer 301

Hadley v Baxendale Loss must be within the reasonable contemplation of the parties. This will be the case where: • It arises from the ordinary course of things; or • The special circumstances causing the loss are known to the parties at the time the contract is made

Answer 302

Normal profits are foreseeable, but profits from a special contract are not

Answer 303

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd

Answer 304

If a particular TYPE of loss is within parties’ reasonable contemplation then the culpable party is liable for the FULL SCALE of that loss, no matter if it is higher than contemplated

Answer 305

Parsons (Livestock) Ltd v Uttley Ingham Ltd

Answer 306

Normal profit is a different type of loss to high profits resulting from an specially lucrative contract

Answer 307

Brown v KMR services

Answer 308

In the complex financial cases where loss is difficult to quantify, you can look at the commercial context, not simply reasonable contemplation.

Answer 309

Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)

Answer 310

In this case, it was said by the Court of Appeal that there might be unusual cases, like The Achilleas, in which particular circumstances and context make it necessary to consider whether or not a party had assumed responsibility for losses of that particular kind.

Answer 311

John Grimes Partnership Ltd v Gubbins

Answer 312

Claimant must take reasonable steps to mitigate his loss

Answer 313

British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railway Company of East London

Answer 314

The claimants damages can be reduces according with the Act

Answer 315

Law Reform (Contributory Negligence) Act 1945

Answer 316

Damages are assessed by reference to the time of breach, but the key principle is that damages must cover the loss suffered so that the normal rule should not be applied if this key principle is offended.

Answer 317

Golden Strait Corporation v Nippon Yusen Kubishiki Kaisha (The Golden Victory)

Answer 318

Clauses that state an amount payable in the event of a breach will either be a specified damages clause or a penalty clause

Answer 319

Is the authority for the current test for a penalty clause, which is defined as a clause which creates a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. In short, a penalty clause is one that attempts to put exorbitant or unconscionable economic pressure on a party to perform the contract.

Answer 320

Cavendish Square Holding BV v Makdessi

Answer 321

Cavendish Square Holding BV v Makdessi Is the authority for the current test for a penalty clause, which is defined as a clause which creates a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. In short, a penalty clause is one that attempts to put exorbitant or unconscionable economic pressure on a party to perform the contract

Answer 322

* A party’s legitimate interest in enforcing such a clause may go beyond the merely financial. In that case, the presumption is that where the parties are commercial entities of fairly equal bargaining power, they must be taken to have been the best judges of what they were prepared to agreed to. * Where the legitimate interest of a party in enforcing the clause is merely financial (i.e. just compensation for breach), the guidelines from Dunlop Pnemaumatic Tyre Co, can be used to decide if the clause is penal.

Answer 323

Guidelines for deciding whether a clause is specified damages or penalty • Is the sum extravagant/unconscionable? --> penalty • If breach is not paying a sum of money, or if the sum in the clause exceeds the amount that ought to be paid --> penalty • If a single sum is due on the happening of one of multiple events, varying in severity, there is a presumption of penalty • Clause CAN be specified damages clause even if it is difficult/impossible to pre-estimate the cause of the breach.

Answer 324

Dunlop Pnemaumatic Tyre Co v New Garage & Motor Co Ltd * Is the sum extravagant/unconscionable? --> penalty * If breach is not paying a sum of money, or if the sum in the clause exceeds the amount that ought to be paid --> penalty * If a single sum is due on the happening of one of multiple events, varying in severity, there is a presumption of penalty * Clause CAN be specified damages clause even if it is difficult/impossible to pre-estimate the cause of the breach.

Answer 325

Commercial Considerations are also important, e.g. balancing the bargaining power between parties.

Answer 326

Azimut-Benetti SpA (Benetti Division) v Healey

Answer 327

Certainty is important

Answer 328

Phillips Hong Kong Ltd

Answer 329

BROAD ETHOS: The goal is to prevent the unjust enrichment of one party

Answer 330

• Recovery of paid money due to ‘total failure of consideration’ i.e. not done any part of consideration; or what was performed was completely useless • Compensation for work done/goods supplied o The contract has been broken – a claim for a reasonable sum for work done/goods supplied as an alternative claim for damages/quantum meruit/quantum valebrant o The contract was never formed – the supplier may be able to claim in restitution for a reasonable sum for work done/goods supplied (British Steel Corp. v Cleveland Bridge and Engineering Co Ltd)

