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Title: contract law notes LLB YEAR ONE
Description: 1st year law students contract law has everything needed !

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Contract  Law  
A  contract  is  a  legally  enforceable  agreement  between  two  or  more  parties,  an  obligation  
which  is  voluntarily  assumed,  The  formation  of  contracts  has  3  elements:  Offer  and  
acceptances,  intention  to  create  legal  relations,  and  consideration
...
 This  decision  came  in  Smith  V  Hughes  (1871)  –  
Blackburn  J  held  if  a  person  conducts  themselves  that  a  reasonable  person  believes  they  are  
agreeing  to  the  terms  given,  they  are  equally  bound  as  if  they  intended  to  agree
...
 Objective  test  is  put  in  place  to  remove  uncertainty  
which  would  be  caused  if  a  person  who  would  have  agreed  could  escape  a  contract  by  
arguing  they  had  no  intention
...
 
Argued  that  there  are  3  different  interpretations  of  the  objective  test:    
1)   Detached  objectivity  –asks  what  interpretation  where  a  person  is  watching  
behaviour  of  the  contracting  parties  place  upon  their  words/actions
...
 
2)   Promisee/Claimant  objectivity  –  to  interpret  words  as  they  were  reasonably  
understood  by  the  promisee
...
 
 

Offer  and  Acceptance  
Offer/  Invitation  to  treat:  An  offer  is  a  statement  from  a  party  of  willingness  to  enter  into  a  
contract  on  stated  terms
...
 No  general  requirement  for  the  form  of  the  offer  (can  be  oral,  written,  or  through  
conduct)
...
 Distinction  between  the  two  can  be  
seen  in  intention;  did  the  maker  of  the  statement  intend  to  be  bound  by  an  acceptance  of  
his  terms  without  further  negotiation,  or  did  he  only  intend  his  statement  to  be  part  of  the  
continuing  negotiation  process?  Harvey  V  Facey  (1893)  –  Harvey  sent  a  telegram  to  Facey  

saying  ‘will  you  sell?’  and  requested  the  lowest  price,  Facey  replied,  lowest  price  £900,  
Harvey  then  replied  ‘we  agree’,  however  didn’t  intend  to  sell,  so  no  contract,  only  an  
invitation  to  treat
...
 Gibson  V  Manchester  City  Council  
(1979)  –  held  there  was  no  contract  was  concluded  as  the  previous  council  before  change  
clearly  stated  they  were  ‘prepared  to  sell’  property,  which  was  merely  an  invitation  to  treat
...
 
Goods  displayed  for  sale:  Generally  treated  as  an  invitation  to  treat,  offer  tends  to  be  made  
when  items  are  placed  on  cash  desk
...
 Application  of  rule  shown  in  Pharmaceutical  Society  of  GB  v  Boots  (1953)  –  Held  goods  
on  shelf  constituted  to  an  invitation  to  treat,  whereby  customer  makes  an  offer  when  he  
takes  goods  to  the  till
...
 Partridge  v  Crittenden  (1968)  –  D  
advertised  birds  for  sale,  charged  with  offence  of  ‘offering  for  sale  live  birds’
...
 However  
in  some  cases,  advertisements  can  be  interpreted  as  an  offer  rather  than  invitation  to  treat,  
Carlill  v  Carbolic  Smoke  Ball  Co  (1893)  –  D’s  advertised  to  pay  £100  to  anyone  catching  
influenza  having  used  their  smoke  ball
...
 Held  advert  was  an  
offer  which  C  accepted  when  she  accepted  by  performing  conditions  stated
...
 Offer  is  
made  my  bidder  and  is  accepted  by  the  auctioneer  when  they  strike  the  hammer  on  the  
table  under  the  Sale  of  Goods  Act  1979  s
...
 Barry  v  Davies  (2001)  –  stated  that  In  a  
‘without  reserve  auction’  there’s  a  contract  between  the  auctioneer  and  the  highest  bidder  
and  that  the  seller  can  avoid  risk  of  a  low  price  by  stipulating  a  reserve
...
 Similarly  in  Harris  v  
Nickerson  (1873)  -­‐  The  ad  for  the  auction  was  merely  an  invitation  to  treat,  there  was  no  
promise  that  the  articles  shown  would  be  put  up  for  sale
...
 Making  a  tender  
is  an  offer
...
 However  in  some  cases,  courts  can  hold  
invitation  to  tender  was  in  fact  an  offer
...
 of  Canada  
(1986)  –  2  companies  requested  to  submit  tenders  for  buying  shares,  D’s  said  offer  binds  for  
highest  bidder
...
 An  invitation  to  tender  could  give  rise  to  a  unilateral  contractual  
obligation  to  consider  tenders,  like  in  Blackpool  and  Fylde  Aero  Club(1990)  -­‐    

Held  an  invitation  to  treat  could  give  rise  to  a  binding  contractual  obligation  to  consider  
tenders  conforming  to  the  conditions  of  the  tender  in  these  circumstances
...
 
