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The Law of Obligations Summary OFFER AND ACCEPTANCE offer is an expression of willingness to contract on certain terms with the intention that it shall become binding as soon as It is accepted the person to whom it is o THORNTON V SHOE LANE PARKING: money inserted into a machine, held machine consti...

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The Law of Obligations Summary  OFFER AND ACCEPTANCE “an offer is an expression of willingness to contract on certain terms with the intention that it shall become binding as soon as It is accepted by the person to whom it is addressed” o THORNTON V SHOE LANE PARKING: money inserted into a machine, held machine constituted the offer and acceptance was buy putting the money in and dispensed ticket acceptance. o Offers can take a unilateral form like CARLILL V CARBOLIC SMOKE BALL where the context is an offer made to the whole world o Offers can be made by writing, orally or by conduct The requirements for a valid contract 1) Agreement between both parties 2) Requirement of certainty 3) Consideration 4) Intention to create legal relations 5) Both parties entering into the contract must be mentally sound and of age. INVITIATION TO TREAT “statement or conduct indicating the maker’s willingness to receive offers” Advertisements

Self- service and shop window displays

Partridge v Crittenden dft placed advertisement in a magazine stating bramblefinch cocks 25s each – prosecuted under the birds act 1954 – held ITT and not ofer Pharmaceutical society v Boots o Defendants changed format of their shop from counter service to self-service s.18 of pharmacy and poisons act 1933 provided that the sale of certain drugs should contain certain drugs shouldn’t occur other than under supervision of a registered pharmacist o CA considered whether contract formed at

time that customer removed goods from shelves or at time goods presented at counter for payment o Held contract formed when goods presented at cash desk and that display of goods on shelves was an ITT Fisher v Bell o Shopkeeper displayed knife in window – offensive weapons act 1959 prohibited the offering for sale of various offensive weapons. – shopkeeper prosecuted under act o Prosecution failed as court held display of knife in window was an ITT not offer COMMUNICATION OF OFFERS o For a valid offer it must be communicated to the offeree – meaning that no party is bound by an offer they are unaware of TERMINATION OF OFFERS o Offers can simply be rejected and refused or extinguished using counter offers – in addition offers may be terminated by Revocation

Lapse of time

Failure to comply with condition precedent

Death of one of the parties

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Refers to the rescinding annulling or withdrawal of the offer - BYRNE V VAN TIENHOVEN - Revocation must be communicated it can be done by a reliable 3rd party - 3rd party both parties deem reliable Offers can’t stay open forever, it can state when it’s to be terminated on a particular fixed period - RAMSGATE VICTORIA HOTEL V MONTEFIERE - Claimant offered to buy shares in the hotel company in June but didn’t issue shares till November, court held offer would lapse after a ‘reasonable time’ what’s reasonable would depend on offer and subject matter. Offers can also terminate if parties had agreed to meet certain conditions and then failed to do so, for instance, an offer to sell a car on hire-purchase was considered to be subject to condition that it would remain in same condition Death of the offeror  when die before offer accepted then personal representatives may still be bound by an acceptance provided that

1) Contract doesn’t involve personal services 2) Offeree is ignorant of the offeror death ACCEPTANCE “An acceptance is a final and unqualified expression of assent to the terms of an offer” -

Mirror image rule  principle that a valid acceptance must correspond exactly with the terms of the offer is sometimes referred to as the mirror image rule

COUNTER OFFERS o Destroying the original offer and offering a new one renders the previous one incapable of being accepted o HYDE V WRENCH  wrench offered to sell the farm to Hyde for £1,000 and Hyde rejected this price and offered to pay £950. Wrench rejected Hydes offer – wrench then sold the farm to a 3rd party Hyde attempted to accept the original offered price of £1,000 and sue wrench for BOC when wrench sold the farm to another party. REQUESTS FOR MORE INFORMATION o If response is made to an offer which doesn’t attempt to vary the terms of the offer it is not a counter offer, since it doesn’t reject terms of the offer. Its therefore still open to acceptance by the offeree. o STEVENSON, JACQUES & CO V McLEAN STANDARD FORM CONTRACTS o Problems can arise where 1/both parties used pre-prepared contract forms in relations to the general rule that the acceptance must correspond exactly to the offer. o Battle of the forms  the situation where one or both of the parties attempts to rely on their standard terms if often referred to as the battle of the forms.

