Notesale: Turn your study into money

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Contract Law

Treitel defines a contract as an agreement giving rise to legal obligations which are enforced or
recognised by law
...

Smith v Hughes
The claimant had purchased a quantity of what he thought was old oats having been shown a
sample
...
The claimant wanted the oats for horse feed and new oats
were of no use to him
...
The
claimant brought an action against the seller based on mistake and misrepresentation
...
The action based on misrepresentation failed as you cannot have silence as
a misrepresentation
...
The
action based on mistake failed as the mistake was not as to the fundamental terms of the contract
but only a mistake as to quality
...

This is linked to the availability and credibility of evidence
...


Centrovicial Estates plc v Merchant Investors Assurance Company Ltd 1983
Centrovincial's solicitors wrote to Merchant Investors, stating 'Our clients and the Board are advised
that the appropriate rental value at the review date of 25th December 1982 is £65,000
...
' The figure of £65,000 should have read
£126,000 but Merchant Investors were not aware of the mistake
...
00 per annum as being the appropriate rental value at the review date of
25th December 1982
...



Contradiction to the above case, and an exception to the above rule laid out in Smith v
Hughes as here the conclusion is that subjective intention did play a role; i
...
the tenants
knew of the mistake but did not say anything because it was to their advantage
...

Invitation to treat is a statement to enter into negotiation
...
Facey (1893)
Harvey sent a Telegram to Facey which stated: - "Will you sell us Bumper Hall Pen? Telegraph lowest
cash price-answer paid;" Facey replied by telegram:- "Lowest price for Bumper Hall Pen £900
...
Please send us your title deed in order that we may get early possession
...
Facey had
not directly answered the first question as to whether they would sell and the lowest price stated
was merely responding to a request for information not an offer
...

Gibson v
...
refer to your request for details of the cost of buying your Council house
...
If you wish to pay off some of the
purchase price at the start and therefore require a mortgage for less than the amount quoted above,
the monthly instalment will change; in these circumstances, I will supply new figures on request
...
The
interest rate will be subject to variation by the Corporation after giving not less than three months'
written notice, and if it changes, there will be an adjustment to the monthly instalment payable
...
If you would like to make formal
application to buy your Council house, please complete the enclosed application form and return it
to me as soon as possible
...
The issue before the House of Lords was whether the Council’s letter amounted to an offer
...

Standard Situations for Offer/Invitations to treat:
Sometimes the law makes exceptions, a form of consumer law
...
Advertisements
In general advertisements are seen as invitations to treat, as illustrated in the following case;
Partridge v Crittenden Newspaper Ads
The defendant placed an advert in a classified section of a magazine offering some bramble finches
for sale
...
6 of the Protection of Birds Act 1954 made it an offence to offer such birds for sale
...

Held: The defendant's conviction was quashed
...

The literal rule of statutory interpretation was applied
...
Great Minneapolis Surplus Store (US):
Defendant advertised the sale of three fur coats and three fur stoles for $1
...
The

advertisement said “first come, first serve”
...
Defendant refused, saying the sale was only for women
...

The terms were clear and definite, there was no room for open negotiation
...

Depends on the intention of the parties and surrounding circumstances
...
Objectively looking at whether a reasonable person would
presume there was an offer
...

Of course the defendant in court is going to say “there was no intention for contract” because they
don’t to pay, but we need to look at what any other reasonable person would presume
...
Carbolic Smoke Ball co
A Newspaper advert placed by the defendant stated: “£100 reward will be paid by the Carbolic
Smoke Ball Company to any person who contracts the influenza after having used the ball three
times daily for two weeks according to the printed directions supplied with each ball
...
"
Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu
...

The defendant raised the following arguments to demonstrate the advertisement was a mere
invitation to treat rather than an offer:
Held: The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted
an offer of a unilateral contract which she had accepted by performing the conditions stated in the
offer
...
Due to the money they claimed they paid into a bank account this exception
fell under the fact it was a uni-lateral contract
...

Uni-lateral contract: offer is in the form of payment in exchange for an act and offer is accepted by
performance of the act
...
No further negotiation or
bargaining was intended
...

However there is also bi-lateral contracts in existence in contract law, whereby the parties reach an
agreement through promises and offer and acceptance
...

Performance is needed from both parties in order for a contract to happen
...
g
...
)

2
...

Fisher v Bell
The defendant had a flick knife displayed in his shop window with a price tag on it
...
His conviction was quashed as goods on display in

shops are not 'offers' in the technical sense but an invitation to treat
...

The display was not an offer, merely an invitation to treat, therefore he got off under the law of
contract
...
The
Pharmaceutical Society of Great Britain brought an action to determine the legality of the system
with regard to the sale of pharmaceutical products which were required by law to be sold in the
presence of a pharmacist
...

Held: Goods on the shelf constitute an invitation to treat not an offer
...
The shop assistant then chooses whether to accept the offer
...


3
...
The
acceptance is the auctioneer bringing the hammer down, if he doesn’t do this then the contract isn’t
made
...
57 (2) states the sale is complete is when the hammer falls
...
Auction without a reserve being
held, then the sale is completed when the hammer goes down, regardless whether it was the
amount wanted or not, a contract has been made
...
Cave:
Mr Cave made the highest bid for Mr Payne's goods at an auction
...
It was held that the
defendant was not bound to purchase the goods
...
Note: The common law rule laid down in this case has now been codified in many countries
in variations of the Sale of Goods Act, e
...
UK 1979 s57(2)
...
Nickerson:
Nickerson advertised in the London newspapers that a public auction of certain goods and office
fittings would take place in Bury St Edmunds on 14 August 1872
...
Harris sued for £2 16s 6d (two days' lost time, railway fare and two days' board and
lodging)
...

Merely invitation to treat, no promise the articles would be put up for sale
...
Davies:
The auctioneer withdrew goods from an auction (the goods had no reserve price) when a bona fide
bid of £200 was effective
...
A

bid in an auction, the possibility of acceptance of the bid, unless the bid is withdrawn, and the
benefit to the auctioneer of driving up the price bid is sufficient consideration
...

4
...
A request for tenders is an invitation to treat
...
Generally, the
invitation to tender will be treated as an invitation to treat
...
Royal Trust of Canada:
The Royal Trust Co
...
Harvela bid
$2,175,000 and Sir Leonard Outerbridge bid "$2,100,000 or $101,000 in excess of any other
offer… expressed as a fixed monetary amount, whichever is higher
...
Harvela sued for breach of contract, saying a referential bid
was invalid
...





The request for tenders was an implied unilateral offer to accept the highest bid
...


Blackpool and Fylde Aero Club v
...
It was mistakenly marked
late and excluded from the competition
...
Held that if a tender was received before the deadline
then there was a contractual right that the tender be considered
...

Implied obligation without which no contractual relationship
Flexibility of rules of offer and acceptance
Reasoning: There were absolute conditions governing submissions of tenders in a formal
process, tenders were sought from a small number of firms, Blackpool was the incumbent
provider, bids were requested by a public authority
...
Court of Appeal found that the defendant was actually at breach
...

How remedies were calculated is not known, as they only loss the chance to be considered for a
contract, they did not actually lose the contract itself
...
Acceptance is an unqualified
expression of assent to the terms proposed by the offerer
...

Offer on its own does not lead to contractual liability, not yet consensus ad idem on objective view
...
Mirror principle, is that
acceptance must be an exact match to offer to be valid, as in they mirror each other
...
Miles Far East Corporation:
The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from
the defendants in Holland
...
The question for the court was at what point the contract came into
existence
...
If the acceptance took place when the telex was received
in London then the contract would be governed by English law
...

Offer accepted by telex from sellers received on PL’s machine in London
...

Held: CA contract made in London where acceptance received (not Holland where
acceptance sent from
...

Carlill v
...

Brogden v
...
They had been dealing
for some years on an informal basis with no written contract
...
The defendant drew up a draft contract and sent it to the
claimant
...
The defendant then simply filed the document and never communicated their
acceptance to the contract
...

Subsequently a dispute arose and it was questioned whether in fact the written agreement was
valid
...
The acceptance
took place by performing the contract without any objection as to the terms
...
(A slight wrinkle on the normal rule that acceptance had to be communicated
...
Original offer cannot be
revived if a counter offer has been made and rejected
...

Hyde v
...
The claimant in reply offered £950

which the defendant refused
...
The
defendant refused to sell to the claimant and the claimant brought an action for specific
performance
...
Where a counter offer is made this destroys the original offer so that it
is no longer open to the offeree to accept
Ignorance of Offer examples:
Williams v
...
The plaintiff, Mrs Williams, gave evidence at the
Hereford assizes against two suspects, but did not say all she knew
...

On April 25, 1831, the victim's brother and defendant, Mr Carwardine, published a handbill,
stating there would be a £20 for ‘whoever would give such information as would lead to the
discovery of the murder of Walter Carwardine
...
She claimed the reward
...
At the trial her motives were
examined
...
It was apparent that after the first murder trial, Mrs Williams had
been savagely beaten by Mr Williams
...
The advertisement amounted to a general promise or contract to
pay the offered reward to any person who performed the condition mentioned in it, namely, who
gave the information
...
Littledale J said, "If
the person knows of the handbill and does the thing,that is quite enough
...
"
R v
...
The claimant gave the information
...
He told the police "exclusively in order to clear himself"
...

Held: Higgins J interpreted the evidence to say that Clarke had forgotten about the offer of the
reward
...
The Court held it was necessary to act in "reliance on" an offer in order to accept it, and
therefore create a contract
...
" But here it was held that the
evidence showed, Mr Clarke was not acting on the offer
...

Gibbons v
...
T
...
It was held that the officer was entitled to claim
the reward
...
The case is
sometimes wrongly cited as authority for the proposition that acceptance in ignorance of an offer
is effective
...


Cross Offers:
Cross offers do not make a contract because there would be no chance for anyone to change their
mind
...
Further communication would be needed, a contract is formed by a promise from one
and a consideration for promise by another
...
)
Tinn v Hoffman
What if the offeror has specified some particular method of acceptance?
Manchester Diocesan Council for Education v
...

Felthouse v
...
He offered to purchase the horse and said if I
don't hear from you by the weekend I will consider him mine
...
The auctioneer had been asked not to sell the horse but had forgotten
...
The action depended upon
whether a valid contract existed between the nephew and the uncle
...

Re Selectmove:
Selectmove Ltd owed the Inland Revenue substantial sums in outstanding tax and national
insurance
...
Mr Polland said he
would have to check and would contact the managing director if it was unacceptable
...
Mr ffooks
subsequently claimed that the Revenue had said he could repay less
...

Held: In exceptional circumstances where offeree indicates offer is to be treated as acceptance
unless further communication: offeree is undertaking to speak – and if he does not his silence will
be acceptance
...
(Estoppel: The principle that precludes a person from
asserting something contrary to what is implied by a previous action or statement of that person or
by a previous pertinent judicial determination
...
(Opposite to receipt rule, whereby its not until acceptance has been
received by the offeror
...
The postal rule only applies if
it is deemed necessary to accept by post
...
Alexander
...
Lindsell
The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the
course of post'
...
On receiving the letter the claimant posted a

letter of acceptance the same day
...
The claimant sued for
breach of contract
...
This case established the postal rule
...
The acceptance then becomes effective when the
letter is posted
...
Fraser
The claimant received a note from the defendant with an offer to purchase a certain property
within 14 days
...
The defendant withdrew the offer before receiving the acceptance, but after the acceptance
was posted
...
Lord
Herschell argued: "Where the circumstances are such that it must have been within the
contemplation of the parties that, according to ordinary usage of mankind, the post must be used
as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it
is posted
...

Household Fire insurance co v
...
The
company allotted the shares to the defendant, and duly addressed to him, posting a letter
containing the notice of allotment
...
Later the company went bankrupt, and asked Mr Grant for the outstanding payments
on the shares, which he refused saying there was no binding contract
...
The
question was whether Mr Grant's offer for shares had been validly accepted, and was he legally
bound to pay?
Held: Bound even though they had not received the letter
...
Rejection
2
...
)
Dickinson v Dodds:
The defendant offered to sell his house to the claimant and promised to keep the offer open until
Friday
...
The defendant then asked a friend to tell the claimant that the offer was withdrawn
...
He then brought an action seeking specific performance of the
contract
...
Therefore no contract existed between the parties
...
The offeror is free to withdraw the offer at any time
before acceptance takes place unless a deposit has been paid
...
Lapse of time

Ramsgate Victoria Hotel v Montefoire
The defendant offered to purchase shares in the claimant company at a certain price
...
The
defendant had not withdrawn the offer but refused to go through with the sale
...

Held: The offer was no longer open as due to the nature of the subject matter of the contract the
offer lapsed after a reasonable period of time
...


4
...
Death
Bradbury v Morgan
JM Leigh requested Bradbury & Co to give credit to HJ Leigh, his brother
...
Bradbury thereafter credited HJ Leigh in the usual way of
their business
...
JM Leigh's executors (Morgan) refused to pay, arguing that
they were not liable as the debts were contracted and incurred after the death of JM Leigh and not
in his lifetime
...


Termination of uni-lateral contracts: (From what point?):
1
...
Errington Woods (1952) - Once performance has commenced
...
The house was put in
the father's name alone
...
The father then
became ill and died
...
After the father's death the son went to live
with his mother but the wife refused to live with the mother and continued to pay the mortgage
instalments
...

Held: The wife was entitled to remain in the house
...
The wife was in course of performing the acceptance of the offer by continuing to meet the
mortgage payments
...
Lord Denning held that once performance had commenced the Mother was estopped
from revoking the offer since it would be unconscionable for her to do so
...

2
...
Cooper – When complete performance has occurred
...
He introduced a potential purchaser
who was prepared to pay the minimum price asked for by the two companies but they refused to

sell the cinemas
...
’
3
...
Four Millbank Nominees (1978) – (Per incuriam) Revocation possible until full
performance subject to implied objection on offeror not to prevent performance
...
The terms had been agreed
but no written contract had been completed
...
00 am on the
22nd December he would complete the written contract
...
The claimant brought an action stating that
unilateral contract existed and the defendant was thus bound by that contract to complete the
written contract for the sale of the property
...
Goff LJ stated obiter on the issue of revocation of a unilateral
offer:- "Whilst I think the true view of a unilateral contract must in general be that the offeror is
entitled to require full performance of the condition which he has imposed and short of that he is
not bound, that must be subject to one important qualification, which stems from the fact that there
must be an implied obligation on the part of the offeror not to prevent the condition becoming
satisfied, which obligation it seems to me must arise as soon as the offeree starts to perform
...
"

Battle of the Forms – Termination of offer
Battle of the forms occurs where parties do business together and have a dispute between offer and
acceptance caused by whose terms the contract is on
...

1
...
Ex-cell-O Corporation
Ex-Cell-O wished to purchase a machine from Butler
...
The terms included a price variation clause and a term
that the seller's terms would prevail over any terms submitted by a purchaser
...
Ex-Cell-O put in an order for the machine at the stated price and sent a
set of their terms which did not include the price variation clause
...
This
slip stated that the contract would be subject to the terms stated overleaf
...
The machines were then delivered and Butler sought to enforce the price variation
clause and demanded an extra £2,893
...

Held: The offer to sell the machine on terms provided by Butler was destroyed by the counter offer
made by Ex-Cell-O
...
The contract
was concluded on Ex-Cell-O's terms since Butler signed the acknowledgement slip accepting those
terms
...


2
...
Amphenol Ltd
...
TI generated purchase orders which stated that
the purchase was to be on TI's own terms, and contained a delivery date of 26 weeks from the date
of the order
...
The judge held that the contracts were made when the
acknowledgment was returned to TI and the contract was made on TI's terms
...
On the facts, the context of a long-term relationship was not sufficient to oust the general
rule
...

Many contracts fit the offer and acceptance model as it is analytically convenient, the framework
allows for flexibility and it is well established
...

Clarke v
...
Each agreed to
the rules, one of which was that rule breakers are liable for all consequential damage, displacing the
statutory position that a defendant’s liability is limited
...

Held: The Court of Appeal held that there was a contract for the owner of The Satanita to pay Lord
Dunraven compensation
...
Lopes LJ agreed that there was a contract
...

New Zealand Shipping v
...
The stevedores were independent contractors who were
engaged to load and unload the ship by the ship owner
...
The owner of the machine brought an action against the stevedore after the limitation
period specified in the contract
...
The owner of the machine argued that the stevedores could not rely on the clause as they
were not privy to the contract and had not provided them with any consideration
...