2)  There  were  absolute  conditions  governing  submission  including  an  absolute  deadline
...
 Thornton  v  
Shoe  Lane  Parking  Ltd  –  Lord  denning  stated  that  an  automatic  machine  which  issued  tickets  
outside  a  car  park  made  a  standing  offer  which  was  accepted  when  money  was  inserted
...
 Does  not  need  to  be  made  in  words,  can  be  made  in  conduct  like  in  
Carlill  v  Carbolic  Smoke  Ball  Co
...
 Acceptance  must  be  communicated,  must  match  the  exact  terms  
set  and  agreement  must  be  certain
...
 This  is  known  by  courts  as  the  ‘mirror  
image’  rule  to  decide  whether  a  contract  has  been  concluded,  to  accept  the  offer  the  terms  
must  be  all  accepted  and  to  introduce  new  or  modified  terms  is  a  rejection  and  
counteroffer
...
 In  Entores  V  Miles  Far  East  Corp  (1955)  –  Lord  
Denning  stated  that  if  an  oral  acceptance  is  drowned  out  by  an  overflying  aircraft,  such  that  
the  offeror  cannot  hear  the  acceptance,  there’s  no  contract  unless  the  acceptor  repeats  it  
after  the  aircrafts  gone
...
 If  a  
person  in  ignorance  of  the  offer  performs  acts  requested  by  the  offeror,  he  is  not  entitled  to  
sue  as  in  a  contract
...
 
Held  where  the  party  had  forgotten  about  the  reward  at  the  time  of  giving  information  was  
not  entitled  to  reward
...
 Felthouse  v  Bindley  (1862)  –  C  entered  negotiations  with  
nephew  saying  if  he  didn’t  hear  further  from  nephew,  he  would  consider  the  acceptance,  
held  that  the  nephews  silence  did  not  amount  to  an  acceptance
...
 Scamell  v  Ouston  (1941)  –  It  was  stated  that  ‘parties  must  so  express  themselves  that  
their  meaning  can  be  determined  with  a  reasonable  degree  of  certainty’,  no  need  for  
complete  certainty
...
 May  and  
Butcher  (1934)  –  Held,  a  concluded  contract  is  one  which  settles  everything  that  is  
necessary
...
 
Postal  Rule:  Where  parties  have  agreed  to  use  the  post  as  means  of  communication  the  
postal  rule  will  apply,  which  states  that  where  a  letter  is  correctly  stamped  and  addressed,  
acceptance  takes  place  when  it  is  placed  in  the  post  box
...
 Where  
the  offeree  sends  his  acceptance,  but  then  sends  a  rejection  via  a  quicker  method
...
 In  Entores  v  Miles  –  held  postal  rule  didn’t  apply  to  telexes,  
making  a  distinction  between  instantaneous  and  non  instantaneous  communication  (emails  
won’t  be  governed  by  postal  rule)
...
 
Dickinson  v  Dodds  (1876)  –Held  no  contract  as  it  was  withdrawn  before  acceptance,  
also  shows  that  no  requirement  that  offeror  must  be  the  one  to  bring  withdrawal  to  
attention
...
   
2)   Rejection/counter  offer  by  offeree  kills  of  the  original  offer  –  Hyde  v  Wrench  (1840)  
3)   Lapse  of  time  -­‐  any  offer  stating  to  last  a  specific  period  of  time  cannot  be  accepted  
after  that  date,  offer  with  no  time  limit  is  deemed  to  last  for  a  reasonable  period  of  
time  as  held  in  Ramsgate  Victoria  Hotel  (1866)
...
 
 
 
 
 

Consideration  
In  order  for  a  contract  to  be  binding,  there  must  be  exchanges  from  both  parties,  so  
therefore  each  party  must  receive  a  benefit  and  a  detriment;  this  is  referred  to  as  
consideration
...
 No  promise  will  be  enforceable  
unless  supported  by  consideration  (something  of  value)  or  made  in  a  deed  (written/signed),  
nor  will  a  gratuitous  promise  (where  no  consideration  is  required  in  return)  be  enforceable  

unless  made  in  a  deed  (a  promise  of  a  gift  is  not  legally  enforceable
...
 Definition  of  
consideration  set  out  in  Currie  v  Misa  (1875)  –  a  reasonable  consideration  may  consist  of  
benefit  to  one  party  or  some  detriment  to  the  other  party
...
 As  shown  in  Thomas  v  Thomas  (1842)  -­‐  £1  rent  per  
annum  was  sufficient  to  support  a  promise  of  the  right  to  live  in  the  house
...
 
