Contract Law Flashcards
(221 cards)
1
Q
Contractual agreement
A
(1) enforceable - based on mutual agreement; (2) based on promise; (3) creates legitimate expectations
2
Q
Freedom of contract
A
Parties are free to negotiate any term they wish
3
Q
Limitations to freedom of contract
A
(1) inequality of bargaining powers (2) implied terms (3) use of standard form contracts (4) statutory intervention to protect consumer (5) obligation to implement eu law
4
Q
Ingredients of formation of contract
A
(1) agreement (2) consideration (3) intention to create legal relation
5
Q
Factors affecting formation of contract
A
(1) form (2) legal capacity (3) privity and rights of 3rd parties
6
Q
Examples of invitation to treat
A
(1) auctions (2) display of goods (3) advertisement (4) catalogues (5) tenders to provide goods or services (6) mere statement of price
7
Q
Pharmacautical Society of GB v Boots Cash Chemists Ltd (1953)
A
Goods on the shelf constitute an invitation to treat not an offer.
8
Q
Fisher v Bell (1961)
A
displaying of the knife in the shop window was merely an invitation to treat and the shopkeeper had not thereby offered the knife for sale
9
Q
Spencer v Harding (1870)
A
Unless the advertisement specifies that the highest tender would be accepted there was no obligation to sell to the person submitting the highest tender. The advert amounted to an invitation to treat, the tender was an offer, the defendant could choose whether to accept the offer or not.
10
Q
Harvey v Facey (1893)
A
There must be clear wording of the offer, not mere statement of the price
11
Q
Carlill v Carbolic
A
It is quite possible to make an offer to the world; In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance.
12
Q
Barry v Davies (2001)
A
The contract in an auction is between the buyer and the seller, not the buyer and the auctioneer, although the buyer has a collateral agreement with the auctioneer.
13
Q
Hyde v Wrench
A
- Offer to sell farm for £1000; 2. counter-offer terminating the offer to buy it for £950; 3. Rejction; 4. No possibility to go back to any of the offers
14
Q
Byrne & Co v Van Tienhoven (1880)
A
an attempt to withdraw offer after acceptance, failed, still valid contract
15
Q
irrevocable offer
A
impossible for the offeror to get back on the offer
16
Q
Death
A
is a termination of an offer only if it involves personal considerations
17
Q
Williams v Carwardine (1833)
A
The offeree has to know about the offer in order to accept it
18
Q
Holwell Securities Ltd v Hughes (1974)
A
if offer requires actual communication of the acceptance, the postal rule does not apply - mere posting not sufficient
19
Q
E-mails
A
acceptance if send properly and the receiver was expected to check the mailbox; if the offeror does not check the inbox - still valid acceptance (Lord Denning in Entores
20
Q
Frank v Knight (1937)
A
If the offeror requires specific methods of acceptance, only this method would be valid
21
Q
Felthouse v Bindley (1862)
A
silence cannot amount to acceptance
22
Q
Errington v Errington (1952)
A
it is impossible to revoke offer after the offerEe has started performing the conditions; offer is accepted after commencing performance
23
Q
Battle of the forms
A
offer -> counter-offer -> offer -> counter-offer (dealing with standard terms of the parties) and so on
24
Q
Currie v Misa (1875)
A
defined as the first one ‘consideration’; contract to be binding must be supported by consideration - price of the promise;
25
Simultaneous contract and performance
(sale of goods at supermarkets) purchase provides money by way of consideration; shop provides goods by way of consideration =/= gifts
26
Bilateral contracts made before due to be performed
(i.e. contract in January to do sth in June) promise to pay - consideration; promise to supply - consideration; contract is formed in January
27
Promise to pay in case of breaking leg
gift subject to a condition, not an offer
28
Consideration must move from the promisee
i.e. A promises to pay B if B cleans C’s windows -> A’s promise is enforceable
29
A promises to pay B if C cleans A’s windows
no consideration from B; not enforceable
30
Doctrine of privity
about the parties to the contract: who made and who accepted the offer
31
Provisions of the Contracts (Rights of Third Parties) Act 1999
grants rights to third party; irrelevant whether consideration is provided or not
32
Chappell & Co Ltd v The Nestle Co Ltd (1960)
Consideration has to be of economic value
33
warranty
written statement
34
White v Bluett (1853)
abstaining from doing one should not do cannot be a consideration
35
forbearance
zaniechanie
36
Consideration has to be legally sufficient means
has to have some kind of value
37
Lampleigh v Braithwait (1615
‘request’ exception - if A asks B to do sth and later promises to pay for it - A’s promise is enforceable
38
Collins v Godefroy (1831)
