Case Summaries (Contract and Unjustified Enrichment) PDF

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CONTRACT AND UNJUSTIFIED ENRICHMENT: CASE SUMMARIES1. INTRODUCTION TO OBLIGATIONS2. CONTRACT: FORMATION Muirhead & Turnball v Dickson - Commercial contracts cannot be arranged by what people think in their innermost minds.Commercial contracts are made according to what people say (regarding ...

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CONTRACT AND UNJUSTIFIED ENRICHMENT: CASE SUMMARIES 1. INTRODUCTION TO OBLIGATIONS 2. CONTRACT: FORMATION • Muirhead & Turnball v Dickson

- Commercial contracts cannot be arranged by what people think in their innermost minds. Commercial contracts are made according to what people say (regarding the delivery of a piano) • Mathieson Gee v Quigley

- Objectivity: no contract: can be seen if you look at the statements that were expressed during forming the contract. These two statements don’t match – they don’t constitute a contact. M says to supply plant, not implying that will be going to do the work themselves. To which Q responds to with accepting the offer to remove silt. – there is and never has been any contact between these parties. Even though both parties subjectively believe there is a contract, there was objectively no contract. Why did the court do this? MG where not there to argue their side of the case – A company that cannot already pay their debts, in other words Q’s actions where in vain. Real reason: house of lord’s perception that this is a waste of time – no contract, action dismissed. • W S Karoulias v Drambuie Liqueur Co Ltd

- complete written agreement but no intention to be bound until full signing by both parties. Held: no contract until signing process completed. • Harvey v Facey

- Distinction between offers and other pre-contractual statements) – H: “Will you sell BHP (an estate in Jamaica) ? Telegraph lowest cash price.” F: “Lowest cash price for BHP £900.”! H: “We agree to buy BHP for £900.” – Harvey’s opening statement: it’s not an offer, it’s merely an opening gambit. / Facey’s statement: not an offer, merely a stating of fact. – crucial part: emphasis on “lowest price”. Facey is saying this is my lowest price, don’t trouble me with any price lower than that. Let’s hear what you, H, are willing to pay. • Carlil v Carbolic Smokeball Co

- Issue in the case: whether the statements made in this advertisement were such as to amount to an offer which could be accepted by the parties to whom it was addressed.

- Carbolic smokeball was supposedly a panacea against catching flu. - Carbolic smokeball produce an ad (look at the handout) in order to get a lead in the industry, as there were similar products in the market at that time.

- It promises, that the users of the product who catch flu will get 100 pounds of compensation. - Mrs. Carlill is the epitome of Victorian respectability. – socially accomplished person. She uses the smokeball for 11 days, constantly and she gets the flu at the end of it. There is evidence to suggest that Mr. Carlill picked up his ear when his wife got the flu – 100 pound reward. He is the one who writes all the letter to the company. The reward is claimed. Company refuses to pay.

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- The argument for the company: this is just an advert. This is just an invitation to treat, it can’t give rise to any contract. Mrs. Carlill had got the smokeball from a third-party seller. Argument: no contract, they have not entered into any agreement whatsoever.

- Critical legal element in the court decision: 1000 pounds is deposited – in order to demonstrate our sincerity in this matter (total lie). This ad had the intension to create legal relationship. This was a seriously meant offer. What was the acceptance? – Mrs. Carlill obviously did not write to the company stating that she was agreeing to use to smokeball and in case of her getting the flu she would get the 100 pounds. However, she could be said to have accepted for 2 reasons:

- She used the smokeball, so the act of using the ball constituted her acceptance. - In any event, with this offer, the offer was addressed to all the world – and the company waved the need for acceptance to be communicated. All that was required that once the costumer got the flu, they were to get in touch with the company.

- There is no question when you look from a moral and ethical perspective, that Mrs. Carlill should have won – however, the question for the judges is: how can we do it in the framework of law? Hence and advertisement, which is usually an intention to treat was found to be an offer – with a bit of inventiveness of course. • Harvela Investments v Royal Trust

- The first defendant held shares in company. By means of a telex communication they invited the claimant and the second defendant to make an offer to purchase shares by sealed tender. They stated in this invitation that they bound themselves to accept the highest offer. The claimant made a bid for a fixed sum; the second defendant made a bid for a fixed sum or alternatively for ‘$101,000 in excess of any other offer’, whichever was to be higher. The first defendant accepted the bid made by the second defendant, despite the fact that the fixed sum which they offered was lower than that offered by the claimant.

- The issue was whether the second defendant’s referential bid was invalid, and by extension whether the first defendant was bound to accept the claimant’s offer as the highest valid bid.