Relying on the case of Scotson v Pegg, there is nothing to prevent consideration owed to a 3rd party
being valid consideration for a new promise to another party
...
The claimant's action was unsuccessful
...
Classique Coaches Ltd
...
He sold a piece of land attached to the filling station to Classique Coaches
to use for their business on the condition that they purchase all of their gas from Foley for as long as
he can supply it
...
After three years, a lawyer for Classique
Coaches claimed that because there was no stated price, the contract is not valid, at which point
Classique Coaches began purchasing gas from other suppliers, and Foley sued for breach
...

Held: Appeal dismissed
...
He struggles to fit
together the precedents of May & Butcher Ltd
...
, Ltd
...
(1932)
...
Further, if there was an issue with the price it should have been settled by arbitration as
was laid out in the contract – Classique breached the contract by going to other vendors
...

Walford v
...
Miles told Walford that if Walford provided a
letter of comfort from his bank for £2m by 20 March then 'he would terminate negotiations with
any third party or consideration of any alternative with a view to concluding agreements with'
Walford
...
' Walford provided the requested letter of comfort in
good time
...
On the same day Miles wrote to the third party
informing them that he had concluded terms for the sale of the property and the shares in the
company to Walford
...
Walford claimed that
there was a concluded contract between himself and Miles whereby Miles had agreed not deal
with a third party and not to give further consideration to any alternative offer
...

Held: [Counsel for Walford] accepted that as the law now stands and has stood for approaching 20
years an agreement to negotiate is not recognised as an enforceable contract
...
The reason is
because it is too uncertain to have any binding force
...
I think we
must apply the general principle that when there is a fundamental matter left undecided and to be
the subject of negotiation, there is no contact
...
The King
May & Butcher Ltd alleged that they had agreed with the Controller of the Disposals Board for the

purchase by them of all the tentage that might become available in the United Kingdom for disposal
up to 31 March 1923
...
' Clause 10 stated 'It is understood that all disputes with reference to or arising
out of this agreement will be submitted to arbitration in accordance with the provisions of the
Arbitration Act 1989'
...
The Court of Appeal affirmed Rowlatt J's decision
...

Hillas v
...
In the contract there was an option to purchase additional "100,000
standards" of lumber
...
" Hillas tried to exercise the
option but Arcos claimed the contract was cancelled
...
" Though they
expressed regret for doing so, MacKinnon J of the Court of Appeal followed the rule set out in the
case of May & Butcher v R which stated that if there are any essential terms of a contract of sale that
are to be set by a future agreement then the contract is void
...
First, whether the description of the goods in the
option clause was sufficient, and second, whether the option clause "contemplate[d] a future
bargain the terms of which remained to be settled
...
He argued that the context of
the language could suggest a precise meaning that would give certainty to the option clause
...
" To which he concluded, that Courts must interpret contracts "fairly and broadly" following
the maxim that "Words are to be so understood that the subject-matter may be preserved rather
than destroyed
...
Wright further noted that it would be mistaken to interpret the option as an
offer into a new contract despite the wording suggesting otherwise
...
Lord Wright also
noted that "a contract de praesenti to enter into what, in law, is an enforceable contract is simply
that enforceable contract, and no more and no less"
...
Both parties had experience in the
trade and had completed similar bargains in the past thus each would have known each other's
intentions at the time
...


Vagueness:
Scammell v
...
C
...
There was then some disagreement
and Scammel refused to supply the van
...
Whilst there was agreement on the
price there was nothing in relation to the HP terms stating whether it would be weekly or monthly
instalments or how much the instalments would be
...

Nicolene v
...
B
...
' On 16 August Simmonds replied by letter stating 'I thank
you for your letter and order of 10 August
...
' There were
no 'usual conditions' between the parties
...
Sellers J held that there should be implied
into the contract the usual force majeure and war clauses as contained in the 'printed form'
referred to by the defendant and that there was a concluded contract between the parties
...

Held: This case raises a short, but important, point which can be stated quite simply
...
The
material words are: "We are in agreement that the usual conditions of acceptance apply"
...
Use of doctrine severance to avoid the problem
...


Consideration:
Something of value given by both parties to a contract that induces them to enter into the
agreement to exchange mutual performances
...
It may consist of a promise to
perform a desired act or a promise to refrain from doing an act that one is legally entitled to do
...
In a unilateral contract, an agreement by which
one party makes a promise in exchange for the other's performance, the performance is
consideration for the promise, while the promise is consideration for the performance
...
A promise, for example, to
make a gift or a promise of love or affection is not enforceable because of the subjective nature of
the promise
...
A
gratuitous promise will not be enforced unless made in a deed
...




Consideration is before a concluded contractual has been formed and made
...




Consideration is important
...
But courts will not find
everything to be valid consideration
...
a duty imposed by general law
2
...
a duty imposed to the promisor by contract
Whether consideration as pastor not is a matter of fact
...
Evidence of seriousness
2
...
Explains measure of relief
4
...

Currie v
...
Mr Currie was the owner of the banking firm and the plaintiff
bringing the action
...
That first
day was the 14th of February Lizardi & Co
...
This draft or order was dated on the 14th, though it was, in fact, written on the 13th, and then
delivered to the banker
...
Lizardi failed, and on the afternoon
of the 14th the manager, learning that fact, stopped payment of the cheque
...
The role of request v
...

Thomas v
...
After his death the executors of his estate (Samuel Thomas, his brother, and Benjamin
Thomas) entered into an agreement with Eleanor (his wife) “in consideration of John's desires”
whereby Elanor would take possession of the house and in return maintain the house and pay

£1/year for the "ground rent"
...
The lower court found for Eleanor and Benjamin appealed
...
In the court's findings Justice Patteson held that motive is not the same as
consideration; consideration must be something which is of value in the eyes of the law
...
Thomas contained an
agreement to pay £1 rent/year which showed this was not merely a voluntary gift and was sufficient
consideration
...

Illustrates: Consideration must have some value in the eyes of the law, but the value need not be
‘adequate’
...


Critics of the above two cases:
Atiyah would say “Detriment not necessary
...
”
JC Smith would say benefit/detriment out of date
...


Issues with consideration:
1
...

3
...

5
...

7
...

Past consideration
The question of existing duty
Forbearance
Nominal consideration
...
Consideration must be sufficient but
does not need to be adequate
...

Nominal Consideration:
A benefit lacking sufficient legal value to justify a contract
...
i
...

the agreement/consideration between the parties to form a contractual relationship is made upon
upon/about an illegal basis
...
Firmstone Boilers [1838]
The plaintiff, at the request of defendant, consented to the defendant weighing two of the plaintiff's
boilers
...
The defendant did weigh
the boilers but failed to return the boilers within a reasonable time
...
The defendant claimed that since the plaintiff had furnished no consideration there
was no contract
...
I suppose this defendant thought he had some benefit; at any rate,
there is a detriment to the plaintiff his parting with the possession for even so short a time
...
The consideration here was the giving of
consent
...
Nestle [1960]
Nestle ran a sales promotion whereby if persons sent in 3 chocolate bar wrappers and a postal order
for 1 shilling 6d they would be sent a record
...
Under s
...
25% of this
...
The question for the court was
whether the chocolate bar wrappers formed part of the consideration
...
If the wrappers were a mere token or
condition of sale rather than constituting consideration, then the notice would be valid and Nestle
could sell the records
...
The fact that the wrappers were simply to be thrown away did not detract
from this
...
8
...

Forbearance:
Refraining from doing something that one has a legal right to do
...
A delay in enforcing a
legal right
...
)
Forbearance is often consideration for a promise by the debtor to pay an added amount
...
Bluett (No consideration if forbear unless forebear to enforce a legal right)
Mr Bluett had lent his son some money
...
The executor of Mr Bluett's estate was Mr
White
...
In his defense, the son argued that his father had
said the son need not repay if the son would stop complaining about how Mr Bluett would distribute
his property in his will among the children
...
The
son had ‘no right to complain’ anyway
...

Hamer v
...
Story I, (Defendant), for the sum of $5,000
...
Story had promised his
nephew, William E
...
Story II
accepted the promise of his uncle and did refrain from the prohibited acts until he turned the
agreed-upon age of 21
...
The uncle responded to his nephew in a letter dated
February 6, 1875 in which he told his nephew that he would fulfill his promise
...
The elder Story also declared in his letter that the money
owed to his nephew would accrue interest while he held it on his nephew's behalf
...
William E
...
Story II had meanwhile transferred the $5,000 financial interest to
his wife; Story II's wife had later transferred this financial interest to Louisa Hamer on assignment
...
As a result, Hamer sued the estate's executor, Franklin Sidway
...
Judge Alton Parker (later Chief Judge of the Court of Appeals),
writing for a unanimous court, wrote that the forbearance of legal rights by Story II, namely the
consensual abstinence from "drinking liquor, using tobacco, swearing, and playing cards or billiards
for money until he should become 21 years of age" constituted consideration in exchange for the
promise given by Story I
...

Wade v
...

Cock v
...

Pitt v
...
PHH Asset
Management Ltd were undisclosed agents of mortgagees, who were selling The Cottage for
£205,000
...
Mr Pitt bid £200,000, which PHH
accepted ‘subject to contract’
...
PHH withdrew its
acceptance of Mr Pitt
...
So PHH agreed to sell to him and said they would consider no further
offers
...
But then, PHH sold to Miss Buckle anyway
...
PHH argued in its defence, there was no consideration to not consider further offers (for
the lock out agreement), because Mr Pitt had only promised to be ready, willing and able to
proceed with exchange of contracts, and he was already obliged to do that
...
Atkinson
A couple were getting married
...
The father of the bride died without
having paid
...
The groom
made a claim against the executor of the will
...
Therefore he was not entitled to enforce the contract
...

Privity of contract: only a party to a contract can sue on it (Now modified by statute
...

Glasbrook Brothers v
...

The police provided the protection as requested and provided the man power as directed by the
defendants although they disputed the level of protection required to keep the peace
...
The
defendants refused to pay arguing that the police were under an existing public duty to provide
protection and keep the peace
...
They were therefore entitled to payment
...

Will depend on the assessment of whether the performance was extra ad necessary
...
Distinguish between duty and power
...

Williams v
...
)






Promisors duty to maintain herself was her own legal responsibility
But this was still seen as good consideration because a promise to perform an existing duty
is good consideration if there is nothing contrary to public policy
...
Byham [1856]
Makes ridiculously long statement in Williams about public policy
...

Shadwell v
...

But the promise appears to be gratuitous – it is unclear whether there was contractual
intent
...
Padavatton
...
The daughter was reluctant to do so at first as she had a well paid job
with the Indian embassy in Washington and was quite happy and settled, however, the mother
persuaded her that it would be in her interest to do so
...
This initial agreement wasn't working out as the daughter
believed the $200 was US dollars whereas the mother meant Trinidad dollars which was about less
than half what she was expecting
...
The Mother then agreed to purchase a house for the daughter to live in
...
The daughter then married and did not complete her studies
...
The question for the court was whether there existed a legally binding
agreement between the mother and daughter or whether the agreement was merely a family
agreement not intended to be binding
...
There was no evidence to rebut this
presumption
...
Bagots Trustee
(Cant find case online)
Consideration had been provided jointly by two promisees (payment had been authorised to wife as
a joint tenant
...

New Zealand Co v A
...
Satterthwaite:
A contract for the carriage of a machine by ship to New Zealand provided that the owners of the
goods could not sue the carriers or stevedores unless any claim was brought within one year of the
action giving rise to the cause of action
...
A stevedore damaged the machine whilst
unloading it
...
The stevedore sought to rely upon the clause in order to escape
liability
...

Held: The stevedores had provided consideration in the form of services of unloading the machine
...
Therefore the stevedores had
protection from the limitation clause
...


Past Consideration:
Consideration cannot be past
...
(Illustrated in the case below
...
The bungalow
formed part of the estate of her husband's father who had died leaving the property to his wife for
life and then on trust for Majorie's husband and his four siblings
...
However, the payment

was never made
...
Past consideration is not valid
...
The ‘promisee’ did not have the payment in mind when she did at work, so she was
not entitled to it
...

Lampleigh v
...
He asked the claimant to do
everything in his power to obtain a pardon from the King
...
The defendant then promised to pay him £100 for his efforts
but never paid up
...
The defendant was obliged to pay the claimant £100
...

Pao On v
...
The defendant was
anxious to complete the main contract as there had been a public announcement of the aquisition of
shares and did not want to undermine public confidence in the company and the consequent effect
on share prices
...
The defendant had taken legal
advice on all these matters before agreeing to the guarantee and indemnity
...

Held: There was no economic duress
...

In the present case the defendant did not protest at the time
...
He had taken legal advice and took no steps to avoid the agreement prior to the claimant
seeking to enforce the guarantee
...
It was simply
commercial pressure far short of duress
...
The past act was done at the promisors request
2
...
The promise would have been legally enforceable had it been made in advance
...
Promising extra:
Stilk v Myick:
The claimant was a seaman on a voyage from London to the Baltic and back
...
During the voyage two of the 12 crew deserted
...
The claimant agreed
...

Held: The claimant was under an existing duty to work the ship back to London and undertook to
submit to all the emergencies that entailed
...
Consequently he was entitled to nothing
...

No consideration because the crew was only doing what they contractually obliged to do
...

This promise to pay extra was not enforced by consideration, which therefore means the
promise is not enforceable
...
”

Doctrine of Duress: At the time of Stilk v Myrick there was physical duress however there was no
doctrine of economic duress
...
Every time a new
promise is made or changed, fresh consideration is needed for support
...
The captain promised the remaining crew members extra
money if they worked the ship and completed the voyage
...

Held: The crew were entitled to the extra payment promised on the grounds that either they had
gone beyond their existing contractual duty or that the voyage had become too dangerous
frustrating the original contract and leaving the crew free to negotiate a new contract
...

New circumstances had arisen before the new promise was made which entitled refusal of
initial obligations
...


North Ocean Shipping Ltd v Hyundai
The defendants agreed to build a ship for the claimants for a certain price specified in US dollars
...
The defendants threatened not to
complete unless the claimants paid an additional 10% on the contractually agreed price
...
8 months after delivery of the ship the claimants brought an action to recover the
additional sums paid
...







The shipbuilders had undertaken an additional contractual obligation which rendered them
liable to an increased detriment
...

No automatic obligation so no existing contractual duty to do so
...

These cases seem to suggest that the concept of ‘existing duty’ will be construed narrowly
...
Duty owed to promisor – Paying More
Williams v Rofey Bros & Nicholls (Court of Appeal)
The defendants were building contractors who entered an agreement with Shepherds Bush Housing
Association to refurbish a block of 27 flats
...
The defendants engaged the claimant to do the
carpentry work for an agreed price of £20,000
...
He approached the defendant who had recognised that the price was particularly low and was
concerned about completing the contract on time
...
The claimant continued work on the flats for a further 6 weeks but only
received an additional £500
...
The defendant engaged another carpenter to complete the contract and refused to pay the
claimant the further sums promised arguing that the claimant had not provided any consideration as
he was already under an existing contractual duty to complete the work
...
Therefore the defendant was liable to make the extra payments
promised
...

D had obtained a practical benefit from the promise to pay more for performance
...

This will amount to good consideration in the absence of duress or fraud
...

Practical benefit, avoiding
...

Glidewell LJ: The present state of the law on this subject can be expressed in the following
proposition
...
Promise to Accept Less
Pinnel’s Case:
The claimant was owed £8 10 shillings
...
The claimant sued
for the amount outstanding
...
Part payment
of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's
request part payment is made either:
a)
...
with a chattel or
c)
...

But if something else is given in addition, then paying less can be consideration
...
Edmunds [1933] 2 KB 223
The extra thing given, in exchange for the promise to accept less must be a benefit to the creditor
and requested by creditor
...
Paying less does not amount to practical
benefit
...
Dr
Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and
agreed she would not seek enforcement of the payment provided he kept up the instalments
...
Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the
interest
...
The agreement reached amounted to part payment of
a debt and under the rule in Pinnel's case this was not good consideration for a promise not to
enforce the full amount due
...

Absence of seal or nominal consideration
In Foakes there was no consideration for alleged promise to forego interest on judgement
debt
...


