Lecture 1 - Contract Law, Ryan Murray PDF

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Contract Law, Ryan Murray ...

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Law of contract and problem solving | Lecture 1

Part 1] Syllabus overview -

Offer + acceptance Consideration Promissory estoppel Terms Exclusion clauses Introduction to misrepresentation

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We’re going to start off by looking at the different stages of forming a contract as shown above A contract is essentially an agreement between two different parties. The agreement is the product of an exchange of an offer and an acceptance. The exchange of an offer and an acceptance is the first step of forming a contract. We’re going to look at the legal principles and what governs and constitutes an offer within law. We’re going to look at how the courts identify the constitution of a contract. Just because there are two people who have an agreement between themselves, this alone does not form a contract as there are a lot more elements that need to be satisfied for it to be classified as an official contract between two parties. There is a requirement of something called consideration. However, at first we’re going to look at what consideration is and the rules and what constitutes consideration. At this stage we need to just look at consideration as being a test of enforceability So if an agreement has been formed is the agreement enforceable? For example, if a party doesn’t perform an obligation they promised, can you sue for breach of that contractor or can you enforce a promise against the other to make them perform a particular act or obligation they undertook. We can only do that via consideration. Consideration is that we need to prove as part of this agreement something of legal value that gives us the ability to enforce a promise against the other. A very basic example of this would be payment. E.g. I offer to sell you goods, you accept to pay, your consideration would be payment in exchange for the goods. There are other ways of enforcing promises that parties make, and the doctrine of promissory estoppel is another way in which a promise may be binding on a party. Maybe that arty promised they wouldn’t enforce a debt against you, and you rely on that. If then the other party goes back on that, thy may be estopped, and prevented from doing so, this is what estoppel is. It is an alternative way of enforcing promises against the parties.

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The next thing we are going to look at is that the agreement has to have some sort of substance to it, it has to have terms, and it’s the terms that determine what obligations the parties have, what rice to pay, what quantity is being negotiated or sd. The terms form the obligations. We will look at what constitute the terms, types of terms etc. Then we will look at a particular type of term or a clause in a contract called an exclusion clause. These terms in a contract or clauses that a party will try and insert into a contract that basically excludes them of liability if they breach a contract. Are these types of clauses enforceable and what are the legal principles if a party can exclude their liability? Then we will finish things at by looking at principles in relation to misrepresentation. This is concerned with what happens of what goes on before what happens before a contract is formed. Were the statements true or false which could be a misrepresentation? E.g. you are negotiation a purchase of a car and the seller tells you the car is of a certain age and on that basis you decide to purchase the car, then you discover its age, what is the remedy? This could be where misrepresentation could be relevant. If we do have a contract, re there ways in which the contract ends validity and enforceability which can be challenged. A mistake is a rare situation in which in all aspects of a formation of a contract can be valid but void by the courts because of a mistake. Finally, we will look at damages; this is concerned when there has been a breach of contract so a party hasn’t met a promise that they stated in a contract. If a contract is breached the innocent party is able to recover some sort of remedy for that. The primary remedy is damages, financial composition as a result of the breach.

COMMON MYTHS OF CONTRACTS

1. Most people think that a contract s a formal written document. Although it can be, it does not have to take the form of a formal written contract. In reality, very few are in writing to be enforceable. An oral agreement can be binding. It could be partly oral and partly written. 2. People think that contracts are only used businesses and are not relevant to everyday life, this is a common myth. In fact, we enter into contracts every day.

What is a contract? (Reminder) -

A contract created and defines obligations The obligations bind the parties to agreement based n the principle of consent.

UNDERLYING THEORIES

(a) “FREEDOM OF CONTRACT” “classical theories” of contract law - that parties are free to enter into a contract with whomever they like, on whatever terms they wish, and the court will be reluctant to interfere with this agreement. E.g. only when there is fraud or illegality.

- Contract is also part of private law, the state don’t usually get involved. the court are there to protect people against certain forms of abuse within contracts. Mostly, contract law is selfregulated. Courts only intervene following an alleged breach of contract, but the parties are generally free to regulate their own agreement. - regarding this freedom of contract there are some problems that come with this freedom. one problem that arises is when the parties are not of equality bargaining power with each other. (inequality of bargaining power. the parties work well when there is equality. usually this inequality arises is when you have a consumer dealing with a business. generally that consumer is going to be in a weaker position cause they are not in a strong position to negotiate, .g with a big company. - What the courts recognize is that when there is this inequality, there is always a possibility of an abuse of this position. The person in the stronger position can hand out unlawful terms to someone who is in a lower position. This is when the courts will look at consumer protection we are going to look at Judicial intervention.