- The House of Lords held that the referential bid was invalid, and as such, the first defendant was bound to accept the claimant’s offer. It reasoned that to allow a referential bid would create the possibility of conflicting obligations for the first defendant (had both parties made a bid offering a certain sum in excess of any other offer), in which case the offeror would be bound by the terms of its own promise to accept both offers. This would therefore be an unreasonable construction of the invitation to tender. It would also undermine the purpose of a sealed tender, which is to prevent a bid being made based on the sum offered by the competitor. • Wolf and Wolf v Forfar Potato Co

- Qualified acceptance – “I accept but…”) - The Forfar merchant!telexed! an offer (open for acceptance till 17.00 hrs., 30 November 1977) to sell potatoes to the international merchant, subject to certain conditions regarding delivery dates and sizes. By telex dated 30 November 1977, the international merchant purported to accept the offer, subject to certain additional conditions. Following a telephone conversation between the parties to clarify the position, the international merchant by further xftelex dated 30 November 1977, sent within the time-limit, again purported to accept the original offer but requested that their conditions telexed

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in their first telex, should be given consideration. The Forfar merchant did not supply the potatoes and was sued for damages. The question arose as to whether there was a valid contract with consensus in idem ever constituted between the parties.

- The sheriff after a proof before answer, held that 1. there was no contract between the parties, and 2. the pursuers failed to prove any loss.

- The pursuers appealed to the! Court of Session! where it was held that on the making of a qualified acceptance and counter-offer, the original offer falls and that on the failure to obtain the terms requested in the counter-offer, the party cannot fall back on and accept the original offer. • Thomson v James

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postal acceptance rule 26/11/1853: J writes to T offering to buy land from him. 1/12/1853: T posts his written acceptance of J’s offer. 1/12/1853: J posts his written revocation of his offer. The First Division decided that there was a concluded contract and J’s revocation came too late. The most important effect of the postal acceptance is that it will defeat the offeror’s uncommunicated withdrawal. An offer can be withdrawn at any time before acceptance. If A purports to withdraw an offer to B, the withdrawal will be ineffective if B has posted an acceptance before the withdrawal has actually been communicated to B.

• Countess of Dunmore v Alexander

- postal acceptance rule - The Countess of Dunmore (C) was looking to change servant and wrote to Lady Agnew (LA) requesting information on the character of one of her servants, Alexander. LA responded and recommended Alexander, stating that she would accept the proposed wage. C accepted this and sent a letter to LA, acknowledging the agreement. LA was away from her residence but had the letter forwarded to the appropriate address. She acknowledged the letter and sent this on to Alexander. A day later, C wrote to LA stating that she no longer needed Alexander. LA forward the second letter by express post and both letters were delivered to Alexander at the same time. After C refused to house or pay Alexander, Alexander brought an action against her on the basis that there had been a completed contract and C had breached the terms.

- C argued that as the two letters were received at the same time, Alexander had proper notice that she was not required. The issue for the court to consider was whether a party, who accepts an offer is entitled at the same moment to retract its acceptance.

- The court held that there was no completed contract and therefore Alexander was not entitled to the wages for which she had claimed. The court found that as the two letters were received at the same time by Alexander, there could be no contract but notably stated that if one had arrived in the morning and the other in the afternoon, this would have been different (as per Lord Balgray). As a result of the circumstance, C was allowed to revoke her offer.! • Regus (Maxim) Ltd v Bank of Scotland plc: (promise)

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- Important case defining “promise”. MacQueen mentions the case in his research paper on unilateral promises.

- “What seems likely to be the definitive judicial statement came from Lord President Gill in Regus (Maxim) Ltd v. Bank of Scotland plc in 2013: ‘In my opinion, a promise in the law of Scotland is a unilateral juristic act. It acquires its binding force by reason of the declarant’s expression of his will to be bound. . . . [B]ecause in Scots law a promise acquires its obligatory nature at the moment at which it is made, questions of acceptance and of actings in reliance on it are irrelevant.’ ” • Royal Bank of Scotland v Carlyle: (promise in the course of a business)

- The case summary and discussion according to MacQueen’s aforementioned research paper: “It is yet another case about the financing of commercial activity, but this time the argument that the bank’s commitment to a business person was obligatory was successful. The case arose from a transaction between the bank (henceforth RBS) and a property developer C that began to be negotiated early in 2007. The facts were largely undisputed. C’s business model as a property developer was to buy a plot of land, build house(s) there in which he then lived briefly, before selling at a profit and moving on to his next project. C’s business was a very successful one. He had regular dealings with RBS under which the bank made loans to him, secured on the properties they were used to acquire. The bank would also make separate finance available to cover C’s development costs on the property.

- At the beginning of 2007, C became aware of an opportunity to buy a plot of land being offered for sale in Gleneagles. Under the prospective deal, C would build two houses on the plot. These had to be completed by 31 March 2011 or the vendor would be entitled to buy back the land at the original sale price. C deferred completion of the purchase while he also negotiated with RBS over the finance he would need. RBS was willing to make the loan funding, but it remained unclear for a long time whether it was also willing to provide the development costs funding. Throughout these discussions, C made it clear that he would not take the loan funding without development funding of up to GBP 700,000 also being in place.