Rules  governing  the  law  of  consideration:  
1)    Consideration  must  not  be  past  –  a  promise  to  give  consideration  for  
goods/services  delivered  in  the  past  will  not  be  enforceable
...
 –  However  there  can  be  an  exception  with  past  consideration  
as  held  in  Lampleigh  v  Brathwait  (1615)  -­‐  The  exact  order  of  events  will  not  be  
decisive  if  the  court  is  satisfied  that  the  promise  and  the  past  action  are  part  of  the  
same  overall  transaction
...
 
2)   Consideration  must  move  from  the  promisee  –  if  a  person  other  than  the  promisee  
gives  consideration,  the  promisee  cannot  enforce  agreement
...
 
3)   Consideration  needs  to  be  sufficient  though  not  adequate  (above)  –  Thomas  v  
Thomas  (1842),  Chapell  v  Nestle  (1960)
...
 Unless  the  promisee’s  do  more  than  they  
were  required  to  do  as  held  in  Glasbrook  Bros  v  Glamorgan  CC  (1925)
...
 
2)   Duty  imposed  by  contract  with  third  party  -­‐  performance  of  an  existing  contractual  
duty  owed  to  a  third  party  is  good  consideration
...
 Also  in  Pao  v  Lau  (1980)  –  promise  to  perform  an  existing  obligation  owed  
to  a  third  party  is  good  consideration
...
 Stilk  v  Myrick  (1809)  –  
promise  to  pay  more  wages  was  unenforceable  as  the  crew  of  ship  was  doing  what  
they  were  contractually  obliged  to  do
...
     
Part  payment  is  not  valid  consideration,  as  in  held  in  the  Pinnel’s  Case  (1602),  payment  has  
to  be  made  in  full  unless  given  on  promisors  request,  before  the  due  date,  with  a  chattel  or  
to  a  different  location
...
 
Promissory  estoppel  –  applies  where  there  has  been  modification  to  a  contract,  it  is  a  
doctrine  which  prevents  the  promisor  from  denying  statements,  words  or  conduct  of  the  
promise  made  by  arguing  it  was  not  supported  by  consideration
...
 Requirements  are:  a  pre-­‐existing  contract  or  legal  obligation  which  is  then  
modified,  there  must  be  a  clear  and  unambiguous  promise,  change  of  position  –  against  
detrimental  reliance,  it  must  be  inequitable  (unfair  &  unjust)  to  allow  the  promisor  to  go  
back  on  their  promise
...
 
-­‐   Must  be  a  clear  and  unambiguous  promise:  can  be  implied  through  conduct  as  in  
Woodhouse  v  Nigerian  Produce  Marketing  (1972)  –  The  buyers  conduct  in  accepting  to  
change  the  mistakenly  given  invoice  unquestionably  amounted  to  an  implied  clear  and  
unambiguous  promise  to  accept
...
 
-­‐   It  must  be  inequitable  to  allow  the  promisor  to  go  back  on  their  promise:  D  &  C  
Builder’s  v  Rees  (1966)  –  In  this  estoppel  could  not  operate  as  the  promisors  promise  
was  not  freely  given,  to  use  estoppel  there  must  be  true  accord  between  the  parties
...
 
 
Suspensory  Effect:  Promissory  estoppel  has  the  effect  of  suspending  the  terms  agreed
...
 Tool  Metal  Manufacturing  Co  v  Tungsten  Electric  
(1955)  –  the  d’s  infringed  a  patent  and  promised  compensation,  however  required  it  to  be  

 

lowered  as  they  were  struggling  to  pay  it  during  war  time,  so  it  was  agreed,  however  after  
some  time,  the  C’s  required  compensation  back  to  normal  as  the  D’s  weren’t  struggling  no  
more
...
 
 
Regarding  estoppel  and  part  payments  of  debt,  law  holds  that  if  the  debtor  accepts  promise  
to  take  the  part  payment  of  debt  and  does  so  with  true  accord  or  voluntary  acceptance  
then  debt  is  clear
...
     
 

Intention  To  Create  Legal  Relations  
For  a  binding  agreement  you  need  to  have  intention  to  create  legal  relations  from  both  
parties
...
   
 
In  social  and  domestic  agreements  the  law  raises  a  presumption  that  the  parties  do  not  
intend  to  create  legal  relations  -­‐Jones  v  Padavatton  (1969)  –  held  courts  are  not  to  be  
troubled  with  family  relation  issues  as  it  is  a  waste  of  resources  which  involved  an  
agreement  between  a  mother  and  daughter
...
 However  this  can  be  
rebutted  where  there  is  a  written  agreement  as  held  in  Errington  (1952),  or  where  parties  
have  separated  as  in  Merritt  v  Merritt  (1970)  where  the  agreement  was  agreed  was  after  
separation  of  the  parties,  and  finally  where  there  is  a  third  party  to  the  agreement  Simpkins  
v  Pays  (1955)  –  held  there  was  a  binding  contract  despite  the  family  connection  as  a  lodger  
was  also  part  of  the  contract
...
 Esso  
Petroleum  v  Customs  &  Excise  (1976)  –  held  the  giving  of  coin  collections  was  in  commercial  
context  therefore  presumed  to  have  had  intention  to  create  legal  relations  however  coins  
were  given  as  promotion  (gifts)  so  couldn’t  be  taxed
...
 