Collins received subpoena to be witness at Godefroy trial, Godefroy promised him to pay for that; no consideration due to public duty
39
Glasbrook Bros Ltd v Glamorgan Country Council (1925)
police provided special services beyond the duty; when promisee does more than his public duty requires = good consideration;
40
Shadwell v Shadwell (1860)
man was promised money for getting married, what he has already agreed to - good consideration (based on request =/= gift); pre-existing Contractual Obligation owed to a third party - amounts to a good consideration
41
Stilk v Myrick (1809)
unilateral variation of the contract is not supported by consideration - invalid
42
Williams v Roffey Bros & Nicholls (1990)
subcontracting carpenters to refurbish flats; the practical benefit derived by the promisor from performance of the promisee’s contractual obligation = good consideration given there is no duress
43
Part payment of debt
If debtor’s obligation to give back money to a creditor is to be varied, consideration is required
44
Foakes v Beer (1884)
creditor saying he won't sue debtor for interest if he pays the whole sum is not binding - no consideration on debtor’s side (=/= Roffey (1990))
45
D&C Builders v Rees (1966)
smaller payment not acceptable even if different method of payment (duress)
46
Subpoena
wezwanie sadowe
47
Satisfaction
consideration
48
Privity
powiazanie prawne
49
Estoppel
if you promise something and the other person relies on your promise, you cannot change your mind later = go back on your promise - you will be prevented or estopped from doing so
50
Proprietary estoppel
when promisee is promised to be given an interest and so the promisee acts to his detriment due to reliance on the promise; no consideration needed;
51
Central London Properties v High Tree House Ltd (1947)
[first instance decision, can be used as supportive case, not main]; Promissory estoppel - deals with unilateral variations, consideration is not required; you cannot go back on your promise if someone relied on it;
52
Hughes v Metropolitan Railway (1877)
If parties enter into a negotiation, which has the effect of leading one party to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, the person who otherwise might have been able to enforce those rights will no longer be allowed to enforce them
53
High Trees principle
promissory estoppel prevents a party upon insisting on his legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings btw parties that have taken place; [Denning J]
54
Walton Stores Ltd v Maher (1987)
no contract, just negotiation, but one party already relied on negotiations (promise) and would incur a detriment if not promissory estoppel; High Court of Australia
55
An agreement can fail on two counts:
(1) Parties did not intend to be legally bound
| (2) The parties have left a gap in their agreement or expressed parts in ambiguous or unclear way
56
two policy considerations as for deciding whether an agreement is sufficiently certain to be enforced:
o Parties want to be legally bound -> court should fill in the holes and resolve ambiguities
o Same but agreement is too vague -> the contract is void
57
British Steel Corpn v Cleveland Bridge & Engineering Co Ltd (1984)
Partly or fully performed contract can be insufficiently certain; agreement to do a service fully performed, but lack of agreement on number of matters – indication that parties did not want to be legally bound
58
Hillas & Co Ltd v Arcos Ltd (1932)
If the parties have had a previous agreement, gaps in new agreement can be filled by arrangements from the previous one
59
If there are criteria or machinery laid down in the agreement for determining those matters which have not been dealt with completely
the agreement tends to be sufficiently certain, since it provides mechanism for resolving disputes about particular terms
60
May & Butcher Ltd v The King (1934)
– price to be stated later, this hasn’t happened – no contract; the agreement was uncertain (but is not always the case)
61
Foley v Classique Coaches Ltd (1934)
Parties clearly intend to be legally bound and act upon the agreement then usually certainty test is satisfied; agreement to sell petrol station if defendant agreed to buy petrol exclusively form claimant; if not fixed price then reasonable (court)
62
Walford v Miles (1992)
agreement to negotiate selling business only with claimant for providing a letter of comfort from claimant’s bankers. Defendant sold business to third party. Judgement: there was no contract since it would be too uncertain; each party is allowed to pursue his own interest as long as there is no misrepresentation (controversial)[Lord Ackner]
63
Lock out agreements
An agreement that one party - usually seller - cannot negotiate with anyone else; however it is valid only if it specifies for what period. No time limit = not enforceable
64
Why parties includes exemption (exclusion) clauses?