- An RBS representative placed a phone call to C, and, with reference to the development funding application, said to him: ‘You’ll be pleased to know it’s all approved, Edinburgh are going for it for both houses’. This was the key statement for consideration in the later litigation between RBS and C, although there was also evidence from RBS managers that C was told on several other occasions that development costs funding would be advanced. In August 2007, RBS lent C GBP 1.4 million to buy the land, repayable twelve months later. The contracts were put in writing, but no written confirmation was ever made with regard to the development funding of up to GBP 700,000. C was unworried by this as, previously, completion of development-funding formalities had generally followed sometime after the loan agreements had been executed. He went ahead with his purchase of the land and began the development. A year later, with the loan funding due for repayment, the financial crisis had engulfed RBS (which was effectively nationalized, or ‘bailed out’ by the UK Government in October 2008). C failed to pay on time, arguing that he was entitled to withhold his payment because RBS was in breach of its obligation to provide development costs funding. The bank raised an action of payment against C and also succeeded in having him declared bankrupt.

- C’s reliance upon the statement in entering the loan contracts was clear from the respective timings. The promise, as Lord Glennie was calling the statement by this point in his opinion, was sufficiently certain to be enforced: ‘The amount of the advance sought was set out in the initial proposals

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submitted to the Bank. It was GBP 700,000 then, and it never changed. Whether it would all be taken up would depend on progress in the sale of other properties, but that does not affect the principle’.80 On appeal, the Second Division of the Court of Session reversed Lord Glennie’s decision and held in favour of RBS.81 In reaching this conclusion, the court made much more extensive use than Lord Glennie of Scottish authority and concepts, clearly including that of unilateral promise. However, the fundamental reason for the decision is a perception that the meaning C sought to give the telephone statement was ‘somewhat improbable... major banks do not normally lend private individuals (or companies) millions of pounds... without setting out the terms and conditions of such a facility in writing’.82 C knew from the previous course of dealing with RBS that the development costs funding would be the subject of a written agreement. All that had taken place on the telephone, therefore, was a statement of future intention, with the creation of obligations to come later when a formal agreement was executed.

- In the Supreme Court, however, Lord Glennie’s decision was reinstated. This was primarily because the Court thought that the Second Division had overstepped its appellate function in reviewing Lord Glennie’s findings of fact and drawing different conclusions on them.

- In any event, the Carlyle case well illustrates how words may take on a promissory character when understood in the context in which they came to be uttered.” • McMillan v Caldwell:

- Sellers advertised for sale certain heritable subjects. A formal offer to purchase was sent on behalf of a prospective purchaser by his agents. That offer was then formally amended. The amended offer was met by a qualified acceptance from the sellers containing qualifications. The parties and their agents then met to attempt to resolve the differences between them to enable the missives to be concluded. At this meeting, after some private discussion, the agent for the sellers verbally withdrew the qualified acceptance as the sellers were no longer prepared to conclude missives on those terms. The purchaser's agent did not at that time consider the withdrawal as other than effective. After subsequent reconsideration he obtained instructions to make a formal acceptance of the qualified acceptance which had not yet been withdrawn in writing. Accordingly, he delivered a formal letter purporting to conclude missives into the hands of the agent for the sellers on the same day as the meeting and before the sellers' agent procured the delivery to the purchasers' agent of a formal letter confirming the verbal withdrawal of the sellers' qualified acceptance. The purchasers then sought implement of the missives allegedly concluded arguing that there were completed formal missives and that their terms could not be qualified or contradicted by oral evidence. The defenders argued that there was no completed contract because there was no consensus in idem. – held:

that a formal

written offer to purchase or sell heritable property could be withdrawn verbally, even if error was not an issue, as long as notice of withdrawal was communicated to the other party before an acceptance of the offer had been sent; and accordingly, no valid contract having been concluded by the purported formal acceptance on behalf of the purchaser. • Burnley v Alford:

- A sends offer to B at home address; B goes on holiday; A sends revocation of offer to B at home address; B returns from holiday, doesn’t open revocation letter and posts acceptance to A. Held: no contract

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• Stevenson v Mclean: (request for clarification)

- The defendant, Mclean, offered to sell iron to the complainant, Stevenson Jaques & Co. This was for the price of 40s and the offer would remain open until Monday. The complainant sent a telegram to the defendant, asking whether he would accept a payment of 40 over a two-month period, or what his longest limit would be for payment. McLean did not respond to this telegram. The defendant sold the iron to another party, but did not inform the complainant of this action. On Monday morning, the complaint sent a telegram to accept the offer, unaware it had been sold.

- 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 whether there was binding contract between the parties and if the telegram sent by the complainant was an inquiry for information or a counter offer.

- 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 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. • Tinn v Hoffmann & Co: (cross-offers)

- The defendant, H wrote to the complainant, T 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, T also wrote to H. He offered to buy the iron on similar terms. This case concerned the validity of these two cross offers.

- The issue in this case was whether there was a valid contract between T and H 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.

- It was held in this case that there was no contract between T and H 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. • Brinkibon Ltd v Stahag Stahl: (the rule is applicable to telegrams but not telexes – with regard to telexes it was judicially observed that...