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OFFER - An agreement = a clear and certain offer made and an equally clear, unequivocal acceptance is communicated
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An acceptance is based
on the reasonable man’s intention– Smith v Hughes
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What is an
offer?1
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2
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3
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cf Storer v Manchester CC (it was held to be a clear and certain offer)
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They invite the offeree to enter into
negotiations: 1
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2
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NB EXCEPTION: Unilateral offers (made to the world)
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See: Carlill v Carbolic Smoke Ball; Bowerman v ABTA
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In Lefkowitz v Great Minneapolis Surplus it was limited
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Invitations to tender – where a person seeking
to have work carried out invites people to submit conditions
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BUT NOTE: Blackpool & Flyde Aero Club v
Blackpool BC – was held to be an offer as the parties were invited and there were strict conditions re offers; Harvela Investments Ltd v Royal trust Co
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4
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BUT NOTE: Barry v Davies
re auctions with reserves
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Termination
of an offer
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Termination by:1
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Battle of the forms – Butler Machine Tool v Ex-Cell-O (ct looks at all docs to decide)
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2
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Anytime before acceptance (Payne v Cave), but for it to be valid it must be communicated (Byrne v Van
Tienhoven)
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It can be communicated by a 3rd party – Dickinson v Dodds
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Anytime before complete performance(GNR v Witham), but note Errington v Errington & Woods
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3
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An offer is either going to have an acceptance, request for further information or rejection/counter offer
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1
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Can’t snatch a bargain – Hartog v Colin
shields
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Generally must be communicated to the offeror– Felthouse v Bindley
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BUT NOTE: Taylor v Allon – acceptance by conduct
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Must be by offeree – Boulton v Jones
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As response to the offer – R v Clarke - he didn’t know there was
an offer; Williams v Carwardine – public policy issue report crimes so was valid
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May be communicated by an authorized by 3rd party – Powell v
Lee
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Unilateral Offers – Carlill v Carbolic Smoke Ball
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Negligent conduct of offeror – Entores v Miles Far East
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Ct said purpose was there
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The Postal Rule – Adams v Lindsell
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NB
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Postal Rule-To be able to rely on postal rule:1
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It has to be put in post box
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Lost or damaged (still valid) – Household Fire and Carriage Accident Insurance Co v Grant
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Misaddressed? Depends on
why it has been misaddressed
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EXCEPTIONS:1
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2
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3
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It was clear that acceptance not via post then not valid
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second thoughts can be too late -Byrne v Van Tienhoven
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2
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3
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Moot point in English law
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INSTANTANEOUS COMMUNICATION1
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Postal rule does not apply
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Taken to have been received within office hours – The Brimnes
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Outside office hours? Mondial
shipping v Astarte shipping
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PRECSCRIBED MODE OF ACCEPTANCE1
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2
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Any equally efficacious offer will suffice if you don’t discount them
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Party intended to be advantaged can waive – Yates building co v
PulleynContracts made electronically – governed by Electronics Commerce (EC Directive) Regs 2002
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Emails = receipt rule applies
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v Crompton bros
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Presumption of ICLR – commercial agreementsBunn & Bunn v Rees & Parker;
Bowerman v ABTA
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1
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v Crompton Bros2