Discharge of debt by third party:
Accepting less from a third party can be consideration for abandoning entitlement to full payment
...
They lent money to the defendant Lieutenant Temple
who was an army officer serving in India
...
Some correspondence
went between the claimant and the father's solicitors
...
An amount was agreed which was a
substantial, amount although not the full amount due
...
The father
paid, but the claimant retained the promissory note and sued the son to enforce the balance
...
Where the
person making payment in return for discharging the debt owed by another this will amount to good
consideration as the existing duty to make payment was not owed by them but a third party
...

There was an agreement for good consideration to receive that lesser amount in satisfaction
of the debt
...


Criticisms of Consideration:
1
...

3
...


Over-inclusive: Enforces some non-bargains as bargains
Under-inclusive: It fails to enforce some undertakings which deserve enforcement
Overly-technical: It Is artificial and sometimes internally incoherent
Inconsistent with intention of parties, which can be seen as the primary concern
...
Most of the time, contract law dictates the terms of how
promises should be enforced
...
Courts use the
doctrine in these
...
Promissory estoppel was
developed by an obiter statement by Denning J (as he then was) in Central London Property Trust
Ltd v High Trees Ltd [1947] KB 130
...
R
...
Cas
...
The House of Lords affirmed the existence
of promissory estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761
...
Estoppel protects the reliance interest
...
Extent of original promise not clear
2
...

3
...
e
...
Shield not sword? Combe v Combe
...

5
...


The Classic doctrine:
Jorden v Money



Estoppel must relate to a statement of fact, it does not apply to a statement regarding
intention
...


Hughes v Metropolian Railway:
A landlord gave a tenant 6 months notice to carry out repairs failure to do so would result in
forfeiture of the lease
...
It was thought by both parties that a conveyance of the
property would take place
...
At the last minute negotiations broke down and the Landlord gave the tenant notice to
quit for failure to carry out the repairs
...

Lord Cairns CJ:- "It is the first principle upon which all Courts of Equity proceed, that if parties who
have entered into definite and distinct terms involving certain legal results - certain penalties or legal
forfeiture - afterwards by their own act or with their own consent enter upon a course of
negotiation which has the effect of leading one of the parties to suppose that the strict rights arising
under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person
who otherwise might have enforced those rights will not be allowed to enforce them where it would
be inequitable having regard to the dealings which have thus taken place between the parties
...

Promisor could rely on his rights later, after sufficient notice was given to the promise that
they would do so
...
It was a new block of flats at
the time the lease was taken out in 1937
...
In 1940 many of the flats were still
unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any
change to this situation in the near future
...
The agreement was put in writing and High Trees paid the reduced rent from 1941
...

Held: The rent would be returned to the originally agreed price for the future only
...
This case is important as Denning J (as he then
was) established the doctrine of promissory estoppel
...
Denning LJ "In my opinion, the time has now come for the validity of such a promise
to be recognised
...
”
Negates requirement of consideration
...
Rent goes back to full amount
...
Detrimental Reliance
Detrimental reliance is a term commonly used to force another to perform their obligations
under a contract, using the theory of promissory estoppel
...

Detrimental reliance must be shown to involve reliance that is reasonable, which is a
determination made on an individual case-by-case basis, taking all factors into
consideration
...

Ajayi v RT Briscoe Ltd
...
Briscoe's defence was based on
promissory estoppel; he claimed that Ajayi was estopped from claiming the money owed
because Ajayi had written to Briscoe stating '
...
' Briscoe argued that since the lorries were still off the road Ajayi could
not go back on the promise they had made in their letter
...
This equity is, however, subject to the qualification (a) that the other party has altered
his position, (b) that the promisor can resile from his promise on giving reasonable notice,
which need not be a formal notice, giving the promises a reasonable opportunity of
resuming his position, (c) the promise only becomes final and irrevocable if the promisee
cannot resume his position
...
The defence was first put forward effectively in the
Federal Supreme Court and further elaborated before their lordships on inadequate
material
...
”The
question remains whether the hire-purchaser has made good the defence
...
The hire-purchaser did not alter his position by
not putting forward counter proposals after receipt of the letter of July 22, 1957
...
It can be said that the
lorries were laid up and there is evidence to support the view that they were laid up after
the receipt of the letter of July 22, 1957
...
it cannot be said to have been proved that the lorries were not made
available for the hire-purchaser after they had been repaired
...

By contract, the sellers agreed to sell 250 tons of coffee beans at 262 Kenyan shillings per
cwt to El Nasr payable on credit
...
Whilst the contract stipulated the price payable in
Kenyan shillings, the credit account referred payment in pound sterling
...
These other discrepancies were rectified in a
revised agreement however, the new agreement still referred to payment in pound sterling
...
45
shillings
...
The buyers raised promissory estoppel in their defence in that in accepting the
instalment in pound sterling and redrafting the credit agreement without changing the
currency there was an implied promise that they would not revert to Kenyan Shillings
...

Held: Detrimental reliance is not a requirement of promissory estoppel
...

Brikrom Investment Ltd v Carr
A landlord made an oral promise to his tenants that if they bought a 99 year lease to their
flats he would repair the roofs of the flats at his own expense
...

After the leases had been signed by the tenants the landlord repaired the roof at a cost of
£15,000; he then claimed a contribution from the tenants towards the cost of the repairs
...
The landlord claimed that Carr could not rely on her promise since she had not
acted on his promise because she would have entered into the lease without any such
promise having been made
...
’ That it did in fact influence the promisee is then presumed
...
Equitable Conduct
DC Builders v Rees
Mr Rees instructed the claimant to do some building work at his home to the value of £746
...
The claimant wrote to the defendant several times pressing for payment but
was unsuccessful there had been no complaints as to the workmanship at this time
...
The defendant telephoned the home and Mrs Rees
answered she made complaints about the work and said she would give them £300 in
satisfaction of the whole debt
...
He called at the house to collect the money but Mrs
Rees remained firm that she would only pay £300 and demanded that the defendant wrote
on the receipt 'in completion of the account' otherwise she would pay him nothing
...
He subsequently brought an action to recover the balance
...

Held: The claimants were successful
...

3
...
When TMM heard of this they
waived all infringements in return for Tungsten paying 10% Royalty and also 30%
'compensation' if sales exceeded 50KG in any month
...
Tungsten struggled to make payments
...

Held: TMM could not enforce the compensation payments during the war years but could
enforce them on termination of the war
...
Generally promissory estoppel will merely
suspend legal rights rather than extinguish them
...

4
...
The managing director, Mr ffooks, met with Mr Polland, from the Inland Revenue

and said he would pay future tax as it fell due and the arrears at £1000 a month
...
Selectmove Ltd heard nothing till a £25,650 notice came in and a threat of a
wind-up petition
...
The High Court held that even if that were found to be true, Mr Polland had not bound
the Revenue, and there was no consideration for the varied agreement anyway
...
No
promise may have been made at all
...

Mr Collier was one of three partners of a property developer
...
From 1999 the
payments went down to £200 a month
...
The
other two partners went bankrupt in 2002 and 2004
...
Mr Collier applied under rule 6
...
6
...
So
the court just had to decide, was there a ‘genuine triable issue’
...

Held: Agreement to limit liability unsupported by consideration but promissory estoppel can enforce
promises to make part payment of debts
...
Must be true accord or voluntary acceptance by creditor
...

If a debtor offered to pay part only of the amount he owed; the creditor voluntarily accepted that
offer; and in reliance on the creditor's acceptance the debtor paid that part of the amount he owed
in full, the creditor would, by virtue of the doctrine of promissory estoppel, be bound to accept that
sum in full and final satisfaction of the whole debt
...

In addition, in those circumstances, the promissory estoppel had the effect of extinguishing the
creditor's right to the balance of the debt
...
The
wife brought an action to enforce the promise invoking promissory estoppel
...
There was no pre-existing agreement which was later modified by a promise
...
Estoppel cannot be used to
create a cause of action where one did not exist
...
Promissory estoppel
leaves the principle of consideration intact
...

Walton Stores Ltd v
...
He was negotiating with a department

store company called Waltons Stores for a lease of the land
...

In reliance on representations made before a contract was completed, Maher demolished the
building and started to erect a new one
...
Waltons told their solicitors to slow the deal while they did
further investigations as to whether the transaction would be good business, but allowed Maher to
remain under the impression that the deal would be completed
...
Promissory Estoppel can be extended to create a cause of action
...

Intention to create legal relations:
The parties to a contract must intend that they are undertaking legally binding obligations
...

Two presumptions:
1
...
Commercial settings: is an intention to create legal relations
...
At the time of
the agreement the couple were happily married
...
The wife sought to enforce the agreement
...






There is a presumption against ICLR in a domestic setting
An objective approach is taken when considering intention to contract
Court time should not be wasted with trivial disputes
Relevant that the parties had not yet separated when the agreement was made
...
The daughter was reluctant to do so at first as she had a well paid job
with the Indian embassy in Washington and was quite happy and settled, however, the mother
persuaded her that it would be in her interest to do so
...
This initial agreement wasn't working out as the daughter
believed the $200 was US dollars whereas the mother meant Trinidad dollars which was about less
than half what she was expecting
...
The Mother then agreed to purchase a house for the daughter to live in
...
The daughter then married and did not complete her studies
...
The question for the court was whether there existed a legally binding
agreement between the mother and daughter or whether the agreement was merely a family

agreement not intended to be binding
...
There was no evidence to rebut this
presumption
...


Merritt v Merritt
A husband left his wife and went to live with another woman
...
The husband signed an agreement whereby he would
pay the wife £40 per month to enable her to meet the mortgage payments and if she paid all the
charges in connection with the mortgage until it was paid off he would transfer his share of the
house to her
...

Held: The agreement was binding
...
Where spouses have separated it is generally
considered that they do intend to be bound by their agreements
...




The presumption in favour of ICLR does not apply to spouses who are separated
When the marriage breaks down it becomes necessary to make legal arrangements
regarding assets
...
The coupon was sent in the Grandmothers name each week and all three made
forecasts and they took it in turns to pay
...
The grandmother received £250 in prize money and refused to share it
with the other two
...

Held: There was a binding contract despite the family connection as the lodger was also party to the
contract
...





The presumption against ICLR can be rebutted
There was mutuality in the relationship (despite the fact that it was not formal)
Relevant that the agreement was nothing to do with it
...

Rose and Frank Co v JR Crompton & Bros Ltd
...
Under the agreement the claimants were to be the defendant's sole agents in the US until
March 1920
...
The defendants terminated the agreement early and the claimants brought an
action for breach
...
The agreement
therefore had no legal affect and was not enforceable by the courts
...

There was a clear indication there was no ICLR
The presumption was rebutted
Such clauses are interpreted restrictively so clear words must be used
...
He was to be made redundant
...
The claimant agreed to this
and withdrew his contributions
...

Held: The agreement had been made in a business context which raised a strong presumption that
the agreement is legally binding
...





In a commercial context, the party claiming there was no ICLR must prove it (but must rebut
the presumption)
There is a heavy onus that will not be discharged easily
The use of the term ‘ex gratia’ payment
...
The question for the court was whether these coins were
'produced in quantity for general resale' if so they would be subject to tax and Esso would be liable
to pay £200,000
...

Held: 3:2 There was an intention to create legal relations
...
However, the coins were not
exchanged for a money consideration and therefore the coins were not for resale
...

Triviality of subject matter is irrelevant

Overview of Policies behind ICLR:
1
...
Promoting market transactions
3
...
The Parole Evidence Rule states there is a presumption that the
written contract was meant to be the entire agreement
...
There are many exceptions to
this rule, thus the presumption is easily rebutted
...
The court’s have recourse to evidence if its consistent with the parties intentions
...
A legislative change would be even more confusing
...
g
...

An approach is slightly different when promises and assumptions have been added to
contractual obligations
There are 3 ways to look at what is in and out of a contract
...


Incorporation Techniques:
1
...
If a document is signed it will be difficult to argue that it
did not form part of the contract
...
)
L’Estrange v Graucob 1934
The claimant purchased a cigarette vending machine for use in her cafe
...
The vending machine did not work and the
claimant sought to reject it under the Sale of Goods Act for not being of merchantable
quality
...
Consequently her claim was
unsuccessful
...

Misrepresentation, as illustrated in the following case
...
She was asked to sign a form
...
The form in fact contained a clause excluding all liability for
any damage howsoever caused
...

Held: The assistant had misrepresented the effect of the clause and therefore could not rely

on the clause in the form even though the claimant had signed it
...

2
...
Course of dealing and custom

Oral terms overriding Written terms
...

City and Westminster Properties v Mudd [1959]
The lease said the tenant could only use No 4 New Cavendish Street, London, for business purposes
only
...
He had been assured he could live in the back
room of the shop and using the basement a living space as a wartime arrangement since 1941
...
In 1957,
after some changes of landlord and caution of surveyors, the new landlord tried to eject Mr Mudd
...

Counsel for the landlord (City and Westminster Properties) argued that reasonable notice was being
given and therefore it could not fall within the High Trees case
...

Incorporation by Notice
Usually unsigned but written contract
...
Notice must be given before or at the time of contracting
Olley v Marlborough Court
The claimant booked into a hotel
...
In the hotel room on the back of the door a notice
sought to exclude liability of the hotel proprietors for any lost, stolen or damaged property
...

Held: The notice was ineffective
...
It did not therefore form part of the contract
...
Term must be contained or referred to in document intended to have contractual effect
...
There was a notice on
the beach next to the deck chairs stating that the deck chairs could be hired at 2d for three
hours and also 'respectfully requested' the public to obtain tickets issued by the chair
attendants
...
In fact
there was an exclusion clause printed on the ticket excluding the council's liability for
personal injury caused in using the deck chair
...
The fabric of the deck chair split away from the frame
...

Held: The exclusion clause was not incorporated into the contract
...
Furthermore, the wording of the notice suggested that a person could

obtain the deck chair and get a ticket later
...
It would not be open to the council to introduce new
terms after the contract had been formed
...
Reasonable steps must have been taken to bring terms to attention of other party
...
On depositing his bag and paying two pence he received a ticket
...
On its back, it stated that the railway was excluded from
liability for items worth £10 or more
...
However, he admitted that he knew the ticket
contained writing
...
He sued the
company
...

At trial the jury found for Mr Parker as it was reasonable for him not to read the ticket
...
”
Interfoto Picture Gallery CA 1987
Interfoto delivered 47 photographic transparencies to Stiletto in a jiffy bag
...
It never opened the transparency bag or
read Interfoto's standard terms and conditions, which were inside the bag
...
After around a month,
Interfoto sent a bill for £3,783
...

Held: (Dillon LJ): Never became part of the contract
...
Quantum Meruit; reasonable sum of money to be paid for services rendered or work done
when the amount due is not stipulated in a legally enforceable contract
...

This condition was both unusual and unreasonable (compared to an industry standard) and
the notice given was insufficient
Demonstrates courts attempt to achieve a fairer outcome, or to give effect to the presumed
intention of the parties
...

The plaintiff put scratchcards with its newspapers-- Daily Mirror, Sunday Mirror and The People
...
Mr O’Brien on 3 July 1995 got two sums of £50,000
...
MGN had only intended to
have one prize of £50,000
...
MGN pointed to "Rule 5", which said
there would be a draw where more prizes were claimed than available
...
This only said ‘Normal
Mirror Group rules apply
...
The question was whether Rule 5 was
incorporated into the scratchcard agreement
...
Sufficient notice give, rules were referred to on face of scratch card
...

McCutcheon v MacBrayne 1964 HOL
The claimant's car sank in a car ferry owned by the defendant
...
Sometimes he had been asked to sign a document containing an
exclusion clause sometimes he had not been asked to sign a form
...
The defendant sought to rely on the exclusion clause claiming it had been
incorporated through previous dealings
...
The defendant was liable to pay damages
...
The defendants, Ipswich Plant Hire
(IPH), were doing some work on some marsh land and needed a dragline crane urgently so
contacted the claimant, British Crane Hire (BCH), to hire one
...
Unfortunately the crane sank in the marsh land so much that it
was out of sight
...
However, it cost
a great deal of money to get it out
...

A copy of the terms and conditions of hire were handed to the defendant on delivery of the crane,
although the defendant had not yet read or signed it
...

Held: The term relating to risk was not incorporated into the contract as the defendant was unaware
of it at the time the contract was made, however, the court implied the term into the contract as
both parties were in the business of plant hire and it was known to both that the use of such terms
was prevalent in the trade
...

Statutory intervention
Unfair Contract Terms Act 1977 submit exclusion clause to test of reasonableness so incorporation
not so key
...

