Contract Law Flashcards

Question

Chappell & Co. Ltd v. Nestlé Co. Ltd [1960] AC

Answer 1

Concerning: sufficiency and adequacy of consideration Facts – Nestlé were offering a record (the copyright of which was owned by Chappell) for sale at 1s. 6d plus three wrappers from their chocolate bars. The record normally sold at 6s. 8d. Permission to use the copyright was not obtained. Chappell sued to prevent the promotion since they would receive a much lower royalty from it. Legal principle – The wrappers were held to be part of the consideration, even though they were thrown away when received. As Lord Somervell commented:"It is said that, when received, the wrappers are of no value to Nestlé. This is irrelevant.A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn."

Answer 2

Concerning: consideration; performance of an existing public duty Facts – A police officer was promised a sum of money by the defendant in a trial in return for the officer giving evidence, since it was important to the defendant that the officer did so. The officer had already been subpoenaed to do so. Legal principle – The promise to pay was unenforceable since there was no consideration given by the police officer for it. He was already under a legal duty to attend court.

Answer 3

Concerning: consideration; exceeding an existing public duty Facts – During a miners' strike, the owner of a pit asked the police for extra protection and promised to pay for it. After the strike, the pit owner refused to pay, claiming that the police were already bound by a public duty to protect the pit. Legal principle – The promise to pay was enforceable: since the police had done more than they would ordinarily have done (in sending additional officers), this was good consideration for the pit owner's promise to pay.

Answer 4

Concerning: consideration; exceeding an existing contractual duty Facts – The facts of this case are very similar to Stilk v. Myrick and involved a number of sailors deserting a ship. The captain had promised to pay the remaining sailors additional wages for crewing his ship back home. However, in Stilk v. Myrick 9 crew out of 11 remained; in this case 19 out of 36 remained. Legal principle – The promise to pay was enforceable: the court considered that the greater proportional reduction in crew numbers (in this case almost half the crew deserted, rather than 2 from 11) made the return voyage much more dangerous since the ship was short- handed.The sailors' promise to return under more dangerous conditions had exceeded their existing contractual obligations and therefore this represented good consideration for the promise of extra pay.

Answer 5

Concerning: consideration; performance of an existing contractual duty owed to a third party Facts – Scotson contracted to deliver coal to X, or to X's order. X sold the coal to Pegg and ordered Scotson to deliver the coal to Pegg. Pegg promised Scotson that he would unload it at a fixed daily rate. Pegg did not fulfil this promise. Scotson attempted to enforce Pegg's promise. Pegg argued that the promise was not binding because Scotson had not provided consideration as Scotson was bound by his contract with X (a third party) to deliver the coal. Legal principle – It was held that delivery of the coal to Pegg (in other words, the performance of the existing contractual duty owed to X by Scotson) was good consideration to enforce Pegg's promise to pay.

Answer 6

Concerning: consideration; extra benefit Facts – Roffey Bros was a firm of builders contracted to renovate a block of flats. Their own contract contained a penalty clause for late completion, so it was in their interests to finish the work on time. They sub- contracted the carpentry work to Williams for £20,000. Williams fell behind schedule because, they claimed, they had not quoted a high enough price for the work. Roffey promised to pay Williams an additional sum of £10,300 to complete the carpentry on time. When the work was complete, Roffey refused to pay, claiming that the new agreement with Williams was void for lack of consideration (since Williams were already fulfilling a contractual obligation). Legal principle – The Court of Appeal held that Williams had provided consideration by completing the work on time and therefore Roffey's promise to pay the additional £10,300 was binding, even though, at first glance, this proposition seemed incompatible with the rule from Stilk v. Myrick.

Answer 7

Concerning: consideration; part payment of a debt Facts – Cole owed Pinnel £8 10s. At Pinnel's request, Cole paid £5 2s. 6d. one month before the full sum was due. Cole claimed that there was an agreement that the part payment would discharge the full debt. Legal principle – Pinnel was unsuccessful in claiming the balance of the unpaid debt. The court held that in general part payment of an original debt did not provide good consideration for the promise to waive the balance. However, since Pinnel gained some benefit by part payment having been made early, this was sufficient consideration to enforce his promise to forego the balance of the debt. The court stated that: "Payment of a lesser sum on the day in satisfaction of a greater sum cannot be any satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the [claimant] for a greater sum: but the gift of a horse, hawk, or robe, etc. in satisfaction is good . . . [as] more beneficial to the [claimant] than the money."

