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The document outlines the fundamental principles of contract law, including the formation, content, enforcement, and termination of contracts. It discusses key concepts such as offers, acceptance, consideration, and the intention to create legal relations, along with relevant case law. Additionally, it covers doctrines like promissory estoppel and waiver, emphasizing the importance of context and intention in legal agreements.
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0% found this document useful (0 votes)
15 views32 pagesContract Law
The document outlines the fundamental principles of contract law, including the formation, content, enforcement, and termination of contracts. It discusses key concepts such as offers, acceptance, consideration, and the intention to create legal relations, along with relevant case law. Additionally, it covers doctrines like promissory estoppel and waiver, emphasizing the importance of context and intention in legal agreements.
Uploaded by
lauangeline0403Copyright
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We take content rights seriously. If you suspect this is your content, claim it here.
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/ 32
The
Law
Of
Contract
(Study Notes) The Analytical Framework of Contract Law
THE LAW OF OBLIGATIONS
1
Con
ct Tort Restitution
(the law of ‘promises! or (the law of ‘civil wrongs’) (the law of ‘unjust
“expociations’) enrichment’)
+ Part |- Hew are contracts formed?...
= Invitations to reat
- Offers
= Acceptance
- Consideration
+ Intention to create legal relations
~ Certainty and completeness:
~ Form
‘* Part Il What is the content of contracts?...
Page 6
~Tenms and representations
~ Parol evidence rule
- Conditions / Warranties / Innaminate Terms:
= Exclusion clauses
- UCTA 1979 and UTCGR 1999
+ Part Ill—Who can enforce contracts?. ot Page 13,
+ Rules of privity
= Contracts (Rights of Third Parties) Act 1999
~ Exceptions ta the Privity Dactrine
+ Part IV—How are contracts destroyed? nnn ve venee Page 17
= Incapacity
~ Misrepresentation
- Mistake
= llegalty
~ Duress and Undue Influence
+ Part V- How do contracts come to.an end
‘and what are thelr consequences?.......:..o0 cn sae PAge 23
+ Discharge by Performance
~ Discharge by Breach
- Discharge by Agreement
+ Discharge by Frustration
~ Damages
- Other remedies
~Lawof Restitution
~ Deposits and Part Payments
~Extinetion of remedies Part | - Formation of Contracts
‘A contract may be defined simply as a legally binding agreement. Alternatively. it may be defined as a promise or
‘set of promises which the law will enforce,
‘All contracts are agreements — but not all agreements are contracts,
Contracts may be classified as either bilateral or unilateral. A bilateral contract is one where a promise by one
party is exchanged for a promise by the other. The exchange of promises is enough to render them both
enforceable. Thus in a contract for the sale of goods, the buyer promises to pay the price and the seller promises
todeliver the goods.
A unilateral contract is one where one party promises to do something (usually pay a sum of money) in retum for
‘an act of the other party, as opposad to a promise, A classic example is a reward case where A promises a reward
to anyone who will find his lost dog. The essence of a unilateral contract is that only one party, A. is bound to do
anything. No one Is bound to search for the lost dog, but if B, having seen the offer, finds the dog and returns it, he
is entilled to the reward,
‘The test for the existence of an agraement is objective: Centrovincial Estates v Merchant Investars
What matters is not what meaning a party actually intended to convey by his words oF canduet but what meaning a
reasonable person in the other party's position would have understood him to be conveying. This is called the
promisee objectivity’ test
An offer is a statement by one party of a willingness to enter into a contract on stated terms. An offer has to be
communicated to the offeree: Tayiory Laird
‘The distinction between an offer and an invitation to treat is. primarily one of intention: did the maker of the
statement intend to be bound by an acceptance of his terms without further negotiation or did he only intend his
statement to be partof the continuing negotiation process? See Gibson v Manchester City Cound
ef, Slorerv Manchester City Council
Invitations to treat
‘An invitation to treat is simply an expression of willingness to enter into negotiations which may lead to the
conclusion of a contract
