Contract Law
- Created by: Amir
- Created on: 10-05-15 15:13
Contract
What is a 'Contract'?
• legally binding agreement between two/more parties.
• a promise that the law will enforce.
Are all contracts agreements?
• All contracts are agreements, but not all agreements are contracts.
What types of contracts are there?
• BILATERAL: Promise from one party in exchange for promise from another party.
(e.g. 'sale of goods' contract: buyer promises to pay the price in exchange for seller's promise to deliver the goods)
• UNILATERAL: Promise by one party in return for Act by another.
(e.g. 'reward' contract: 'A' promises reward to whoever finds his lost dog. ONLY one party ('A') bound to do anything. Noone bound to find dog. BUT...if 'B' [having seen offer] finds 'A's dog and returns it, he's entitled to reward!)
Test to check existence of an agreement?
• OBJECTIVE TEST
• Centrovincial Estate v Merchant Investors: 'P' rent price mistake; 'D', unaware of mistake, accepts; Slade LJ.
• As Per Slade LJ (obiter)...about convey.
Offer
What is an 'Offer'?
• Statement of willingness to enter a contract on stated terms.
Offer must be ____________ to offeree?
• Offer must be communicated to offeree.
• Taylor v Laird: HELD: ex-captain failed to communicate offer to ship owner; ∴ No Binding Contract.
'Offer' or 'Invitation to Treat'?
Difference between 'Offer' and 'Invitation to Treat'?
• One of intention.
• Did maker of statement intend to:
- Be bound by an acceptance of his terms, without further negotiations? {offer}
OR
- Intend his statement to be part of ongoing negotiation process? {invitation to treat}
• Gibson v Manchester CIty Council (CoA): Talks to buy council property; letter council MAY be prepared to sell; later...refused to sell; HELD (CoA): letter merely inviation to treat.
Invitation to Treat
What is an 'Invitation to Treat'?
• Statement of willingness to enter negotiations which MAY lead to conclusion of contract.
What is a 'Statement of Information'?
• Statement that merely provides info to other party - not intended to be acted upon.
• Harvey v Facey: Telegram; "how much for farm?"; "lowest price £900"; HELD (Privy Council): merely responding to request for info - NOT an offer.
TYPES of 'Invitation to Treat':
• DISPLAY OF GOODS:
- Pharmaceutical Society of GB v Boots: where is point of contract formation?
• ADVERTISMENTS:
- Partridge v Crittenden: wild birds "For Sale".
- (However...Advert can amount to Offer: Carlill v Carbolic Smoke Ball)
• AUCTIONS:
- WITH Reserve / WITHOUT Reserve.
- Sale of Goods Act 1979 s.57(2): "sale complete when hammer falls."
- Barry v Davies: goods withdrawn; highest bid made; 'WITHOUT reserve'; ∴ must sell to highest bidder.
• TENDERS
Methods of Terminating an Offer
Methods of TERMINATING an Offer?
> REVOCATION by Offeror: Dickinson v Dodds: Offer to buy house; was to someone else; HELD: Offeree informed of revocation (even by 3rd party!) before replying to offer.
> COUNTER-OFFER by Offeree: Hyde v Wrench: HELD: counter-offer TERMINATES original offer.
> LAPSE of TIME: Ramsgate Victoria Hotel v Montefiore: Offer to buy shares in hotel; accepts 5 months later; HELD: lapse of time terminated the offer.
> FAILURE of Condition: Financing Ltd. v Stimson: HELD: agreed precondition car was in 'good condition' NOT met.
> DEATH of Offeror: Bradbury v Morgan: BUT...only once Offeree informed of death. HOWEVER...where offer is for service by deceased, revoked immediately!
> Unilateral Contract TERMINATED (by offeror) BEFORE Performance: Errington v Errington: HELD (Denning LJ): once couple began paying, offer could not be revoked.
Acceptance
What is 'Acceptance'?
• Expression of approval to terms proposed by Offeror.
RULES of 'Acceptance'?
• Must be communicated to offeror: Entores v Miles Far Eastern (CoA): telex from London to Holland to buy 100 cathodes; HELD (CoA): To amount to acceptance, acceptance needs to be communicated to Offeror; ∴ contract made in England.
