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CASE-LAW OF CONTRACT...

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CASE

Significance

Detail

Tinn v Hoffman

cross offers

Facts

and Co 1873

The defendant, Mr Hoffman wrote to the complainant, Mr Tinn with an offer to sell him 800 tons of iron for the price of 69s per ton. He requested a reply to this offer by post. On the same day, without knowing of this offer, Mr Tin also wrote to Mr Hoffman. He offered to buy the iron on similar terms. This case concerned the validity of these two cross offers.

Issues The issue in this case was whether there was a valid contract between Mr Tinn and Mr Hoffman for the sale of the iron. There was also the issue if acceptance had to be by post for it to be valid, as this was specified in the offer.

Decision/Outcome It was held in this case that there was no contract between Mr Tinn and Mr Hoffman for the iron. The cross offers were made simultaneously and without knowledge of one another; this was not a contract that would bind the parties for the iron. There is a difference between a cross offer and a counter offer. In order to form a valid contract, there must be communication that consists of an offer and acceptance. There was no acceptance by post, as had been stated in the offer. The court also said that while post had been indicated in the offer, another equally fast method would have been successful, such as a telegram or verbal message. Emphasised

Smoke

significance of offer and

The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a newspaper for their products, stating that any

acceptance in contract law;

person who purchased and used their product but still contracted influenza despite properly following the instructions would be

distinguishes between offers

entitled to a £100 reward. The advert further stated that the company had demonstrated its sincerity by placing £1000 in a bank

and invitations to treat.

account to act as the reward. The claimant, Mrs Carlill, thus purchased some smoke balls and, despite proper use, contracted

Company

Ball

the

Facts

Carlill v Carbolic

influenza and attempted to claim the £100 reward from the defendants. The defendants contended that they could not be bound by

Issue Whether

the

advert

question

constituted

in

the advert as it was an invitation to treat rather than an offer on the grounds that the advert was: mere ‘puff’ and lacking true

an

intent; that an offer could not be made ‘to the world’; the claimant had not technically provided acceptance; the wording of the

offer or an invitation to

advert was insufficiently precise; and, that there was no consideration, as necessary for the creation of a binding contract in law.

treat. Held The Court of Appeal found for the claimant, determining that the advert amounted to the offer for a unilateral contract by the defendants. In completing the conditions stipulated by the advert, Mrs Carlill provided acceptance. The Court further found that: the advert’s own claim to sincerity negated the company’s assertion of lacking intent; an offer could indeed be made to the world; wording need only be reasonably clear to imply terms rather than entirely clear; and consideration was identifiable in the use of the balls. Stevenson Jacques

Contract – Acceptance –

Facts

& Co v Mclean

Telegraph – Postal Rule –

The defendant, Mclean, offered to sell iron to the complainant, Stevenson Jaques & Co. This was for the price of 40s and the offer

Revocation – Offer

would remain open until Monday. The complainant sent a telegram to the defendant, asking whether he would accept a payment

The

court

complainant inquiring

heard was for

the

of 40 over a two-month period, or what his longest limit would be for payment. McLean did not respond to this telegram. The

only

defendant sold the iron to another party, but did not inform the complainant of this action. On Monday morning, the complaint

more

sent a telegram to accept the offer, unware it had been sold.

information about whether the terms of the offer could

Issues

be changed; there was no

The complainant sued the defendant for non-delivery of the iron and that this was a breach of contract. The issue in the case was

specific wording to indicate

whether there was binding contract between the parties and if the telegram sent by the complainant was an inquiry for information

that it was a counteroffer or

or a counter offer.

rejection. Decision/Outcome The court heard the complainant was only inquiring for more information about whether the terms of the offer could be changed; there was no specific wording to indicate that it was a counter offer or rejection. This was in contrast to Hyde v Wrench. This meant that the offer made by the defendant was still valid and the second telegram by the complaint formed a binding contract. While the promise of the offer remaining open until Monday was not itself binding and an offeror can revoke this at any time, there had been no revocation communicated to the complainant in this case.

Manohar t/a

Chugh

Electric

Battle of form

Battle of forms – the ‘last-shot approach’ In the course of negotiation, several standard letters or forms might have been exchanged. The last form will ‘kill’ the unamended order form by what amounted to be the counter-offer. Manohar Chugh t/a

&

Electric & Electronic Industries v Oka Electronics Ltd [1991] 2 HKC 1

Electronic Industries v Oka Electronics

Ltd

[1991] 2 HKC 1 Cook and Others v

Consideration must actually

Houses owned by (non-resident) A

Wright

be of value in the eyes of

B is the agent of A who deals with the houses

the Law, and not merely

Works done by C which create statutory liability to the owners of the houses

something believed to be of

C asks B to pay

value by the parties.

B says: I am not the owner C threatens to sue B B signs 3 promissory notes to pay in 3 instalments so that C does not sue B pays the first but refuses to pay the others. Is C entitled to payment?