for excluding or limiting liability to the other party for failure to perform or defective performance (commercial context)
65
'contra proferentem’
The principle means that the clause is construed against the interest of the person seeking to rely on it; before UCTA ambiguity was sometimes found merely to prevent liability of a contractor
66
Photo Production Ltd v Securior Transport (Ltd)
Exclusion for liability for fundamental breach; the more serious the breach, the clearer the words of exclusion must be,
67
Canada Steamship Lines Ltd v The King (1952)
Courts accept clauses exempting liability for negligence if this is expressly indicated in the agreement
68
Olley v Marlborough Court Ltd (1949)
Parties are bound by an exclusion clause of which they had express knowledge at the time the contract was formed
69
Hollier v Rambler Mototrs (1972)
Ambigious expression in the clause works against the party included in the contract
70
Unfair Contract Terms Act 1977
deals only with terms, which exclude or limit liability; it covers exclusion and limitation provisions in contracts, exclusion or limitation of non-contractual liability and notices excluding or restricting tort liability for negligence
71
McCutcheon v MacBrayne (1964)
If past dealings were inconsistent, only actual knowledge of the clause is sufficient; it cannot be implied in previous dealings
72
Liabilities that can never be excluded in a contract:
⇒ Liability in negligence for death or personal injury
| ⇒ Liability for selling or supplying defective products to someone dealing as a consumer
73
Chappleton v Barry UDC (1952)
Handing over a ticket with reference to the clause on the back is insufficient notice
74
L'Estrange v Graucob (1934)
Parties are generally bound by the terms of any agreement they have signed
75
Ailsa Craig Fishing Co Ltd v Malvern Fishing (1983)
If bargaining strength is equal, even with a dramatic breach, if the clause is clear and unambiguous then it can be relied upon
76
George Mitchell Ltd v Finney (1983)
Since UCTA courts may apply the test of reasonableness from the Act
77
UTCCR applies to
contracts relating to land and interest in land, and to insurance contracts; most of ‘unfair terms’ in a non-negotiated consumer contract fall within the scope of Regulations,
78
Office of Fair Trading v Abbey National plc and others (2009)
if price term is excessive in comparison with what is provided for exchange, reg 6(2)(b) does not apply
79
Director General of Fair Trading v First National Bank plc (2002)
good faith covers only procedural unfairness
80
Why third party is not allowed rights under the contract?
⇒ Third party is not a party to the contract
⇒ Third party provides no consideration
⇒ Neither party under the contract make a promise to the third party
⇒ If C had rights under the contract, this could restrict A and B’s right to vary the contract in some situations (because it might affect C’s rights)
⇒ Normally A and B do not intend C to have any rights
But if A and B intend to allow C acquire rights under the contract, C will have this rights
81
Avraamides and Another v Colwill and Another (2006)
S 1(3) of 3rd Parties Act cannot apply where there is no express mention of at least a class of person to whom the claimant is recognisable
82
Assignment
B may assign his contractual rights against A, to C (without A’s consent)
83
Beswick v Beswick (1968)
Third parties cannot sue for breach of contract when they were not a party to the contract, even if they were named as a benefactor of the contract; Executors of wills can sue for specific performance of promises made in contracts with the deceased
84
Enforcing negative obligation in 3-parties contract
B may seek an injunction to stop A breaching the contract; i.e. where A promises not B that he will not compete with C
85
Indirect representation
when B is the agent of C but has no authority to conclude contract on C’s behalf, so B concludes contract between A and himself; hence, B will account to C for any damages recovered from A and sue A if C asks for it
86
Nisshin Shipping Co Ltd v Cleaves & Co Ltd (2003)
The presumption of giving rights to C will not be rebutted if the contract is neutral as to whether C should be able to enforce a term
87
Jones v Padavatton (1969)
the courts ‘presume’ that domestic agreements are not intended to be legally binding
88
Possible claims under duress:
(1) Setting aside or resisting enforcement of the contract
| (2) Restitutionary action to recover money paid under duress
89
Duress
the use of force, psychological torture etc. (przymus); involves one party coercing or pressuring the other to make a contract; social pressure doesn’t count; pressure should be applied by means of illegitimate threat however express threat is not necessary
90
Barton v Armstrong (1976)
test of causation; If A threats B to do x, even if B would do this anyway, A’s threats are regarded as a ‘but for’ cause; but as for economic duress strict causation test applies
91
Is contract under duress is void or voidable?
Transaction was void, but in terms of economic duress it is rather voidable; the more serious form of duress, the greater vitiating effect on transaction
92
Deed
a written document, which transfers ownership or an interest in real property to a different person
93
Pao On v Lau Yiu Long (1980)
There must be present some factor ‘which could in law be regarded as a coercion of his will so as to vitiate his consent.’
Factors:
(1) Did the person claiming to be coerced protest?
(2) Did that person have any other available course of action?
(3) Were they independently advised?
(3) After entering into the contract, did they take steps to avoid it?