Answer 331

o The contract was never formed – the supplier may be able to claim in restitution for a reasonable sum for work done/goods supplied

Answer 332

British Steel Corp. v Cleveland Bridge and Engineering Co Ltd

Answer 333

Restitutionary damages may be awarded where the defendant’s breach is deliberate and for their own reward, the claimant can’t show any loss and the claimant has legitimate interest to restrict the defendant’s behaviour

Answer 334

Wrotham Park Estate Co Ltd v Parkside Homes, clarified by Experience Hendrix LLC v PX Enterprises Inc

Answer 335

The law is a bit murky on whether it is compensatory or Restitutionary; it is viewed as a new and distinct means of determining damages

Answer 336

Court awarded full account of profits from a published book (but very exceptional factual circumstances)

Answer 337

Attorney General v Blake

Answer 338

Court awarded Claimant only 5% of profits made by the defendant; majority of judges said that the damages were not compensatory (i.e. they were focussed on the defendant’s gain, rather than the claimant’s loss)

Answer 339

Wrotham Park Estate Co Ltd v Parkside Homes Ltd

Answer 340

Tone was Restitutionary

Answer 341

Experience Hendrix LLC v PX Enterprises Inc

Answer 342

Tone was Compensatory

Answer 343

The claimant can start an action for an agreed sum if: • The contract provides for one party to pay a definite sum to the other; and • The Duty to pay has arised This is a simple debt action; remoteness and mitigation rules do not apply.

Answer 344

* This is an order by the court which requires a party to perform his contractual obligations. Failure to comply will result in Contempt of Court. * A discretionary remedy

Answer 345

Specific performance will not be provided where the court will have to supervise, for service contracts, or for contract where relationship of trust is paramount

Answer 346

Ruxley Electronics and Construction v Forsyth

Answer 347

* A prohibitory or mandatory order * Injunction will not be granted if the effect would be to compel the defendant to act in a way he could not be ordered to by an order for specific performance * Negative promises (e.g. not to work for another company) can be enforced (Warner Brothers Pictures Incorporated v Nelson) * The court will not enforce a promise in a contract if the injunction would result in the party remaining idle and detrimentally impacting their career (Page 1 records v Britton)

Answer 348

Negative promises (e.g. not to work for another company) can be enforced

Answer 349

Warner Brothers Pictures Incorporated v Nelson

Answer 350

The court will not enforce a promise in a contract if the injunction would result in the party remaining idle and detrimentally impacting their career

Answer 351

Page 1 records v Britton

Answer 352

Step One: Identify Contracting Parties Step Two: State General/original rule Step Three: Identify the party who, in order to avoid a charge of breach of contract, might try and claim that the contract was frustrated. Step Four: Is there frustration? Step Five: What is the effect if the contract is frustrated? Step Six: What is the effect if the contract has NOT been frustrated

Answer 353

If a party has assumed an absolute obligation, even If circumstances make performance of this obligation impossible, he is liable for breach of contract

Answer 354

Paradine v Jane

Answer 355

# DEFINE Frustration and apply to the facts. A contract is frustrated when: a) Supervening event; which b) Is unforeseen c) Is outside the control of the parties (The Super Servant 2); and d) Renders the contract impossible to perform (Davis Contractors Ltd v Fareham UDC)

Answer 356

c) Is outside the control of the parties

Answer 357

Maritime Fish Ltd v Ocean Trawlers and The Super Servant 2

Answer 358

d) Renders the contract impossible to perform

Answer 359

Davis Contractors Ltd v Fareham UDC

Answer 360

Essential person unavailable

Answer 361

Condor v Barron Knights

Answer 362

Essential thing unavailable (e.g. venue)

Answer 363

Taylor v Caldwell

Answer 364

Fundamental event does not occur

Answer 365

Krell v Henry

Answer 366

Government Intervention

Answer 367

Metropolitan Water Board v Dick Kerr and Company

Answer 368

Illegality of the contract

Answer 369

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Answer 370

Delay – consider the length and time obligation in performance. How long was the delay? Was there a time limit for obligations to be performed? The delay will only frustrate the contract if ti has become radically different.