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Comfort letters – Kleinwort Benson ltd v Malaysia
mining corporation
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Subject to contract – Chillingworth v Esche5
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Presumption of
NO ICLR – social/domestic agreements1
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Parent and child – Jones v PadavattonHOWEVER, rebuttable presumption –
social/domestic agreements1
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Mutuality of obligations – Simpkins v Pays3
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The context is all important
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The Rule of ‘Good Consideration’must be:1
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Move from the promiseeA C can
only claim on a contract if he has given consideration – Tweddle v AtkinsonOther side of the same coin as privity – Dunlop v SelfridgeNote: S1 The Contract (Rights of
Third Parties) Act 1999
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Be sufficient not adequate- Chappell & o v Nestle & Co
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Contrast with Hamer v SidwayNOTE: An
existing obligation is not good consideration and part payment of a debt is not good consideration
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Performance of an existing duty
obligation: contractualPerformance of existing obligation NOT good consideration – Stilk v Myrick
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EXCEPTION to Stilk v Myrik - ‘factual consideration’/ ‘practical benefit’ – Williams v Roffey Bros
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Benefit to B is capable of
being consideration, so B’s promise will be binding
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However, in Re
Selectmove, Williams will NOT apply to claim for debt owed
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Performance of an existing duty obligation: owed to the third
party
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At common law the payment of a lesser sum does not discharge the obligation pay the full amount – Foakes v Beer;
Re Selectmove
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NB Williams v Roffey rule of factual consideration to a promise to pay more, not
to a promise to pay less
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EXCEPTIONS TO PART PAYMENT RULE1
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This applies if it is a different thing, different place or earlier debt received by the creditor
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PAYMENT BY THIRD PARTY– where a lesser amount is paid in satisfaction of a debt by a third
party to that debt, the creditor cannot sue for the balance – Welby v Drake
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PROMISSORY ESTOPPEL
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‘A natural result of the fusion of law and equity’ – Lord Denning
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Origins – Hughes v Metropolitan Railway; Lord
Denning applied PE in CLP trust v High Trees case (lease contract – half rent through war)
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However, the courts do not favour PE,
so they have narrowed the principle and for someone to claim PE they must show the following criteria
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The promise is to waive existing contractual rights - either by express statement or by conduct which implies that promise
–Hughes v Metropolitan Railway
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Builders quote Foakes
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Not a different thing
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Ct said unfair – see duress)e)shield not a sword – act as a defence to a claim
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It doesn’t stand alone as a cause of action
itself
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The English CA has not been followed – Baird Texile Holdings Ltd v Marks
and Spencer
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Past periodic payments like rent, PE may be
applied, not only as to suspend strict legal rights, but also to precude the enforcement of them
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It is a vitiating (weaken or destroy) factor
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There is an interrelation between consideration, PE and duress
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Duress of the person –where contract entered into unwillingly by one party because of threats to their person
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– Barton v ArmstrongDuress of goods –the unlawful detention of or threat to another’s goods – The Siboen and the
Sibotre
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Economic duress – effect
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it is a valdic contract unless and until the victim takes the perpetrator to court, proves duress and
court orders the variation contract set aside
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Contractual variations made under duress will
fail
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consideration used to restrain unfair practice – stilk v myrick2
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Although it was found there was no
duress in this case, as it was merely hard bargaining
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C would have to prove there has to be coercion of the will so as to
vitiate consent
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Pao On v Lau Yiu long stated, did the victim: protest; have an alternative course open to him; receive independent advice; and take steps to avoid contract
(ie as soon as the duress as lifted)
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’lack of consent’ then went to ‘illegitimate pressure’ – Universal Sentinel
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EDTODAY“There must be pressure, resulting in lack of practical choice for the