Answer 8

Concerning: consideration; part payment of a debt Facts – Foakes owed Beer £2,090. They agreed that Foakes could pay in instalments. Beer agreed that no further action would be taken if the debt was paid by the agreed date. Later, Beer demanded an additional interest payment. Foakes refused to pay. Legal principle – Beer succeeded in the claim for the interest payment. The same reasoning was applied as in Pinnel's Case.

Answer 9

Concerning: privity of contract Facts – Dunlop sold tyres to Dew & Co. who were wholesalers. Dew & Co. undertook (expressly in the contract) that the manufacturers could fix the lowest price at which they could sell the tyre and promised not to sell the tyres below that price. Dew & Co. also agreed to obtain the same pricing terms from customers to whom they resold the tyres. They sold tyres to Selfridge on these terms. Selfridge broke the pricing agreement and sold the tyres at discount prices. Dunlop sued Selfridge and sought an injunction to prevent them from selling their tyres at a discount. Legal principle – Dunlop failed. Although there was a contract between them and Dew & Co., Selfridge were not a party to that contract and Dunlop, therefore, could not impose their terms upon them.

Answer 10

Concerning: privity of contract, collateral contracts Facts – The claimants entered into a contract with painting contractors to paint their pier, having been assured by the defendants (paint manufacturers) that their paint would last for at least seven years without deterioration. The defendants then sold the paint to the contractors. However, the paint peeled within three months. The pier owners could not sue the painters since they had carried out the work professionally and thus had completed their side of the contract. The pier owners sued the paint manufacturers. Legal principle – The pier owners were successful. Although they were not a party to the contract between the paint manufacturers and the painting contractors (and therefore there was no privity of contract), it was held that a collateral contract had arisen from their promise as to the suitability of the paint.

Answer 11

Concerning: privity of contract; restrictive covenants over land Facts – Tulk owned land which he sold subject to an express promise that it would not be used for property development. The land was re-sold several times, subject to the same undertaking. Moxhay eventually bought the land and, despite knowing of the restriction, intended to build upon it. Tulk sought an injunction to prevent Moxhay from building on the land. Legal principle – Tulk's claim was successful. The court considered that it would be unconscionable for Moxhay to buy with knowledge of the restriction and yet to build on the land. An injunction was therefore granted to enforce the original agreement between Tulk and the first purchaser of the land, even though Moxhay had not been a party to that agreement.

Answer 12

Concerning: privity of contract: recovery by third parties Facts – Jackson had booked a family holiday in his sole name. For a variety of reasons, the holiday was a complete travesty: the accommodation, food, services, facilities and general standard of the hotel to which they were transported proved so unsatisfactory that the whole family suffered discomfort, vexation, inconvenience and distress and went home disappointed. Jackson sued the holiday company on his own behalf and that of his family. The company disputed that it should pay damages in respect of the family since it was not a party to the contract. Legal principle – The Court of Appeal held that the disappointment suffered by the family was a loss to Jackson himself and awarded damages in respect of the whole family on that basis.

Answer 13

Concerning: privity of contract: recovery by third parties Facts – The purchasers, Wimpey Construction, had entered into a contract to buy certain land from the vendors, Woodar. The purchase price was £850,000 of which £150,000 was to be paid on completion to Transworld Trade, a third party. The sale was to complete within two months of planning permission for the site being granted or a fixed date (whichever was the earlier). Wimpey unlawfully repudiated the contract after the market fell. Legal principle – The issue here concerned whether damages should include the £150,000 payable to the third party. Although the House of Lords did not overrule Jackson, it was held that there was no general principle allowing a party to a contract to sue on behalf of a third party who had suffered loss as a result of breach of that contract.

Answer 14

Concerning: privity of contract: recovery by third parties Facts – There was a contract between McAlpine and Panatown for the design and build of a multi-storey car park. McAlpine had also entered into a 'duty of care' deed with Unex Investment Properties Ltd (UIPL) who were the owners of the site. By that deed UIPL acquired a direct remedy against McAlpine in respect of any failure by the contractor to exercise reasonable skill, care and attention to any matter within the scope of the contractor's responsibilities under the contract. The deed was expressly assignable by the owner to its successors in title. Serious defects were found in the building and Panatown sued. Legal principle – The House of Lords held that the duty of care deed with the third party (UIPL) prevented Panatown from suing since this deed gave the third party a specific remedy. However, the Lords were split 3-2 on the issue, which suggests that the law is still somewhat unclear in this area.