Answer 371

Metropolitan Water Board v Dick Kerr and Company

Answer 372

Event was foreseen or should have been foreseen

Answer 373

Davis Contractors Ltd v Fareham UDC

Answer 374

Prices go up

Answer 375

Tsakiroglou & Co Ltd v Noblee Thorl

Answer 376

Contract becomes more expensive/difficult to perform

Answer 377

Davis Contractors Ltd v Fareham UDC

Answer 378

Essential person is unavailable for an insignificant period

Answer 379

If event is not directly related to objective of contract (N.B. Contrast with Krell v Henry)

Answer 380

Herne Bay Steamboat Co v Hutton

Answer 381

If event is in any way self-induced – any element of choice will prevent frustration

Answer 382

The Super Servant Two

Answer 383

Delay and Leases of Land – not being able to use property for two out of ten years was held not to be a frustrating event

Answer 384

National Carriers Ltd v Panalpina (Northern) Ltd

Answer 385

If there is frustration, mention presence or not of a force majeure clause (a clause that releases parties from contractual obligations when circumstances beyond their control arise)

Answer 386

* Contract is automatically discharged/terminated * Future Obligations cease * No parties are in breach

Answer 387

Contract is automatically discharged/terminated

Answer 388

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Answer 389

Future Obligations cease

Answer 390

Krell v Henry

Answer 391

Law Reform (Frustrated Contracts) Act 1943

Answer 392

• Money paid before the frustrating event is recoverable • Money that was payable before the frustrating event need not be paid • Expenses incurred by the payee are recoverable, but: o This is subject to a price ceiling (the sum of money paid before the frustrating event and money payable before the frustrating event) o The court has a broad discretion as to this amount, and its goal will be to avoid unjust enrichment. It will achieve this goal by adjusting the amount for the payee depending on whether the payer has also incurred any expenses. (Gamerco SA v ICM/ Fair Warning (Agency) Ltd)

Answer 393

The court has a broad discretion as to this amount, and its goal will be to avoid unjust enrichment. It will achieve this goal by adjusting the amount for the payee depending on whether the payer has also incurred any expenses.

Answer 394

Gamerco SA v ICM/ Fair Warning (Agency) Ltd

Answer 395

• If there is any valuable benefit that survives the frustrating event, court may order a ‘just sum’ to paid with regard to all the circumstances. • Valuable benefits must be ‘benefits accrued in, or for the purpose of the contract.’ • The size of this sum will be decided with regard to: o The value of the benefit to its recipient at time of event (BP Exploration Co (Libya) Ltd v Hunt); and o Any expenses awarded under s.1(2) LR(FC)A 1943 • Unpredictable element – hard to know what courts may do

Answer 396

The size of this sum will be decided with regard to: | o The value of the benefit to its recipient at time of event

Answer 397

BP Exploration Co (Libya) Ltd v Hunt

Answer 398

Discuss BREACH of contract and appropriate remedies (See previous WS for Remedies) 1. Type of Breach 2. Remoteness 3. Measure of Damages 4. Mitigation

Answer 399

If serious, a repudiatory breach, the innocent party can either discharge the contract and get damages, or affirm contract

Answer 400

Loss must be within the reasonable contemplation of the parties at the time the contract was entered into. The loss must either: a) Arise naturally from the breach itself; or b) Could reasonably be supposed to have been in reasonable contemplation of parties at time of contract due to special circumstances known to them.

Answer 401

Compensatory: the goal is to compensate the claimant, not punish the defendant

Answer 402

a) Start with EXPECTATION LOSS: The aim is to put the claimant in the position he would have been in, had the contract been properly formed

Answer 403

Robinson v Harman

Answer 404

b) If this cannot be calculated, move onto RELIANCE LOSS: the aim is to put the claimant in the position he would have been in had the contract not been entered into

Answer 405

Anglia Television v Reed

Answer 406

The claimant must take reasonable steps to keep loss at a minimum

Answer 407

British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railway Company of East London

Answer 408

Step One: Is there a valid contract? Step Two: Explain whether the statement in question is a term, representation, or a mere sales puff Step Three: If statement is a TERM, consider remedies for breach of contract Step Four: If statement is a REPRESENTATION, consider the definition of Misrepresentation Step Five: Apply each part of the definition to the facts to ascertain whether there has been a misrepresentation Step Six: Remedies for Misrepresentation Step Seven: Consider whether the defendant may have a DEFENCE (available for non-fraudulent mis-representation only)

Answer 409

Are the three elements of a contract present? (Agreement, intention to create legal relations, consideration) [If YES, continue to step two]

Answer 410

Cannot claim for misrepresentation. Claim in TORT instead for NEGLIGENT MISSTATEMENT

Answer 411

(a) Unlike misrepresentation, don’t need a contractual relationship to sue (b) A statement of OPINION may be a negligent misstatement, as well as one of fact.