victim, which is illegitimate, and which is a significant cause inducing the C to enter into the contract” – DSND subsea v petroleum geo ltd
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LACK OF PRACTICAL CHOICE“whether the victim had any realistic practical alternative but to
submit” –DSND subsea v petroleum geo
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ILLEGITIMATE PRESSUREFactors to consider in assessing legitimacy of
pressure: threatened breach of contract? Good or bad faith? Protest? Affirmation?a)threatened breach of contract?Atlas express ltd v kafco ltd; carillion construction ltd v
felix (uk) ltd; b&s contracts & design v victor green
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Legitimate threat for unlawful end – in good faith – CTN v Gallagher
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Contrast with: legitimate threat? But
for illegitimate purpose – The Universal Sentinelc)legitimate pressure?‘A hard bargain’ is not a legitimate pressure– Alec lobb v total oil
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d)protest or affirm?The remedy for ED will be lost unless the innocent party takes actions to protest and reopen the
issue at the time, or shortly after, the contract performance is completed
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However, ct has not specified duration that would be classed as ‘affirming’/ dsnd subsea v petroleum geo ltd
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Similar to the rule that consideration
must move from the promisee
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The aim was to prevent the need for cts to manipulate the system
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The common law rules still apply and there is large academic debate on the extent to which courts should go to restrict or extend
the doctrine of privity
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A man provides consideration but cannot enforce promise because it was not
address to him
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This means: the intention of the parties thwarted, injustice to the third party, the person who has suffered the loss
can’t sue, the person who has no loss can sue but has no loss to recover
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Guarantor’s right of subrogation2
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TRUST–les affreteurs reunis sa v leopold walford ltd
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AGENCY – Dunlop v selfridge; scruttons v midland silicones ltd – scruttons couldn’t take
advantage of limitation clause sillicones had with carriers, so sillicones were able to sue for full amount of damage caused by scruttons
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b)that the contracting party was acting as agent for the
principalc)the contracting party has authority from the principal to act as his agentd)the principal has provided consideration to the other contracting partyAlso see:
Eurymedon – commercial agreement was set up differently so they were allowed to rely on the exemption clause as it stated ‘the carrier, its servants, agents and employees
are exempted’ (himalayan clause) 5
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6
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C
sues B on basis of B’s contract with A
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JUDICIAL EXCEPTIONS (or activism) –Jackson v horizon holidays – but it has been limited ie must be a contract for
enjoyment (Woodar v Wimpey)Albazero principle (commercial setting):Linden Gardens v Lenesta sludge - Assignment prohibition meant that Albazero couldn’t apply
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Where A and B contract for goods,
knowing the goods will be transferred to C before the breach, A will be treated as having entered into the contract for the benefit of C and is entitled to recover
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PRIVITY -7
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No change to common law rule that a third party cannot be subject to a burden
under a contract
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Certain contracts excluded from Act – section 6
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All exceptions still apply – S7(1) – the Act ‘does not affect any right or remedy of a third party that
exists or is available apart from this act’
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The devices of collateral contracts, trusts, agency and tort can still be used
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Under s 6 of the Act, certain contracts are excluded
from its ambit
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third party where the contract expressly provides that he may enforce a term (s1(1)(a))2
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The parties did not intend the term to be enforceable by the third party (s1(2)) – note
presumption of enforceability – Nisshin Shipping co ltd v Cleaves & co ltd4
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The third party gets the same rights as if they had been a party to the contract (s1(5))6
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If there is any ambiguity, there can be no agreement – Gibson v Manchester CC
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A term is a contractual promise
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There are ‘express terms’ (both parties are aware of them), including pre-contractual statements made during negotiations, and agreed terms
written into the contract
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EXPRESS TERMSTerms that are specifically agreed between the
parties either orally or in writing are said to be express
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Was the statement when it was made, was it clear the statement was important? – Bannerman v white
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2