The  distinction  between  social  and  domestic  agreements  and  commercial  agreements  can  
be  fine,  as  in  Coward  v  MIB  (1963)  –  where  a  widow  couldn’t  claim  damages  from  the  
insurance  company  as  the  agreement  of  a  the  man  insured  allowing  his  friend  to  drive  was  
social/domestic
...
 
 

Terms  

Statements  made  during  the  course  of  negotiations  could  amount  to  a  contractual  term  or  a  
representation
...
   
 
Relative  expertise  -­‐  If  the  representor  has  the  greater  knowledge,  it  is  more  likely  to  be  a  
contractual  term
...
 Oscar  Chess  v  Williams  (1957)  –  held  the  statement  was  only  a  
representation  as  the  representee  (car  buyer  who  was  a  car  dealer)  had  greater  knowledge  
of  the  car
...
 
Bannerman  v  White  (1861)  –  where  the  C  needed  hops  stating  he  needed  it  to  make  beer  
and  was  given  the  wrong  hops,  there  was  a  term
...
 Eddy  (1951)
...
 Traditionally,  
contractual  terms  were  classified  as  either  conditions  or  warranties
...
 It  is  important  for  parties  to  
correctly  identify  which  terms  are  to  be  conditions  and  which  are  to  be  warranties
...
 If  a  condition  is  breached  the  innocent  party  is  entitled  to  repudiate  (end)  the  
contract  and  claim  damages
...
 
 
Warranties  -­‐  Warranties  are  minor  terms  of  a  contract  which  are  not  central  to  the  
existence  of  the  contract
...
 Bettini  v  Gye  (1876)  –  also  involved  an  opera  singer,  where  
singer  missed  rehearsals  it  was  held  contract  could  not  be  repudiated  as  rehearsals  were  
only  regarded  as  warranties
...
 In  this  scenario  
the  innocent  party  substantially  deprived  of  the  whole  benefit  will  be  able  to  treat  the  
contract  as  at  an  end
...
 D’s  liable  for  
wrongful  repudiation
...
 –  this  approach  has  been  criticised  for  sacrificing  certainty  as  the  innocent  party  
may  be  liable  for  wrongful  repudiation  if  they  treat  the  contract  as  an  end  where  it’s  found  
there  was  no  breach
...
 
Bunge  v  Tradax  (1974)  –  held  the  innominate  term  approach  should  only  be  used  where  it  is  
impossible  to  classify  a  term  as  a  condition  or  warranty
...
 Schuler  (1974)  –  despite  the  contract  expressly  stating  the  term  was  a  condition,  
courts  held  it  was  only  a  warranty
...
 There  are  
limited  circumstances  where  the  courts  will  imply  a  term  into  a  contract:  
-­‐   Term  implied  through  custom  
-­‐   Terms  implied  at  courts  (fact  and  law)  
-­‐   Terms  implied  in  statute  
 
Terms  implied  through  custom:  Where  a  particular  term  is  common  in  a  trade  the  courts  
may  imply  a  term  in  a  contract  of  the  same  type  in  that  trade
...
 
     
Terms  implied  by  courts:  terms  are  implied  by  courts  only  if  it  is  necessary
...
 Terms  implied  in  fact  -­‐  Terms  implied  as  
fact  are  based  on  the  intention  of  the  parties
...
  The  business  efficacy  test  -­‐  this  asks  whether  the  term  was  necessary  to  give  the  
contract  business  efficacy
...
e
...
 The  Moorcock  (1889)  
-­‐    the  C  moored  his  boat  in  exchange  of  payment,  boat  was  damaged  whilst  there,  
although  not  in  contract  for  d’s  to  pay  for  damages,  courts  implied  terms  as  it  
wouldn’t  be  business  efficient  not  to  keep  boat  safe
...
  The  officious  bystander  test  -­‐  had  an  officious  bystander  been  present  at  the  time  
the  contract  was  made  and  had  suggested  that  such  a  term  should  be  included,  it  
must  be  obvious  that  both  parties  would  have  agreed  to  it;  something  so  obvious  that  
it  goes  without  saying’  so  must  be  a  very  high  standard
...
 
 
Terms  implied  in  law  -­‐  courts  may  imply  a  term  in  law  in  contracts  of  a  defined  type  e
...
 