ACCEPTANCE

o Communication of acceptance – generally speaking an acceptance has no effect until its communicated to the offeror.  o The principle was explained in ENTORES V MILES FAR EAST CORPORATION by Lord Denning. o Silence cannot amount to acceptance  it follows that silence can never constitute acceptance

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o FELTHOUSE V BINDLEY – uncle and nephew negotiating the sale of a horse, uncle stated that if I hear no more from you I shall consider the horse mine at agreed price, nephews didn’t reply but asked an auctioneer to withdraw horse from an auction. He forgot and it was sold to another party – court held no contract since nephew never communicated his intention to accept his uncle or done anything to bind himself. o Acceptance by conduct  BROGDEN V MET RAILWAY CO o Acceptance by postal rule  ADAMS V LINDSELL (don’t forget to discuss the actual conditions which apply when dealing with postal rule) NON-INSTANTANEOUS COMMUNICATION OF ACCEPTANCE o Acceptance takes place when and where the acceptance is received ENTORES V MILES FAR EAST CORPORATION o BRINKIBON V STAHAG STAHL  acceptance was sent by telex out of office hours and HOL held telex message sent outside office hours shouldn’t be considered instantaneous communication and therefore could only be effective when office re-opened. CONSIDERATION AND PROMISSORY ESTOPPEL 

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Parties agreements must be complete and certain – English law will not enforce an agreement on a contract unless the parties reached an agreement on all necessary terms and the terms are sufficiently clear to be enforced  SCAMMEL V NEPHEW V OUSTON Valuable consideration in the eyes of the law may consist of some right or benefit to the other party or some detriment or loss undertaken by the other – CURRIE V MISA English laws badge of enforceability – promisee shouldn’t be able to enforce a promise unless promisor obtained something in return.

What will the law recognize as good consideration? 1) Intangible actions e.g. giving up right of action – COOK V WRIGHT 2) Promise not to do something, if it has value – WHITE V BLUETT 3) Person who promises to do more than his existing public duty – WARD V BYHAM Promise only enforceable if its supported by consideration unless -

Promissory estoppel Contained in deed On basis of other doctrines

RULES OF CONSIDERATION 1) May be sufficient but need not be adequate to both parties  Chappell & co v Nestle

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2) It must be not be past consideration  ROSCORIA V THOMAS 3) Must move from the promise  TWEEDLE V ATKINSON PERFORMANCE OF AN EXISTING DUTY -

STILK V MYRICK WILLIAMS V ROFFEY BROS V NICHOLLS  extra benefit

PART PAYMENT OF DEBT -

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General rule part payment of a debt without more isn’t good consideration for the crediors promise to accept lesser sum and discharge the remainder Cheque payments don’t amount to more – Approved by CA in D&C BUILDERS AND REES PINNELS CASE & FOAKES V BEER  foakes owed beer £2,090 they agreed that foakes could pay in instalments and beer agreed that no futher action would be taken if the debt was paid by the agreed date – later beer demanded an additional interest payment – foakes refused to pay

PROMISSORY ESTOPPEL The equitable doctrine of promissory estoppel can provide a means of making a promise binding even without consideration – developed by Lord Denning in High Trees -

CENTRAL LONDON PROPERTY TRUST V HIGH TREES

REQUIREMENTS FOR THE DOCTRINE TO APPLY -

Must be a clear or unequivocal promise or representation Inequitable for promisor to go back on promise Promisee must alter his position in reliance on A’s promise

PROMISSORY ESTOPPEL CANNOT CREATE RIGHTS AS AFFIRMED IN -

COMBE V COMBES “a shield, not a sword” Promissory estoppel can only protect contractual rights which are already existing – cannot form basis of an action which seeks to establish new rights, obviously couldn’t work in a Roffey case as this was an action to claim more than Williams was entitled to under the original contract. CONTRACTS AND 3RD PARTIES - PRIVITY OF CONTRACT

o General rule  is that only parties to a contract can acquire rights and liabilities under that contract. So if you are not a party to a contract then you cannot sue upon it, or be sued under it.