94
Requirements for economic duress:
(1) Illegitimate pressure or threat
(2) Which (subjectively) caused the victim to act as he did
(3) Which (objectively) would cause a reasonable person to act as the victim did; no other realistic course of action
95
Atlas Express Ltd v Kafco (1989)
additional bad conduct of the other party to economic duress; due to mistake in calculations A put pressure on K to double to agreed price; held: economic duress, no consideration for the alteration
96
Injunction
a writ issued by a court ordering someone to do something or prohibiting some act after a court hearing
97
CTN Cash and Carry Ltd v Gallagher Ltd (1994)
a threat not to contract cannot amount to economic duress
98
Undue influence
requires a relationship of trust or dependency between the parties; pressure used to force a party to execute a will, to make a gift, to change decision, to sign a contract which results in party loosing his ability to exercise his judgement and can not refuse to give in to the pressure
99
Common examples of undue influence
(a) Wife guaranteed her husband’s business debts to bank procured by his undue influence
(b) Elderly person makes a gift to a relative (person caring for her) before death
100
Distinction between presumed and actual undue influence according to Birks and Chin (1995):
⇒ Actual: defendant-sided; based on defendant’s wrongdoing; terms are suspicious
⇒ Presumed: claimant-sided, based on claimant’s impaired consent; not fully claimant’s consent; terms are disadvantageous
101
For the presumed undue influence there must be
(a) Relationship of trust and confidence between the parties
(b) Suspicious transaction
(c) No possibility to rebut it by evidence of the victim entering into contract with full and informed consent
102
Relationship (undue influence)
⇒ Class 1 – actual undue influence
⇒ Class 2 – presumed undue influence:
o Class 2B – not always of trust etc.
o Class 2A – relationships always classified as of trust and confidence: doctor and patient; solicitor and client; religious adviser and follower; all below are 2A
103
Royal Bank of Scotland v Etridge [1998] 4 All ER 705
eight joint appeals concerning wife signing a charge or mortgage agreeing to secure the debts of her husband; when business failed, wife sought undue influence; contract held void
104
Credit Lyonnais Bank Nederland NV v Burch (1996)
employee had close relationship with the employer and executed an unlimited all-monies charge over her flat in favour of the bank; undue influence
105
Suspicious transaction for undue influence
Original test in Allcard v Skinner (1887): The gift has to be too large as not to be reasonably accounted for on the grounds of friendship, charity, etc.
106
Lloyd's Bank Ltd v Bundy (1975)
Duress of goods – the owner is in a weak position because he is in urgent need of goods and the stronger demands more than is justly due
Unconscionable transaction – a man is in need of special care and protection, yet a stronger party exploits his weakness and his property is taken for grossly under value
Undue influence:
the stronger party is guilty of fraud to gain the advantage of the weaker; or the stronger has taken advantage of their relationship of the weaker to gain an advantage for himself
107
Abbey National Bank plc v Stringer (2006)
mother mortgaged her home for her son’s business venture, but received no explanation what was she signing; undue influence
108
remedies for undue influence
ONLY rescission
109
Barring rescission (undue influence)
on the following grounds: delay, affirmation, intervening third party rights, impossibility of restoring the status quo ante;
110
Rescission on terms (undue influence)
Court can attach terms to order for rescission i.e. allowing innocent party to make counter restitution of benefits received (getting back the value of profits)
111
Tackling three-party cases of undue influence:
(1) Is undue influence established between A and B? If yes, then:
(2) Does C have notice of the undue influence? If yes, then:
(3) The third party will be bound by the undue influence unless he has taken reasonable steps to avoid it
112
Fry v Lane (1888) by Kay J
‘where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice, the Court of Equity will set aside the transaction’
113
Elements of unconscionable bargains:
⇒ Weakness/disability of party seeking relief
⇒ Unconscionable behaviour of the stronger party in exploiting the other’s weakness
⇒ Unfair or oppressive terms of transaction
⇒ (Lack of adequate independent legal advice) – merely shows party’s weakness; not a requirement for unconscionable bargain
114
mistake ad idem
Situation where the parties’ joint assumption turns out to be incorrect; parties share the mistake ad idem (to the same thing)
115
Common mistake v frustration:
⇒ Common mistake: agreement to buy a bike, bike is being destroyed a minute before the contract was concluded; possible to claim damages for misrepresentation, however the measure would be for reliance loss, not purchaser’s lost expectation
⇒ Frustration: same, but bike is destroyed one minute after the contract was concluded
116
‘Doctrine of mistake’ approach:
Common mistake rends contract void in certain circumstances (although it is not a good name for it, since it would mean that there was no contract at all); favoured judicial view;
117
Construction approach’ or ‘implied terms approach’
the effect of common mistake is ascertained by construing and interpreting the contract, implying terms in the normal way and the ‘voidness’ will only be the appropriate solution if, unusually, the contract says should happen; denies any independent mistake; this approach is preferable
118
The test for common mistake in common law
Great Peace Shipping Ltd:
(1) Common assumption as to existence of a statute of affairs
(2) No warranty by either party that the state exists
(3) Non-existence of the state can’t be because of either party
(4) That non-existence must cause the performance of the contract impossible
(5) If the performance is to be possible, the state of affairs must be the existence of consideration or certain circumstances
119
Brennan v Bolt Burdon (2004)
The common mistake can be either of fact or law
120
Res extincta
The subject of contract matter (unbeknown to both parties) does not exist
121
Res sua
The thing seller purports to sell already belongs to the buyer (unbeknown to both parties)
122
McRae v Commonwealth Disposals Commission (1951) (Australian case)
Mutual mistake only arises and renders a contract null when both parties make the same assumption which they intend to be a condition of the contract they are forming. When a contract HAS been formed, a plaintiff can recover reliance damages for breach.