Landlord/tenant,  retailer/customer  where  the  law  generally  offers  some  protection  to  the  
weaker  party
...
 Courts  did  
imply  a  term  of  a  defined  type  between  landlord  and  tenant  that  the  landlord  was  to  take  
reasonable  care  to  maintain  the  common  parts
...
 Wilson  v  Best  Travel  (1993):  although  a  defined  contract  between  
a  retailer  and  customer,  no  term  was  implied  as  it  wasn’t  reasonable  to  be  held  liable  for  the  
safety  standards  of  the  accommodation  provided
...
 
   
Terms  implied  by  statute:  applies  with  contracts  for  the  Sale  of  Goods
...
12  -­‐  The  seller  must  have  the  right  to  sell  the  goods    
-­‐   S
...
14  -­‐  Goods  must  be  of  satisfactory  quality    
-­‐   S
...
 
 
 

Unfair  Terms  

Most  common  of  the  unfair  terms  are  exclusion  clauses  –  where  a  party  seeks  to  exclude  
their  liability  arising  under  the  contract
...
 As  unfair  terms  are  oppressive,  law  restricts  the  use  of  such  terms;  
protection  comes  from  common  law  and  also  statute  law;  Unfair  Contract  Terms  Act  1977  
and  the  Unfair  Terms  in  Consumer  Contract  Regulations  1999
...
 Olley  v  Marlborough  Court  (1949)  –  the  unfair  terms  were  
brought  to  the  attention  of  the  party  after  the  agreement  was  made  so  therefore  held  
to  not  be  part  of  the  contract
...
 L’Estrange  v  
Graucob  (1934)  –  held  ignorance  of  not  reading  the  contract  does  not  mean  you  have  a  
protection
...
 I
...
 they  took  reasonable  steps  to  bring  the  term  to  the  attention  of  the  party
...
 
-­‐   If  a  clause  is  particularly  onerous  then  more  steps  are  required  to  bring  it  to  the  notice  
of  a  reasonable  person  as  stated  in  Interfoto  v  Stilletto  (1989)  

-­‐   Incorporation  through  previous  dealings  –  if  the  parties  have  dealt  with  each  other  
before  regularly  then  the  term  can  be  incorporated  without  bringing  it  to  the  attention  
of  the  other  party  as  in  Spurling  v  Bradshaw  (1956)
...
 
-­‐   Incorporation  through  trade  custom  –  a  term  may  be  incorporated  where  the  use  of  
such  terms  is  prevalent  in  a  particular  trade  and  both  parties  operate  in  that  trade  as  
stated  in  British  Crane  Hire  (1975)  
Does  the  clause  cover  the  loss  in  question?  
-­‐   Once  the  unfair  term  is  held  to  have  been  incorporated,  it  must  be  looked  at  whether  
the  clause  covers  the  loss  in  question
...
   
-­‐   The  contra  proferentem  rule  –  where  there  is  ambiguity  in  the  wording  of  the  clause  it  
goes  against  the  party  seeking  to  rely  on  it,  which  was  established  in  Andrews  Bros  Ltd  
(1934)
...
 
 
There  is  also  protection  of  unfair  terms  via  statute:  
-­‐   UTCCR  only  apples  to  consumer  contracts,  whereas  UCTA  applies  to  business  to  
business  relationships  as  well
...
   
-­‐   UCTA  only  apples  in  certain  situations  whereas  the  UTCCR  can  be  used  against  any  
term
...
   

 
UCTA:  
The  main  provisions  cover:  
-­‐   s
...
1  
-­‐   s
...
4  -­‐  Liability  to  pay  an  indemnity  
-­‐   s
...
7  -­‐  Exclusion  of  liability  in  hire  contracts  
-­‐   s
...
11  -­‐  Sets  out  the  reasonableness  test  –  which  is  found  under  Sch  2,  which  provides  
further  guidance  on  the  reasonable  test  which  looks  at:  Strength  of  the  bargaining  
position  of  the  parties;  Whether  the  customer  received  an  inducement;  Whether  the  
customer  knew  or  should  have  known  of  the  term;  Whether  the  term  excludes  or  
restricts  liability  if  some  condition  is  not  complied  with
...
 Director  General  of  Fair  Trading  v  First  
National  Bank  (2001)  -­‐  Good  faith  is  a  general  presumption  that  the  parties  to  a  contract  
will  deal  with  each  other  honestly  and  fairly,  

-­‐   It  causes  a  significant  imbalance  in  the  parties’  rights  and  obligations  to  the  detriment  
of  the  consumer
...
 
b)   Exclude  or  limit  liability  of  seller  in  the  event  of  total  or  partial  non-­‐performance
...
 