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Reduction into writing – Inntrepreneur Pub Co v East Crown Ltd
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Specialist
knowledge – Oscar Chess v Williams; cf Bentley v Harold smith (motors)2
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However, in Hopkins v Tanqueray, the delay was too long i
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PAROL EVIDENCE RULE- Extrinsic evidence may not be adduced to vary an express written contract – Jacobs v BataviaIf you have a written contract, nothing
outside should be allowed into it
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Not wholly written contracts- J Evans & Sons v Andrea Merzario
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2
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Where terms ‘onerous’ – Interfoto v Stiletto
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Avoiding the argumentInclude the entire agreement clause – Inntrepreneur Pub Co
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TERMS IMPLIED IN LAWA term implied in law into all contracts of a particular type because it is necessary –
Liverpool City Council v Irwin; Mahmud v BCCI; Crossley v Faithful & Gould Holdings LtdTERMS IMPLIED IN FACT Trade custom (two business in same business
know what eachother contracts are like, despite the fact the contract was not signed in time) – British Crane Hire v Ipswich PlantCourse of dealing (it must be regular
and consistent) - McCutcheon v MacBrayne; Hollier v Ramblers Motors
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Test:
parties’ intentions – reasonable man with the business knowledge and context of the contract – AG of Belize v Belize Telecom LtdBusiness efficacy: The Moorcock
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Contrast: Ultraframe (uk) ltd v tailored roofing systems with equitable life
assurance society v hymanIMPLIED BY STATUTE SGA 1979 – implies terms into a contractS12 Title (can’t sell something you don’t own ie nemo dat qui non
habet)– Rowland v DivallS13 Description – Arcos v RonaasenS14 Quality or fitness – Priest v Last – only applies to sales made in the course of businessS15 Sample –
Godley v PerrySale of Goods & Services Act 1982S13 – with due care and skill
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S15 – pay reasonable consideration
BREACH OF A TERM gives rise to two possible options: If a term is a CONDITION, the innocent has a right to either terminate the contract and claim damages OR
affirm and claim for damages
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CONDITION or
WARRANTY?Poussard v Spiers – held it was a condition as it “went to the root of the contract”
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However, in Bettini v Gye – held it was
a warranty
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CONDITIONPromissory conditions ie promises that are fundamental to contract
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Two types: condition precedent (contract will only happen if some event happens) and condition subsequent
(if specific happens then whole contract is over)
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Statutory classificationSGA 1979 –
S12(5A), S13(1A), S14(6), S15(3)
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-Arcos v Ronaasen //Sale and Supply of Goods Regs 2002 Amendments to SGA 79 – S48(A),(B),(C),(D)
SGA 79 –If goods do not conform consumer may request that: the goods are repaired or replaced within a reasonable period of time; without causing significant
inconvenience to the consumer; with the seller bearing any necessary cost of repairing or replacing the goods
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If D’s negligence has deprived the c of the whole or substantially the whole benefit of the contract then the term will have the same effect as a breach of a
condition entitling him to termination of the contract and damages
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A term ‘breach of which deprives the innocent party
of substantially the whole benefit of the contract’
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Court looks ‘to seriousness of the consequences of the breach’ – Hong Kong Fir v Kawasaki; Aerial Advertising Co v Batchelor
Peas Breach of innominate termInnocent party’s rights may be uncertain and possibility of wrongful repudiation – Hong Kong Fir
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’ – photo productions v securicor
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Controlling
exemption
clause:
incorporation,
construction
and
statutory
regulations
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REASONABLE NOTICEProferens must take reasonable steps to bring the term to the other party’s notice – Parker v South
Eastern RailwaysIncorporation by reference? (refer to another document)
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NB
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Exnor Craggs Ltd or fraud
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However, the ct will look at each case
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It was regular for that type of business
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They will
give the clause its natural and ordinary meaning ie does the clause cover the breach, whether fundamental or otherwise? – George Mitchell v Finney Lock Seeds
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Contra Proferentum: any ambiguity in the clause will be construed against the proferens – Andrews
brother v singer & co; Houghton v Trafalgar insurance co ltd
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Excluding liability for negligence
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Apply: The Canada Steamship Test per Lord Mortona)Does clause specifically refer to negligence
OR synonym of negligence? – Monarch Airlines Ltd v London Luton Airport ‘any act or omission, neglect or default’
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c)If yes, is the clause too wide? Ie some ground other than negligence which is not too fanciful or remote–