Answer 412

(a) Misrepresentation claims under the Act are better for claimants as they reverse the burden of proof (the defendant has to prove that there was not a negligent misrepresentation).

Answer 413

S2(1) Misrepresentations Act 1967

Answer 414

(b) Remoteness rules that apply to damages are better because no remoteness.

Answer 415

Due to Royscott Trust Ltd v Rogerson

Answer 416

If so, apply Hedley Byrne & Co v Heller etc. i.e. a special relationship must exist.

Answer 417

A part of the contract which if untrue, provides a remedy for breach

Answer 418

A statement made by one party to the contract which may have induced the other party to enter into the contract, but does not form part of it

Answer 419

An obviously extravagant claim providing no right of action (e.g. Red Bull doesn’t actually give you wings)

Answer 420

* What were the parties’ intentions at the time of the statement? If these are not clear, consider the objective test. * Objective test: would a reasonable man consider the parties’ intentions to be that the statement is a term or a representation

Answer 421

The party making the statement has greater skill/knowledge than the recipient.

Answer 422

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd

Answer 423

The statement is of vital importance to the contract and the recipient made this known

Answer 424

Bannerman v White

Answer 425

Where the maker of the statement tells the recipient not to bother verifying it.

Answer 426

Schawel v Reade

Answer 427

Where the party makes a statement about something out of his control

Answer 428

Birch v Paramount Estates Ltd

Answer 429

The recipient of the statement has greater skill or knowledge

Answer 430

Oscar Chess Ltd v Williams

Answer 431

There was a long-time lapse between the statement and the contract

Answer 432

Routledge v McKay

Answer 433

The maker of the statement asks the recipient to verify it

Answer 434

Excay v Godfrey

Answer 435

The statement is ORAL, and not repeated in the WRITTEN contract.

Answer 436

Routledge v McKay

Answer 437

[The statement is ORAL, and not repeated in the WRITTEN contract. (Routledge v McKay)] o However, this is not a definite rule. Where oral statement is not followed up in writing, contract could be deemed part written, part oral, so could be a term.

Answer 438

Birch v Paramount Estates Ltd

Answer 439

Damages to be assessed on EXPECTATION OF LOSS basis, i.e. aim is to put the claimant in the position he would have been in had the contract been properly formed.

Answer 440

Robinson v Harman

Answer 441

Scope of damages are those which are natural or contemplated, i.e.

Answer 442

Hadley v Baxendale

Answer 443

Those which fairly and reasonably should be considered as arising naturally from breach of contract

Answer 444

Those which may reasonably be supposed to have been in the contemplation of both parties at the time the contract was made.

Answer 445

There is a possible breach of the implied term that goods should match their description. The remedies for which are damages, the option to reject goods etc. (may be additional remedies available to consumers)

Answer 446

s.13 SGA; s.3 SGSA; s.11 CRA 2015

Answer 447

A false statement of fact made by one contracting party to another before the contract was made and which was one of the factors that induced the other party to enter into the contract.

Answer 448

1. False statement of Fact 2. Made at the time of/before the contract 3. Induces the representee to enter the contract

Answer 449

The statement must be one of fact, not opinion.

Answer 450

Bisset v Wilkinson

Answer 451

Unless it is an ‘implied false statement of fact’, that is: o The opinion is not genuine; or o There are no reasonable grounds for the maker to believe it is true [case]

Answer 452

Smith v Land and House Property Corp

Answer 453

A Misrepresentation can be made by CONDUCT

Answer 454

Spice Girls v Aprilia World Service BV

Answer 455

A statement of INTENTION will only be a misrepresentation when that intention was never really held

Answer 456

Edgington v Fitzmaurice

Answer 457

SILENCE does not constitute misrepresentation.

Answer 458

Hamilton and Others v Allied Domecq plc

Answer 459

• SILENCE does not constitute misrepresentation. Exceptions: o Failing to disclose a change in circumstances that would render a previously true statement, false. (With v O’Flanagan) o Telling of a half-truth (only telling half the story) (Curtis v Chemical Cleaning & Dyeing Co) o Where there is an obligation to disclose facts (e.g. under a fiduciary relationship, or under contracts of the utmost good faith e.g. insurance contracts)

Answer 460

o Failing to disclose a change in circumstances that would render a previously true statement, false.