• Does not have to be words (can be conduct): Carlill v Carbolic Smoke Ball: offer accepted by performance of act (conduct); "use smoke ball as instructed and catch influence, claim £100 reward".
• Offeree must have knowledge of offer: R v Clarke: Reward for info leading to capture of murderers; Offeree saw offer but forgot the reward; HELD: cannot be acceptance without knowledge of offer (this includes forgetting).
• Must be 'Last-Shot' in 'Battle-of-Forms': Butler Machine v Ex-Cello (CoA): Price Variation Clause; HELD: Offer to sell machine on Butler's terms destroyed by Ex-Cello's counter-offer; Denning LJ: "Where there is Battle-of-Forms, the 'Last Shot' Rule applies (contract is concluded on 'terms' submitted by party last to communicate, before performance of contract begins)."
• Complete Performance (= acceptance in unilateral contract): Carllil v Carbolic Smoke Ball
Methods of Acceptance - 'Postal Rule'
METHODS of 'Acceptance'?
a.) 'POSTAL RULE': established in Adams v Lindsell: HELD: letter of acceptance delayed, but valid from moment it's placed into post box.
• Must be reasonable for Offeree to use Post.
• Offeror may exclude the 'Postal Rule': Holwell v Hughes: clause "must physically receive acceptance in writing"; HELD: excludes 'postal rule'.
• Letter lost in post?
- 'Postal Rule' still applies!
- BUT...not if due to carelessness of Offeree: Korbetis v Transgrain: Letter of acceptance addressed wrongly.
• Acceptance posted, then rejection made?
- 'Postal Rule' still applies!
- HOWEVER...Race! (rule does not apply if rejection letter reaches Offeror first).
Methods of Acceptance - 'Prescribed Method'
METHODS of 'Acceptance'?
b.) 'PRESCRIBED METHOD': Manchester Council v Commercial Investments: HELD: if different method used than prescribed gives Offeror less advantage = Ineffective; BUT... if different method not give Offeror less advantage and Offeror still made aware of acceptance = Effective method.
Consideration (1/3)
What is 'Consideration'?
• As Per Lush LJ in Currie v Misa... Benefit acruing to one party OR Detriment suffered by the other.
3 TYPES of 'Consideration':
1.) EXECUTORY Consideration - exchange of promise to perform act in future.
(E.G: 'A' promises to deliver goods to 'B' at future date, and 'B' promises to pay on delivery.)
2.) EXECUTED Consideration - when act is completed = executed!
3.) PAST Consideration - consideration comes before the promise. ← not valid consideration
(E.G: 'A' voluntarily performs an act; 'B' makes a promise afterwards; ∴ consideration for promise is in the past.)
KEY REQUIREMENTS for 'Consideration':
• Consideration must be SUFFICIENT (of economic value), but need not be ADEQUATE.
Chappel v Nestlé: HELD: chocolate wrappers were part of considetaion, despite having trivial economic value.
• Past Consideration is NOT good consideration.
EXCEPTION: Doctrine of Implied Assumpsit (Lampleigh v Brathwaith)
• Consideration must COME FROM the Promisee.
Dunlop v Selfridge: HELD: "An act of one party is the PRICE for which the promise of other party is bought."
Consideration (2/3)
Doctrine of 'Implied Assumpsit'
• "assumption" of obligation.
• Lampleigh v Brathwait: 'D'sked 'C' to request king for a pardon; 'D' released and later promises to pay 'C'; 'D' never pays him and relies on 'past consideration is not good consideration'; HELD: there was 'IMPLIED ASSUMPSIT';
∴ reward reasonably expected.
Consideration NOT something Promisee already bound to do
• LEGAL DUTY: cannot be used as consideration for new promise.
- Collins v Godefroy: 'C' court witness; after trial, asked 'D' to pay him; 'D' did not pay; HELD: 'C' was under
legalduty; ∴ cannot be used as consideration for new promise.
- EXCEPTION: If performance EXCEEDS legal duty
• CONTRACTUAL DUTY: cannot be used as consideration for new promise.
- Stilk v Myrrick: Captain promised to split wages of 2 deserted seamen among rest of crew; he didn't;
HELD: perfomance of existing contractual duty not good consideration for promise of extra pay.