‘A supply of information is a statement that merely provides information to the other party and is not intended
bbe acted upon: See Harvey v Facey
‘Common types of invitations to treat:
Display of Goods: Fisher y Bell & Pharmaceutical Society v Boots Cash Chemists
+ Advertisements: Partridge v Critenden & Carll v Carbolle Smoke Ball & Lelkowitz v Minneapolis Stores
* Auctions: Harris v Nickerson & Barry v Davies
+ Tenders: Harvola y Royal Trust Co. of Canada & Blackpool Aero Ciub v Blackpool Borough Coun
Time Tables and Automated Machines: Wilkie v London Transport & Thomton v Shoe Lane Parking
Methods of terminating an Offer
= Ifthe offer is revoked (withdrawn) before acceptance: Routledge v Grant
(Knowledge of the revocatian may come from a third party rather than the offeror: Dickinson v Dodds)
«Ifthe offer is rejected or a counter offer is made: Hyde v Wroneh
(Note that a request for further information is not @ counter offer, Stevenson v McLean)
+ On the lapse of set time or reasonable time: Ramsgate Victoria Hotel v Montefiore On the failure of a contingent condition precedent: Financings v Stimpson
On the death of the offerae. It also terminates on the death of the offeror if the contract involves-a personal
element or the offeree has knowledge of the offerar’s death: Bradbury v Moran
Unilateral offers can be terminated before performance begins: Errington v Errington & Daulia v Millbank
& Luxor v Cooper"
Unilateral offers to the world-a-large ean be terminated before complete performance and their revocation
should reach the same audience asthe offer (preferably same channel): Shuey v US
Rules of Acceptance
‘An acceptance is an unqualified expression of assent to the terms proposed by the offerar.
Acceptance must be communicated to the offeror: Entores v Miles Far Eastern Corporation
Acceptance may be inferred from conduct: Brogden v Metropolitan Railway
Acceptance cannot be silence: Felthouse v Bindley
Acceptance cannot occur if afferee does not have knowledge of the offer: Fev Clarke & Gibbins v Proctor!
Motive for acceptance is irrelevant: Williams v Cowardine
Acceptance must be made by the offeree or his agent: Powell v Lee
‘Acceptance cannot be in the form of a cross offer: Tinny Hoffman
Acceptance must be the “last shot” in a "battle-of-the-forms": Buller Machine Tool v Ex-Gell-O Corporation
Complete performance amounts to acceptance In unilateral contracts: Daulia v Millbank
Methods of Acceptance!
(2) By post: Adams v Lingsol na post! ma is estabishoa
Hentom y Fraser «must be reasonabie forthe lfecoe to vse tho post
Holwell Securities v Hughes - tho postal nie docs not apply whera Would laad to manifest sbeurcty
Byme v Van Tienhoven -the posta rule does not apply oletara of revocation
{@ Exam tip: Note how the postal rule applies to the following factual scenarios:
If the letter is lost in the post, the postal rule still applies; Household Fire Insurance v Grant; but does
not apply if the letter was lost because of the carelessness of the offeree (e.g. an incorract address.
was used or the leer was not propery stamped): Korbetis v Transarain Shipping
if the acceptance was posted and then a rejection was made, the postal rule still applies (assuming
it was reasonable for the offeree to use the post in the first place). However, it does not apply if (i) the
rejection reaches the offeror frst and (i) the offeror changes his position in reliance on it, There is na
English law authority on this point,
if a rejection was made and then the acceptance was posted, the postal rule doos not apply.
Whichever one reaches first is effective (‘It's a race!"). There is no English law authority on this point.
(b) By instantaneous mediums: Entores v Miles Far Easter & The Brimnes:
re ae
(¢) Prescribed method: Manchester Diosecean Council v Commercial Investments
+ 11s supgosted thal this case be confined to agency seonarios
* Not considered good law
-2-|Page Consideration
Consideration is defined as, “Some right, interest, profit, or benefit accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered or undertaken by the other” (per Lush J in Currie v Misa).
Consideration is needed for the formation and variation of a contract. There are three forms of consideration:
Executory consideration: Consideration is called executory where there is.an exchange of promises to perform
acts in the future, For example, a bilateral contract for the sale of goods wherein A promises to deliver goods to B
at a future date and B promises to pay on delivery
Executed consideration: This arises in unilateral contracts where the act of acceptance is also the consideration.