123
Common mistake as to quality
In some cases common misapprehension about the quality or value of the goods to the contract can render contract void, but subject to certain requirements
124
Raffles v Wichelhaus (1864)
Mistake of one party is irrelevant unless there is no objective way to determine what the contract was about (subject matter) – in which case there is no meeting of the minds and thus no contract (mutual mistake)
125
Lewis v Averay (1972)
When two parties have come to a contract, the fact that one party is mistaken as to the identity of the other does mean that the contract is VOIDABLE
126
Bell v Lever Brothers Ltd (1932)
When mutual mistake, the mistake must be fundamental and a contract is void when:
* Mistake as to subject matter - Before or at the time of contracting if the subject matter of the contract is destroyed or doesn’t exist
* Mistake as to quality – only if the subject matter is essential different from what they thought they were contracting for
127
Nicholson & Venn (1947)
Contract can be void if the subject matter of the contract is defined or identified by the quality of a good which turns out to be based on a common mistake as to the essential quality; Georgian relics are not Carolean relics
128
Associated Japanese Bank v Credit du Nord SA (1988)
‘A party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party’
129
Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd
Impossibility test for mistake: Look at whether mistake means it is impossible to perform the contract
Mistake as to the existence of some quality of the subject matter which makes the thing or the quality essentially different from the thing it was believed to be, means the contract is void; NO MORE COMMON MISTAKE IN EQUITY
130
Rectification
the rewriting of a written document where one or both parties are mistaken as to its terms; it deals with mistakes in written documents (in here, contracts); it allows the courts to rewrite the contract; powerful remedy; if both parties are mistaken due to common mistake rectification gives effect to the parties’ intentions;
131
Conditions for rectification in common mistake:
(1) mistake relates to the manner in which the oral agreement is recorded in writing;
2) A mistake must be common to both parties and must be the belief that the document accurately records the transaction
(3) There must have been a prior concluded agreement or a common intention as to the terms of the contract, which was objectively manifested in terms, which the court can ascertain
132
Rose v Pim (1953)
the common intention must be made out using ordinary principles of objective interpretation, so that one must demonstrate such intention from communications between the parties rather than relying on the subjective intentions of the parties
133
Smith v Hughes (1871)
A mistake by one party known to the other party – does not matter
→ as long as seller does not induce the buyer to buy then he is not liable
⇒ It doesn’t affect the contract EXCEPT: if it is a mistake as to the term of the contract
→ No meeting of the minds – because the parties are not talking about the same terms
134
Saunders v Anglia (1971)
the plea of non est factum should not be too widely applied and reserved for those who through no fault of their own are unable to read the document eg blind, illiterate or incapacitated through age
135
Requirements for rectification in unilateral mistake:
(1) One party is mistaken as to the terms of the agreement
(2) The other party knows of this mistake or suspects it has been made
(3) This latter party acts badly in some way, i.e. preventing the other party discovering the truth, making misrepresentation, etc.
136
(The Super Servant Two) (1990)
‘Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not to be lightly invoked, must be kept within very narrow limits and ought not to be extended’
137
The current test for frustration
Davis Contractors Ltd v Farehame UDC (1956);
(1) There must be a radical change in the obligation
(2) The contract must not distribute the risk of the event occurring
(3) The occurrence of the event must not be due to either party
138
No frustration possible if
the contract contains implied or express term what would happen in case of the occurrence of the given event, there is no possibility for the frustration
139
force majeure clause
provides list of unexpected events and legal solutions; what provides certainty
140
Non-occurrence of an event (frustration)
The situation where an event fails to occur that at least one party assumed would occur
141
Taylor v Caldwell (1863)
Destruction of subject matter of the contract; If contract performance depends on the continued existence of a person or thing, and that person or thing ceases to exist, w/o fault of either party, performance may be excused for impossibility of performance
142
Appleby v Myers (1867) NOPE
agreement to erect machinery on defendant’s premises, but they burnt down as well before the work was completed; held: frustration
143
Davis Contractors Ltd v Fareham
Davis undercalculated the price and time needed for building houses that he agreed to build and tried to claim frustration; held: no frustration; increased expense cannot be reason for frustration
144
Forced alteration of manner of performance/impossibility of performance by the defendant
is not a reason for frustration
145
Effect of the war (frustration)
If both parties assumed that performance would occur in a particular way, and it couldn’t due to the outbreak of the war, the contract would be frustrated; the importance of joint assumption
146
Maritime National Fish v Ocean (1935)
If the frustrating event was self induced then there is no frustration of contract
147
Krell v Henry [1903]