white v warwick; EE Caledonia ltd v orbit valve co
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Where clauses ONLY excluding negligence it will work - alderslade v hendon v
laundry
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The (obsolete) doctrine of fundamental breachCannot exclude
liability for ‘fundamental breach’
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Also Contract (Rights of Third Parties Act) 1999 – s1(6) and s6(5) can exempt third parties
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S1(1) Negligence – ‘breach of any term to take reasonable care or exercise reasonable skill’
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S2(1) cannot exclude or restrict liability for death or PI resulting from negligence BUT S2(2) dealing with other loss or damage
from resulting negligence can be excluded BUT clause/notice will be subject to reasonableness test (s11 & sch
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S11(3) specifically for notices
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S3 Control over terms that
exclude or restrict liability for breach of contract
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S12 Dealing as
Consumer – where NOT dealing in course of business AND other party IS dealing in course of business – R & B Customs Brokers v United Dominions Trust (decided the
company car was a consumer purchase as it was not integral to the business)/ Stevenson v Rogers/ Feldaroll Foundry plc v Hermes Leasing ltd
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Also, the
circumstances known to one party only are irrelevant eg market difficulties involved in procuring product
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S11(4)(a) Resources of party relying on clause
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Burden of proving that a contract term is reasonable rests
upon the person claiming that it is (s11(5))Guidelines schedule 2 (note s11(2)), but “the considerations there set out are normally regarded as being of general application
to the requirement of reasonableness” – Stewart Gill v Horatio Myer
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Liability arising in contract – S3Breach of general contract term (NOT implied by SGA/SGSA), where business to consumer contract on standard
terms
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2)Cases: R & B Customs
Brokers v United Dominions Trust/ Stevenson Rogers/ Feldaroll Foundry plc v Hermes Leasing ltd
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S6(1)(a) – s12 SGA 79 (ie title) can NEVER be excluded or restricted
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S6(3) – as against NON-CONSUMERS, ss13-15 of the SGA 79 can be excluded or restricted in
so far as it is reasonable to do so
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All above are true for corresponding SGSA terms
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Reg 4 Scope of Regs – Business to consumer
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Reg 5
Unfair – Not ‘individually negotiated’ ‘contrary to good faith’, which causes ‘significant imbalance’ in the parties’ rights to the consumer’s detriment
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Reg 7 Plain, intelligible languageReg 8 Effect
of unfair term – shall not be binding; contract continues if possible
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2 – indicative/non-exhaustive list unfair terms (terms in the past that have decided to be unfair) –
Director General of Fair Trading v First National BankSch2(1)(a) – limiting liability where death or PI
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Misrepresentation is a vitiating factor
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The court may allow rescission for all types of
misrepresentation
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Evans & Son v Andrea Merzario Ltd), which give an action for breach
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All
elements must be proven
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If wording is clear, the C can’t manipulate the
meaning
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It has to be substantially correct, then it is not false ie not a misrep
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It is a statement asserting a given state of affairs (Klienwort Benson Ltd v
Malaysia Mining Corp)
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Conduct may be fact: Attempts at concealment (Gordon v Selico); conduct (Spice Girls ltd v Aprilia WS)2
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A layman’s opinion with no greater knowledge than C is not fact
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If the facts are not equally well know on both sides, then a statement of opinion involves very often a
statement of material fact, for he impliedly states that he knows facts which justify his opinion
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Expert opinion may be fact where expert gives opinion in area of their
expertise – Esso v Marden4
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“A representation that something will be done in the future cannot be true or false at the moment it is made” –
Beattie v Ebury
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Must be a fact not a promise
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It is a statement asserting a given state of affairs – Kleinwort Benson Ltd v Malaysia Mining Corp
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5
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No general duty to disclose information – Keates v The Earl of Cadogan;
Sykes v Taylor-Rose
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This didn’t apply in Wales v Wadham, as this is about
intentions
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Statement of law: Pankhania v Hacknet LBC) can constitute a misrep
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MATERIALITY AND INDUCEMENT*Test for materiality is objective ie does the statement relate to issue that