Tests
There is a basic test that is illustrated in the case of Heilbut Symons & Co v Buckleton [1913] AC 30
...

Heilbut Symons & Co v Buckleton [1913] AC 30
Heilbut, Symons & Co were rubber merchants who were underwriting shares of what they claimed
was a rubber company
...
In
response to the questions, the manager stated that they were "bringing out a rubber company"
...
The shares turned out not

to be for a rubber company at all
...
Buckleton sued for breach of
warranty
...
Nevertheless, at trial it was found that there was a warranty in the statement regarding
the rubber company
...

Intention must be deduced from the totality of the evidence – objective test
...
He asked the
seller if the hops had been treated with sulphur and told him if they had he wouldn't buy them as he
would not be able to use them for making beer if they had
...
In fact they had been treated with sulphur
...
His action for breach of contract was successful
...
The
registration document stated it was first registered in 1948
...
The son
stated the car was a 1948 model and on that basis the Oscar Chess offered £290 off the purchase
price of the Hillman
...
8 months later Oscar Chess ltd found out that the car was in fact a 1939 model and
worth much less than thought
...

Held: The statement relating to the age of the car was not a term but a representation
...

Routledge v McKay [1954] - Also Illustrating Special Knowledge
The claimant acquired a Douglas BSA motorcycle and sidecar by exchanging another motorcycle and
paying £30
...
The
motorcycle was in fact a 1936 model but had been modified and re-registered by a previous owner
...

Held: The statement was a representation and not a contractual term
...
Neither party was an expert, and there was a
lapse of time between the making of the statement and entering the contract giving the claimant
the opportunity to check the statement
...
Denning stated not a contractual statement as no intent,
seller pointed to log book but had no knowledge
...

Esso's experts had estimated that the petrol station would sell 200,000 gallons of petrol
...
The planning
permission changed the prominence of the petrol station which would have an adverse affect on the
sales rate
...
The rent under the tenancy was also based
on the erroneous estimate
...
In fact, despite his best endeavours the petrol station only sold 78,000 gallons in
the first year and made a loss of £5,800
...
However, the claimant was entitled to
damages based on either negligent misstatement at common law or breach of warranty of a
collateral contract
...
Reade [1913] – Illustrating Verification/Reliance
The claimant purchased a horse from the defendant
...
Whilst he was examining the
horse, the defendant told him that the horse was sound
...
In
reliance of these statements the claimant purchased the horse which turned out to have a
hereditary eye disease and was therefore not able to be used as a stud
...
The defendant had assured him he could rely on his
word and the claimant had communicated the purpose for which the horse was to be used
...

Ecay v Godfray [1947] – Illustrating Verification/Reliance
The defendant sold a boat to the claimant
...
The boat turned out to be
defective
...
The statement was not
sufficiently emphatic to amount to a term and the advice to have the boat surveyed demonstrated
the defendant did not wish the claimant to rely on the statement
...
Couldn’t find case
...
Legal justification for implication of terms not specifically agreed by parties? Custom and
statute reasonably straightforward, the problem lies with terms implied by courts (fact and law
...
Terms implied by the courts (fact and law)
2 Issues; why can a court imply a term? What term can be implied? Legal justification:
presumed intention of parties? Terms implied because it is necessary, a test is necessity
however though
...

a) Fact
Where parties have failed to provide for events/specific particular transaction
...

The Moorcock [1889]
The claimant moored his ship at the defendant's wharf on the river Thames
...
The ship became damaged due to uneven surfaces and rocks on the river
bed
...

Held: The court implied a term in fact, that the river bed would be safe for mooring
...
If the contract makes business sense without the term, the courts
will not imply a term
...
Term
to be implied: one that gives business efficacy
...
’
Shirlaw v Southern Foundries 1939
The claimant had been employed as a managing director of Southern Foundries the office of
employment was to last for 10 years
...
They then dismissed the claimant as a director who brought an
action for wrongful dismissal
...
However, if he was not a director he was not able to be a managing
director
...

Held: The Court of Appeal applied the officious bystander test and did imply the term
...
It must be obvious that both parties would
agree to the term at the time the contract was made
...

Modern Approach: Commercial Contracts
...

AG of Belize and others v Belize Telecom Ltd [2009]
Mediterranean Salvage and Towage Ltd v Semar Trading and Commerce [2009]
Case re-emphasizes test of necessity
...
‘Definable category of contractual
relationship
...
Somewhere
between necessity and reasonableness
...
The
common parts of the flats, the lifts, stair cases, rubbish chutes etc, had fallen into disrepair
...
The council
sought to evict the defendant for non payment of rent and she counter claimed for breach
of an obligation to repair
...
In fact the tenancy agreement only imposed obligations on the tenant with no
mention of the obligations of the landlord
...

Held: The courts did imply a term
...
However, there was no breach of this duty
...
Note that there is a high standard for the
necessity test
...
Terms implied by statute
Sale of Goods Act 1979
...
12: title
...
13: Sale by description- implied term that goods will
correspond with description
...
14 Sale in course of a business – implied term goods are of
satisfactory quality
...
14(3) reasonably fit for purpose if… S
...

3
...
The claimant had
planted corn and Barley on the fields and worked the fields to ensure the crops would grow
...
The claimant then
submitted a bill to the defendant for the work and cost of seed spent on the field as was
customary in farming tenancies
...

Held: The court implied a term into the tenancy providing for compensation for the work
and expenses undertaken in growing the crops
...

In certain transactions there is a presumption that the parties intended more than they put
into the contract
...

Classification of terms:




Conditions: Breach entitles innocent party to terminate and claim damages
...


Three ways to classify terms:
1
...
g
...
Courts

3
...
’
Schuler v Wickman [1974]
Schuler were manufacturers of certain tools and Wickman were a sales company granted the sole
right to sell certain tools manufactured by Schuler
...
This imposed an obligation to make 1,400 visits
in total
...

Held: Despite the fact the contract had expressly stated the term was a condition, the House of
Lords held that it was only a warranty
...

Hong Kong Fir Shipping [1962]
A ship was chartered to the defendants for a 2 year period
...
The problems developed with the engine of
the ship and the engine crew were incompetent
...
The defendants treated this as a breach of condition
and ended the contract
...

Held: The defendants were liable for wrongful repudiation
...
Rather than seeking to classify the term itself as a condition or warranty, the court
should look to the effect of the breach and ask if the breach has substantially deprived the innocent
party of the whole benefit of the contract
...
20 weeks out of a 2 year contract period did not substantially deprive the
defendants of whole benefit and therefore they were not entitled to repudiate the contract
...
Parties’ intentions not determinative
...

Clause 7 of the contract of sale stated 'Shipment to be made in good condition'
...
When the cargo was unloaded from the
Hansa Nord on 25 May it was discovered that the cargo in hold two, 2,053 tons, was in good
condition but that some of the cargo in hold one, 1,260 tons, was damaged
...
The sellers refused to
accept the rejection of the cargo
...

The cargo was bought by a third party for £33,000 who then sold it to the original buyers for
£33,000
...
The issue before the court
was whether the 'Shipment to be made in good condition' term in the contract was a condition
Held: Intermediate (innominate) term
...
Roskill LJ refers to ‘market fluctuations
...
A clause in the agreement stated the ship was expected ready to load on 1st
July
...
The defendant cancelled the contract on 17th of July
...
The ship owners
brought an action against the defendants for anticipatory breach
...

Held: The expected ready to load clause was a condition despite the fact it had caused no loss to the
defendant
...

Bunge v Tradax [1981]
A contract for the sale 5,000 tons of soya beans required the buyers to give the sellers 15 days notice
of readiness of loading
...
The buyers gave a shorter notice period
and the sellers treated this as terminating the contract and claimed damages
...
The initial hearing was decide by arbitration where it was
held that the sellers were entitled to end the contract and awarded $317
...
The buyers appealed to the High court who reversed this
decision applying the innominate term approach from Hong Kong Fir
...

Held: the term was stated as a condition and should be treated as such
...

Time clause was a matter of construction condition
...
’
Limitation Clauses limit rather than exclude liability
...
Conditional Duty is timely delivery is required only if there
is no erupting volcano
...
See cases referred to earlier:
Interfoto v Stiletto and Curtis v Chemical Cleaning
...
For
example, ‘new car’ does not include ‘old car’ n’or does ‘goods delivered’ include ‘partially delivered
goods
...

Construction: Liability for Negligence
Historically, in order to exclude liability for negligence, the word ‘negligence’ or a synonym had to be

used
...
Note now that the exclusion of
liability for negligence would not be permitted under the UCTA
...
The lease contained the
following clauses: Clause 7 said "the lessee (ie, CSL) shall not have any claim… for… damage… to…
goods… being… in the said shed
...
Clause 17 said “the lessee shall at all times indemnify
...
by whomsoever made
...
by virtue
hereof, or the exercise in any manner of rights arising hereunder
...
According to proper practice he was negligent and should
have used a hand drill because sparks flew and lit some cotton bales
...
The Crown argued that CSL could
not sue because clause 7 excluded liability
...

Suisse Atlantique v Rotterdamsche Kolen Centrale
The case involved the charter of a ship for two years’ consecutive voyages between US and Europe
...
The owners were to be paid according to the number
of voyages made during the two-year period
...
The charterers were
taking many extra days in loading and unloading but were allowed to continue to have the use of the
ship for the remainder of the two years
...
However, the owners alleged
that the charterers delay in loading and unloading had made a further six trips impossible and sued
for damages
...

The total demurrage, at $1000 per day, was $150,000
...

Held: Doctrine of fundamental breach did not allow a party to ignore a limitation clause otherwise it
would be a violation of freedom of contract
...
Doctrine of fundamental breach virtually abolished
...
The security
guard’s negligence caused the destruction of the claimant’s factory by fire
...

Held: Where the parties re negotiating at arms length, and have set out who should bear the risks,
the courts should be unwilling to interfere
...


Limitation Clauses
Limitations at common law are interpreted less restrictively than exclusion clauses
...

As a result of negligence and breach of contract the claimant’s vessels sunk
...
The House of Lords held that where the clause limits liability rather than
excludes liability altogether the courts should apply the natural meaning of the clause and not be
too eager to find ambiguity
...
The relevant words must be given, if possible, their natural,
plain meaning
...
Clauses of
limitation are not regarded by the courts with the same hostility as clauses of exclusion
...
The claimant planted the seed over 63 Acres and spent many hours of labour on the crops
...
The
contract contained a clause which limited liability to the price of the seeds
...

The Court of Appeal held that the clause was unreasonable as the buyer would not have been aware
of the fault whereas the seller would
...
The enforcing party could have insured against the liability without
materially affecting prices
...

Unfair Contract Terms Act 1977
Act applies to clauses that seek to restrict or exclude business liability
...

Gateways have to be follow
...






Controls only Exemption clauses in favour of consumers generally and of businesses dealing
on standard terms
...

Applies only to business liability
Certain types of contract are excluded
...
g
...
2 can no longer exclude liability for death or personal injury; attempts to exclude
other loss subject too reasonableness test
...
2(1) prevents entirely the exclusion or restriction of liability for negligently caused physical injury
...
2(2) exclusion or restriction of negligently caused loss or damage (other than injury) must be
reasonable
...
1: An obligation to take reasonable care or skill in the performance of

a contract
...

UCTA: Contract s3: Where one deals as a consumer or on the others written standard terms of
business attempts to exclude liability for breach subjected to test of reasonableness
...
3(1)a: Where one party is a consumer or deals on standard written terms, the exclusion or
restriction of liability is not permitted unless the clause is reasonable
...
12 definitions of ‘consumer’ – not acting in the ordinary course of a business and the other party is
acting in the ordinary course of a business
...
Ltd v United Dominions Trust
R&B was a shipping broker and a freight forwarding agent, but merely a two person company
...
The car roof leaked, a breach of section 14(3) of the Sale of Goods Act 1979
...
R&B argued that this was contrary to UCTA 1977 section 6, and United Dominions
contended that R&B could not avail themselves of the Act because as a business they could not
count as a consumer
...

s
...


These factors are not exhaustive
...
The claimant planted the seed over 63 Acres and spent many hours of labour on the crops
...
The
contract contained a clause which limited liability to the price of the seeds
...

Held: The Court of Appeal held that the clause was unreasonable as the buyer would not have been
aware of the fault whereas the seller would
...
Under the contract the
claimant had to have a driver provided by Hampstead
...
The driver (Hyland) crashed the JCB into a building owned
by the claimant causing extensive damage
...
The contract was entered into at short notice
2
...
The claimant was forced into a take it or leave it situation as had no choice but to accept the

driver
...
There was little opportunity to arrange own insurance cover
5
...

It was held the clause was unreasonable because; unequal bargaining power, term on standard form
agreement (non-negotiated), Philips had little opportunity to arrange insurance, Philips had no
choice as to the identity of the driver
...
13 a) prevents making liability or its enforcement subject to restrictive or onerous
conditions
...
13 b) prevents excluding or restricting any right or remedy or subjecting a person to any
prejudice as a consequence of pursuing this remedy
S
...

Terms implied by Sale of Goods Act




S
...
12 of the sale of goods act cannot be
excluded or restricted
...
6(2) a prevents attempts to exclude or restrict liability for breach of the terms implied by
the SOGA ss
...

S
...
13-15 in
contracts between businesses: terms can be excluded if it reasonable
...
’
Concepts: ‘Consumer’ is any natural person who is acting for purposes outside his business,
trade or profession
...

‘Non-individually negotiated’: drafted in advance – therefore the consumer is not able to
influence content
...
g
...

‘Unfairness’: contrary to the requirement of good faith, there is a significant imbalance
between the parties’ rights and obligations to the detriment of the consumer
...
The
House of Lords were determining the question of whether a clause, providing that interest at the
contractually agreed price, was payable after a judgment, came within the ambit of Regulation 3 of
the 1995 Regulations
...

Lord Steyn: "In any event, article 3(2) must be given a restrictive interpretation
...
Similarly, article
3(2)(b) dealing with "the adequacy of the price of remuneration" must be given a restrictive
interpretation
...
That is not what is intended
...
"
On the issue of the meaning of good faith under Reg 5
Lord Bingham: "Good faith in this context is not an artificial or technical concept
...
It lays down a composite test, covering both the
making and the substance of the contract, and must be applied bearing clearly in mind the objective
which the regulations are designed to promote
...

2
...

4
...

6
...

8
...


Type of Dealing
‘Consumer’
Standard Form or Negotiated
Types of clauses
Black list or grey list
Review Mechanism
Guidelines
Burden of Proof
Enforcement

Contract Notes Term 2
Regulating pre-contract negotiations
There are two possible ways in principle:
- Each party under duty to disclose to other party all relevant information within his knowledge, OR
- No general obligation of disclosure, but rule that if you do provide information to the other party,
then what you provide must be accurate
...
) The other party can in principle rescind the
contract and in some circumstances damages may be available
...
However
there are some exceptional cases, such as;
1
...


2
...
This meant that the price was
roughly one third of what it should have been
...

Held: The court held that the contract was void for mistake
...


3
...
The claimant was induced to
buy the practice by the defendant's statement that the practice took £2,000 per annum
...
However, subsequently the defendant became
ill and many patients went elsewhere
...

Held: Where a statement is rendered false by a change in circumstances there is a duty to
disclose the change
...


4
...

Notts
...
v Butler [1866]

5
...
v Aprilia World Service BV [2002]
The Spice Girls (SGL) entered into a contract with an Italian company, Aprilia World Service
(AWS), who manufactured motorcycles
...
At the time of entering the
contract AWS believed that all the Spice Girls would remain members of the group until the
end of the tour
...
AWS claimed
that the Agreement had been induced by misrepresentation
...


Fiduciary relationships

Misrepresentation
A misrepresentation is a false statement of fact or law which induces the representative to enter a
contract
...
There are three types of misrepresentation:
1
...
Negligent misrepresentation
3
...
The remedy available
depends on the type of misrepresentation, but generally consists of rescission and/or damages
...

In order to amount to an actionable misrepresentation, certain criteria must be satisfied:
1
...

Bisset v Wilkinson [1927] AC 177
The claimant purchased a piece of farm land to use as a sheep farm
...
The seller had not used it as a sheep farm but estimated
that it would carry 2,000 sheep
...
The estimate turned out to be wrong and the claimant brought an action for
misrepresentation
...
The claimant's action
was therefore unsuccessful
...
Esso's experts had estimated that the petrol station would sell 200,000 gallons of
petrol
...
The planning permission changed the prominence of the petrol station which
would have an adverse effect on the sales rate
...