Performance will be excused when the purpose of a contract is frustrated by an unforeseeable supervening event and the purpose was not within the contemplation of both parties when the contract was executed. A contract’s purpose may be inferred from surrounding circumstances
148
The effects of frustration
(1) The contract was brought to end automatically
(2) The parties were released from obligations that would have fallen due after the occurrence of the frustrating event
(3) The parties were not released from obligations that should have been performed before the frustrating event occurred (then changed by Act)
(4) At common law you could only recover the value of the benefit that you had transferred if the other party had performed non of his obligations; in other words, when there was a ‘total failure of basis’
149
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943
Where a party obtains no benefit from a contract, and they have paid part of a sum before frustration, then that party can recover the money paid in advance because it can be said there has been total failure of consideration
150
Goff J in BP Exploration Co (Libya) Ltd v Hunt (No 2) (1979)
generally we should look at the value of end product of the services (i.e. machine, not the action of making it) or alternatively service if there is no end product
⇒ However, if we value the benefit after the frustration occurred, the benefit could be equal 0 (i.e. when house in which service was done has burnt)
⇒ Therefore, the just sum should be determined; then the impact of frustrating event and incurred expenses calculated
151
Breach of a contract:
⇒ Only sometimes contract is set off
⇒ Unlike rescission, termination of contract is prospective
⇒ To establish breach, express and implied terms have to be analysed
152
Conditions precedent
Condition precedent is something that the party has promised to achieve, so that failure to perform the condition is sometimes itself a breach of contract
153
Cutter v Powell
In some contracts one party must fully perform his part, before other party’s obligations arises (i.e. payment)
154
Three categories of terms that can be breached:
⇒ Condition: breach always gives innocent party option to terminate contract and claim damages
⇒ Innominate term: party can always claim damages, but only if the effect of breach is serious enough, can terminate the contract
⇒ Warranty: breach never gives option to terminate contract and party can only claim damages
From the Sale of Goods Act (1893)
155
Sumpter v Hedges
If part performance is accepted by the other side, payment for this part should be enforceable unless the acceptance was not genuine
156
White& Carter (Councils) Ltd v McGregor [1961]
Where the innocent party elects to treat the contract as continuing (ie, he affirms it) the affirmation can be regarded as a species of waiver; The innocent party waives his right to treat the contract as repudiated and may be estopped from changing his decision
157
Hoening v Issaacs (1952)
Where performance is substantial then recovery would be possible and the amount payable will correspond to the price of work less cost of incomplete part
158
Bolton v Mahadeva (1972)
What amounts to 'substantial' performance and what is a breach of the whole contract is a question of the fact in each case
159
Hong Kong Fir Shipping Ltd v Kisen Kaisha Ltd (1962)
only a very serious breach of an innominate, which must ‘deprive the innocent party of substantially the whole benefit which it was intended that he should obtain from the contract’, will entitle the party to end the contract
160
Alan Auld Associates v Rick Pollard Associates (2008)
Party can also wish to terminate contract due to many small breaches with adds up to substantial failure of performance
161
Types of discharge agreements:
(1) ACCORD AND SATISFACTION - mere rescission of present agreement and nothing more
(2) RESCISSION AND SUBSTITUTION - rescission of the original contract and substitution of a new contract
(3) VARIATION - modifying or altering the terms of the original agreement
(4) WAIVER - one party can refrain from insisting on his rights
162
Höchster v De La Tour (1853)
If within a reasonable time the innocent party does not indicate that he accepts the other party's repudiation so that the contract is discharged, then the contract remains open for the benefit of, and the risk of, both parties
163
The anticipatory breach
Anticipatory breach is repudiation before the time fixed for performance, but contract is discharged on grounds of repudiation; measure to encourage more gentle litigation
164
The innocent party can (but does not have to) terminate the contract following:
⇒ Breach of condition
⇒ Serious breach of an innominate term
⇒ Repudiation
165
Schüler v Wickman (1974)
The condition must conform to its proper description, when its breach is to give rise to full range of remedies
166
Rejection of the breach
If party rejects the breach, the decision is irrevocable, but must be unequivocal and fully informed
167
Hong Kong Fir (1962)
Breach may include an innominate term where the breach was sufficiently serious to warrant repudiation by the other party
168
Cehave NV (1976)
Before repudiating, the party must be sure that the term is a condition or there is sufficiently serious breach, otherwise the repudiation may be a breach
169
Types of terms
(1) Condition - major term of the contract
(2) Innominate - if this term was breached, the party would be substantially deprived of the whole benefit (Hong Kong Fir established)
(3) Warranty - minor term to the contract
170
Vitol SA v Norelf Ltd (The Santa Clara) (1996)
the buyers send a telex to the sellers rejecting the contract, while cargo was still being loaded; sellers resold cargo to someone else and claimed damages; buyers claimed there was no acceptance of repudiation; unequivocal acceptance by lack of performance