If one party makes a promise in exchange for an act by the other party, when that act is completed, itis executed
consideration, However, this label is also used to describe the situation where, in a bilateral contract, one party has
performed as per his promise ~ in the above example it would be whan A delivers the good to B,
Past consideratian: Consideration that comes before the promise. If one party voluntarily perfomms an act and the
other party then makes a promise, the consideration for the promise is said to be in the past. Past consideration is
not a valid form of consideration,
* Consideration must be sufficient (of economic value) but need not be adequate:
‘Chappell v Nestle & White v Bluett
= Past consideration is not good consideration; ReMcArdle
Exception: Doctrine of implied assumpsit: Lampeighv Braitwalt & Pau On v Lau Long
= Consideration must move (come}from the promisee: Tweedle v Atkinson
Note there-is no equivalent requirement that consideration must move to the promisor: Ballon v Madden
* Consideration must not be something the promise is already bound to-do:
‘0 Legal Duty: Collins v Godefroy
Exception: Performance exceeds legal duty: Glasbrook Ltd v Glamoraan ©C
Contractual Duty: Stik v Myrick
Exception 1: Performance exceeds contractual duty: Hartley v Ponsonby
Exception 2: Practical benefit: Williams v Roffey
‘The concept of ‘practical benefit’ does not extend to contracts of debt: Re: Selecimove
© Bul consideration can be something the premisee is bound to do for a third party: Seattson v Pega
* Consideration must not be part payment of a debt: Foakes v Beer Exception: Pinnel’s Case
* Consideration must not be forbearance to sue for an invalid claim: Wade v Simeons & Cook v Wright
+ Consideration exists when the variation or discharge is capable of benefiting either party:
WJ Alan v El Nasr
-3-|Page Promissory Estopp¢
Promissory Estoppel is defined as, “Where, by words or conduct, a person makes an unambiguous
representation as to his future conduct, intending the representation to be relied on and to affect the legal relations
between the parties, and the representee alters his position in reliance on it, the representor will be unable to act
inconsistently with the representation if by sa doing the representee would be prejudiced”.
Central Londan Property v High Tree House
See
© Exam tip: Consider promissory estoppel only after you are unable to ‘find’ consideration for a particular promise.
Seven conditions must be satisfied:
+ There must be a pre-existing contractual relationship: Hughes v Metropolitan Railways
+The promise must be unequivocal (but can be implied) as to fulure conduct:
Israel Cocoa v Nigerian Produce Mar
+The promisee must have acted in reliance (whether to his detriment oF not): WJ Alan'v EI Nast
* Itcamonly suspend not extinguish rights* : Tool Metal v Tungsten Electric
* Itmust be inequitable to allow the promisor to go back on his promise: D&C Builders v Rees
+ Itcan only be used as a defence and not as a cause of action: Combe v Combe
= The promise must not be prohibited by legistation: Evans v Amicus Healthcare
Doctrine of Waiver: Where one parly voluntarily accades to a request by another to forbear his right to striet
performance of the contract, or where he promises another that he will not insist upon his right to strict
performance of the contract, the court may hold that he has waived his right to performance as initially
contemplated by the parties.
See Hickman v Haynes.
@ Exam tip: Consider the doctrine of waiver if you are being asked to advise a potential claimant. Note that the
doctrine of waiver will factually overlap with promissory estoppel where the promisor is waiving @ particular
condition or abligation of the contract but in such a situation the doctrine of waiver, unlike estoppel, can be used by
the promisee as a cause af action
For example, you are asked 10 advise a contractor in a claim against a home owner. Homeowner's duty to make
‘monthly payments is eonditionad on the contractor providing an architect's certificate that the work done the prior
month was acceptable. Homeowner tells the contractor that he will make fulure payments without a certificate and
so the contractor does not provide the certficale the next month; the homeowner then refuses to pay. The
contractor will be able to successfully sue the homeowner on the graunds of waiver.
© Exam tip: In an essay question asking you to consider the relationship between consideration and promissory
estoppel, always cite the analysis of the Australian High Court in Walton Stores v Maher where the court ruled that
in appropriate cases promissory estoppel could be used as a cause of action in the absence of a pre-existing legal
relationship,
* Arguably this principe applies only to eoricts tat nclveperote performance say when a ena has to make monty rent payments.
{he contract slputes the payment ofa ingle lump sums then te effect can be permanent as ew scanano ike the DC Buksar case
-4-|Page Intention to create legal relations
‘The determination of whether or not the parties actually intended to enter into legally binding relations is an
objective one and context is all important. The courts will not examine the states of mind of the parties to the
agreement (a subjective approach) but will ask whether or not reasonable parties to such an agreement would
possess an intantion to ereate legal relations.