The rent under the tenancy was also based on the erroneous estimate
...
In fact, despite his
best endeavours the petrol station only sold 78,000 gallons in the first year and made a loss
of £5,800
...
However, the
claimant was entitled to damages based on either negligent misstatement at common law or
breach of warranty of a collateral contract
...
The seller described one of the tenants as being 'most
desirable'
...
This was held to be a statement of fact rather than opinion as the seller was in a
position to know the facts
...
The company prospectus
stated the shares were being offered in order to raise money to expand the company
...

Held: Despite the fact that the statement related to a statement of future intent, it was an
actionable misrepresentation as the defendant had no intention of using the money to
expand the company
...
In fact the current occupant was in fact a tenant protected under the
Landlord and Tenant Act 1954
...
The rule barring recovery for mistake of
law was abolished by the House of Lords in Kleinwort Benson v Lincoln County council
...
The claimant's action was therefore successful
...
In fact the oats were new oats
...
The seller was aware of the mistake of the claimant but said
nothing
...

Held: both actions failed
...
The defendant had not mislead the claimant to believe they
were old oats
...

…Unless it is a contract of uberrimae fidei
...
e
...
In such contracts, a
duty exists to disclose all material facts and a failure to do so may give rise to an action for
misrepresentation
...

HIH provided insurance for the event that the film did not make enough revenue to repay
the loan
...

HNA obtained the insurance policies but in doing so made certain fraudulent
misrepresentations and failed to disclose a report that suggested the films were unlikely to
make a profit
...
The insurance company refused to pay out
claiming to rescind the contract for misrepresentation and a failure to disclose a material
factor as required under s
...
S
...
The contract of
insurance contained a truth of statement clause which provided:

"[6] the Insured will not have any duty or obligation to make any representation, warranty or
disclosure of any nature, express or implied (such duty and obligation being expressly
waived by the insurers
[7] and shall have no liability of any nature to the insurers for any information provided by
any other parties
[8] and any such information provided by or nondisclosure by other parties including, but
not limited to, Heath North America & Special Risks Ltd (other than section I of the
questionnaire) shall not be a ground or grounds for avoidance of the insurers' obligations
under the policy or the cancellation thereof
...

Held: The clause was ineffective
...

If a statement made becomes false because of a later change of circumstances, there is an
obligation to disclose the change of circumstances:
With v O’Flanagan [1936] Ch 575
See above for case summary
2
...
This is the subjective test
...
There can be no inducement or reliance if the representee was unaware of the
false statement
...
His action for
misrepresentation failed as he hadn't inspected the gun before purchasing it
...

If the representee or their agent checks out the validity of the statement they have not
relied on the statement:
Attwood v Small [1838] UKHL J60
The claimants purchased Corngreaves estate from the defendant for £600,000
...
Many of the properties were subject to leasehold and generated income
...
A preliminary agreement was made
between the parties whereby the claimant agreed to purchase subject to being satisfied that
the reports and accounts given by the defendant were accurate
...
The claimant then proceeded with the purchase
...

Held: The claimant was unsuccessful
...


If the representee is given the opportunity to check out the statement but does not in fact
check it out, they are still able to demonstrate reliance:
Redgrave v Hurd [1881] 20 Ch D 1
A solicitor purchased into the partnership in the solicitors' firm
...
He
declined the offer to check the accounts and took them at their word
...

Held: He was entitled to rescind the contract as he relied on the statement
...

The right counterfactual is: What would the representee have done if no representation had
been made?
Raiffeisen Zentralbank Osterreich v Royal Bank of Scotland [2010]
Remember, the misrepresentation need not have been the only or main thing that the
representee relied on, it is just important that it played a ‘real and substantial part, in
inducing the claimant to act
...
A
misrepresentation can be classed as either; fraudulent misrepresentation, negligent
misrepresentation under s
...

Fraudulent misrepresentation
Lord Herschell defined fraudulent misrepresentation in Derry v Peek as a statement which is made
either:
i)
ii)
iii)

Knowing it to be false
Without belief in its truth, or
Recklessly, careless as to whether it be true or false
...

Derry v Peek [1889] 5 T
...
R
...
However, at the time the right to use steam powered
trams was subject of approval of the Board of Trade, which was later refused
...

Held: The statement was not fraudulent but made in the honest belief that approval was
forthcoming
...
The burden of proof being on the
representor to demonstrate they had reasonable grounds for believing the statement to be true
...
In order
to make an accurate estimate for tender of the work to be completed, Ogden asked HM the capacity
of the barge
...
In fact the entry in Lloyds
register was wrong
...
Consequently the work carried out by
Ogden took much longer and cost a great deal more to perform
...
HM argued that they had reasonable grounds for believing the
statement to be true as they had checked Lloyds register
...

Wholly innocent misrepresentation
An innocent misrepresentation exists where the representor can demonstrate reasonable grounds
for belief in the truth of the statement
...
2(1) Misrepresentation Act 1967
...
For all
types the remedy of rescission is available
...
Each party gives back the benefit which they had received under the contract
...

Remedies for fraudulent misrepresentation
Where there has been fraudulent misrepresentation, the innocent party is entitled to rescind the
contract and claim damages
...
There is thus no requirement that the damages are
foreseeable
...
The trial
judge assessed damages on contractual principles as to what position the claimant would have been
in had the statements been true and awarded a sum of £1,500
...
The claimant appealed on the
assessment of damages
...
Where there has been a fraudulent misrepresentation damages should be
assessed in the tort of deceit
...
The object of damages is to put the plaintiff in as good a position,
as far as money can do it, as if the promise had been performed
...
The object of damages is
to compensate the plaintiff for all the loss he has suffered, so far, again, as money can do it
...
In fraud, they are not so limited
...
”
Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051
Citibank loaned £23M to Parent Industries Incorporated (PII)
...
PII then defaulted on the loan
...
Mr Roberts was a senior employee of citibank
and a director of the defendant company arranged the sale
...
The market value of
the shares was stated as 78-82p per share, however, a massive fraud had been perpetrated on FIS
which meant the market value was fictitious
...
Smith subsequently
sold the shares in small parcels between Nov 1989 and April 1990 for prices between 30-49p per
share making a loss of 11
...

Lord Browne Wilkinson gave the following guidance in assessing damages for fraudulant misrep:
1
...
Although such damage need not have been foreseeable, it must have been directly caused by the
transaction;
3
...
As a general rule, the benefits received by him include the market value of the property acquired
as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so
would prevent him obtaining full compensation for the wrong suffered;
5
...

6
...
The plaintiff must take all reasonable steps to mitigate his loss once he has discovered the fraud
...
Royscott v Rogerson confirmed that
the principle in fraudulent misrepresentation relating to tortious damages applied also in negligent
misrepresentation
...
The finance company operated a rule whereby they would only advance
money if a 20% deposit was paid by the company
...
This was the amount
the customer needed to borrow, although the price and deposit values stated were false
...
The claimant brought
an action against the defendant seeking damages of £3,625 representing the difference between
£6,400 paid to the defendant minus the sum of £2,774 paid by the customer before defaulting
...
The trial judge accepted neither submission
...
Because the Finance Company were induced to
pay an extra £1600, which was the relevant loss suffered by the Finance Company
...

Held: Damages under s
...
This applies in the absence
of fraud
...
2(1) was clear and not capable of an alternative construction
...
The claimant cannot claim both
...

Bars to rescission:
1
...
g
...
If, however, the representee does an act to rescind the contract before a sale has
taken place, the 3rd party has not acquired any rights:
Car & Universal Credit v Caldwell [1964] 2 WLR 600
Mr Caldwell sold his Jaguar car on 12th Jan to a rogue, Norris, who had paid £10 cash
deposit and left another car as security and gave a cheque for £965
...
Mr Caldwell reported the incident to the police and used his
best endeavours to co-operate with the police to find Norris in order to rescind the contract
of sale
...
Norris had
acquired a voidable title to the car as the contract was induced by fraudulent
misrepresentation
...
The question for the
court was whether the actions taken by Mr Caldwell were sufficient to avoid the contract
...
He had taken all steps possible to
demonstrate that he no longer wished to be bound by the contract
...

2
...
The lorry was advertised in a newspaper
which described the lorry as being in exceptional condition
...
He went to view it
the following day and was told it was capable of doing 40 mph and 11 miles to the gallon
...
The claimant still decided to
purchase the lorry
...
The claimant accepted this
...

Held: By accepting the offer of payment for half the repairs when he became aware of the
defects, the defendant had lost his right to rescind as he had affirmed the contract
...
Lapse of Time
The right to rescind will be lost after lapse of time
...
If a wholly innocent misrepresentation
time runs from the entering of the contract
...
Both parties believed that the
painting was by the artist Constable
...
The claimant brought an action based both on
misrepresentation and mistake
...
With innocent misrep the time starts to run from
the date of the contract not the date of discovery
...
He believed he was
buying a painting and he got a painting
...
Restitution in integrum is impossible
Where it is impossible to restore the parties to their pre-contractual position, e
...
where the
goods have perished or been consumed, the right to rescind will be lost
...

Pearson v Dublin Corporation [1907]
But could exclude liability for his own negligent and innocent misrepresentations, subject to
usual incorporation/interpretation rules
...
Common mistake (Mutual Mistake) – where both parties make the same mistake
Common mistake exist where both parties to the contract make the same mistake
...

Res extincta – the subject matter of the contract no longer exists
Res exctincta will apply where both parties enter a contract with the belief that the subject
matter exists when in fact it does not exist
...
When in fact he was dead
...
6 Sale of Goods Act 1979
...
This will
generally render the contract void
...
His uncle died
...
It later transpired that the uncle had
given the nephew a life tenancy in his will
...

This is an instance of res sua
...
The
lease was held to be voidable rather than void as the claim was based in equity as it related
to beneficial ownership as oppose to legal ownership
...
In particular Lord Denning argued that
such a position of the law existed in Solle v Butcher
...

A mistake as to quality is only capable of rendering a contract void where the mistake is as to
the existence of some quality which renders the subject matter of the contract essentially
different to that what it was believed to be:
Bell v Lever Bros [1932] AC 161
Lever bros appointed Mr Bell and Mr Snelling (the two defendants) as Chairman and Vice
Chairman to run a subsidiary company called Niger
...
However, due to poor performance of the Niger
company, Lever bros decided to merge Niger with another subsidiary and make the
defendants redundant
...
The defendants accepted the offer and
received the payments
...
Lever bros brought an action based on mistake in
that they entered the agreement thinking they were under a legal obligation to pay
compensation
...
The action therefore
failed
...
Both parties believed that the

painting was by the artist Constable
...
The claimant brought an action based both on
misrepresentation and mistake
...
With innocent misrep the time starts to run from the date of the contract not the date
of discovery
...
He believed he was buying a painting and he got a painting
...
However, it will be very difficult
to show these things
...
The courts apply an
objective test to see if the contract can be saved
...
e
...
If yes, the contract is valid on that meaning
...

Raffles v Wichelhaus [1864] 2 H & C 906
The parties entered a contract for the sale of some cotton to be shipped by 'The Peerless'
from Bombay
...
The
defendant thought that it was the October sailing and the claimant believed it was the
December sailing which had been agreed
...
Therefore the contract was
void as there was no consensus ad idem
2
...
There are two categories within
unilateral mistakes: mistakes relating to the terms of the contract and mistakes as to
identity
...

Mistakes as to the terms of the contract
Hartog v Colin & Shields [1939] 3 All ER 566
The defendants mistakenly offered a large quantity of hare skins at a certain price per pound
whereas they meant to offer them at that price per piece
...
The claimant accepted the offer
...
Hare skins were generally sold per piece
and given the price the claimant must have realised the mistake
...
In fact the oats were new oats
...
The seller was aware of the mistake of the claimant but said nothing
...

Held: both actions failed
...
The defendant had not mislead the claimant to believe they were old oats
...

Mistake as to identity
Mistakes as to identity are generally induced by fraud in that one of the parties is claiming to be
someone who they are not
...
A claim based in
mistake is more favourable to one based in misrepresentation as the effect of a finding of mistake is
that the contract is void as oppose to voidable
...
If the contract is void the rogue will never receive title to the
goods an will not be able to pass title when selling the goods
...
If the goods are sold before the innocent party rescinds the
contract, the purchaser acquires good title to the goods
...
)
Inter absentes
Where the parties are not physically present when the contract is made, e
...
where the contract I
made through dealings through the post, telephone or over the internet, the courts will only make a
finding of mistake if the claimant can demonstrate an identifiable person or business with whom
they intended to deal with
...

Cundy v Lindsay [1878] 3 App Cas 459
A rogue, Blenkarn, hired a room at 37 Wood street, Cheapside
...
The rogue ordered a quantity of handkerchiefs
from claimant disguising the signature to appear as Blenkiron
...
Blenkarn sold a quantity the handkerchiefs on to
the defendant who purchased them in good faith and sold them on in the course of their trade
...
The success of the action depended upon the contract between the Blenkarn and the
claimant being void for mistake
...
Ownership of the goods would remain
with the claimant
...

King’s Norton Metal Co Ltd v Edridge; Merret & Co Ltd [1897] 14 TLR 98
A rogue ordered goods from the claimant using a printed letter head a claiming to be a company
called Hallum & co with offices in Belfast Lile and Ghent
...
The
claimant sent out the goods on credit
...
The rogue then disappeared without paying for the goods
...

Held: the contract was not void for mistake as they could not identify an existing company called

Hallum & co with whom they intended to contract
...
The contract was voidable for misrepresentation but that would not stop title passing to
the rogue and the defendants therefore acquired good title to the goods
...
He had produced a false driving licence in
the name of Durlabh Patel
...
The claimant then did a credit search on
Durlabh Patel and then told the dealer to let the rogue have the car
...
He then sold it on to the defendant and reneged on the finance
agreement
...

Held: 3:2 The contract was void for mistake
...
The identity of the person was crucial to the contract as
that it was Durlabh Patel that the credit check was carried out on and the claimant would not have
allowed the car to go without the credit check
...
Lord Millet and Lord Nicholls were of the opinion that there should be no distinction between
contracts made inter absentes and contracts inter praesentes and that Cundy v Linsey should be
overruled
...

He paid by cheque and persuaded the jewellers to allow him to take a ring immediately as he
claimed it was his wive's birthday the following day
...
The rogue then pawned the ring
at the defendant pawn brokers in the name of Mr
...
He then disappeared
without a trace
...

Held: The contract was not void for mistake
...
The
jewellers were unable to demonstrate that they would only have sold the ring to Sir George Bullogh
...
Hutchinson
...
She wanted
cash or no sale
...
When she returned she
informed Elsie that the details checked out and the sisters agreed to let Mr
...

The cheque was dishonoured and the car was sold on to Mr
...
The sisters brought an action to
recover the car
...
The Court of Appeal held that the sisters only intended to
deal with Mr
...
This case has received widespread criticism and has not been
followed since
...
The rogue showed the claimant a Pinewood studio pass which
had Richard Greene's name and an address on it
...
The rogue sold the car on to
Mr Avery for £200 claiming to be the claimant
...

Held: The contract was not void for mistake
...
The presumption that the parties intend to deal with the
person in front of them was not displaced
...
If one of the parties signs a document under the complete
misapprehension (importantly through no fault of his own) as to its affects a plea of non est factum
(it is not my deed) may be raised
...
It applies only where the
document signed is fundamentally different to what was believed to be signed and only where party
was not careless in signing
...

Saunders v Anglia Building Society (Gallie v Lee) [1970] AC 1004
Mrs Gallie, a woman of 78 years, signed a document which stated it was the sale of her interest in
her home to Mr Lee
...
He failed to keep up repayments on the mortgage and the building society sought
possession of the property mortgaged
...
Mrs Gallie knew that they wished to raise some money and she had agreed to help them
...
She had been told by the two men that the document she
signed gave effect to that agreement
...
The agreement between Mr Lee and Mrs Gallie had
been held to be voidable for misrepresentation
...

Held: The House of Lords found against Mrs Gallie
...
Furthermore the House of Lords stated that the plea of non est factum should not be
too widely applied and reserved for those who through no fault of their own are unable to read the
document e
...
blind, illiterate or incapacitated through age
...
A contract may be frustrated where there exists a
change in circumstances, after the contract was made, which is not the fault of either of the parties,
which renders the contract either impossible to perform or deprives the contract of its commercial
purpose
...
e
...
It is important that this
change was unforeseen and unforeseeable by the parties, and the change of circumstances or event
arises beyond the control of the parties
...
The allocation of loss is decided by the Law
Reform (Frustrated Contracts) Act 1943
...