- EXCEPTION: If performance EXCEEDS contractual duty
- BUT...Existing Contractual Duty with 3rd Party = Good Consideration for New Promise!
Scotson v Pegg: 3rd party instructed 'Scotson' to deliver coal to 'Pegg'; 'Pegg' promised to unload coal when 'Scotson' delivers; 'Scotson' agrees; 'Pegg' fails to unload; HELD: 'Pegg' obliged to unload coal from 'Scotson's ship because existing contractual duty with 3rd party = good consideration for new promise!
Consideration (3/3)
Consideration not PART PAYMENT of DEBT
• Part Payment of Debt = NOT good consideration for new promise.
- Foakes v Beer: 'Dr. Foakes' owes 'Mrs. Beer' debt; 'Foakes' offered to make part payment of debt and pay rest later; 'Beer' agreed; however 'Foakes' made no mention of paying interest for taking longer to pay; HELD: 'Dr Foakes' liable to pay interest [promise to make Part Payment of Debt doesn't allow Dr.Foakes to avoid paying interest].
- EXCEPTION: Pinnel's Case:
Part Payment of Debt = NOT good consideration, UNLESS...
a) Before Due Date
b) With a Chattel (personal property)
c) To a Different Location
Consideration not FORBEARANCE to sue for an Invalid Claim
• Forbearance: refraining from exercising a legal right.
• Wade v Simeon:
> a promise not to enforce a VALID Claim = Good Consideration
> a promise not to enforce an INVALID Claim = Bad Consideration
Promissory Estoppel
What is 'Promissory Estoppel'?
• Doctrine which STOPS Promisor from going back on a promise NOT supported by consideration.
REQUIREMENTS for 'Promissory Estoppel':
1) There must be a PRE-EXISTING Contract between parties {which was later modified)
- Combe v Combe: Husband promised maintenance payments to divorced wife; failed to pay; ex-wife sued using ' Promissory Estoppel'; HELD: sue FAILED - there was NO Pre-Existing Contract later modified.
(Wife used 'Promissory Estoppel' as SWORD and not SHIELD!
2) Promisor must make CLEAR & UNAMBIGUOUS promise to Promisee
3) INEQUITABLE to allow Promisor to go back on their promise {inequitable = unfair}
- D&C Builders v Rees: 'D' owed 'C' money; aware 'C's in Financial Difficulty, offers to pay less; 'C' forced to agree; later, sues 'D'; 'D' uses 'Promissory Estoppel' in Defence (that 'C' shouldn't go back on promise after accepting less); HELD: (Denning LJ): Mrs. Rees ('D') TOOK ADVANTAGE of 'C's Financial Difficulty! (NOT INEQUITABLE TO ALLOW 'C' TO GO BACK ON PROMISE BECAUSE THEY WERE FORCED!)
4) Promisee must've acted in RELIANCE of promise {whether to their detriment or not}
Intention to Create Legal Relations
TWO PRESUMPTIONS:
1) DOMESTIC / SOCIAL settings: NO intention to create legal relations.
- (Parent + Child, Husband + Wife)
- Balfour v Balfour: Husband agreed to send maintenance payments to wife; they divorce, husband stops sending money; HELD: agreement purely domestic/social (parties not intend to be legally bound).
2) COMMERCIAL / BUSINESS settings: IS an intention to create legal relations.
- Esso Petrol v Customs (HoL): PROMOTION: "Purchase petrol & get free coin"; Esso argues coins simply gifts; HELD: Although coins offered in a COMMERCIAL Setting, coins were NOT EXCHANGED for MONEY
(∴ NO intention to create legal relations).
REBUTTAL
• Party claiming there was no 'Intention to Create Legal Relations' must PROVE IT!
Certainty & Completeness
• Uncertainty may be caused by VAGUENESS &/or INCOMPLETENESS
• Scamell v Oustom: 'P' supplied 'D' with van; 'D' agreed to pay "on HIRE-PURCHASE terms"; HELD: "on HIRE-PURCHASE terms" TOO VAGUE! (∴contract unenforceable)
DEED
• Unilateral promise in a DEED are ENFORCEABLE (irrespective of consideration).