Answer 15

Concerning: incorporation of terms; signed contract Facts – Mrs L'Estrange owned a café. She ordered a cigarette machine from the manufacturers which was faulty. The contract, which she had signed, contained a clause stating that 'any express or implied condition, statement or warranty, statutory or otherwise not stated herein is hereby excluded'. L'Estrange claimed for breach of a term implied by the Sale of Goods Act 1893 that the goods were unfit for purpose. She also claimed that she had not seen the clause and therefore had no knowledge of its contents. Legal principle – L'Estrange's claim failed. Scrutton LJ stated that: When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound and it is wholly immaterial whether he has read the document or not.

Answer 16

Concerning: incorporation of terms; importance of statement Facts – The defendant was the purchaser of hops. Before the contract was formed the purchaser stated that 'if they have been treated with sulphur, I am not interested in even knowing the price of them'. The seller stated (wrongly) that they had not been so treated. When the purchaser discovered this, he repudiated the contract. The seller sued on the basis that the discussions were preliminary to the contract and not part of it. Legal principle – The seller failed. The court held that the statement was so important to the purchaser that it became a term of the contract that had been breached.

Answer 17

Concerning: incorporation of terms; specialist knowledge Facts – The claimant asked the defendants to source a 'well vetted' Bentley. The defendants claimed that a particular car had done 20,000 miles since being fitted with a new engine and gearbox. It had, in fact, done 100,000 miles, which the claimant discovered after purchasing the car. Legal principle – The statement regarding mileage was held to be a term of the contract. The claimant had relied on the specialist knowledge of the dealer in making the statement which was a major factor in his decision to enter into the contract.

Answer 18

Concerning: incorporation of terms; lapse of time Facts – A motorcycle was first registered in 1939. A new registration document was issued which erroneously stated this as 1941. In 1949 the then owner, who was unaware of this inaccuracy, stated that the age of the motorcycle was 1941 to a prospective buyer. The buyer bought the motorcycle a week later by a written contract that did not stipulate the age of the motorcycle. He later discovered the true age and sued for breach of a term. Legal principle – The buyer's claim failed. The court considered that the lapse of time was too great to infer that the contract was formed based on the statement of age and as such the statement was not incorporated as a term of the contract.

Answer 19

Concerning: breach of condition Facts – An actress was under contract to appear as the lead in an operetta. She was taken ill and unable to attend the first performances. Her role was given to her understudy. Once recovered, she sued for breach of contract. Legal principle – The claim by the actress failed. The court held that as the lead performer she was of crucial importance to the success of the production. This was therefore a condition of the contract which she had breached by failing to attend the first performances. Therefore, the producers were entitled to repudiate and terminate the contract.

Answer 20

Concerning: breach of warranty Facts – The facts of this case are similar to those of Poussard v. Spiers. Here, a singer was under contract to appear in a series of concerts in different theatres. The contract included a term that he should attend rehearsals for six days before the live performances commenced. The singer did not attend the first three rehearsals. He was replaced. The singer sued for breach of contract. Legal principle – The claim by the singer was successful. The court held that attendance at rehearsals was peripheral to the main purpose of the contract. Therefore the term was considered to be a warranty which entitled the producers to sue for damages but not to repudiate and terminate the contract by replacing the singer with another.

Answer 21

Concerning: terms implied in fact Facts – The claimant entered into a contract with the defendants to dock and unload cargo from his ship at their wharf on the Thames. The ship was grounded at the jetty at low tide and broke up on rocks. The claimant sued for the damage to his ship. The defendants claimed that there was no express term relating to the safety of the ship and, as such, they could not be liable for breach of contract. Legal principle – The court held that there was an implied term in the contract that the ship would not be damaged. This term was necessary in order to give the contract business efficacy. Therefore the defendants were liable for breach of this implied term.

Answer 22

Concerning: terms implied in law Facts – The condition of a council tower block deteriorated such that the stairs and lifts were in disrepair and internal rubbish chutes were blocked. Irwin alleged a breach on the part of the council of its implied covenant for their quiet enjoyment of the property. Legal principle – The House of Lords held that it was an implied term of the lease that the landlord should take reasonable care to keep the common parts of the block in a reasonable state of repair. The term was clearly not implied in fact. The 'officious bystander' test was not satisfied. The implication was also not required to give business efficacy to the contract.The implication arose because the relationship between the parties made it desirable to place an obligation on the landlord as to the maintenance of the common parts of the premises. This was done by the imposition of a legal duty even though no contractual term could be implied in fact.

Answer 23

Concerning: incorporation of terms; signed contract Facts – Mrs L'Estrange owned a café. She ordered a cigarette machine from the manufacturers which was faulty. The contract, which she had signed, contained a clause stating that 'any express or implied condition, statement or warranty, statutory or otherwise not stated herein is hereby excluded'. L'Estrange claimed for breach of a term implied by the Sale of Goods Act 1893 that the goods were unfit for purpose. She also claimed that she had not seen the clause and therefore had no knowledge of its contents. Legal principle – When a document containing contractual terms is signed, then, in the absence of fraud or misrepresentation, the party signing it is bound and it is wholly immaterial whether he has read the document or not.