Courts may be a bit more willing to find a contract brought to an end because of frustration than to

find it void for common mistake
...

Why are courts reluctant to find contracts discharged because of frustration?
1
...
For example
illustrated in the following case:
Davis Contractors Ltd v Fareham UDC [1956]
Davis Contractors agreed to build 78 houses for Fareham Council within 8 months for an
agreed price of £85,000
...
Davis Contractors
were paid the contractually agreed price but bought an action arguing for more money
based on the fact that the contract had become frustrated and therefore they were entitled
to further payment based on a quantum meruit basis
...
The fact that a contract becomes more difficult to
perform or not so profitable is not sufficient to amount to frustration
...

2
...
(For example, suspend performance; change price; etc)
See below for change of circumstances/ force majeure clauses
...
g
...
” (Channel Island Ferries Ltd
...

Clause to identify the relevant change of circumstances and what consequences of such change are
to be
...

So self-induced frustration is not frustration, it has to be outside the control of the parties
...
The Sea Angel CA [2007]
If ordinary intelligent people in position of the parties would have foreseen the possibility, treated as
foreseeable
...
Destruction of the subject matter:
Taylor v Caldwell3 B & S 826
The claimant hired out a music hall in Surrey for the purpose of holding four grand concerts
...
However, a week
before the first concert was due to take place the music hall was destroyed by an accidental
fire
...

Held: The claimant's action for breach of contract failed
...

2
...
The claimant suffered a mental breakdown and was told by his doctor that
he should not perform more than 4 nights per week
...
He brought a
claim for wrongful dismissal
...


3
...
The machines were to be delivered
in 3-4 months
...

The Polish company paid £1000 on 18th of July on account of the initial payment due
...
On
23rd of September Orders in Council made Poland an enemy territory making it illegal for
British companies to trade with Poland
...

4
...
The contract specified the ship, The Orlando, which was to carry the cargo
...

Held: By naming the exact ship which was to carry the cargo, the contract was frustrated as
it was impossible for this ship to carry the cargo within the contractually agreed period
...
A contract may also be frustrated where it is deprived of its commercial purpose:
Krell v Henry [1903] 2 KB 740
The defendant hired a flat on Pall Mall for the sole purpose of viewing King Edward VII's
coronation procession
...
The defendant paid £25
deposit
...
Consequently, the
defendant did not use the flat
...

Held: The contract was frustrated as cancellation of the procession deprived it of its
commercial purpose
...


6
...
The purpose of the contract was to take
paying passengers to view the Naval Review which was part of King Edward VII's coronation
celebrations
...
The Naval
Review was cancelled as the King was ill
...
The defendant argued the contract
had become frustrated due to the cancellation of the Naval Review
...
The contract had not been deprived of its sole
commercial purpose as it was still possible to perform the days cruise
...

7
...
Due to a shortage in skilled labour and material the contract took
22 months to complete and was much more expensive than anticipated
...

Held: The contract was not frustrated
...
It was still possible to
perform the contract
...
Forced alteration of manner of performance:
Blackburn Bobbin Co V TW Allen CA [1918]
The facts are stated in the judgement of Pickford LJ
...

Pickford LJ: “The point raised is whether an implication is to be read into the contract the
performance of which has been interfered with or prevented by matters arising out of the
war
...
Before the war it was the regular practice to load the timber on vessels at ports
in Finland for direct sea carriage to English ports, and not to send it by rail across
Scandinavia and ship it from a Scandinavian port to England
...
In August, 1914, and the
following months some correspondence took place between the plaintiffs and the
defendants as to the timber, the former asking for supplies, and the defendants talking up
the position that all pre-war contracts had been cancelled by the war
...
We have had a most
interesting discussion of the numerous cases where this doctrine has been dealt with, and it
is from no disrespect to Mr MacKinnon's argument that I refrain from going through them,
but I refrain from doing so because I accept the principle for which those cases were cited
...
" It was also stated thus by Lord
Shaw in Horlock v Beal: "The underlying ratio is the failure of something which was the basis
of the contract in the mind and intention of the contracting parties
...
He has found that the plaintiffs were unaware at the time of the
contract of the circumstance that the timber from Finland was shipped direct from a Finnish
port to Hull, and that they did not know whether the transport was or was not partly by rail
across Scandinavia, nor did they know that timber merchants in this country did not hold
stocks of Finnish birch
...
But there remains the question, must they be deemed to
have contracted on the basis of the continuance of that method although they did not in fact
know of it ? I see no reason for saying so
...
I can see no reason for saying and to free the
defendants from liability this would have to be said -- that the continuance of the normal
mode of shipping the timber from Finland was a matter which both parties contemplated
necessary for the fulfilment of the contract
...
Here there is nothing to show that the plaintiffs contemplated, and there is no
reason why they should be deemed to have contemplated, that the sellers should continue
to have the ordinary facilities for dispatching the timber from Finland
...
It was not a matter forming the
basis of the contract they entered into
...
The appeal will be
dismissed
...
Outbreak of war:
Tsakiroglou v Noblee Thorl HL [1962]
The defendant agreed to ship some Sudanese peanuts during November or December 1956
to Hamburg for a certain price
...
The
defendant could still have transported the peanuts within the contractually agreed time but
this would mean going via the Cape of Good Hope which would have taken four times as
long and increased the cost of transport considerably
...

Held: The contract was not frustrated
...
The fact that it was more difficult or costly to perform is not
sufficient to amount to frustration
...
A contract will not be frustrated merely because it becomes more difficult or expensive to
perform:
Davis Contractors v Fareham UDC HL 1956 & Tsakiroglou v Noblee Thorl HL [1962]
2
...
The
fishing vessels were all fitted with otter trawler nets
...
The claimant applied for five
licences but was only granted three
...
He named his own vessels and excluded the vessel which the defendant was using
...
The claimant sued
the defendant for the price of hire and the defendant in his defence stated the defendant
had committed a breach in not providing a licence so he was not obliged to pay for the cost
of hire
...

Held: The contract was not frustrated since the claimant had chosen to keep the three
licences granted for himself rather than using one to fulfil his contractual obligation
...

3
...

The clause must actually cover the event which occurred
...
Frustration will also not exist where the frustrating event should have been foreseen:
Walton Harvey Ltd v Walker & Homfrays Ltd [1931] 1 Ch 274
A hotel owner entered a contract with an advertising agency enabling them to put
illuminated adverts on the roof of their hotel
...
The advertising agency sued for breach of contract and
the hotel argued the contract had become frustrated
...
They
should have foreseen the fact that this could happen in the life time of the contract and
made provision in the contract for such an eventuality
...

Peter Cassidy Seed Co Ltd v Osuustukkuk-Auppa Ltd [1957] 1 WLR 273
The claimant, an English company, purchased some ants eggs from the defendant in Finland
...
The after agreeing to the sale, the defendant was
refused the licence
...
The defendant
argued the contract was frustrated so they were not liable for breach
...


Consequences of frustration
Where a contract is found to be frustrated, both parties are released from their obligations under
the contract and neither party sue for breach
...
This provides:
Section 1(2): ‘All money payable under the contract ceases to be payable and any money already
paid may be recovered
...
This is at the discretion of the court and is subject to what is just and equitable in
the circumstances of the case
...

Section 1(3): ‘Where a valuable benefit has been conferred this must be paid for
...
It was understood between the parties that the money for the room should be
paid before the procession
...
Ultimately the customer did not want the room, since a relative had died
...
15s
...
I shall be obliged if you will take the room on sale, and I
authorize you to sell separate seats in the room, for which I will erect a stand
...
15s
...
The question was whether the £100 could be recovered by Mr Chandler, or whether Mr
Webster could demand the balance
...
e
...

Fibrosa v Fairburn [1943]
An English company which manufactured textile machinery agreed by contract dated 12th July 1939
to supply some machines to a Polish company
...

£1,600 was payable up front and the balance of £3,200 payable on delivery
...
On 1st Sept Germany invaded
Poland and on 3rd Sept Great Britain declared war on Germany
...

Held: the contract was frustrated as it was no longer possible to perform the contract because of the
supervening illegality
...
(Whincup v Hughes [1871] – Cant find case summary
...
(Fibrosa v Fairbairn – See above
...
Miles told Walford that if Walford provided a
letter of comfort from his bank for £2m by 20 March then 'he would terminate negotiations with any
third party or consideration of any alternative with a view to concluding agreements with' Walford
...
' Walford provided the requested letter of comfort in good
time
...
On the same day Miles wrote to the third party
informing them that he had concluded terms for the sale of the property and the shares in the
company to Walford
...
Walford claimed that
there was a concluded contract between himself and Miles whereby Miles had agreed not deal with
a third party and not to give further consideration to any alternative offer
...

The issues before the court were was there a concluded contract as Walford alleged and if there was
such a contract was there an implied term of good faith in the contract?
However, more recent cases show a more sympathetic approach from the courts, such as in
Timeload Ltd v BT [1995], Phillips v BskyB [1995] and Balfour Beatty v Docklands Light Railway
[1996]
...
” (Lord Justice Steyn in First Energy UK Ltd v Hungarian
International Bank [1993]
...
Economic duress is regarding relationship with doctrine of consideration, for example:
Williams v Roffey Bros
...
This contract was subject to a liquidated damages clause
if they did not complete the contract on time
...
6 months after commencing the work, the claimant
realised he had priced the job too low and would be unable to complete at the originally agreed
price
...
The defendant agreed to pay the claimant an
additional £575 per flat
...
He then ran out of money and refused to continue unless payment was
made
...

Held: Consideration was provided by the claimant conferring a benefit on the defendant by helping
them to avoid the penalty clause
...


Stilk v Myrick [1809] EWHC KB J58
The claimant was a seaman on a voyage from London to the Baltic and back
...
During the voyage two of the 12 crew deserted
...
The claimant agreed
...

Held: The claimant was under an existing duty to work the ship back to London and undertook to
submit to all the emergencies that entailed
...
Consequently he was entitled to nothing
...

Duress at common law
Duress in contract law relates to where a person enters an agreement as a result of threats
...
The basis of
duress as a vitiating factor in contract law is that there is an absence of free consent
...
The effect of
finding of duress and undue influence is that the contract is voidable
...

Duress to the person
Where a person enters a contract as a result of threats of physical violence, the contract may be set
aside providing the threat was a cause of entering the contract
...

Barton v Armstrong [1976] AC 104
Armstrong was the chairman and held the largest sharing holding in Landmark Corporation Ltd a
public company
...
There
were two other directors Bovil and Cottrel
...
The other directors in the company were also unhappy with Armstrong and wanted him
to be removed for abusing certain privileges and they disagreed with the way he ran the company
believing him to be putting the company at risk of insolvency
...

The three managed to take control of subsidiary companies and removed all credit facilities from
Landmark Corp
...
Barton agreed to this partly due to the threats but also due to the fact that it would
mean that Armstrong would no longer have controlling interest and he believed he would be able to
turn the company around without Armstrong's dealings
...

Held: The contract could be set aside
...

Duress to goods
Duress to goods is not recognised as giving rise to grounds for having the contract set aside:

Skeate v Beale [1840] 11 Ad & El 983
A landlord was owed money by a tenant
...

The tenant agreed to the repayment terms but then sought to have the agreement set aside for
duress
...


However, this decision has received widespread criticism and is out of line with restitutionary claims:
Maskell v Horner [1915] 3 KB 106
The defendant demanded money from the claimant by way of a 'toll fee' for his market stall
...
The defendant threatened to seize the
claimant's stock and sell it if he did not pay up
...

Held: The claimant was entitled to recover the sums paid in the law of restitution
...

It is thought that the position in relation to duress to goods is unlikely to survive if it is tested in the
higher courts, particularly given the more liberal position that has taken hold in response to claims
for economic duress
...
Whilst
the contract was not held to be voidable for duress, Kerr J did state that where there exists coercion
of the will so as to vitiate consent, it should be possible to set the contract aside
...

Occidential Worldwide Investment Corporation v Skibs [1976] 1 Lloyds Rep 293
The defendants chartered two vessels from the claimant
...
This was completely untrue
...
The claimants therefore agreed to renegotiate the contract to lower the cost of
charter
...

Held: Whilst recognising that it would be possible to render a contract voidable for economic duress,
it was not established in this case
...
Commercial pressure was not sufficient
...

After entering the contract the US dollar was devalued by 10%
...
The
claimants had a valuable charter lined up so agreed to pay the additional sums and did pay them
without protest
...

Held: The contract was voidable for duress, however, since the claimants had left it so long in
bringing their claim they had affirmed the contract and lost their right to rescind
...
The defendant was
anxious to complete the main contract as there had been a public announcement of the aquisition of
shares and did not want to undermine public confidence in the company and the consequent effect
on share prices
...
The defendant had taken legal
advice on all these matters before agreeing to the guarantee and indemnity
...

Held: There was no economic duress
...
He also could have enforced the
contract of sale through specific performance and thus had another avenue of redress available to
him
...
Therefore no economic duress could be established
...

The requirement of vitiation of consent was replaced in the following case with the absence of
choice:
The Universe Sentinel [1983] 1 AC 366
The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port
...
The ship owners agreed in order that the ship
could leave port and then sought to recover the sum paid to the welfare fund
...
The House of
Lords held that earlier case law had been wrong to look at coercion of the will so as to vitiate
consent
...

Accordingly two elements of duress were identified:
1
...
Illegitimacy of the pressure

Illegitimacy of the pressure
Initially it was thought that the threat must be unlawful:

Dimskal Shipping v International Transport Workers Federation (The Evia Luck) [1991] All ER 871
The ITWF threatened strike action unless certain demands were met
...
They later sought to have
the agreement set aside as being procured by duress
...
At the
time of the threatened strike the Evia Luck was in Sweden
...

Held: English law applied and the threat was therefore unlawful and illegitimate
...
The cigarettes were then
stolen
...
The defendant threatened to withdraw the claimant's credit facility unless the
invoice was paid
...

Held: The threat to withdraw credit facility was lawful since under the terms of the credit agreement
credit could be withdrawn at any time
...

However, dicta from Lord Hoffman in the Privy Council case of R v Attorney General for England and
Wales [2003] suggests a different approach:
“The legitimacy of the pressure must be examined from two aspects: first, the nature of the pressure
and secondly, the nature of the demand which the pressure is applied to support: see Lord Scarman
in the Universe Tankships case, at p 401
...
On the other hand, that fact that the threat is lawful does not
necessarily make the pressure legitimate
...
What he has to justify is not the threat, but the demand of money
...
The agreement was to last for 2
years
...
Three months before the contract was due to expire IFR gave notice in writing
that they would not be renewing the contract when it expired
...
However, no such compensation was payable under English law
...


The effect of a finding of duress has always been to render a contract voidable as oppose to void,
however, a voidable contract would not have aided Federal as they had acted on the contract
without protest for nearly 2 years so would most certainly have lost their right to rescind
...

Held: Following later case law (Universe Sentinel etc) the basis of duress is not the absence of
consent; when acting under duress the actor will give consent for the contract
...
It is the absence of choice that renders the contract voidable
...
” (Huyton v Peter Cremer & Co [1998])

Undue influence
Undue influence exists where a contract has been entered as a result of pressure which falls short of
amounting to duress, the party subject to the pressure may have a cause of action in equity to have
the contract set aside on the grounds of undue influence
...
Undue influence is divided into actual undue
influence and presumed undue influence
...
This will enable the person influenced to
have the contract set side as against a party who subjected the other to such influence
...

Classes of undue influence
There are three classes of undue influence which were set out in the following case:
Bank of Credit & Commerce International v Aboody [1990] 1 QB 923
A husband exerted actual undue influence over his wife in order to get her to sign a charge securing
the family home on the debts owed by the company in which the husband and wife owned shares
...
The
wife sought to have the mortgage set aside on the grounds that it was procured by actual undue
influence of the husband
...
However, the transaction was
not to the manifest disadvantage of the wife since she owned shares in the company
...
Therefore the bank were granted possession
...


The Court of Appeal set out the classes of undue influence:

Class 1 - Actual undue influence (requires proof of the influence)
Class 2a - Presumed undue influence (relationship as a matter of law gives rise to presumption that
influence was exerted)
Class 2b - Presumed undue influence (requires proof of relationship of trust and confidence if
established the presumption of influence arises)
Class 1 – Actual undue influence
Actual undue influence, requires proof that the contract was entered into a result of actual influence
exerted
...
This may include such acts as threats to end a relationship, continuing to badger the party
where they have refused consent until they eventually give in
...