o)   Oblige  consumer  to  fulfil  all  his  obligations  where  the  seller  does  not  fulfil  his
...
 Where  a  statement  made  during  negotiations  is  classed  as  a  
representation  rather  than  a  term  which  turns  out  to  be  untrue  can  be  treated  as  
misrepresentation
...
 However  there  are  some  exceptional  
cases
...
 Where  the  offeree  
has  clearly  misunderstood  terms  of  offeror’s  offer  as  held  in  Hartog  (1939)
...
 Where  the  
statement  is  literally  true,  but  actually  misleading,  telling  half  the  truth  which  was  stated  in  
Butler  (1866)
...
 The  statement  cannot  be  an  opinion  
or  estimate  of  future  events
...
 Bisset  v  Wilkinson  (1927)  statement  of  opinion  
was  disregarded  as  misrepresentation  however  in  Smith  v  Land  (1884),  it  was  held  a  
statement  of  opinion  may  amount  to  an  actionable  misrepresentation  where  the  
representor  was  in  a  position  to  know  the  facts
...
 Pankhania  (2002)  –  false  statement  of  law  
will  amount  to  actionable  misrepresentation
...
 There  can  be  no  inducement  or  
reliance  if  the  representee  was  unaware  of  the  false  statement  which  was  stated  in  
Horsfall  (1962)
...
 Redgrave  v  Hurd  
(1881)  -­‐  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  
 
There  are  three  types  of  misrepresentation:    

-­‐   Fraudulent  misrepresentation  (burden  of  proof  on  claimant)  -­‐  Lord  Herschell  defined  
fraudulent  misrepresentation  in  Derry  v  Peek  (1889)  as  a  statement  which  is  made  
either:  
I
...
  without  belief  in  its  truth,  or  
III
...
2  (1)  Misrepresentation  Act  1967  -­‐  a  negligent  
misrepresentation  is  a  statement  made  without  reasonable  grounds  for  belief  in  its  
truth
...
 Hedley  Byrne  v  Heller  –  
established  test  for  negligent  misrepresentation:  if  D  carelessly  made  false  statements,  
if  it  was  reasonable  for  C  to  rely  on  statement,  if  there  was  a  special  relationship
...
2  (1)  Misrepresentation  
Act  1967
...
 The  right  to  rescind  the  contract  may  be  lost  where:    
-­‐   Where  a  third  party  requires  the  rights  in  the  goods  eg:  where  they  have  been  sold  on  
or  subject  to  a  charge  or  mortgage,  rescission  will  not  generally  be  granted  as  it  will  
prejudice  the  third  party
...
 
-­‐   Where  the  representee  affirms  the  contract:  If  the  representee  does  an  act  to  adopt  the  
contract,  or  demonstrate  a  willingness  to  continue  with  the    contract  after  becoming  
aware  of  the  misrepresentation  they  will  lose  the  right  to  rescind:  Long  v  Lloyd  (1958)
...
 
International  Galleries  (1950)
...
 
 
 
 
 
 
 
 

Mistake  
There  are  three  different  types  of  mistakes  recognised
...
 

-­‐   Unilateral  mistake:  one  party  is  very  seriously  mistaken  about  a  crucial  part  of  the  
contract
...
 
-­‐   Mutual  mistake:  where  both  parties  are  mistaken  as  to  the  terms  of  the  contract,  each  
believes  they  are  contracting  to  something  different
...
 
-­‐   Common  mistake:  both  parties  at  the  time  of  making  the  contract  make  the  same  
mistake
...
 

 
Unilateral  mistake:  in  a  unilateral  mistake,  only  one  party  is  mistaken
...
 
Mistakes  as  to  identity:  
-­‐   Generally  induced  by  fraud  where  one  party  claims  to  be  someone  they  are  not
...
 
-­‐   In  determining  whether  there  is  a  mistake,  courts  draw  a  distinction  between  contracts  
made  inter  absentes(at  a  distance)    and  made  inter  praesentes  (face  to  face)
...
 Cundy  v  
Lindsay  (1978)  –  contract  void  as  claimant  demonstrated  an  identifiable  business  whom  
they  intended  to  contract  with
...
 
Where  the  parties’  contract  is  face  to  face,  law  presumes  that  the  party  intended  to  do  
the  deal  with  them  and  cannot  argue  mistake
...
   The  presumption  as  to  this  is  that  you  intend  to  make  a  
deal  with  whoever  is  in  front  of  you
...
 Anything  obvious  is  a  mistake
...
 
-­‐   If  a  fraudster  pretends  to  be  someone  who  actually  exists  (and  particularly  if  that  
person  is  known  to  innocent  party),  those  terms  are  not  made  to  the  fraudster  but  to  
actual  person  the  fraudster  made  out  to  be
...
 
-­‐   There  can  also  be  mistakes  relating  to  signed  documents  (non  est  factum),  if  one  party  
signs  a  document  with  a  complete  misunderstanding  of  the  terms,  then  mistake  may  be  
raised
...
 
 
Mutual  mistake:  is  where  parties  are  at  cross  purposes,  there  is  a  meeting  of  the  minds  but  
parties  are  mistaken
...
 Raffles  v  Wichelhaus  (1864)  -­‐  If  a  reasonable  person  could  not  determine  
the  meaning  then  the  contract  will  be  void  for  mistake
...
 

