Contract Law Revision - Lecture notes 1-16 PDF

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Contract Law – Year 1 `For there to be a contract made, there has to be an offer and acceptance. An offer – when an offeror makes an offer to someone else, there has to be objective intention to be bound and there has to be specified terms in order for something to be an offer rather than an Invitat...

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Contract Law – Year 1

`For there to be a contract made, there has to be an offer and acceptance. An offer – when an offeror makes an offer to someone else, there has to be objective intention to be bound and there has to be specified terms in order for something to be an offer rather than an Invitation to treat. Offer + Acceptance form an agreement. Acceptance 3 Main Rules: - The acceptance must be communicated to the offeree - The terms of the acceptance must exactly match the terms of the offer - The agreement must be certain Invitation to treat – where a party is merely inviting somebody to make an offer, which he is then free to accept or decline. e.g. an advertisement in a shop/newspaper. Acceptance – the action of consenting to receive or undertake something that has been offered to you. Counter Offer – purports to be acceptance but has either added a new term or, more usually, amended an existing term. Unilateral Contract – A contract created by an offer that can only be accepted by PERFORMANCE. Bilateral contract – a reciprocal agreement between two parties which each promise to perform an act in exchange for the other party’s act. (face-to-face) If the offeree acts on the offerors promise the offeror is legally obliged to fulfil the contract, but the offeree cannot be forced to act because no return promise has been made to the offeror. A unilateral contract differs from a bilateral contact, in which the parties exchange mutual promises.

Communication – The general rule is that the offeror must receive the acceptance before it is effective. Entorres v Miles Far East (1955) EWCA Civ 3: - Silence will not generally amount to an acceptance. Consideration – a benefit which must be bargained for between the parties and is the essential reason for a party entering a contract. One consideration is exchanged for another consideration. Legal Sufficiency – The question in the law of evidence as to whether a party has produced enough evidence that supports his case.

Carlill v Carbolic Smoke Ball Company (1892) EWCA Civ 1: - Carbolic smoke ball co manufactured and sold the smoke ball - Various newspapers offered a small reward to anybody who had used it 3 times per day as directed too and had caught influenzas colds - Carbolic Smoke Ball Co refused to pay therefore Carlill sued for damages as a Breach of Contract Rule Held: An Advertisement as considered to be an offer when it specifies the quantity of persons who are eligible to accept their terms. - ‘if such an advertisement requires performance, the offeree is not required to give notice of his performance’ Objective Approach – What the reasonable person would think. The court prefers to use the objective approach (using the reasonable persons standard), however we do not use this test when the offeree does not intend the terms of the offer. Fisher v Bell (1961) 1 QB 394: - Rule: Displaying goods in a shop window is an invitation to treat only when the customer buys it. - This turns into a contract when the customer accepts the offer by buying the item.

Partridge v Crittenden (1968) 2 All ER 421: - Bilateral Contract Carlill v Carbolic Smoke Ball Company (1892) EWCA Civ 1: - Unilateral Contract Legal Rule- Adverts are generally an invitation to treat unless they show objective intention to be bound and have specific terms. An offeror may revoke an offer before it has been accepted, but the revocation MUST be communicated to the offeree (does not have to be communicated by the offeror)!!! Brogden v Metropolitan Railway Co: Claimants: - Supplies of coal to the defendant railway company - No written contract - Decided to make up a written contract - Made some amendments to the contract draft & continues the sale of coal. Defendants: - Made a written draft contract - Never communicated their acceptance Held: the written draft was valid despite no communication of acceptance… Acceptance took place by performing the draft contract. Shively v United States: - Rule: An offer of reward made by means of a published proclamation can be revoked in the manner in which it was made or through similar publicity. There Is no legal duty to satisfy an acceptor who doesn’t know of the revocation.

CONSIDERATION - Beneftit/Detriment or the price for which the promise of the other is bought – Currie v Misa (1875) Executory Consideration – knowing we owe money etc.

Essential Elements of Consideration: 1. 2. 3. 4.

Must be legally sufficient Must move from the promise Must not be past Must be sufficient but need not adequate

3 Types of consideration: 1. A performance of duty imposed by law – (traditionally sufficient consideration) 2. Performance of an existing contractual duty owed to a third party 3. Performance of a contractual duty owed to the promisor (Public duty is usually insufficient) Past Consideration – not linked to one another – exception to the rule. Economic Duress – Wrongful or unlawful conduct that creates fear or economic hardship. Performance of a duty imposed by law and performance of an existing contractual duty owed to the promiser have traditionally been regarded as insufficient to act as consideration for a fresh promise. Stilk v Myrick (1809) : - Had to sail ship back to land - Was held that the crew members were already bound to sailing back home and therefore consideration was unforeseeable. Hartley v Ponsonby (1857): - Most sailors were deserted (37) - Lord Campbell said that Harris v Weston was authority that a sailor is expected to complete a voyage if there is an emergency on board, however there was no such emergency here, the ship was in port and was only unseaworthy due to the lack of crewmembers. - Therefore, the plaintiff was within his rights to put to sea, consequently, by agreeing to do the work, the plaintiff supplied fresh consideration, therefore the contract was now valid.

The court came up with their decision due to floodgates – so that other ships could not follow this. Court wouldn’t want to make payment due to floodgates.