The promise not to sue was consideration so B obliged to pay. Howard Marine v

Contract

law

Ogden - 1978 QB

Misrepresentation

574

Negligence

–

Facts

–

The defendant, A, were civil engineering contractors who entered into negotiation with H for the hire of two ships to carry clay out to sea. During the negotiation, A, represented that the ships could carry 1600 tonnes, a representation which was based upon consultation of an erroneous register. The accurate capacity was significantly lower but A continued negotiations without checking this figure. The parties agreed on a charter-party which included a clause which stated that the hiring party had examined the ships and that they were fit for purpose. Six months later, A gained further information on the correct capacity and paid £20,000 for the hire but no more. H restricted the use of the barges and claimed for the remaining hire charge amount. A brought a counter-claim for damages. Issue

The defendant claimed for breach of the collateral warranty in the representations between the parties before the agreement had been reached as well as in negligence under Hedley Byrne v Heller & Partners [1964] AC 465, on the basis of a special relationship between the parties and for breaching the Misrepresentation Act 1967, section 2. Decision/Outcome The court allowed the appeal in part. It was found that there was no collateral warranty agreed between the parties prior to the agreement of the parties. Moreover, the misrepresentation regarding the capacity of the ship was considered a minor matter. However, the court found H liable for a breach of duty under the Misrepresentation Act 1967. On this basis, the court was not required to consider the claim in tort law under Hedley Byrne v Heller & Partners [1964] AC 465. Tamplin v James

As Baggallay LJ in Tamplin

Facts

v

A seller sold property in a sale-room under the description:

James

forcefully

observed, if a defendant is

‘All that inn with the brewhouse, outbuildings, and premises known as The ship, together with the saddler’s shop and premises

to

adjoining thereto, situate at N., NOS. 454 and 455 on the tithe map, and containing by admeasurement twenty perches more or

evade

obligations

contractual by

simply

less.’

saying that he has made a

The sale-room also provided plans of the property. At the back of the land were unfenced gardens which were not part of the sale.

mistake

The buyer was acquainted with the land but did not realise that the gardens were not part of the sale. They did not look at the

(and

therefore

made a bad bargain), then

plans. The seller sought specific performance of the sale contract.

the

Issue(s)

performance

of

a

contract could seldom be

Could the buyer rely on their mistake to resist a claim for specific performance?

enforced upon the unwilling

Decision

and unscrupulous. Mistake

The Court of Appeal held in favour of the seller. The seller had not made any misrepresentation and had not done anything to

should not be the excuse to

induce the buyer’s mistake. Since the buyer’s mistake was purely subjective and not induced by the seller, they had no grounds to

avoid transactions which

resist an order for specific performance.

turn out to be distasteful.

Raffles

v

Contract – Mutual Mistake

Facts

Wichelhaus

– Contract Formation –

The complainant, Mr Raffles, offered to sell an amount of Surat cotton to the defendant, Mr Wichelhaus. This Surat cotton would

Void

–

be brought to Liverpool by a ship from Bombay, India. This ship was called the Peerless, but there were two ships that had this

Enforceability – Objective

name. The complainant and the defendant were both thinking about a different Peerless ship when they agreed to make the sale.

Test – Certainty – Breach of

One of the ships was due to leave Bombay in October, which was what the defendant had thought for his Surat cotton delivery, but

Contract – Meeting of the

the complainant was referring to the ship that was to leave in December. When the Surat cotton arrived in Liverpool, Mr

Minds –

Wichelhaus refused to pay, as in his mind, it was months late.

Contract

Issues The complainant sued the defendant for breach of contract. The issue in this case was whether there was an enforceable contract between the parties. Decision/Outcome It was held that the contract between the complainant and defendant was not enforceable. When the contract was being discussed, there was ambiguity in the Peerless and what ship was being referred to, as well as no agreement on the terms on the sale. There had been no consensus ad idem or meeting of the minds between the parties to form a binding contract. The objective test made it clear that a reasonable person would not have been able to identify with certainty what ship had been agreed on. Lilik Andayani v

Lilik Andayani v Chan Oi Ling (2001 1 HKC 252)

Chan Oi Ling

Domestic helper agreed she will be paid $2200 per month asked to sign contract showing she will be paid $3,860 per month (the statutory minimum wage) Accused employer for assault left employment and sued for money owed to her She could not recover under the oral contract- illegal as she would not have been allowed in the country on these terms The signed contract was not valid- she was never aware of the arrangements under that contract so she had never agreed (no meeting of the minds) She succeeded under an implied de facto contract.