- Development of implied terms at common low. generally when you enter into contract, you will; express the terms. but in some contract, just because the type of contract they are, there will be terms that are automatically inserted into that contract that you dont need to agree to. that is why

they are called implied terms. - A lot of these implied terms arise from legislation. where parliament has decided that there are certain rights some people have that cannot be excluded, limited or signed away. one example is in the 'SALE OF GOOD ACT 1979'. that previously if yo brought or any contract between a business and a consumer, was regulated by the sale of goods act, so if good exchanged hands between businesses and a consumer, the consumer would have automatic rights that are inserted not that contract without having to expressly agree to them. the sale of goods act implies certain terms in relation to this goods, most importantly, the goods have to be of satisfactory quality. it must match their description, must be fit for the purpose that they're sol if you buy goods via a sample, the corresponding goods your supplied with must match the sample that you were originally supplied with. these are all examples of implied terms, that protect the consumer who is usually in the weaker position in comparison to the business who is in the stronger position. - For many years many of those terms were included within the 'Sale of Goods act' However, last year there was a slight change to the law. The government introduced a new piece of legislation known as the 'CONSUMER RIGHTS ACT 2015'. This [piece of legislation extracts some of those provisions int the SALE OF GOODS ACT' in relation to consumer contracts. So if there is a contract between the two business, the sale of goods act applies that contract if a contract is between a seller and a consumer, or a business and a consumer, those rights that the consumer have are in the consumer rights act. - the courts will sometimes regulate agreements in some cases.

CLASSIFICATION OF CONTRACTS Deeds: Formalities must be met, and this is the reason why it will bind the parties but there is no requirement of consideration. Within deeds there are more requirements needed than most other contracts. Contracts via deeds, you satisfy the formalities of the document and its the formalities that make the contract binding. A deed creates ab obligation that is binding purely because it is made in a particular form. Until 1989 it had to be signed, sealed and delivered. However, a contract contained in a deed does not require 'consideration'. "Simple Contracts" - Not contained in a deed, but must be supported by consideration, no formal contracts. All other contracts apart from deeds are "Simple Contracts" and no particular formalities are required. They also don’t need to be i writing, they could purely be verbal or take place by conduct.

BILATERAL AND UNILATERAL CONTRACTS: (different types of 'simple contracts)

- Bilateral: bi means 2. Essential, both parties to that contract have obligations. they have to perform. a bilateral contract is based on a mutual exchange. it could be as simple as ' promise to sell", and "You promise to pay". if either parties fail to meet those obligations, they could be liable to breach of contracts. An example of a bilateral contract would simply be - A CONTRACT TO BUY AND SELL GOODS. For example, you have 2 parties. You have the seller, and then the purchaser. In this situation there is a mutual exchange between the two; one requires the promise of the other. The seller is agreeing to sell, he is promising to sell but he wants something n exchange for that promise. The seller wants the purchasers promise to pay in exchange. Vice versa, the purchaser is promising to buy the goods in exchange for the sellers promise to sell. Both parties are wanting something in this relationship, payment in exchange for goods. In this situation if either party fails to meet their obligations, either party could be liable to breach of contract.

- Unilateral contract: uni =1. Under a unilateral contract, only one party has an obligation and that obligation only arises when the other party performs the required acts that the offeror is requesting and until that act is performed, then the other doesn't arise. For example, an offer of reward. E.g. there is an advertisement that states "£1000 reward to the person who finds my lost dog". An offer of reward is an offer of a unilateral contract because only on party has an obligation here, the person who placed the advertisement. He has the obligation to pay the £1000 to the person who finds his dog. But he only has that obligation if someone sees the obligation, finds the dog and then returns it. Just because someone may see the advertisement, that doesn't create an obligation them to go and then find the dog. There isn't an obligation on both parties, there is only an obligation o the person who places the advertisement in the first place. - Bilateral and Unilateral can have an impact on how a contract is formed, and when the contract comes into existence.

What is a contract? -

A contract is a legally binding agreement between two parties or more.

Myths of contracts ? -

Some people have a common misconception that a contract is that a formal written document. However. Although it can be written down, majority of the contracts are not written down. Very few contracts are not in writing in order for them to be enforced.

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Myth Number 2: Contracts are only used by large businesses – they are not of relevance to everyday life. We enter into many contracts on a daily basis.

Underlying Theories   

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“Freedom of Contract” Classical Theory of Contract Law: Parties are free to contract with whomever they like, on whatever terms they wish, and the court will be reluctant to interfere with this agreement. Self-Regulatory nature of Contract Law

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Courts intervene following an alleged breach of contact, but the parties are generally free to regulate their own agreement. Problems? Inequality of bargaining power!

Judicial intervention    

Development of implied terms at common law. Contained within statutory provisions: Sale of Goods Act 1979 More recent developments: Consumer Rights Act 2015

Classification of contracts – 

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Deeds: Formalities must be met, and this is the reason why it will bind the parties (but no requirement of “consideration”) “Simple Contracts” - Not contained in deed, must be supported by consideration, no formal requirements.

Bilateral and unilateral – 

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Bilateral = both parties have obligations under the contract, mutual exchange of obligations/promises. Unilateral = binding on one party, only one party has obligations following the performance of an act.

Formation of a contract     

Three key elements of a contract: Offer + Acceptance = Agreement Consideration = test of enforceability (c) Intention to create legal relations = Binding contract...