Lord Nicholls, in RBS v Etridge described the concept as:
"Undue influence is one of the grounds of relief developed by the courts of equity as a court of
conscience
...

In everyday life people constantly seek to influence the decisions of others
...
The law has set
limits to the means properly employable for this purpose
...
The means used is regarded as
an exercise of improper or 'undue' influence, and hence unacceptable, whenever the consent thus
procured ought not fairly to be treated as the expression of a person's free will
...
The circumstances in which one person acquires influence over another,
and the manner in which influence may be exercised, vary too widely to permit of any more specific
criterion
...
However it was held in
CIBC Mortgages v Pitt [1994] 1 AC 200, that manifest disadvantage was not required in cases of
actual undue influence
...
He pressured his wife into signing a
mortgage of £150,000 securing the family home
...
The husband used the money to purchase shares
and then used those shares as collateral to purchase further shares
...
The wife saw no benefit from these shares as any income
was always used to purchase more shares
...
The bank sought to
enforce the security under the mortgage which at the time exceeded the value of the home
...

Held: Overruling BBCI v Aboody - it is not necessary for a claimant to demonstrate manifest
disadvantage where a defence is based on actual undue influence
...

Class 2 a – Presumed undue influence
Under class 2a there is no requirement to prove that improper influence was actually exerted
...
Relationships capable of giving rise to an automatic presumption of undue influence are
those of fiduciary nature and include; Parent&Child, Solicitor&Client, Religious Avisor&Disciple,
Doctor&Patient, and Trustee&Beneficiary
...

Where the transaction is obviously not to the benefit of the vulnerable party but confers a great
advantage to the party in a fiduciary position, the law will raise a presumption that the transaction
was entered as a result of some sort of abuse of the relationship
...
However, this lead to confusion
...
The couple were unable to meet the
payments and got into arrears
...
Natwest offered a rescue
package to help the couple save the home whereby they would pay off the existing mortgages and
give a bridging loan which was to last 5 weeks for the purposes of aiding the husbands business
...
He was at the house for 20 minutes and spent 5 minutes alone with
the wife
...
The manager told the wife the charge was to pay off the existing debt and to provide a
bridging loan for a period of 5 weeks which was what the bank had intended to provide, however,
the actual document did not limited the amount or time
...
The manager assured her that the risks were limited in the way he had
described
...
She signed the
charge
...
In her defence the wife stated that the bank manager
had exercised undue influence over her in procuring her signature
...
Lloyds Bank v Bundy was confined to its facts but not expressly
overruled
...

Bank of Credit & Commerce International v Aboody [1990] 1 QB 923
A husband exerted actual undue influence over his wife in order to get her to sign a charge securing
the family home on the debts owed by the company in which the husband and wife owned shares
...
The
wife sought to have the mortgage set aside on the grounds that it was procured by actual undue
influence of the husband
...
However, the transaction was
not to the manifest disadvantage of the wife since she owned shares in the company
...
Therefore the bank were granted possession
...
He pressured his wife into signing a

mortgage of £150,000 securing the family home
...
The husband used the money to purchase shares
and then used those shares as collateral to purchase further shares
...
The wife saw no benefit from these shares as any income
was always used to purchase more shares
...
The bank sought to
enforce the security under the mortgage which at the time exceeded the value of the home
...

Held: Overruling BBCI v Aboody - it is not necessary for a claimant to demonstrate manifest
disadvantage where a defence is based on actual undue influence
...

Given the difficulties in relation to manifest disadvantage, the House of Lords in Royal Bank of
Scotland v Etridge [2001] held that the term should no longer be used and replaced with the
requirement that the transaction must be one which cannot be readily explained by the relationship
of the parties
...
The court should consider the transaction as
a whole
...
Here it must be
established that there is a relationship of such a kind that one party in fact placed their trust and
confident in the other to safeguard their interest
...

The important distinction between class 2a and 2b is the fact that the trust and confidence
relationship must be proved
...
The company was experiencing financial difficulty and the bank wished to find
security for the company debts
...
He told his
wife that the charge was limited to £60,000 and that it was only to last for a few weeks
...
In fact the charge was not limited in the amount or time
...

The manager of the bank had left sent the documents to their local branch with instructions that the
wife was to be advised of the full extent of the liability and that the wife should be advised to take
independent advice before signing
...
The bank sought to enforce the charge and the wife raised undue influence and
misrepresentation in her defence to have the charge set aside
...
The wife was successful with regards to misrepresentation
...

Exceptionally, it has been held that a relationship of trust and confidence existed between a bank
manager and his client:

Lloyds Bank v Bundy [1975] QB 326
A father secured the debts of his son's business on his farm which had been in the family for
generations
...
The son's company also banked at the same branch and the bank manager was aware of the
dire financial position of the company
...
The bank manager and the son called at the farm with the forms already
filled in
...
The father agreed to sign in order to help
his son
...

Held: There was a relationship of trust and confidence between the father and the bank manager
giving rise to a presumption of undue influence under class 2 b
...

NB the normal relationship between a banker and customer is not one of trust and confidence but a
business relationship whereby the bank is looking out for its own interest (See Natwest v Morgan)
however, the bank manager in giving evidence admitted that the father relied implicitly and solely
on the advice given by him and the father stated that he had trusted the bank and had a long
relationship with the bank and generally acted on advice given
...
The couple were unable to meet the
payments and got into arrears
...
Natwest offered a rescue
package to help the couple save the home whereby they would pay off the existing mortgages and
give a bridging loan which was to last 5 weeks for the purposes of aiding the husbands business
...
He was at the house for 20 minutes and spent 5 minutes alone with
the wife
...
The manager told the wife the charge was to pay off the existing debt and to provide a
bridging loan for a period of 5 weeks which was what the bank had intended to provide, however,
the actual document did not limited the amount or time
...
The manager assured her that the risks were limited in the way he had
described
...
She signed the
charge
...
In her defence the wife stated that the bank manager
had exercised undue influence over her in procuring her signature
...
Lloyds Bank v Bundy was confined to its facts but not expressly
overruled
...

A relationship of trust and confidence has also been seen in employer and employee relationship:
Credit Lyonnaise Bank Nederland v Burch [1997] 1 All ER 144
Miss Burch started working for her employer at the age of 18
...
She often visited
his home to do babysitting and went on holiday with the family to Italy
...
5 years later, she was still working for him but the company was experiencing
financial difficulty
...
He told her that his home and villa in Italy were also secured on the debt but they would
not accept 100% mortgage on these properties and needed another £20,000
...
The bank had
written to her and informed her that the charge was unlimited in amount and time and advised her
to seek independent advice
...

Held: The agreement of Miss Burch had been obtained by undue influence and the bank had notice
of this as the transaction was so obviously to her disadvantage
...
Therefore the transaction could be set aside
...
There is also no need to establish a causal link in relation to
misrepresentation beyond reliance:
UCB Corporate Services Ltd
...
Toyota threatened to
withdraw the franchise unless the showrooms were extended and improved
...
The Williams approached the bank for a loan which asked for security by way of a charge
on the three showrooms in addition to a charge on each of the partners' homes
...
She had signed the charge without
having been told the full extent of the liability
...
Howells, the solicitor of the partnership
...
The business was unable to repay the loan and became bankrupt
...
The trial
judge, HHJ Hickinbottom, held that undue influence and misrepresentation were established
...
Mrs Williams
appealed to the Court of Appeal
...

For both undue influence and misrepresentation there is no requirement to establish that a person
would not have entered the contract but for the influence or misrepresentation
...
For misrepresentation it is sufficient
to demonstrate the party relied on the false statement
...
The fact that the signature was witnessed by a solicitor
does not necessarily mean that they would have advised her
...
If there were no instructions to advise Mrs Williams they
would not be expected to do so and it was wrong of UCB to assume this had taken place
...

Rebutting the presumption in class 2a and class 2b
The party accused of exercising undue influence may rebut the presumption by demonstrating that
the vulnerable party exercised free will entering the transaction
...

Undue influence and third parties
Generally the undue influence is exercised between a husband and wife
...

Following the decision in Natwest v Morgan, it became clear that banks were not acting in a
fiduciary capacity so as to give rise to a presumption of undue influence
...
Barclays Bank v O’Brien [1993] (See
case summary above) introduced the concept of constructive notice
...

The current factors to be considered were set out in:
Royal Bank of Scotland v Etridge [2001] 3 WLR 1021
The case concerned a number of conjoined appeals concerning banks seeking possession of homes
where a wife had signed a charge or mortgage agreeing to secure the debts of the husband on the
family home
...
The main changes:
1
...
Instead the transaction must be one which can not readily be explained on ground
of friendship, relationship or charity
...
Constructive notice
A bank will be put on enquiry whenever a wife offers to stand surety for her husband's debts
...

There is no absolute obligation on a bank to have a private meeting with the wife provided they take
other steps to satisfy themselves that the wife has been appropriately advised
...

The steps a solicitor should take as a core minimum:
(i) He will need to explain the nature of the documents and the practical consequences these will
have for the wife if she signs them
...
Her home may be her only substantial asset, as well as the family's home
...

(ii) He will need to point out the seriousness of the risks involved
...
She should be told the amount of her liability under her guarantee
...
The solicitor should discuss whether the wife or her husband has any other
assets out of which repayment could be made if the husband's business should fail
...

(iii) The solicitor will need to state clearly that the wife has a choice
...
Explanation of the choice facing the wife will call for some discussion of the present financial
position, including the amount of the husband's present indebtedness, and the amount of his
current overdraft facility
...
She should be asked whether she
is content that the solicitor should write to the bank confirming he has explained to her the nature
of the documents and the practical implications they may have for her, or whether, for instance, she
would prefer him to negotiate with the bank on the terms of the transaction
...
The solicitor should not give any confirmation to the bank
without the wife's authority
...
The solicitor's explanations should use non-technical language
...
If the bank fails for any reason to provide
information requested by the solicitor, the solicitor should decline to provide the confirmation
sought by the bank
...


Illegality
Courts will generally not enforce a contract which is illegal or otherwise contrary to public policy
...

When determining whether a contract is illegal you have to distinguish between the following;
1
...

2
...
E
...
St
...
)
A position of a party who does not know neither do they consent to the illegality may be able to
enforce the contract, as illustrated in Archbolds v Spanglett [1961]
...
)
A position of a party who knew of the illegality will less likely be able to enforce, for example,
Ashmore Benson Pease & Co v Dawson [1973]
...

Contracts illegal at common law as contrary to public policy;

i)
ii)
iii)
iv)
v)

Contract to commit crime or tort;
Taylor v Bhail [1995]
Contrary to good morals, prejudicial to family life:
Pearce v Brooks [1866]
Prejudicial to the proper administration of justice
Further or promote corruption in public life
...


Severance
It is possible to sever (cut out) the unenforceable/illegal part of the contract from the rest, without
altering the meaning and purpose of what is left
...
This is only possible if the
unenforceable or illegal element was not the main purpose of the contract neither was it the main
consideration for the other party’s obligation
...
(Can’t find case
summary for
...
In summary it
means they will not be making a new contract for the parties
...

Lucas v Mitchell [1974]
(Can’t find case summary
...
g
...
)
Holman v Johnson [1775]
The Claimant sold and delivered a quantity of tea to the Defendant
...
The Defendant intended to smuggle the tea in to England
...
The Defendant never paid for the tea and the Claimant brought an action for
the price of the tea
...
He had not himself committed any offence and played
no part in the smuggling or received no benefit from it
...
It is not for his sake, however,
that the objection is ever allowed; but it is founded in general principles of policy, which the
defendant has the advantage of, contrary to the real justice as between him and the plaintiff, by
accident, if I may so say
...
No court
will lend its aid to a man who founds his cause of action upon an immoral or an illegal act
...
It is
upon that ground the court goes; not for the sake of the defendant, but because they will not lend
their aid to such a plaintiff
...
"

However, recovery or return may exceptionally be possible on an unjust enrichment basis, and
assumes one of the usual grounds for restitution would help
...
Claimant reasonably didn’t know contract was illegal:
Oom v Bruce [1810]
2
...
If contract was illegal under statute enacted to protect people in Claimant’s position:
Kiriri Cotton v Diwani [1960]

Recovery of benefits conferred/property transferred under illegal contract may be possible:
1
...
It turned out he was not liable
...

2
...
e
...
The agreement did not comply with statutory requirements
...
The Defendant argued that the Claimant's illegality in failing to comply with the
statutory requirements, barred their recovery
...
The Claimant did not plead the illegal agreement in
making their claim
...

Tinsley v Milligan [1994]
The Claimant and Defendant were lovers
...
It was agreed that the
house was to be registered in the name of the Claimant alone
...
The relationship broke down and the Claimant sought possession of
the house asserting full ownership
...
The Court of Appeal applied the public
conscience test and held that it would be an affront to the public conscience to allow the

Claimant to keep the whole interest in the house
...

Held: The House of Lords rejected the public conscience test as it was inconsistent with
previous authorities and gave too much discretion to the court
...

Overall to conclude illegality; Courts will not give effect to an illegal contract or one that breaches
public policy
...


Discharge by breach & Discharge through performance
There are 4 possible ways that a contract could be discharge or brought to an end (according to
McKendrick):
1
...
By the parties agreeing to abandon/discharge the contract (needs consideration or deed)
3
...
g
...
By breach
“Where a party without lawful excuse fails or refuses to perform what is due from him under
the contract, or performs defectively, or incapacitates himself from performing
...

-The breach does not automatically terminate the contract, it just gives the other party the
option
...
(termination here operates
with future effect only
...
Where there exists a
breach of condition (as opposed to a breach of warranty) this will enable the innocent party the right
to repudiate the contract (bring the contract to an end) in addition to claiming damages
...

Anticipatory breach
Where a party indicates their intention not to perform their contractual obligations, the innocent
party is not obliged to wait for the breach to actually occur before they bring their action for breach
...
On the
11th May the defendant wrote to the claimant stating he no longer wanted his services and refused

to pay compensation
...
The claimant brought an action on 22nd May for breach of contract
...

Held: Where one party communicates their intention not to perform the contract, the innocent
party need not wait until the breach has occurred before bringing their claim
...

This gives the innocent party the option to either sue immediately or continue with the contract
themselves and wait for the breach to occur before bringing their action
...

The defendant owned a garage
...
The agreed price was payable by three
annual instalments and if one of the payments was late the whole price became immediately due
...

The claimant ignored the defendant's communication and arranged for the advertising plates to be
made up and placed on the bins
...

Held: The House of Lords held that the claimant was not obliged to accept the breach of contract
and could continue with the contract
...
NB this case seems to ignore the general rule of the duty to mitigate loss applicable to
claims for damages
...
The claimant arrived early to collect
the cargo and the defendant told them to sale on as they did not have any cargo for them to carry
and would not have by the agreed date
...
However, before the date the cargo was supposed
to be shipped the Crimean war broke out which meant the contract became frustrated
...
Had they brought their action immediately they would
have had a valid claim
...
If one party does not fully perform the contract this will amount to a breach
of contract and the other party may have a claim for damages unless the contract has been
frustrated
...
Where a contract is one where the price is payable on
completion, then completion is generally required in order to discharge the contract
...
Completion triggers the requirement of
payment; no completion, no payment
...


Cutter v Powell [1795] EWHC KB J13
The claimant's husband agreed by contract to act as a second mate on the ship the 'Governor Parry'
on a return voyage to Jamaica
...
A term in the contract stated: "Ten days after the ship 'Governor Parry,' myself master,
arrives at Liverpool, I promise to pay to Mr
...
Cutter the sum of thirty guineas, provided he
proceeds, continues and does his duty as second mate in the said ship from hence to the port of
Liverpool
...
"
Six weeks into the voyage the claimant's husband died
...

Held: The wife's action failed
...

The harshness of this rule relating to discharge through performance has been mitigated by the
creation of various exceptions
...

Where it is possible to divide a contract into separate parts, e
...
if a sum is agreed to be payable per
week or hour, then the courts can award a sum for the separate parts of the contract which have
been completed
...
The price
agreed was £5 per ton for the hemp and 5 shillings per ton of iron
...
The defendant argued the contract had not been fully performed and therefore
no payment was due
...
The
claimant was thus entitled to payment for the amount carried although the defendant was entitled
to damages for non-performance in relation to the amount not carried
...
The
court may then award the contractually agreed price and deduct sums to reflect the amount not
performed
...
Difficulty arises as to what amounts to substantial performance
...