The Moorcock

Ship

damaged

at

Facts

defendant’s jetty; whether

Ship-owners contracted with the defendant wharfingers to discharge a ship at their jetty. The jetty extended into the River Thames

implied

where the ship must necessarily ground at low water. The river-bed adjacent to the jetty was not vested in the wharfingers, and

term

to

take

reasonable care

they had no control over it. They had taken no steps to determine whether the space was safe for the ship and, on grounding, she suffered damage because of the uneven nature of the river-bed next to the jetty. The ship-owners claimed for breach of contract. Issues The wharfingers contended there was no term of the contract stating they were under a duty to ascertain the state of the river-bed. There was no implied warranty that the space was a safe place for the ship, and nor had there been any representation that the condition of the river-bed had been checked. There was no evidence of a lack of reasonable care and the wharfingers had no way of foreseeing the risk of damage to the ship. The ship-owners argued it must have been an implied term of the contract that the river-bed was safe, because the jetty could not be used at all without the vessel grounding at low water. The wharfingers must be held to have warranted they had taken reasonable care to ascertain the river-bed was safe for the ship to lie on. Decision/Outcome The ship owners were successful in their claim. The whole purpose of the contract was to use the jetty and the jetty could not be used without the vessel grounding. The wharfingers must, therefore, be deemed to have impliedly warranted they had taken reasonable steps to ensure the vessel could safely ground without suffering damage.

terms

in

Scrutton LJ said that ‘[a] term can only be implied if it is necessary in the business sense to give efficacy to the contract’. He

Reigate v Union

Implied

Manufacturing Co

employment contracts.

added that a term would only be implied if ‘it is such a term that it can confidently be said that if at the time the contract was being

(Ramsbottom) Ltd:

The traditional justification

negotiated’ the parties had been asked what would happen in a certain event, they would both have replied ”Of course, so and so

CA 1918

for the implication of terms

will happen; we did not trouble to say that; it is too clear”.

is that the court is giving effect

to

the

presumed

intention of the parties on its view of the reasonable expectations of the parties to the transaction. Hong

Kong

Shipping

Ltd

Fir

Construction of contractual

Facts

v

terms as ‘conditions’ and

Ship owners let the vessel, Hongkong fir, to charterers for a period of 24 months. Clause 1 of the contract obliged the owners to

Kisen

Kaisha

-

1962

repudiatory

breach

of

contract.

deliver a “seaworthy” vessel and Clause 3 further obliged them to maintain the vessel’s seaworthiness and good condition. Upon initial delivery, the vessel’s machinery was described to be in ‘reasonably good condition,’ yet required constant maintenance due to its age. The vessel owner’s chief engineer was inefficient and incompetent, and the vessel suffered numerous breakdowns and delays. The charterer’s repudiated the contract, alleging a breach of the obligations to deliver and maintain a seaworthy vessel. Issues The questions arose as to (1) whether the seaworthiness obligation constituted a ‘condition’ of contract, the breach of which entitles the party to repudiate; and (2) whether the breach caused delays of a sufficient degree so as to entitle the charterer to treat the contract as repudiated. Decision/Outcome Firstly, the Court held that in order to construe whether a contractual clause constitutes a condition precedent, the breach of which permits repudiation, or an innominate term, the breach of which permits damages, depends on a holistic assessment of the contract’s surrounding circumstances in determining the intention of the parties in their treatment of the clause. On the facts, the Court held that the seaworthiness and maintenance clause was not viewed as so fundamental so as to amount to a condition of the contract, but rather constitutes a term allowing damages. Secondly, the Court held that an innocent party cannot treat the contract as repudiated due to delays, however significant, if the breach falls short of a frustration of the contract rendering performance impossible. On the facts, the delays, albeit serious and repeated, did not amount to a frustration of contract that entitled repudiation of the contract, but merely a breach allowing for damages.

Photo Ltd

Production

Due diligence, negligence

Photo Production Ltd v Securicor Transport Ltd [1980] AC 827

Securicor

and exclusion clauses in

Facts

contracts

Photo Production Ltd and Securicor had a contract for the provision of security services by the latter to the former. One

v

Transport

Ltd

[1980] UKHL 2

Securicor’s staff, Mr Musgrove, decided to warm himself while providing these security services on Photo Production’s premises, and he did so by starting a fire. The fire spread and burned down Photo Production’s factory, causing them damage amounting to £615,000. Photo Production sued Securicor, who however defended by pointing to an exclusion clause in the contract which stated that Securicor would “under no circumstances be responsible for any injurious act or default by any employee. . . unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of [Securicor].” On those grounds,

Securicor asserted that they were not liable for the damage caused. Photo Production in turn asserted that Mr Musgrove’s actions as agent of Securicor constituted a fundamental breach of the contract, and therefore invalidated it along with the exclusion clause. In the Court of Appeal it was held that similarly to Karsales (Harrow) Ltd. v Wallis, [1956] 1 WLR 936, [1956] 2 All ER 866, the doctrine of fundamental breach did apply in this case and that Securicor was therefore liable. Securicor appealed to the House of Lords. Issues The issue in this case was whether the doctrine of fundamental breach applied and was relevant, and whether an exclusion clause could be effective on the facts of this case. Decision/Outcome The House of Lords held that the doctrine of fundamental breach was not rele...