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DUNLOP V SELFRIDGE  Dunlop sold tyres to dew & co were wholesalers. The wholesalers undertook that the manufacturers could fix lowest price at which they could sell the tyre and promised not to sell the tyres below that price. Sold tyres to Selfridge on agreed terms. He broke the pricing agreement and sold tyres at a discounted price. Dunlop sued Selfridge and sought an injunction to prevent them from selling their tyres at a discounted price. o Legal principle  Dunlop failed, although there was a contract between them and dew & co – selfridge were not a party to that contract and Dunlop therefore couldn’t impose their terms upon then. o Common law rule on privity has been criticized for leading to a harsh and unfair outcome particularly in cases where the contract purports to confer a benefit on a 3rd party who remains unable to sue if that benefit isn’t forthcoming due to a breach by 1 of parties to the contract Exceptions to the basic rule developed 1) exceptions provided by statute 2) collateral contracts  a contract between 2 parties may be accompanied by a collateral contracts between one of those parties and a 3rd party relating to the same subject matter o SHANKLIN PIER V DETEL PRODUCTS 3) agency 4) covenants in land law 5) trusts. Justification for privity doctrine -

where burden of the contract is placed on 3rd party: “if parties to a contract agreed that 3rd person should run a marathon - Collins” where contract confers benefit on a 3rd party: answers may lie with doctrine of consideration. CONTRACTS ACT 1999

o this act doesn’t abolish the rule of privity. o Increasing number of exceptions led to this area of law becoming more complicated and it’s not surprising that there have been several calls for legislative reform. STATUTORY 3RD PARTY RIGHTS S.1.1 (a) & (b) S.1.3

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A person who isn’t a party to a contract may in his own right enforce a term of the contract if the contract expressly provides that he may 3rd party must be expressly identified by contract by name – as a member of a class or answering a particular description but need not be in existence when the contract

is entered into. CONTRACTUAL TERMS Puff

Boastful statement, extravagant phrasing – TURNER V ANQUETIL (extravagant phrasing which would naturally be discounted by sensible persons) Representat Statement inducing party to enter into the contract – WALKER V MILNER (sale of a safe which was described as ion strong, holdfast and thief proof it was in fact stolen within 30 minutes of purchase) Terms Promise which becomes part of the contract itself – CF OSBORN V HART (superior old port it was borderline undrinkable not a mere representation but actual term of the contract) DISTINGUISHING BETWEEN TERMS, REPRESENTATIONS AND TERMS Timing

The longer the interval between negotiations and entering contract less likely its treated as a representation: ROUTLEDGE V MCKAY (motorcycle and car by exchanging motor and paying £30 – it was stated that the vehicle was a 1942 and it was actually a 1932 model it was held that it was a statement held as a representation not a term neither part expert and there was a lapse in time) Importan If a specific element of the contract is expressed with ce importance and isn’t abided by then this poses an issue  BANNERMAN V WHITE (claimant agreed to purchase hops for beer making and didn’t want hops treated with sulphur and he emphasised the importance of this and hops were in fact treated with sulphur it was held to be a term of the contract due to the emphasis of its importance – BOC claim was successful) - COUCHMAN V HILL – ‘heifer requested to be unserved but it was in fact 8 weeks pregnant and it died of a miscarriage’ - OSCAR CHESS V WILLIAMS: Williams bought a 2nd hand Special car on the basis it was a 1948 model and the son used skill or knowled the car as a trade in for a new Hillman which he ge purchased from Oscar-chess – OC later found that the car was a 1939 model and was worth much less brought an action for breach of contract giving grounds to repudiate contract and claim damages. CONTRACTS IN WRITING o If contracts are in writing, then the statements within them are held to usually be regarded as terms rather than representations.

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o L’Estrange v Graucob – Mrs L owned a café, ordered cig machine from manufacture and was faulty. Contract she signed contained a clause stating ‘any express or implied condition, statement or warranty is hereby excluded’ – she claimed for breach of a term implied by the sale of goods act 1893 that goods unfit for purpose – also claimed she hadn’t seen clause and had therefore no knowledge of its contents. o Her claim failed – Scrutton LJ “when document containing contractual terms is signed then in the absence of fraud or misrepresentation the party signing it is bound and it is wholly immaterial whether he has read the document or not” PAROL EVIDENCE RULE o General rule states that where a contract has been reduced to writing, extrinsic evidence is inadmissible to add to, or vary, or contradict its terms - JACOB V BATAVIA & GENERAL PLANTATIONS TRUST o UK 2000 LTD V WEIS 2004  Property sold at an auction and memorandum of the sale was signed and it contained a mikvah with the accommodation but seller intended to exclude both from the accommodation and there was confusion with the documentation and the written agreement took precedent. o At common law a written contract is presumed to contain everything upon which parties agreed and anything that isn’t embodied in the contract is considered to have been never initially intended. o Law commission in 1976 recommended the rule to be abolished but by 1986 they concluded that it didn’t stop courts accepting parol evidence. EXCEPTIONS TO THE BASIC RULE 1) If written agreement wasn’t intended to include to be the whole contract on which the parties had actually agreed, parol evidence is inadmissible. 2) Parol evidence may be given to determine the validity of the contract. – J EVANS AND SON 3) Parol evidence can show contract yet to operate or that it ceases to operate – PYM V CAMPBELL CLASSIFICATION OF TERMS Condition