Bolton v Mahadeva [1972] 1 WLR 1009
The claimant installed central heating in the defendant's home
...

The defendant was not happy with the work and refused to pay
...
The action by the claimant to enforce the payment failed since the court held there was no
substantial performance
...
The main focus is on free acceptance
...
It was agreed that £565
would be payable on completion
...
He had performed just over half of the contract
...
The claimant sought to recover £333 representing the value of the
work he had completed
...

Held: The claimant's action failed
...

Tender of performance
Where a party is willing to perform and tries to tender performance but the other party does not
accept the performance then the party seeking to tender performance is discharged from the
contract and the non-accepting party is liable in damages for non-acceptance
...
The claimant delivered the oil at 8
...
The defendant refused to
accept the delivery because of the lateness of the hour
...

Performance prevented by the promisee
Where the promisee prevents completion of the performance then the promisor is entitled to
payment for the work which has been completed
...
The agreed contract price was £100 to be payable on completion
...
The defendant refused to pay the claimant despite his undertaking and the fact that the
claimant was still willing to complete
...

Held: The claimant was entitled to recover £50 because the defendant had prevented the
performance
...
Damages are an award
of money to compensate the innocent party
...


Addis v Gramophone [1909] AC 488
The claimant was employed as a manager by the defendant
...
The claimant brought an action
for breach of contract claiming that the level of damages should reflect the circumstances in which
he was dismissed damaged his reputation and ability to find suitable employment
...
He was therefore limited to claiming wages and loss of commission during the
contractually agreed notice period
...
Such claims would have to be actioned in the law of tort
...
If one should select the former mode of redress, he may, no doubt,
recover exemplary damages, or what is sometimes styled vindictive damages; but if he should
choose to seek redress in the form of an action for breach of contract, he lets in all the
consequences of that form of action: Thorpe v
...
One of these consequences is, I think, this:
that he is to be paid adequate compensation in money for the loss of that which he would have
received had his contract been kept, and no more
...
After the cargo had been loaded and the journey
commenced TBM developed problems with its boilers which caused considerable delay in the
shipment
...
During the delay period the war broke out and TBM
was ordered to unload in Glasgow
...
The defendant claimed the outbreak of
the war broke the chain of causation
...

Damages?
1
...

3
...

5
...


Has the claimant suffered any loss?
Has the claimant suffered a recoverable type of loss?
Did the D’s breach cause C’s loss? (Causation)
Was the type of loss that D has suffered reasonably foreseeable? (Remoteness)
Has C taken reasonable steps to mitigate his loss? (Mitigation)
What if C’s loss has been caused in part by his own acts/omissions?

Has C suffered any loss?
Generally, C can only recover damages for his own loss:
Alfred McAlpine Construction v Panatown Ltd [2000]
What if all he lost was a chance?
Chapman v Hicks [1911]

The expectation approach:
Generally, damages award takes the expectation approach; “where a party sustains loss by reason of

a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect
to damages, as if the contract had been performed
...
[1] Then Mr Harman
changed his mind and refused to complete the lease
...
Mr Harman had inherited the property from his recently deceased father
...
In fact trustees had got the
property and Mr Harman had been entitled to only a moiety of the rent during his life
...
” Mr Harman urged that the plaintiff could not recover damages for the
loss of his bargain
...
He found that Mr
Robinson was entitled to £200 (including court expenses) to cover the loss to Mr Robinson from not
getting the house
...

The question is, how to convert into monetary value the loss of C’s expectation that D would
perform? There are two approaches; the “diminution value” approach and the “cost of cure”
approach
...

The reliance approach:
Compensate C for expenses he incurred in reliance on D’s promise that D would perform, and which
are now wasted
...
This approach can only be claimed as an alternative to the expectation approach
...

Hadley v Baxendale [1854] Ex Ch 341
The crankshaft broke in the Claimant’s mill
...
Due to neglect of the Defendant, the crankshaft was returned 7 days late
...
The Defendant argued that
he was unaware that the mill would have to be closed during the delay and therefore the loss of
profit was too remote
...
Those which may fairly and reasonably be considered arising naturally from the breach of contract
or
2
...


If any special circumstances exists which were actually communicated to the Defendant, the
Claimant may recover any damages which would ordinarily follow from a breach of contract under
the special circumstances communicated
...
The defendant was
aware that they wished to put it to immediate use and knew the nature of their business
...

The claim contained a sum for a particularly lucrative contract which they lost due to the absence of
the boiler
...

Pilkington v Wood [1953] Ch 770
The claimant purchased a house which turned out to have a defective title
...
He had difficulty in selling
the house due to the defect in title He brought an action against his solicitor for his negligence in
failing to notice the defect
...
However, he was not liable for the added loss caused
by the need to move as it was not in the reasonable contemplation of the parties that he would
move so soon after sale
...

Jackson v Royal Bank of Scotland [2005] 1 WLR 377
The claimants carried on business of importing goods and selling them on for resale
...
Both businesses banked at the Royal Bank of Scotland
(RBS), the defendant
...
This revelation was in breach of
confidence and amounted to a breach of contract
...
Consequently, Economy Bag ceased to trade with the claimants
...
The
claimants brought an action against RBS to recover their loss
...
The Court of Appeal reduced this to one year
...

Held: The loss of profit was not too remote
...
The trial judge’s findings as to
assessment of damages restored
...
They are a duty to take
reasonable steps to reduce their loss
...
The contract was to run for
nine months
...
The claimant was late in making the first
instalment (This amounted to a breach of warranty not entitling the defendant to repudiate the
contract)
...
The claimant rejected this offer and purchased the good
elsewhere at a higher price
...

Held: The claimant was not entitled to damages
...
He was under a duty to take reasonable steps to mitigate his loss
...

Pilkington v Wood [1953] Ch 770
The claimant purchased a house which turned out to have a defective title
...
He had difficulty in selling
the house due to the defect in title He brought an action against his solicitor for his negligence in
failing to notice the defect
...
However, he was not liable for the added loss caused
by the need to move as it was not in the reasonable contemplation of the parties that he would
move so soon after sale
...
The claimant was entitled to sue the vendor,
although the court held there was no duty to sue the vendor in order to mitigate their loss arising
from the defendant’s negligence
...
These include:
1
...
Reliance loss
Where it is difficult to quantify the position the claimant would have been in it may be
possible to recover expenses incurred in reliance of the contract
...
Subsequently Reed pulled out and Anglia was unable to find a replacement
...

Held: Whilst damages generally seek to put the parties in the position they would have been
in had the contract been performed, the parties may elect to claim reliance loss and recover
expenses incurred in an abortive transaction
...


3
...
This is most commonly seen in holidays which fail to
meet the standard the holiday maker was lead to believe would be enjoyed
...
The brochure in which the holiday was advertised made several claims about the
provision of enjoyment relating to house parties, a friendly welcome from English speaking
hotel owner, a variety of ski–runs, afternoon tea and cakes and a Yodler evening
...
Mr Jarvis brought a claim for breach
of contract based on his disappointment
...
Mr Jarvis appealed
...

Jackson v Horizon Holidays [1975] 1 WLR 1468
Mr Jackson booked a 28 day holiday in Ceylon for himself and his family through Horizon
Holidays
...
The trial judge made an award for the disappointment
suffered by Mr Jackson, but stated he could not take into account the disappointment
suffered by his wife and children since they were not party to the contract
...

Held: Mr Jackson was able to recover for the disappointment suffered by his wife and
children
...

4
...

Bailey v Bullock [1950] 2 All ER 1167
A solicitor failed to take action to recover the claimant’s house
...
It was held that he was
entitled to recover damages to reflect the inconvenience of having to live in overcrowded
circumstances
...

5
...

Dunk v George Waller [1970] 2 QB 163
The defendant engaged the claimant under a four year apprenticeship to train him as an
engineer
...
The claimant bought an action for wrongful dismissal
...
He was entitled not only to his wages for
the remainder of the contractually agreed period, but also a sum to reflect his lack of
training and the loss of opportunities that the completion of the contract would confer
...
”
6
...
She entered a beauty contest organised by Hicks
...
The readers
of the newspaper were to vote and the top 50 would be invited to an interview where 12
would be selected for employment
...
She brought an action based on
her loss of a chance of gaining employment
...

Hicks appealed contending that the damages were speculative in nature and incapable of
assessment
...
The claimant was entitled to recover damages for her loss
of a chance of gaining employment
...

Vaughan Williams LJ: “the fact that damages cannot be assessed with certainty does not
relieve the wrongdoer of the necessity of paying damages for his breach of contract
...
This provides certainty to each party so that they
know exactly what they are liable to pay should they be unable to perform their obligations
...
If
however, the amount specified in the contract is not a genuine pre-estimate but is aimed at
deterring a breach of contract or punishing the party in breach, this is known as penalty clause which
is not enforceable
...
The contract
between Dunlop and New Garage contained a clause preventing New garage from selling the tyres
below list price
...
would be
payable for each tyre sold below the list price
...
The
defendant argued that the relevant clause was a penalty clause and thus unenforceable
...
per tyre
...
per
tyre representing the actual loss suffered
...

Held: The clause was a liquidated damages clause not a penalty clause
...
Though the parties to a contract who use the words "penalty" or "liquidated damages" may prima
facie be supposed to mean what they say, yet the expression used is not conclusive
...
This doctrine

may be said to be found passim in nearly every case
...
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party;
the essence of liquidated damages is a genuine covenanted pre-estimate of damage (Clydebank
Engineering and Shipbuilding Co
...
Don Jose Ramos Yzquierdo y Castaneda)
3
...
Hills and Webster v
...
To assist this task of construction various tests have been suggested, which if applicable to the
case under consideration may prove helpful, or even conclusive
...
(Illustration given by Lord Halsbury in Clydebank Case)
( b ) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the
sum stipulated is a sum greater than the sum which ought to have been paid (Kemble v
...
Whether it had its
historical origin in the doctrine of the common law that when A
...
a sum of money
on a certain day and did not do so, B
...
R
...
Smith
( c ) There is a presumption (but no more) that it is penalty when "a single lump sum is made payable
by way of compensation, on the occurrence of one or more or all of several events, some of which
may occasion serious and others but trifling damage" (Lord Watson in Lord Elphinstone v
...
On
the contrary, that is just the situation when it is probable that pre-estimated damage was the true
bargain between the parties (Clydebank Case, Lord Halsbury; Webster v
...


Repudiation in contract law
Repudiation is a remedy available for breach of contract
...
It is only available for breach of condition as oppose to breach of warranty
...
He became ill and
missed 6 days of rehearsals
...


Held: Bettini was in breach of warranty and therefore the employer was not entitled to end the
contract
...
She became
ill five days before the opening night and was not able to perform the first four nights
...

Held: Madame Poussard was in breach of condition and Spiers were entitled to end the contract
...

It may also be available for breach of an innominate term, where the breach substantially deprives
the claimant of the whole benefit of the contract
...
The agreement included a term that the
ship would be seaworthy throughout the period of hire
...
Consequently the ship was out of service for a 5
week period and then a further 15 week period
...
The claimants brought an action for wrongful repudiation arguing the term
relating to seaworthiness was not a condition of the contract
...
The court introduced the innominate
term approach
...
Only where this is answered affirmatively is it to be a
breach of condition
...

Rescission in contract law
Rescission is an equitable remedy available at the discretion of the judge
...

Rescission is available where a contract is voidable as a result of a vitiating factor such as
misrepresentation, undue influence or duress
...

Car & Universal Credit v Caldwell [1964] 2 WLR 600
Mr Caldwell sold his Jaguar car on 12th Jan to a rogue, Norris, who had paid £10 cash deposit and
left another car as security and gave a cheque for £965
...
Mr
Caldwell reported the incident to the police and used his best endeavours to co-operate with the
police to find Norris in order to rescind the contract of sale
...
Norris had acquired a voidable title to the car as the contract was
induced by fraudulent misrepresentation
...
The
question for the court was whether the actions taken by Mr Caldwell were sufficient to avoid the
contract
...
He had taken all steps possible to
demonstrate that he no longer wished to be bound by the contract
...


Leaf v International Galleries [1950] 2 KB 86
The claimant purchased a painting from the defendant
...
In fact 5 years later the claimant discovered the painting was not a
Constable
...

The claim based on misrepresentation was successful however, since it was an innocent
misrepresentation, the claimant had lost the right to rescind the contract through lapse of time
...

The claim based on mistake was unsuccessful as the mistake related to the quality and did not
render the subject matter something essentially different from that which it was believed to be
...

Specific performance in contract law
Specific performance is an equitable remedy available at the discretion of the judge
...
Whilst it is often said that
contracts are made to be performed and parties should be held to their contract obligations, the
courts are often reluctant to order a party to unwillingly perform the contract and specific
performance is only available in limited circumstances
...

1
...

Nutbrown v Thornton [1805] 10 Ves 159
The claimant entered a contract to purchase some machinery from the defendant
...
The defendant was the
only manufacturer of this type of machinery
...

Held: Specific performance of the contract was granted
...

Cohen v Roche [1927] 1 KB 69
The claimant owned a furniture shop and entered an agreement to purchase a quantity of
Hepplewhite chairs to sell in his shop
...
The claimant sued for breach of contract and sought specific performance
for delivery of the chairs
...
The claimant would be adequately
compensated by an award of damages
...
The claimant could have purchased the chairs
elsewhere
...
Type of contract
Specific performance is most commonly ordered for contracts for sale of land
...

3
...
The claimant wished to mine the land and produced a
draft lease and pressured the defendant into signing the lease before he realised the value
of the land
...
The claimant sued for breach of contract and sought specific
performance
...

Held: There was no misrepresentation since the claimant had not said anything to mislead
the defendant as to the value of the land
...

However, the court refused an order of specific performance as the claimant had sought to
take advantage of the defendant’s ignorance by rushing him into signing the lease
...
In 1979, Argyll Stores took a lease of one of the units for a period of 35
years for the purpose of operating a Safeway supermarket
...
However in 1995, head office of Argyll Stores took the decision to close 27
of their supermarkets including the one at Hillsborough which was trading at a loss
...

Held: Specific performance was refused
...
A remedy which enables him to
secure, in money terms, more than the performance due to him is unjust
...
It is not only a waste of resources but yokes the parties together in a
continuing hostile relationship
...
If the
defendant is ordered to run a business, its conduct becomes the subject of a flow of
complaints, solicitors' letters and affidavits
...
An award of damages, on the other hand, brings the litigation to an end
...
”
Injunctions in contract law
Injunctions are another form of an equitable remedy available only at the discretion of the judge
...
Interlocutory or interim (temporary injunction until a court hearing)
2
...
Mandatory (an order that a party must do something)
There is an overlap between mandatory injunctions and specific performance which has been
recognised by the courts
...

By contract, The Troggs agreed that Page One Records would be their manager and sole agent for 5

years in return for 20% of their profits
...
However, their relationship with Larry Page broke down and The
Troggs wrote a letter to the claimant seeking to terminate the contract
...

Held: The injunction was refused
...

However, this does not prevent the ordering of a prohibitory injunction which may be an indirect
way of ensuring compliance with contract:
Lumley v Wagner [1852] 42 ER 687
The defendant Johanna Wagner, an opera singer, was engaged by the claimant to perform in his
theatre for a period of three months
...
She was then approached by the manager of Covent
Garden Theatre, Frederick Gye, who offered her more money to sing for him
...
The defendant argued that to
allow an injunction would in effect amount to specific performance of the contract in circumstances
where specific performance would not be available
...

Lord St Leonards LC: “Wherever this Court has not proper jurisdiction to enforce specific
performance, it operates to bind men's consciences, as far as they can be bound, to a true and literal
performance of their agreements; and it will not suffer them to depart from their contracts at their
pleasure, leaving the party with whom they have contracted to the mere chance of any damages
which a jury may give
...
The contract stipulated not only that could she not act for another but also she could take no
employment of any kind
...
Warner Bros sought an injunction to prevent her from doing so
...
The term relating to no employment of any kind was severed and did not
form part of the injunction
...
With regard to
the first of these considerations, it would, of course, be impossible to grant an injunction covering all
the negative covenants in the contract
...
It is confined to forbidding the defendant, without the consent of the plaintiffs, to render
any services for or in any motion picture or stage production for anyone other than the plaintiffs

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