171
When contract is terminated by acceptance of repudiation, then
the parties’ primary obligations (to perform, pay the price, etc.) are discharged and replaced by secondary obligations (paying damages, ‘duty’ to mitigate)
172
Misrepresentation
przekrecanie
173
Non-disclosure
nieujawnienie
174
Contracts uberrimae fidei
contracts of the utmost good faith i.e. contract of insurance or guarantee contracts; material matters known by vendor have to be disclosed
175
Material representation
a convincing statement made to induce someone to enter into a contract to which the person would not have agreed without that assertion
176
Representation later falsified
If a true statement turns to be false later on, the party must disclose new fact, other ways he will be liable with misrepresentation
177
With v O’Flangan (1936)
the vendor was selling a practice worth £2000 a year, but later on he become ill so the price felt but he didn’t inform the purchaser. Verdict: contract set aside
178
Continuing representation
applies when representor states his intention from the beginning but before contracting and then changes his mind without informing the other party since at the time of contracting there is already misrepresentation
179
Mere puffs
A party should not rely on exaggerated, flippant comments not intended to be taken seriously or statements of opinion or future intention – they do not give rise to liability, if not judged differently
180
Bisset v Wilkinson (1927)
Unjustified statement of opinion gives no rise to liability for misrepresentation
181
Smith v Land and House Property Corpn (1884)
if the facts are known only to the side giving opinion, it is assumed that the statement involves facts as well
182
Spice Girls Ltd v Aprilla World Service BV (2002)
a statement as to the future can contain implied statement of facts
183
Bowen LJ in Edignton v Fitzmaurice (1885)
if maker of statement does not hold belief or intention at the time when making a statement, he misrepresents the fact due to false state of mind
184
East v Maurer (1991)
in the absence of fraud, the purchaser had no right to rescind the contract
185
William Sindall plc (1994)
In applying sec 2(2) of Misrep Act one has to consider
(1) the nature of the misrepresentation (damage vs. actual value of contract),
(2) loss that would be caused by misrepresentation if contract were upheld (loss suffered, not damages recoverable),
(3) and loss suffered by representor by recession
If gross disparity, then award damages rather than rescission.
186
To satisfy misrepresentation requirement:
(1) It must be material misrepresentation – objective question; what significance it would have to a hypothetical reasonable person
(2) It must induce or cause the representee to enter the contract – actual issue as to the impact on the representee
187
Redgrave v Hurd (1881)
rescission for innocent misrepresentation; material representation influencing a reasonable person is considered to have caused the representee to enter into contract; if misrepresentation makes no difference for the representee – no possibility of litigation for damages or rescission
188
JEB Fasteners v Marks Bloom & Co (1983)
Representation must be claimant’s main and only inducement for a liability for misrepresentation to occur
189
Rescission
uchylenie
190
‘status quo ante’
restoring pre-contract position due to rescission
191
When rescission is unavailable (barred)?
(1) If the representee intends to affirm the contract after discovering the misrepresentation has occurred
(2) If the representee delays too long before rescinding
(3) When property is sold to 3rd party it is too late to rescind; financial equivalent available
(4) The impossibility of restoring the status quo ante
192
Leaf v International Galleries (1950) YEP
L bought painting from IG that was supposed to be painted by Constable (wholly innocent misrepresentation); 5 years later he realised it wasn’t – too late for rescission
193
Fraudulent misrepresentations
the innocent party may chose not to rescind the contract but to claim damages for the tort of deceit
194
Waiver agreement
a legal document in which one party agrees to release another from legal responsibility
195
Thomas Witter Ltd v TBP Industries Ltd (1996)
if rescission is barred damages are still available
196
Cremdean Properties Ltd v Nash (1977);
The wording of the clause does not have to be direct, it can indirectly have a practical effect of excluding liability for misrepresentation, so it falls under s 3
197
Walker v Boyle (1982
in commercial long-term negotiations clause excluding liability for misrepresentation possible in other documents etc.
198
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (2010)
Even in lack of finalisation of all terms, it can be judged that the parties didn’t intended to be legally bound
199
Baird Textiles Holdings Ltd v Marks & Spencer plc
BTH was supplying M&S with clothes for 30years, but there was no contract – no intention to be legally bound, so no litigation possible when BTH accused M&S of cancelling the order
200
Unilateral mistake
(1) as to as to the identity of the person that you appear to be contracting with
(2) in terms of the proposed contract
(3) as to the very nature of the proposed contract where the mistaken party signs a written contract = non est factum
201
Boulton v Jones (1857)
defendant purchased goods from Brocklehust (addressed him by name), but he was unaware that B sold the shop to the claimant. Since he was willing to sign a contract with B, not the claimant, there was no contract between the parties and defendant. Hence, the defendant was not liable
202
Fraud
A contracts with B with changed name. B sells goods from A to C and disappears.