Answer 461

With v O’Flanagan

Answer 462

o Telling of a half-truth (only telling half the story)

Answer 463

Curtis v Chemical Cleaning & Dyeing Co

Answer 464

• There must be RELIANCE on the representation/statement

Answer 465

Attwood v Small

Answer 466

• Provided the stamen encourages entry into the contract, it need not have been the only inducement

Answer 467

Edgington v Fitzmaurice

Answer 468

• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim.

Answer 469

Redgrave v Hurd

Answer 470

[• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim. (Redgrave v Hurd)] Unless: o The true position was set out in the final contract and the claimant is experienced in the area.

Answer 471

Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd

Answer 472

[• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim. (Redgrave v Hurd)] Unless: o Distinguish from the Curtis Case where contract included true terms but claimant was a consumer

Answer 473

Curtis v Chemical Cleaning & Dyeing Co

Answer 474

It makes a contract voidable; innocent party may affirm or rescind the contract

Answer 475

1. Rescission 2. Damages in lieu of rescission 3. Damages

Answer 476

Rescission is an optional remedy, available for all forms of misrepresentation. The effect of rescission is that each party returns money/property to each other, and both are released from any future obligations. The innocent party must notify the other of the intention to rescind.

Answer 477

(a reasonable attempt may suffice)

Answer 478

Car and Universal Finance Co Ltd v Caldwell

Answer 479

a) An innocent purchaser acquires an interest in the property before the contract is rescinded (e.g. purchase of goods); b) The innocent party affirms the contract; c) There has been undue delay [case] from the point at which the misrepresentation should have been discovered (but when misrepresentation is fraudulent, from the point at which the misrepresentation was actually discovered) (Leaf v International Galleries); or d) It is impossible substantially to restore goods/property to the other (Crystal Palace FC (2000) Ltd v Iain Dowie)

Answer 480

c) There has been undue delay [case] from the point at which the misrepresentation should have been discovered (but when misrepresentation is fraudulent, from the point at which the misrepresentation was actually discovered);

Answer 481

Leaf v International Galleries

Answer 482

d) It is impossible substantially to restore goods/property to the other

Answer 483

Crystal Palace FC (2000) Ltd v Iain Dowie

Answer 484

• N.B. However, the restoration need not be exact

Answer 485

Erlanger v New Sombrero Phosphate Co.

Answer 486

On rescission, the innocent party may also claim an indemnity for expenses incurred from the contract. However, claims for indemnity are very restricted and only cover the precise terms of the contract

Answer 487

Whittington v Seale-Hayne

Answer 488

(a) Under s2(2) Misrepresentation Act 1967: the court may award damages IN LIEU OF RESCISSION (b) This remedy is at the discretion of the court (c) Will most likely be awarded where false statement was made about a minor matter and where it would be unjust to allow the other party to rescind. (d) Will not be available if rescission itself has been barred.

Answer 489

May be claimed in addition to either affirming or rescinding the contract (a) if the misrepresentation is FRAUDULENT, sue in the tort of deceit (b) If the misrepresentation is NON-FRAUDULENT

Answer 490

* To prove fraudulent misrepresentation, the claimant must prove that they statement was made knowingly, or without belief in its truth, or recklessly. (Difficult to prove.) (Derry v Peek) * Damages assessed on tort principles (put person back in the position they would have been before contract entered into) * Usual remoteness/foreseeability rules do not apply. The means you can recover damages for all direct consequences, including for example, profits that would have been made had another contract been entered into. (East v Maurer)

Answer 491

• To prove fraudulent misrepresentation, the claimant must prove that they statement was made knowingly, or without belief in its truth, or recklessly. (Difficult to prove.)

Answer 492

Derry v Peek

Answer 493

• Usual remoteness/foreseeability rules do not apply. The means you can recover damages for all direct consequences, including for example, profits that would have been made had another contract been entered into.

Answer 494

East v Maurer

Answer 495

Sue for a non-fraudulent misrepresentation under s.2(1) MA 1967

Answer 496

* The claimant need only show that there was a misrepresentation and that he suffered loss. * Damages are assessed according to tort principles in the same way as for fraudulent misrepresentation, i.e. usual remoteness rules do not apply. (Royscott Trust Ltd v Rogerson) * Effectively removes the need to make a claim of fraudulent misrepresentation and moves burden of proof onto the defendant with regard to his defence.