Although the presumptions can be rebutted by evidence of contrary intention, the presumptions themselves are
‘matters of public policy: that coniract law should be confined to the commercial sphere and should not operate in
social or domestic situations — athenwise the courts would be swamped by trifling domestic disputes,
* Social and domestic agreements are presumed not have legal effect:
(i) Husband and wife: Batfoury Balfour & Merritt v Merrit
(ti) Parent and child: Jones v Padavation
(li Friends: Simpkins v Pays & Coward v MIB
Rebuttal: () Business context: Snelling v John Snaiting
(i) Detrimental reliance: Parker v Clark
© Commercial and business agreements are presumed to have legal effect:
Ps my mn
Edwards v Skyways
Rebuttal: (i) Honour clauses: Rose and Frank v J Cromplon and Bros.
(ii) Subject to contract clause: Tiverton Estates v Weanwell
(Wi) Comfort eters: Kleinwort Benson v Malaysia Mining
Certainty and Completeness
‘© Uncertainty may be caused by vagueness andlor incompleteness:
‘Scammell y Ouston & Nicolene v Simmonds & Hillasv Arcos
Requirements of Form
* Unilateral gratuitous promises contained in a deed are enforceable irespective of consideration,
© Adeed is @ document which (a) bears the word ‘deed’, (bu) Is signed by the maker of the deed, (cis
aitested by at least one witness and (d) is defivered i.¢. some conduct thal shows that the person
executing the deed intends to be bound by i.
© Certain contracts such as those pertaining to the sale or other disposition of an interest in land must be
made in writing,
= At-common taw, @ defect in form renders @ contract unenforceable (but not void). This is subject to the
equitable doctrine of part performance.
-8-|Page Part Il - Contents of Contracts
Difference between Terms and Representations
‘A torm is 2 word or phrase that is part of the contract. Terms. define the obligalionsiundortakings of a party.
A representation isa statement which simply asserts the truth of a given state of facts.
An objective test of intention is used to determine whether a word or phrase is @ term or representation
‘Hellbut, Symons & Co. v BucKieton
“The following factors are considered in determining objective intention:
© Importance of the Statement: Couchman y til
«Strength of the statemenwNead for verification: Schawol v Reade & Ecay v Godtrey
© Special knowledge and skill: Bentley Productions v Harold Smith Motors & Oscar Chess v Williams
«Timing of the statement: Routledge v McKay
Ina written form: Duffy v Neweastle United Football
The Parol Evidence Rule
The parol evidence rule is that where the contract is embodied in a written document, extrinsic evidence is not
generally admissible to vary, contradict or interprat the dacument. The document is the sole repository of the terms
Of the contract.
Entire agreement clauses are often used to, in effect, codify this rule,
There are many exceptions to this rule:
© Partially writen agreement: Couchman v Hill
9 Operating status of the contract: Pym v Campbell
o Rectifications
© Implied terms
© Evidence about the
© Aids to construction
2 Proving custom: Hutton v Warren
2 Collateral contracts: City and Westminster Properties v Mudd
city of parties
Rules regarding Implied Terms
Terms may be implied into a contract:
* By statute: Sections 12-15 of the Sale of Goods Act 1979
* By custom: Huttony Warren
= By comman law:
© Tams ‘implied in fact:
“Business Efficacy’ test: The Moorcock: ‘Officious Bystander test: Shirlaw v Southern Foundries
© Terms ‘implied in law:
ELAwadi v BCC! lays down two requirements: (}) Contract of a defined type; (i) The necessity test
-6-|Page Distinguishing between Conditions / Warranties / Innominate terms
A condition is an essential term of the contract which goes to the root of the contract. A breach of a condition
enables the party who is not in breach of contract (‘the innocent party’) either to terminate performance of the
contract and obtain damages for any loss suffered as result of breach or to affirm the contract and recover
damages for breach.
‘Such promissory conditions should be distinguished from contingent conditions — events upon which the
existence of the contract Is dependent. A contingent condition may be a condition precedent (‘if), a condition
concurrent (‘as long as’) or a condition subsequent (‘nti
‘A warranty is 3 lesser, subsidiary term of the contract. A breach of a warranty only enables the innocent party to
claim damages; he cannot terminate performance of the contract and must therefore continue to perform his
obligations under the contract,
Distinguish this meaning from the following: A warranty is an assurance by one party