would influence the reasonable man? – Pan Atlantic Insurance Co ltd v Pine Top Insurance Co ltd*If statement is found to be material, actual inducement will be inferred
(Smith v Chadwick), subject to d proving otherwise (subjective test)
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*Inducement need not be the sole factor (Edginton v Fitzmaurice), but it must be a factor (JEB Fasteners v Marks Bloom)*There is no inducement where c
is unaware of the representation (Horsfall v Thomas), the c knew that the statement was untrue (Redgrave v Hurd), or the C did not rely on misrep (Smith v Chadwick), or
the rep did not affect the c’s judgment ie no inducement if rely on own investigation (Attwood v Small)
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*It seems to now depend on whether it might be reasonable to check – Smith v Eric Bush (if the c is a commercially aware party
then may be reasonable to expect them to have checked whether the statement was true or not)If don’t check and should have or do a negligent job of checking then
may be a defence of contrib neg for the d in limited circums – if misrep is fraudulent then investigation is ignored by court – S
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FOUR CATEGORIES OF MISREPRESENTATION-FRAUDULENT – tort of deceit (common law)
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Once proven – motive irrelevant (Derry v Peek)*BUT, the court will ignore investigation (Attwood v Small) by c (S Pearson & Son v Dublin
Corp)*Remedies – Indemnity if relevant AND rescission AND damages (extensive)*Measure of damages is all loss ‘directly flowing the transaction, does not have be
foreseeable, not rendered too remote by C – Doyle v Olby Ironmongers ltd
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*C can also recover loss of profits (Down v Chappell) but note the measure (East v Maurer) ie tortious –
put c back in position s/he would’ve been in had contract not taken place
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NEGLIGENT MISREP – s2 (1) misrep act 1967
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the burden is on the D to prove they weren’t negligent
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*Just the losses directly flowing from that NM (Royscott Trust
v Rogerson/Smith new ct v scrimgeour Vickers)
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*S2(2) MA 67 ct MAY award rescission OR damages ‘in lieu’ of rescission
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*Can damages be reduced for contrib neg? NB Grey area: Gran Gelato ltd v Richcliff/ cf Royscott Trust v Rogerson (treat NM same as FM ie d cannot argue
contrib neg)INNOCENT MISREP – s2(1) misrep act 1967
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*Remedies – Indemnity (if relevant)
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C will be awarded either rescission OR damages in lieu (s2(2) MA
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Misrep renders contract voidable
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*Rights to rescind may be lost: third party rights (Phillips v Brooks); affirmation (Long v Lloyd); lapse of
time (Leaf v International Galleries); Impossibility (Clarke v Dickson)
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*Indemnity is available
for all types of misrep
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NB Generally no indemnity given if damages
awarded
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Tort of neg – failing to take reasonable care that the
representation was true, where misrepresentor is a 3rd party to contract which has caused loss
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Remedies- no recission
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The general rule is that were a mistake has been made
by the parties, at common law the contract may be deemed void, as if the contract had never existed
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However, a fundamental mistake, often referred as operative
mistake, may render the contract void ab ignition (void from the beginning)
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Ltd v John Walker & Sons Ltd
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TYPES OF MISTAKE: Common mistake (both parties make the same mistake); mutual
mistake (both parties mistaken in different ways); unilateral mistake (both parties agree, but one is mistaken)
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Events which occur AFTER the contract are not mistakes but may frustrate the contract
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Common mistake as to
existence of subject matter*Res Extincta – at the time of the contract but unknown to the parties the subject matter of the contract has ceased to exist – Couturier v Hastie/
McRae v Commonwealth Disposals Commission*Codified in s6 SGA 1979*Res Sua – at the time of the contract but unknown to the parties the subject matter already
belongs to the purchaser – Cooper v Phibbs2
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MUTUAL MISTAKE – NON-AGREEMENT MISTAKE*Such ambiguity that no agreement could be found – no ‘consensus ad idem’
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”
This will give mutual mistake
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Clearly, there was no
agreement
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Unilateral mistake as to the expression of offeror’s intention *The offeror makes a mistake in expressing their intention and
other party knows or is deemed to know of that mistake – Hartog v Colin & Shields2
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*Exception – Non Est Factum (not my deed)
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Unilateral mistake as to identity*Must be mistake as to identity not attributes
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*EQUITY’S DARLING - S23 SGA 1979 – “when the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale,
the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of seller’s defect in title