Answer 497

• Damages are assessed according to tort principles in the same way as for fraudulent misrepresentation, i.e. usual remoteness rules do not apply.

Answer 498

Royscott Trust Ltd v Rogerson

Answer 499

Under s2(1) of the MA 1967 Available for non-fraudulent misrepresentation under s2(1) of the MA 1967 only

Answer 500

Available for non-fraudulent misrepresentation under s2(1) of the MA 1967 only

Answer 501

* The defendant must prove that he had reasonable grounds to believe, and did honestly believe up to the time that the contract was made, that the facts were true. * Very difficult to establish, as there are objective and subjective elements to the belief in the truth of the statement. (Howard Marine & Dredging v Ogden) * If the defence succeed, claimant will not be entitled to damages but may still rescind the contract provided rescission is not barred.

Answer 502

• Very difficult to establish, as there are objective and subjective elements to the belief in the truth of the statement.

Answer 503

Howard Marine & Dredging v Ogden

Answer 504

Step One: Identify (1) original contract; and (2) variation Step Two: Is there consideration for the variation Step Three: Consider economic duress (fifth factor in Williams v Roffey and Nicholls (Contractors) Ltd) Step Four: Effect of Duress and Remedy Step Five: Conclude

Answer 505

If there is consideration, the variation is valid and the ‘new’ contract is binding. If there is no consideration, the variation is void and the ‘new’ contract is not binding.

Answer 506

Consideration is the price you pay for another man’s promise

Answer 507

The basic rule is that ‘performance of existing contractual duties is not good consideration’

Answer 508

Stilk v Myrick

Answer 509

Exception 1: ‘if the defendant exceeds his duties in some way or extra benefit is conferred, there is consideration’

Answer 510

Hartley v Ponsonby

Answer 511

Exception 2: a) There is a contract to do work/supply goods and services in return for payment; b) B doubts whether A will complete his obligations; c) B promises additional payment if A completes his obligations on time (it does not matter who introduces the promise) d) As a result of giving his promise, B obtains a practical benefit or obviates a disbenefit; and e) B’s promise was not given as a result of economic duress or fraud on the part of A.

Answer 512

Duress is some sort of violence, illegitimate threat or pressure. To amount to economic duress, the threat must be improper or illegitimate (i.e. a threat to breach a contract or to commit a tort – apply). The burden of proving duress is on the party who alleges in. The effect of duress is to make the contract (or variation) voidable (i.e. the contract is valid and binding unless and until it is rescinded by the innocent party.)

Answer 513

To establish duress, the innocent party must establish that there has been: a) An illegitimate threat or pressure b) Whether the threat or pressure left him with no practical choice; and c) Whether the threat or pressure was a significant factor in inducing him to enter the contract or variation, although it need not be the only reason why the innocent party entered the contract (Barton v Armstrong)

Answer 514

Carillion Construction Ltd v Felix

Answer 515

Whether the threat or pressure was a significant factor in inducing him to enter the contract or variation, although it need not be the only reason why the innocent party entered the contract.

Answer 516

Barton v Armstrong

Answer 517

Duress may also be used as a defence if the other party tries to enforce a variation of the contract.

Answer 518

Altas Express v Kafco

Answer 519

The current position is if conditions 1-4 in Williams v Roffey Bros and Nicholls (Contractors) Ltd are satisfied, but number 5 is not, it means that there is consideration, but there is also economic duress. Hence the contract is voidable which means the claimant has a choice to rescind or affirm (Adam Opel GmbH (2) Renault SA v Mitras Automotive (UK) Ltd).

Answer 520

The claimant has a choice to rescind or affirm

Answer 521

Adam Opel GmbH (2) Renault SA v Mitras Automotive (UK) Ltd

Answer 522

a) Innocent party must inform the other party that it wants to rescind. If the other party cannot be found or refuses to return the money/property, they must inform the police or apply for a court order of rescission. b) Once rescinded, no party has any future obligations. All money/property must be returned. c) Rescission will not be possible if any of the bars to rescission exist: i. Delay, e.g. the claimant left it 8 months before alleging duress (North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron)) ii. Affirmation, e.g. the claimant paid while not under any pressure (North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron)) iii. An innocent party has acquired an interest in the property before the contract is voided; or iv. Where it is impossible to substantially return goods/property, e.g. goods destroyed/used

Answer 523

i. Delay, e.g. the claimant left it 8 months before alleging duress ii. Affirmation, e.g. the claimant paid while not under any pressure

Answer 524

(North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron))

Answer 525

There has been a variation; has there been consideration (Stilk, Hartley, Roffey); has there been economic duress (Carillion); do any bars to rescission apply (Atlantic Baron); should the claimant rescind (Opel)?