Williams v Roffey Brothers + Nicholls (1991): - 1 party had agreed that one was doing work for £20,000 - Promised to be paid an extra £10,000 to get the work done on time (quicker) - The promise was enforceable - There was no economic duress – given freely - No fraud They were entitled to already receive these things due to a practical benefit, there are 2 key elements: - No Economic Duress - Practical Benefit Rule: PERFOMRANCE IS AN EXISTING CONTRACTUAL DUTY OWED TO THE PROMISOR CAN BE GOOD CONSIDERATION IF THERE IS NO ECONOMIC DURESS AND THERE IS PRACTICAL BENEFITS. Williams v Roffey should have outdated Stilk v Myrick so it should over rule it or distinguish the case on a lack of consideration basis. Practical Benefit – a benefit that already exists. Economic Duress – when somebody threatens to break a contract. Williams v Roffey said Stilk v Myrick did not over rule the principle, however they still do follow it but it does not over rule. Stilk v Myrick: - Unless secured as a threat then it could be argued that the outcome could be different. There was no principle of economic duress until 1970’s. Public Policy – The greater good.

Privity of a Contract General rule – a person who is not a party to a contract may not enforce rights or be bound by obligations arising from that contract. Tweedle v Atkinson (1861): - Wightman J stated, “It is now well established that no stranger to the consideration can take advantage of a contract although it may be made to his benefit”. Dunlop Pneumatic Tyre Co v Selfridge (1915): - To impose a liability (contractual) without consent strikes a liberty of individual The doctrine can be analysed under 2 heads: 1. Attempts to confer benefits on third parties 2. Attempts in impose obligations on third parties Attempts to confer benefits on third parties: By direct means: - Assignment - Constructive trusts – the courts use this concept to say that a contracting party is a trustee of a promise to pay money to a third party - Les Affreteurs Reunis v Walford (1919) - Collateral Contract – Shanklin Pier v Detel By indirect means: - Action by promise on behalf of a third party: - Specific performance – Beswick v Beswick (1968)

Promisers Action for damage Jackson v Horizon Holidays (1975): - You CANNOT sue unless party to the contract

RULE: only parties to a contract may recover damages!!

PART PAYMENT OF A DEBT Pinnles Case (1602) 5 Co Rep 117: Whether part payment of a debt can be good consideration. RULE IN PINNELS CASE: Payment of a smaller sum is not satisfactory as a whole, part payment of a debt is NOT good consideration. CONSIDERATION MUST BE OF VALUE AND IS EXCHANGED FOR BY PERFORMANCE OR PROMISE OF PERFORMANCE BY THE OTHER PARTY. Foakes v Beer- held: Foakes was held liable to pay the interest. The agreement reached amounted to pay part payments of a debt and under the rule in Pinnels case this was not good consideration for a promise not to enforce the full amount due. Promissory Estoppel- the legal principle that a promise is enforceable by law, even if made without formal consideration. When a promisor has made a promise to the promisee he then relies on that promise to his subsequent detriment. 5 elements of promissory estoppel: 1. Some form of legal relationship must exist or is anticipated between parties 2. Representation or promise by one party 3. Reliance by the other party on the promise or representation 4. Detriment 5. Unconsciability (there is no general restriction, which prohibits a person from breaking his or her promise) Clear promise not to enforce equal rights – Woodhouse A.C Israel Cocoa Ltd v Nigerian Product Marketing Co Ltd (1972) AC 741 The buyers conduct in accepting the invoice unquestionably amounted to an implied clear and unambiguous promise to accept on those terms. Promisee changes position in reliance – WJ Alan & Co Ltd v El Nasr Export & Import Co (1972) 2 WLR 800

Detrimental reliance is not a requirement of promissory estoppel. It only needs to be established that the promisor has changed their position.

Inequitable to go back on your promise – D&C Builders v Rees (1966) 2 QB 617 The appeal by Rees was dismissed. The agreement was invalid as there was no consideration in favour of Builders for reducing the value of the amount owing by Rees. The case of Foakes v Beer was applied in the fact that the payment was by cheque made no difference to the principle that the late payment of a lesser amount did not equal satisfaction to the total amount owing. Builders had been under duress to accept a reduced amount due to their financial position which Rees was aware of and took advantage of. An acceptance arising from a threat does not amount to a settlement. MWB Business Exchange v Rock Advertising (2016) EWCA CIV 533 CA - An oral agreement was made - Part payment of a debt - They said you ca apply Williams v Roffey for part payment of a debt however, it conflicts with Re Select Move. House of Lords believe that we should overrule Foakes v Beer as it is too important to deal with in this type of ‘setting’. Collier v Wright (2007) EWCA Creator can go back on promise – Pinnels case

Common Law Exceptions -

Payment in a different place Lower payment Someone else paying Different time Objects instead of money Composition agreements

Re Select Move aid about Williams v Roffey – “it cannot be applied for a partpayment of a debt”. Promissory Estoppel can be suspensory or extinctive depending on the circumstances.

Common Law – Consideration - Pinnels case - Foakes v Beer A promise to accept part payment of a debt is not binding unless agreed to: - Pay early - Pay in a different place - Chattel instead - Composition agreement - Third party payments Practical Benefit – Williams v Roffey – does not apply to promise to accept partpayment, re select move. BUT NOW!! – MWB Business Exchange v Rock Advertising – ‘refined’ Re Select move – there may be practical benefits other than simply getting part of the money, in that case ‘avoiding a void’ though left open by the Supreme Court. Equity – Promissory Estoppell (Hughes v Metropolitan Railway (1876-77) LR 2 App Cas 439 House of Lords) Central London Property Trust v High Trees House Ltd (1947) KB 130 – for promissory estoppel to apply there must be, 1. A clear promise (Woodhouse v Nigerian Produce) 2. Reliance...