Answer 24

Concerning: incorporation of terms; misrepresentation Facts – The claimant took a wedding dress to be cleaned. She signed a document which contained a clause purporting to exempt the dry cleaners from liability for any damage 'howsoever caused'. When asked, the shop girl said that the clause only referred to exclusion for liability for damage to beads or sequins on the dress. The dress suffered bad staining and the claimant sued for damages. The dry cleaners attempted to rely on the exclusion clause. Legal principle – The claim was successful. The court considered that the defendants could not rely on the exclusion clause because of the statement made by the assistant. The court said that the exclusion clause would be effective only in the event of damage to sequins or beads.

Answer 25

Concerning: exclusion clause; timing of notice; express notice Facts – Mr and Mrs Olley booked into the Marlborough Court Hotel. The contract for their stay was formed at the point of check-in. While they were out for the evening, their key was taken from reception and used to gain access to their room. Mrs Olley's fur coat was stolen and she claimed damages from the hotel. The hotel attempted to disclaim liability based on a notice displayed on the wall of the Olley's hotel room which stated that:The proprietors will not hold themselves liable for articles lost or stolen unless handed to the manageress for safe custody. Legal principle – The court held that the hotel could not rely upon the exclusion clause to absolve it from liability. The contract was formed at the reception desk, at which time the Olleys had not been to their room and, therefore, could not have seen the notice. Hence, they were unaware of the clause at the time of the contract and, as such, it was not incorporated into the contract.

Answer 26

Concerning: incorporation of terms; reasonable notice Facts – Mr Parker left luggage in the cloakroom at a railway station and was given a ticket in return for payment of a fee. The ticket had a clause on the back which provided that the railway company would not be liable in respect of any luggage exceeding £10 in value.Mr Parker's luggage was stolen. It was worth more than £10. The railway company attempted to exclude liability on the basis of the exclusion clause. Legal principle – Mr Parker's claim was successful since the railway company could not prove that they had brought the claimant's attention to the exclusion clause. Therefore, since the claimant had not been made sufficiently aware of the existence of the clause he was not bound by it.

Answer 27

[1940] 1 KB 532 Concerning: incorporation of terms; contractual document Facts – The claimant hired two deckchairs and received two tickets from the council's beach attendant in return for payment. On the back of these tickets it was stated that 'The Council will not be liable for any accident or damage arising from the hire of the chair'. The claimant believed that the ticket was merely a receipt for payment and did not read it. One chair collapsed and the claimant was injured as a result. The claimant sued for damages; the council attempted to rely on the exclusion clause. Legal principle – The claim was successful. The court did not accept that the exclusion clause had been incorporated into the contract since it had not been brought to the claimant's attention and held that it was unreasonable to assume that the ticket contained contractual terms.

Answer 28

Concerning: incorporation of terms; reference to another document Facts – The booking form for a cruise contained a clause that the contract of carriage was ' subject to conditions and regulations printed on the tickets'. The contract of carriage was issued some time after booking at the same time as the tickets. The ship sank and the claimant was injured. The shipping company attempted to rely on the exclusion clause. Legal principle – The claim was successful. The court held that the booking form did not do enough to draw the claimant's attention to the exclusion clause; therefore, it was not incorporated into the contract and the shipping company could not rely upon it.

Answer 29

Concerning: exclusion clause; contra proferentem rule Facts – The claimant's motor insurance policy provided that the defendant insurers would not be liable if the vehicle carried an 'excess load'. The claimant had an accident while carrying six people in a five-seater car. The insurance company attempted to rely on the exclusion clause. Legal principle – The claimant was successful. The Court of Appeal held that the term 'excess load' could mean either 'excess passengers' or 'excess weight' and interpreted it as meaning 'excess weight', using a narrow interpretation of 'load' as referring to goods and not to passengers.

Answer 30

Concerning: misrepresentation; change of circumstances Facts – Aprilia (moped manufacturers) contracted with the Spice Girls to sponsor a concert tour. The group had appeared in promotional material before Aprilia entered into the contract on 6 May 1998. This contract was based on the representation (made at the promotional photo-call) that all five members of the band, each with their distinctive image, would continue working together. Geri Halliwell ('Ginger Spice') left the band on 29 May 1998. Legal principle – There had been misrepresentation by conduct, since the participation of all five band members in the commercial had induced Aprilia into entering the contract.

Contract Law Flashcards

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