Answer 526

Step One: Was there undue influence? Examine the relationship between the surety and the debtor. Step Two: Did the bank have NOTICE of the undue influence? Examine the position between the ‘abused’ party and the lender. Step Three: Remedies

Answer 527

‘Abuse of a dominant position in a relationship that involves an inappropriate influence on the claimant’; or ‘where one party takes advantage of a relationship of trust and confidence.’

Answer 528

* Do the facts suggest so? E.g. husband was heard shouting at wife when documents signed. * Difficult for the claimant to prove, as it’s often one person’s word against the other’s. * Example of a successful: old lady forced to enter contract by threat of court action (threat may well be legal). The old lady’s evidence was preferred to the nephew’s (Daniel v Drew)

Answer 529

There will be presumed undue influence if (i) there is a relationship of trust and confidence, AND (ii) the transaction calls for an explanation (Royal Bank of Scotland v Etridge).

Answer 530

• Definition: ‘A relationship of influence, where one party trusts the other, and the other conducts his business independently,’

Answer 531

• In law – certain categories of relationship are irrebuttably presumed to be of fiduciary nature (e.g. doctor/patient; solicitor/client; parent/minor child). However, Husband/Wife or cohabitees does not raise an irrebuttable presumption of a fiduciary relationship.

Answer 532

Barclay’s Bank v O’Brien

Answer 533

• On facts – Categories of fiduciary relationship are not closed. The court can find a fiduciary relationship on the facts of a particular case

Answer 534

Tate v Williamson; O’Sullivan v Management Agency Ltd

Answer 535

* The transaction must be such that it is not readily explicable by the relationship between the parties * Example: we're a very large risk (e.g. house repossession) is entirely upon one person and that person is not a partner in the business in question.

Answer 536

Royal Bank of Scotland v Etridge

Answer 537

If both (a) and (b) are present, the onus shifts to the defendant to rebut the presumption of undue influence by showing that the claimant exercised their own, free, informed mind in agreeing to sign.

Answer 538

If the lender has actual or constructive notice of the debtor’s impropriety, the lender will be tainted with it. Consequently, the contract will be voidable.

Answer 539

For example, a bank manager witnessed husband bullying wife to sign document.

Answer 540

A lender will have constructive notice if (i) It ought to have been put on inquiry of risk of undue influence by the debtor, and (ii) it did not take reasonable steps to ensure that the surety was aware of the implications of what she was signing.

Answer 541

• Banks are ‘put on inquiry’ (i.e. have constructive) whenever surety-debtor relationship is non-commercial (personal)

Answer 542

Royal Bank of Scotland v Etridge

Answer 543

• Held: Bank did not have constructive notice of Mr Pitt’s undue influence because the document looked like a straightforward mortgage. Lord Browne-Wilkinson distinguished a ‘joint advance’ from a situation where wife stands a surety for husband’s debts as in the latter wife does not stand to benefit whatsoever.

Answer 544

CIBC Mortgages plc v Pitt

Answer 545

• In Royal Bank of Scotland v Etridge, three ways of doing so were mentioned: o Have a private meeting with surety (e.g. husband must not be present); o Warn/inform surety of the risks; and o Urge surety to take legal advice

Answer 546

• In extreme circumstances, where transactions are particularly disadvantageous to a surety, the creditor should ENSURE and INSIST that the Shorty receives independent legal advice and explain the full extent of the transaction to them. [N.B. case did not involve a husband and wife scenario.]

Answer 547

Credit Lyonnais v Burch

Answer 548

1. If there has been undue influence, the contract is VOIDABLE 2. RESCISSION (Damages not available), unless there are bars: a) Delay – STATE: ‘provided the surety takes action soon, delay will not be a bar b) Affirmation; c) Impossible to substantially return goods and services; d) An innocent party (equity’s darling) acquired an interest in the property before it was voided 3. Effect of Rescission a) Returns parties to pre-contractual position b) The bank/creditor/lender will only be able to claim the money owed from the debtor as an unsecured creditor

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