There  are  3  types  of  common  mistake:  
-­‐   Res  extincta  –  when  parties  thought  a  matter  existed  when  it  fact  didn’t,  contract  will  
be  void  for  mistake
...
 There  is  also  
protection  for  this  mistake  via  the  statute  of  S6  Sale  of  Goods  Act  1979
...
 Cooper  v  Phibbs  (1867)  –  nephew  leased  a  fishery  
from  his  uncle,  uncle  died,  renewed  the  lease  from  his  aunt  however  he  had  inherited  it  
from  his  uncle,  so  contract  was  void  for  mistake
...
 A  mistake  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  
which  was  believed
...
   Leaf  v  International  Galleries  (1950)  –  mistake  was  unsuccessful  
as  although  he  believed  he  was  purchasing  a  very  expensive  painting,  as  he  believed  he  
was  buying  a  painting  and  he  got  a  painting
...
 Frustration  must  
be  unforeseeable  by  parties  when  contract  made
...
 Courts  use  frustration  very  rarely,  if  it  is  found,  courts  can  bring  a  contract  to  an  
end
...
 Parties  should  provide  a  term  in  the  contract  
for  what  they  will  do  in  the  event  of  material  changes  if  circumstances  known  as  ‘force  
majeure  clauses’
...
 
 
Examples  of  frustrating  events:  
-­‐   Destruction  of  the  subject  matter
...
 
-­‐   Personal  incapability
...
 
-­‐   Forced  alteration  of  manner  of  performance
...
 
-­‐   Contract  becomes  illegal  to  perform  as  in  Fibrosa  Spolka  (1943)  where  contract  was  no  
longer  possible  to  perform  the  contract  because  of  its  illegality
...
   
-­‐   Also  where  it  is  deprived  of  its  commercial  purpose  as  in  Krell  v  Henry  (1903),  however  
must  be  deprived  of  the  whole  commercial  purpose  to  amount  to  frustration
...
 
 
Where  a  contract  is  not  frustrated:  
-­‐   Where  a  contract  becomes  more  difficult  or  expensive  to  perform
...
 Also  in  
Tsakiroglou  (1962)it  was  held  a  contract  cannot  be  frustrated  merely  because  it  was  
more  difficult  or  costly  to  perform  
-­‐   Where  the  impossibility  is  the  fault  of  either  of  the  parties
...
 
-­‐   Where  there  exists  a  force  majeure  clause,  this  will  apply  rather  than  the  law  
frustration
...
 Jackson  v  Union  Marine  
Insurance  (1874)
...
 If  parties  foresaw  a  
possibility  of  an  event,  but  didn’t  agree  what  to  do  if  it  did,  risk  is  with  the  party  obliged  
to  perform  the  relevant  obligation  as  held  in  The  Sea  Angels  (2007)
...
 
-­‐   Allocation  of  loss  is  decided  by  the  Law  Reform  (Frustrated  Contracts)  Act  1943  which  
provides:  
S1(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
...
 
S1(3)  -­‐  Where  a  valuable  benefit  has  been  conferred  this  must  be  paid  for
...
1  (3)
...
 The  basis  of  duress  as  a  vitiating  factor  is  that  there  is  
an  absence  of  free  consent  so  therefore  can  be  found  voidable  and  lead  to  rescinding  the  
contract  and  claiming  damages
...
 Contract  may  be  set  aside  providing  the  
threat  was  a  cause  of  entering  the  contract
...
 Barton  v  Armstrong  (1976)  –  held  duress  exists  
as  although  the  party  would  have  agreed  to  the  agreement  without  threats,  threats  were  
still  used  to  gain  consent
...
 Skeate  v  Beale  (1840)  –  where  the  landlord  seized  
goods  owned  by  the  tenant  to  make  the  party  pay  rent  was  not  duress,  it  was  held  duress  to  
goods  will  not  suffice  to  render  a  contract  voidable
...
 
 
Economic  duress  –  Economic  duress  was  established  in  The  Atlantic  Baron
...
 
2
...
 
4
...
   
After  entering  into  the  contract,  did  they  take  steps  to  avoid  it?  