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Seller is concerned with attributes not identity
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*Phillips v Brooks; s23 SGA
1979; cf Ingram v Little (in this instance the contact is void for mistake as they wouldn’t have told the car if they hadn’t of believed who he was)
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Identity is crucial to formation of contract
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Most common way to discharge a contract is by ‘performance’
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Breach occurs in a small percentage of cases
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By a new contract ie
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*An agreement to discharge may be effective if supported by consideration
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*Wholly executory means still requires performance to be executed – so both parties can agree not to perform and that will be
binding provided there is some consideration for that
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*Where
the contract is partially executed it may be discharged by deed or accord and satisfaction – Pinnel’s case
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2
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A contract may contain a condition subsequent, upon the occurrence of which
obligation are discharged - Head v Tattersall
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Also discharge by equitable waiver (promissory estoppel) - Brikom Investments Ltd v Carr
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Entire obligations rule may be avoided though:1
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Substantial performance*Obligation to pay full contract price LESS cost of remedying defects – Hoenig v Isaacs; Bolton v Mahadeva3
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*Where contract itself allows for performance of one or more obligations separately from others – Rose & Frank v Crompton Bros
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4
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Anticipatory breach - Before the time of performance of a contractual obligation one party may inform the other
that they no longer intend to perform – Hochster v De La Tour
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*Breach of innominate term – innocent party’s rights depend upon “seriousness of the consequences of the breach” – Hong Kong Fir v Kawasaki Kisen
Kaisha*Breach of warranty – innocent party can sue for damages onlyRight of Election – affirmation (waiting for due date for performance – if they do not perform by
the due date can then consider the contract repudiated and terminate)*If innocent party elects affirm the contract, the party in default must continue to perform
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2)*Must be clear and unequivocal commitment – Yukong Line v
Rendersburg Investments
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Innocent party must not need
cooperation of party in breach – Hounslow v Twickenham & Garden Development2
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An unaccepted repudiation is a
thing ‘writ in water’ – Howard v Pickford Tool
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*If the breach is anticipatory, the
innocent party gains an immediate right of action – Hochster v De La Tour
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*C must mitigate loss
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A frustrating event is supervening, unforeseeable event (Amalgamated Investment v John Walker), at no fault of
either party (The Eugenia), that renders the contact either impossible, illegal or radically different (Davis Contractors v Fareham UDC)
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There used to be a rule of absolute obligations (Paradine v Jane) and implied term theory ‘artificial’ (Taylor v Caldwell), but the
modern day approach is ‘radical difference’ theory (Davis Contractors v Fareham UDC)
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1
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Unavailability of thing – A matter of degree - Jackson v Union Marine Insurance Co; FA Tamplin
v Anglo-Mexican; Bank Line v Arthur Capel; Edwinton Commercial Cooperation Tsavrilis Russ, The Sea Angel
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As the purpose of the contract had been achieved, the court held that no
frustration occurred, although it was stated that had there been much of the purpose still to achieve this could have potentially frustrated the contract
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Unavailablity of
person – incapacity (Morgan v Manser); death (Stubbs v Holywell Railway Co)SUPERVENING ILLEGALITY - Fibrosa v Fairbairn*A contract to do what has become
illegal to do cannot be legally enforceable – Denny, Mott, Dickson v FraserFRUSTRATION OF PURPOSE/NON-OCCURRENCE OF EVENT*Must be common
purpose of both parties
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In National Carriers v Panalpina, it
was again decidedit was not frustrated but in principle it could be, in rare circumstances
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NO FRUSTRATION WHERE…*Contract made merely more onerous – Commercial impractibility insufficient (Tsakiroglou v Noblee
Thorl; The Eugenia; Davis Contractors v Fareham UDC)*Event is self-induced – If party exercised a choice and it is your fault then no frustration - Maritime National
Fish v Ocean Trawlers; The ‘Super Servant Two’
...
*Event is
foreseeable – Walton Harvey Ltd v Walker & Homfrays Ltd
...
CONSEQUENCES OF FRUSTRATION*All future obligations discharged, by operation of law, from date of frustrating event
...
COMMON LAW – ORIGINAL POSITION*If total failure of consideration, money paid under the contract can be recovered
– Fibrosa v Fairbairn
...
Either way no recovery of expenses
...
LAW
REFORM (FRUSTRATED CONTRACTS) ACT 1943The Act now applies unless excluded
...