1. The contract between A and B is void, so C has to return goods
2. The contract between A and B is not void, C keeps goods
203
Fraud credit transactions
If fraudster claims to be someone else creditworthy, but is not creditworthy, there is no contract at all, so the party can get back all his goods even if sold to the third party due to lack of contract
If fraudster claims to be someone else, but creditworthy – there is misrepresentation of fact, but the contract is valid, so the party can get back his money due to misrepresentation (contract is voidable) unless the good is not already sold by the fraudster to a third party
204
Shogun Finance Ltd v Hudson (2003)
rouge had a hire-purchase agreement to buy a car under different name. Then he sold it to a third party. No contract; no face-to-face agreement (conclusive if the agreement points to a certain person). Shogun intended a contract with the fictive person, not the rogue.
205
Cundy v Lindsay (1878)
If rogue pretends to be a person that exists, the offer will not be addressed to him
206
Non est factum
Where the party signing a document has made a fundamental mistake through no fault of his own as to the character or effect of the proposed contract, the contract will be void under the doctrine of non est factum
207
When non est factum applies?
(1) When the offeree signed a document as a result of a fraud of a third party; to protect offeror
(2) When the offeree is misled by the offeror and then sells on the purchase to a third party; to protect third party (damage if the contract proves to be void)
208
If a statement being term of contract is false:
(1) the defendant will be liable for breach of the terms and
(2) the claimant would be entitled to damages, measure which would put him in the position he would be if the statement was true
209
Collateral contracts are used when
(1) There is a requirement of form with which the statement does not comply (i.e. sale of land contracts – the contract must be written)
(2) Privity cases
(3) Parole evidence rule inhibits existence of other than written agreement
210
General restrictions in implying terms
(1) Any implied term must be sufficiently certain, unless it is an express term
(2) Term can’t be implied if it would be inconsistent with the express term of the contract
211
Types of implied terms
(1) Terms to give effect to trade custom (implied in custom)
(2) Terms implied ‘in fact’ where necessary to give effect to the parties’ presumed intentions (implied in fact)
(3) Terms implied ‘at law’ into a defined category of contract (implied in law)
212
Shirlaw v Southern Foundries Ltd (1939)
The ‘officious bystander test’ concerning implied terms– had an officious bystander been present at the time the contract was made and had suggested that such a term should be included, it must be obvious that both parties would have agreed to it;
213
Scally v Southern Health and Social Services Board (1991)
there was a new regulation giving health practitioners some benefits, but the health authority neglected to inform the employees about it; the court concluded there was implied term to inform the employees about it; Scally employer has a contractual duty, implied into the employment contracts, to properly inform their employees about their rights
214
Unsigned contracts – incorporation by notice
If contract is not signed, a term will be only incorporated if reasonable steps were taken to bring the terms to the other party’s attention; objective test applies
215
British Crane Hire v Ipswich Plant Hire (1974)
both parties were in same business, had same standard terms and conditions based on the same trade association standard form; once the urgent supply was before the contract; should be followed by agreement on the same conditions
216
O’Brien v Mirror Group Newspapers Ltd (2001)
an error in newspaper made many players become the winners, but the newspaper mentioned incorporating a clause that it would draw lots to determine the winner; held; legitimate due to mentioned incorporation and type of a case (newspaper game)
217
Parol evidence rule
(traditional rule, not really favoured nowadays) – where the parties have reduced their contract to writing it was not permissible to adduce oral (parol) evidence to add to, vary, or contradict the written instrument
218
Investors Compensation Scheme Ltd v West Bromwich Building Society (1998):
principles for interpreting written contractual terms:
(1) Objectivity – how it appears to a reasonable person
(2) Surrounding circumstances that the parties must have in mind; factual matrix
(3) Excluding the previous negotiations of the parties (which have nothing to do with the final agreement); not always the case
(4) The meaning of the document seen in what the parties using those words against the relevant background would reasonably have understood to mean
(5) Concerns what to do if there is a linguistic mistake in the contract
219
Rainy Sky SA and others v Kookmin Bank (2011)
if the words of a contract have ambiguous meanings, the court will interpret it in a manner that most accords with "business common sense"; there is no requirement for a party to prove that the alternative interpretation is entirely unreasonable
220
Rectification
used where a written contractual document does not accurately record what the parties ‘actually’ agreed and is rectified to bring it into line with the agreement; operative from the date of court’s order
221
construction
the emphasis is put on what the parties really meant by the words used, rather than the words they used mean; no starting date – decision is about what the contract has always meant
