Contract Law Revision Notes PDF

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Notes taken from revision classes ahead of the exam...

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Contract Law Revision

CCCU

2014

Contract Law Revision Offer/Acceptance Offers:  An offer is an expression of willingness to contract on specific terms  Can be accepted by words or conduct  No need for further negotiation after acceptance  May be ended by o Lapse of time o Rejection o Revocation o Counter-offer o Acceptance Acceptance:  Clear agreement of offer without any variations to key terms  Must be communicated (General Rule) Postal Rule:  Contract accepted as soon as letter is posted, not when it is received Invitation to Treat:  Willingness to enter into negotiations  Adverts, Shop Displays, Auctions, Tenders Capacity:  Minors are only bound for “necessaries”  Mental Capacity Act 2005 – Liable for necessaries as well Formalities:  No requirement for contract to be written  Exceptions – Contracts for sale of land, credit cards, receipts Certainty:  If there is ambiguity, potentially no intention to create legal relations Cases:  Leftkowitz v Great Minneapolis Surplus Store – Adverts (Offers)  Leonard v Pepsico – Adverts (Puffs)  Fisher v Bell – Shop Display (Not an offer)  Hyde v Wrench – Counter-offer (Cancels original offer)  Adams v Lindsell – Postal Rule (Offer accepted even though letter did not arrive)  Entores v Miles – Using Telex (Offer accepted when telex is received)  Balfour v Balfour – Domestic Agreement (No intention to create legal relations)  Carlill v Carbolic Smoke Ball Co. – Commercial Offer (Intention)  Proform Sports v Proactive Sports – Minor capacity (Sport is not necessary for minor)  Scammell v Ouston – Uncertainty (Terms were too vague)  RTS Flexible v Molkerei – Essential Terms (Substantial for contract) Misrepresentation 1

Contract Law Revision

CCCU

2014

Definition:  False statement of existing or past fact, which is made before or at the time of the contract, which induces the other party to enter into the contract Finding Misrepresentation:  Are they terms or misrepresentation (could be both)  Why is it misrepresentation  What type of misrepresentation  What is the effect on the contract  What is the likely outcome Results of Misrepresentation:  Existence of misrepresentation is a vitiating factor  Allows innocent party to avoid the contract  Contract becomes voidable (can be rescinded) Key test - Intention of Parties: 1. Importance of statement 2. Relative Knowledge 3. Reliance Types of Misrepresentation:  Fraudulent o A false statement which is made knowingly or without belief in its truth or recklessly, careless as to whether it be true or false  Negligent o A false statement made by a person who has no reasonable grounds for believing it to be true  Innocent o A false statement by a person who honestly believes it to be true Cases:        

Gordon v Sellico – Hid dry rot in walls (Fraudulent Misrepresentation) Spice Girls Ltd v Aprilla World Service – Misrepresentation by conduct (Knowledge) Sykes v Taylor-Rose – Silence (Cannot be considered a statement) With v O’Flanagan – Statement becomes false (Silence could be misrepresentation) Smith v Land & House Property – Statement of Opinion (Becomes fact) Esso Petroleum v Mardon – Special Knowledge (Induced other party to contract) Attwood v Small – Reliance (By using his experts, no longer relying on other party) Derry v Peek – Definition of Fraudulent Misrepresentation (Case not fraud)

Frustration Definition:

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Contract Law Revision 

CCCU

2014

An event that could not be foreseen which has made the contract illegal/void after it had been signed which neither party was involved in

Circumstances:  Subject matter of contract has been destroyed  Death or incapacity  Contract becomes illegal to perform  Government interference  Whole commercial purpose of contract has failed Test for frustration:  Multi-factorial approach: o Look at terms of contract o Context (suspicious circumstances) o Parties Knowledge o Risk of event o Nature of event (Major or Minor) Limitations:  Can not be used for inconveniences  Can not be used if foreseen by either party  Can not be used if self-induced  Must involve element of surprise Effect:  Contract set aside Law Reform (Frustrated Contracts) Act 1943  Section 1 (2) o Money paid out is recoverable o Money payable need not be paid  Section 1 (3) o If valuable benefit is received, it must be paid for Cases:  Taylor v Caldwell – Music Hall burned down (Contract frustrated)  Davis Contractors v Fareham Urban District Council – Minor event (Change in circumstance but not nature of project so no frustration)  Tsakiroglou & Co v Noblee and Thorl – Minor event (Not impossible to perform)  CTI Group Inc. v Transclear – Minor event (Not impossible to perform)  Condor v Barron Knights – Health problems (Impossible to perform)  Asfar v Blundell – Goods perished (Impossible to perform)  Jackson v Union Marine Insurance Co – Major economic loss (Frustration)