*S1(2) – Expenses recoverable up to limit of money paid/payable before frustrating event – Gamerco SA v ICM/Fair
Warning*S1(3) – ‘Valuable benefit’ – non-monetary ‘end product’, benefiting party may have to pay ‘just sum’ – BP Exploration v Hunt
...
*S2(3) – Parties
can contract out of act
...

REMEDIES - MEASURESLIQUIDATED DAMAGES (fixed sum): planning for breach – certainty (liquidated), privacy, cost effective, amicable (commercial
relationship preserved)
...
The Test for a Penalty Clause – Dunlop
Pneumatic Tyre v New Garage*Terminology inconclusive*Penalty clause is ‘in terrorem’*Based on construction of particular contract, judged at time of contractingValid
LDC = genuine pre-estimate of loss set at the time of contracting
...
Stipulated sum is extravagantly greater than the greatest possible loss conceivable on
breach
...
Breach is non-payment of money and stipulated sum is greater
...
A single lump sum is payable on any of several possible breaches were some are serious but
others trivial
...
Even though loss impossible to precisely pre-estimate, sum stipulated may still be a genuine pre-estimate
...
Not a Penalty Clause*Estimate does not coincide with actual loss – McAlpine Capital Porjects v Tilebox*Acceleration of payment
clause – The Angelic Star*Deposits generally no-recoverable – Workers Trust v Dojap InvestmentsUNLIQUIDATED DAMAGES (unknown amount)
...
Differnce in value2
...
Loss of amenity (can only
claim this if the contract is for enjoyment) –Ruxley Electronics v Forsyth*Application of Ruxley is seen in Farley v Skinner (No2), cf where the cts looked at the intention
of the parties claiming amenity - Birse Construction ltd v Eastern Telegraph Co Ltd, McGlinn v Waltham ContractorsReliance (puts c in position as it had not contracted)–
Anglia Television v Reed*C has unfettered choice between reliance and expectation loss – CC films v quadrant films
...
*Except where trying to escape a bad bargain – c & p haulage v middleton*If expectation damages too speculative – McRae v Commonwealth Disposals*Precontractual expenses available – Anglia TV v ReedRestitution (where D has wrongly enriched himself
...
*Account of profits are available where: exceptional circumstances, damages inadequate, c has legitimate interest in preventing the d’s profit-making
activity*Successful application of AG v Blake was seen in Esso v Niad; cf with AB Corp v CD Co (damages were adequate), Experience Hendrix v PPX Enterprises (not
exceptional circumstances), WWF v WWF (not exceptional circumstances)Other awards:*Generally there is no damages for mental distress – Addis v Gramophone
Company Ltd; Johnson v Unisys Ltd*Contract for pleasure/relaxation/peace of mind – Jarvis v Swans Tours (whole purpose); Farley v Skinner (major object)*Loss of
reputation (Malik v BCCI) and loss of chance (Chaplin v Hicks) both fall within expectation loss*Quantum meruit – Sumpter v Hedges
LIMITING FACTORS -CAUSATION – must be a causal link between breach and loss
...
Is
there a novus actus interveniens? (Lambert v Lewis) OR is it likely to happen? (Monarch Steamship Co v AB Karlshamms)REMOTENESS – Hadley v Baxendale Damages
must be either: 1
...
OR2
...
Confirmed in Jackson v Royal - must discuss repercussions of breach at time of contracting
...
What is required for mitigation?*Reasonable steps – British Westinghouse v Underground Electric*Mitigation party not expected to embark on litigation –
Pilkington v Wood*May have to accept breach if cost effective – Payzu v Saunders*Mitigating party’s conduct not weighed in’nice scales’ – Bank of Portugal v Waterlow
& Sons
...
Also Barclay’s Bank plc v Fairclough EQUITABLE REMEDIES*Specific performance is an order of a
court which requires a party to perform a specific act– cooperative insurance society ltd v Argyll stores (holdings) ltd*Injunction (requires a party to do or refrain from
doing specific acts)– Evening Standard v Henderson*Rescission (bringing parties back to position in which they were before entering into the contract, if
possible)*Rectification (ct corders change in a written doc to reflect what it ought to have said in the first place)

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