 
The  requirement  of  free  consent  was  replaced  in  The  Universe  Sentinel  with  2  elements:  
compulsion  of  the  will  (absence  of  choice)  and  Illegitimacy  of  pressure
...
 What  he  has  to  justify  is  not  the  
threat,  but  the  demand  of  money
...
 Where  there  is  a  relationship  of  trust,  confidence  or  
dependency  between  the  parties  which  predates  the  contract  and  the  party  with  the  
position  of  influence  exploits  for  its  own  gain  with  an  unfair  advantage  therefore  can  be  
voidable
...
Undue  influence  is  divided  
into  two  types:  
 
Actual  undue  influence  –  (class  1)  which  requires  proof  that  the  contract  was  entered  into  
as    a  result  of  actual  influence  exerted,  this  can  include  threats  to  end  a  relationship,  
continuing  to  badger  the  party  where  they  have  refused  consent  until  they  eventually  give  
in
...
 Contractors  Bonding  v  Snee  –  son  made  mentally  incapable  mother  
give  a  guarantee  for  his  company
...
 There  is  no  requirement  to  
prove  that  improper  influence  was  actually  exerted
...
 In  most  cases  NOT  husband  and  wife  
as  held  in  Midland  Bank  v  Shephard  (1988)  &  also  employer  and  employee  however  in  
Mathews  v  Bobbins  (1980)  it  was  allowed  as  the  circumstances  found  that  there  was  
undue  influence  in  this
...
 Here  the  burden  of  proof  lies  with  the  
influencing  parties  to  disprove  undue  influence
...
 Any  
relationship  is  capable  of  amounting  to  this
...
 Lloyds  Bank  v  
Bundy  (1975)  –  held  bankers  and  clients  don’t  really  have  trust  and  confidence  in  a  
relationship  unless  they  are  known  to  each  other  personally  as  in  this  case
...
 
-­‐   by  operation  of  law  
-­‐   by  breach  which  was  defined  by  Treitel  -­‐  “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
...
 
 
There  are  2  types  of  breaches:  
-­‐   ‘Straightforward’  breach  –  where  there  exists  a  breach  of  condition  this  will  enable  the  
innocent  party  the  right  to  repudiate  the  contract  in  addition  to  claiming  damages
...
 Breach  of  an  innominate  term  
will  justify  innocent  party  terminating  when  breach  has  very  serious  consequences  for  
the  innocent  party
...
 
-­‐   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
...
 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
...
 Avery  v  Bowden  (1855)  -­‐  contract  became  frustrated  so  he  
could  not  sue  for  breach,  had  the  claimant  not  waited  he  would’ve  have  been  able  to  
sue
...
 
 
Damages  -­‐  damages  are  an  award  of  money  to  compensate  the  innocent  party
...
 Award  of  damages  is  subject  to  the  application  of  the  rules  on  causation,  
remoteness  and  a  duty  to  mitigate  loss:  
-­‐   Causation    –  The  Monarch  Steamship  v  Karlshamns  Ojlefabrika  (1949)  -­‐  
-­‐   Remoteness  –  rules  of  remoteness  of  damage  are  set  out  in  Hadley  v  Baxendale  (1854):  
I
...
  those  which  may  reasonably  be  supposed  to  be  in  the  contemplation  of  the  parties  at  
the  time  the  contract  was  made
...
 They  are  
under  a  duty  to  take  reasonable  steps  to  reduce  their  loss
...
 
 
There  exists  various  type  of  damage  which  an  amount  can  be  claimed  to  reflect  different  
types  of  loss:  
-­‐   Reliance  loss  –  where  it  is  difficulty  to  quantify  the  position  the  claimant  would  have  
been  in  it  may  be  possible  to  recover  expense  incurred  in  the  reliance  of  the  contract
...
 
-­‐   Discomfort,  disappointment  -­‐  damages  to  reflect  discomfort  and  disappointment  can  
only  be  claimed  where  enjoyment  was  part  of  the  bargain  of  the  contract
...
 
-­‐   Inconvenience  –  where  claimant  has  been  put  to  physical  inconvenience  rather  than  
anger  or  disappointment  that  the  D  has  not  met  his  contractual  obligation,  the  court  
may  award  a  sum  to  reflect  such  inconvenience
...
 Dunk  v  George  Waller
...
 Chaplin  v  Hicks  (1911)
...
 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  it  
is  a  genuine  pre-­‐estimate  it  is  known  as  a  liquidated  damages  clause
...
 

 
Repudiation  –  remedy  available  for  breach  of  contract
...
 It  is  only  available  for  breach  of  condition  as  oppose  to  breach  of  warranty
...
 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
...
 
 
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
...
 It  is  an  
order  by  the  court  requiring  one  party  to  perform  their  contractual  obligation  and  only  
available  in  limited  circumstances
...
 Compare  the  cases:  Nutbrown  v  Thornton  (1805)  
&  Cohen  v  Roche  [1927]
...
 The  courts  are  unlikely  to  order  specific  performance  for  contracts  for  
personal  service
...
 Hardship:  Co-­‐op  insurance  v  Argyll  
Stores  [1997]
...
 There  are  three  types:  
-­‐   Interlocutory  or  interim  (temporary  injunction  until  a  court  hearing)  
-­‐   Prohibitory  (a  court  order  that  a  party  must  not  do  something)  
-­‐   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
...
   
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)
...
 
 
 
 


Title: contract law notes LLB YEAR ONE
Description: 1st year law students contract law has everything needed !