Terms Sources:  Express Terms 3

Contract Law Revision

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CCCU

2014

o Oral and Written Implied Terms o By Court or Statutes

Definition:  Describe duties and obligations undertaken by parties to the contract  Not everything said in negotiation is a term… o Could be a mere puff o Could be mere representation o Could be a term Difference between Representation and Term:  Intention of Parties: o Reliance – How much of statement made you enter into contract o Special Knowledge – Does statement maker have special knowledge (Term) o Strength of Statement – Statement can overrule condition of contract Parole Evidence Rule:  All of what has been agreed by both parties has been written down, neither can change orally  If evidence that not whole agreement was written down, it could change  “Entire agreement clauses” – Parole Evidence Rule will always stand Types:  Condition o Essential Term of the Contract o Relieved on Contractual Duty and Damages  Warranty o Lesser Term of the Contract o Damages  Innominate Terms o Middle Term of the Contract o Dependable of Severity of Breach Cases:  Oscar Chess Ltd v Williams – Expert Knowledge (Buyer had more knowledge than seller therefore it was not a term but representation)  Thake v Maurice – Medical Contract (Cannot guarantee outcome)  Dick Bentley v Harold Smith – Expert Knowledge (Relied upon that)  Couchman v Hill – Strength of Statement (Overruled the terms)  Allen v Pink – Parole Evidence Rule (Not whole contract was written)  Poussard v Spiers and Pond – Condition Breached (Contract was rightly ended)  Bettini v Gye – Warranty Breached (Contract was unfairly ended)  Hong Kong Fir v Kawasaki – Innominate Term (Introduction of type of term) Economic Duress Definition:  Forced to do something after threat or pressure

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Contract Law Revision  

CCCU

2014

Traditionally threat to person/property Nowadays more common Economic Duress

Effect:  Contract is voidable Beginning:  The Siboen & The Sibotre Case o Commercial pressure is not enough for economic duress  Pao On v Lau Liu Long Case o Pressure of threat must be illegitimate o Must have “coercion of the will that vitiates consent”  DSND Subsea Ltd v Petroleum Geo Services ASA o Must be pressure whose practical effect is that there is compulsion on, or lack of practical choice for, the victim, which is illegitimate and which is a significant cause in inducing the victim to enter into the contract  The illegitimate act must be the main cause inducing the other party into the contract Elements:  Wrongful or improper threat  Not reasonable to accept offer  Threat induces making of contract  Other party caused financial distress Limitations:  The remedy for duress will be lost if claimant does not “protest at the time or shortly thereafter” Cases:  B & S Contracts & Design v Victor Green Publications – Duress of damaged reputation  Atlas Express v Kafco – There was Economic Duress (signed unwillingly and under compulsion)  Hennessy v Craigmyle & Co – If possible to take legal proceeding and resist a threat, no economic duress  Carillion Construction Ltd v Felix – Illegitimate Pressure (Economic Duress found)  The Siboen & The Sibotre – Commercial Pressure is not enough to constitute duress  Pao On v Lau Liu Long – Commercial Pressure is not enough to constitute duress  R v HM Attorney – Army Pressure is not duress

Consideration Definition:  “Price for the promise”  Executed Consideration: has been performed 5

Contract Law Revision   Rules:     

CCCU

2014

Executory Consideration: yet to be performed Consideration must be given in return for the promise

“Past consideration is no consideration” (Re McArdle) “Consideration must be sufficient but need not be adequate” (Chappell v Nestle) The promisor must receive something capable of being consideration (White v Bluett) Consideration should move from promisee (Tweddle v Atkinson) An existing public duty is not valid consideration (Collins v Godfrey)

Exceptions:  Doctrine of Implied Assumpsit (Pao On v Lao Liu Long) o An implied promise to pay for the act o Performance of the required act o A later promise which fixes the amount of the award  Gratuitous Promises are not binding unless written in a deed (Re Hudson)  Existing contractual obligations are not consideration (Stilk v Myrick)  A promise to accept part-payment of a debt does not constitute consideration to forego the entire debt (Pinnel)  Performance of existing duty o Imposed by law o Contractual duty o Part-payment of existing debt

Cases:             

Currie v Misa – Case definition of Consideration Pao On v Lau Liu Long – Doctrine of implied assumpsit Stilk v Myrick – Existing Contractual Obligation (Not enforceable consideration) Hartley v Posonby – Existing Contractual Obligation BUT half crew left ship Williams v Roffey – Existing Contractual Obligation BUT needed to avoid penalty (Consideration of avoiding the penalty was enough) Thomas v Thomas – Must be valuable in the eyes of the law (£1 a year is sufficient consideration for a house) White v Bluett – Stop Complaining is not capable of being Consideration Roscorla v Thomas – Past Consideration (Promise was made after contract) Re McArdle – Promise to make payment came after consideration (Not consideration) Lampleigh v Braithwait – Past Consideration BUT with a request so it was valid Re Hudson – Gratuitous Promise after death (Not enforceable consideration) Foakes v Beer – Interest on judgment debt after paying by installments Re Selectmove – Conflicts with Foakes v Beer (Not allowed to pay in installments)

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