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“goes to the root of the contract” Most important terms of the contract Breach of a condition entitles the claimant to repudiate the contract and/or claim damages POUSSARD V SPIERS  actress under a contract to appear as a lead in opera, she was taken ill and unable to attend 1st performance so the role was given to her understudy and she sued for BOC

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Warranty

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Innominate term

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Claim failed = she was crucial and it was a condition she breached by failing to attend: entitled to repudiation and ultimately terminating contract Breach entitles claimant to claim damages only but not to repudiate the contract BETTINI V GUY  singer was under a contract to appear in a series of concerns in different theatres, contract included a term that he should attend rehearsals for 6 days before lives – singer didn’t attend 1st 3 rehearsals |she was replaced and she sued for BOC Successful claim: rehearsal attendance was peripheral to main purpose of the contract and term held to be warranty which entitled producers to sue for damages but not to repudiate by replacement ‘wait and see approach’ courts look to effects of breach on injured party to determine whether breach itself was of condition or warranty. The courts consider the consequences of the breach and then decides the remedy. HONG KONG FIR SHIPPING V KAWASAKI  K contracted with HK to charter vessel for 2 years, term in contract required that the vessel was fitted in every way for ordering cargo service and owners maintain her in a thoroughly efficient state…during service ship broke down to incompetence of its engine room staff it was discovered not sea worthy and needed repairing. Ship was deprived of use for 18 weeks K repudiated charter HK bought claim for wrongful repudiation claiming the term was not a condition only a warranty. – they were in BOC to deliver seaworthy vessel and also failed to maintain it. – Breach not substantial enough to entitle charter to repudiation.

IMPLIED TERMS Terms implied by the court 1) - Implied in fact 2) - Implied in law

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1) Term will be implied in fact if it is obvious and necessary in order to give contract business effect (business efficacy test) the courts in this case used the officious bystander test o THE MOORCOCK  claimant entered into a

Terms implied by custom

Terms implied by statute

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contract with defendants to dock and unload cargo from his ship at their wharf in thames. The ship was grounded at the jetty at low tide and broke up on rocks – claimant sued for damage to ship – defendants claimed no express term relating to the safety of the ship and as such couldn’t be liable for BOC o court held there was an implied term in the contract that the ship would be damaged. This term was necessary in order to give the contract business efficacy – dft liable for BOC for implied term. 2) As well as terms which are implied by the courts in fact, there are also terms which are implied by the courts in law. o LIVERPOOL CITY V IRWIN  condition of a council tower block deteriorated such that the stairs and lifts were in disrepair and internal rubbish chutes were blocked. Irwin alleged that a breach on the part of the council of its implied covenant for their enjoyment of the property. o HOL held it wasn’t an implied term of the lease that the landlord should take reasonable care to keep common parts of the block in a reasonable state of repair o BOTH TESTS OVERLAP AND LORD SIMON IN BP REFINERY V HASTINGS PROVIDED 5 CONDITIONS THAT MUST BE SATISFIED IN ORDER FOR A TERM TO BE IMPLIED IN FACT 1) Reasonable and equitable 2) Necessary to give contract business effect 3) So obvious goes without saying 4) Capable of clear expression 5) Not contradict any express term of contract o Terms implied by custom, in response to the parol evidence rule. o Where the contract itself is silent on the matter – HUTTON V WARREN o Terms won’t be implied by custom where they would be contrary to express terms of contract Certain terms are implied into contracts by stature primarily to protect parties where there is inequality of bargaining strength. 1) Sale of goods act 1979  makes it a term of sales contract that item bought will be of merchantable

quality 2) Supply of goods and services act 1982  states that those supplying services will take reasonable care in performing them EXCLUSION OF LIABILITY  

UCTA 1977 is commonly referred to as Unfair Contract Terms Act These clauses are ones in which the parties to a contract place a limit on the other parties’ legal liability – relevant clause may be termed a ‘limitation claus...