DEED:
- bears the word 'deed'.
- signed by maker of deed.
- verified by ONE witness
- is delivered (conduct to show deed maker intends to be bound by it).
'Terms' & 'Representations' (1/2)
DIFFERENCE between 'Terms' and 'Representations'?
• TERMS: word/phrase that's part of contract.
• REPRESENTATIONS: statement of fact.
'OBJECTIVE TEST' (in context of 'terms'/'representations')
• Used to determine whether a word/phrase/statement is a 'Term' or 'Representation'.
• Heibut v Buckleton: REASONABLE BYSTANDER think parties intended to be bound?
4 FACTORS to identify whether 'Term' or 'Representation':
1) IMPORTANCE of Statement: Bannerman v White: Buyer asked if beer contained sulfur; if it did, he wouldn't buy; Seller ASSURED it didn't (but it did!); HELD: ASSURANCE was IMPORANT STATEMENT in contact; without assurance, buyer would NOT have contracted (∴Seller - Breach of Contract).
2) SPECIAL KNOWLEDGE: Oscar Chess v Williams: Buyer bought car and realised year in logbook was WRONG; HELD (Denning LJ): OBJECTIVE TEST: "Reasonable Bystander would say Seller did NOT intend to bind himself to statement; Seller had NO SPECIAL KNOWLEDGE and too relied on the logbook to verify year when he made wrong statement to 'Expert' Buyer!
3) RELIANCE: Ecay v Godfray: 'D' sold boat to 'C'; 'D' stated: "Boat is in good condition BUT I RECOMMEND you have it surveyed."; boat was, in fact, DEFECTIVE; HELD: 'D' recommended 'C' have boat surveyed means 'D' did NOT wish 'C' to rely on his statement.
'Terms' & 'Representations' (2/2)
4) DELAY: Harling v Eddy: GREATER the delay, LESS LIKELY word/phrase/statement is a TERM.
Parole Evidence Rule
The 'Parole Evidence' Rule
Where contract is a WRITTEN document, rule PREVENTS parties from presenting
'extrinsic evidence' that CONTRADICTS / ADDS TO the written terms.
{Many EXCEPTIONS to rule - ∴ very easily REBUTTED}
Implied Terms
• (a.k.a 'GAP FILLING')
• implied by STATUTE: (s.12-15) Sale of Goods Act 1979
• implied by CUSTOM: Hutton v Warren: Compensation Clause common practice (customary) in farming tenancies; HOWEVER, no such clause in this contract; HELD: court implied a term into contract to include compensation clause (as is custom).
• Terms implied by COMMON LAW:
- in FACT: The Moorcock: Court implies a term so contract makes BUSINESS SENSE ('Business Efficacy' test).
- in LAW: El Awadi v BBCI: Court may imply a term in LAW in CONTRACTS of a DEFINED TYPE
{E.G:. Landlord/Tenant; Retailer/Customer} ← LAW offers some PROTECTION to WEAKER parties!
'Conditions', 'Warranties', 'Innominate Terms'
- CONDITION: ESSENTIAL term of contract. {the root}
- breach of condition = terminate contract & damages
- breach of condition = terminate contract & damages
- WARRANT: LESSER term of contract.
- breach of warranty = damages ONLY {must continue contractual obligations}
- breach of warranty = damages ONLY {must continue contractual obligations}
- INNOMINATE Term: UNCLEAR whether Condition / Warrant?
- gives court REMEDIAL FLEXIBILITY
- gives court REMEDIAL FLEXIBILITY
Exclusion Clause (1/2)
What is an 'Exclusion Clause'?
• EXCLUDES liability
• (a defence for 'Breach of Obligation')
STEPS to determine VALIDITY of an 'Exclusion Clause':
1) INCORPORATION - is clause incorporated into contract?
(a) Signature: L'Estrange v Graucob: 'C' bought cigarette vending machine; signed form which excluded liablity; vendine machine broken; HELD: signing form, 'C' is BOUND by ALL TERMS (whether she read them or not).
> DEFENCE for Signature: 'Non Est Factum'
Gallie v Lee (HoL): HELD: Defence of 'Non Est Factum' should be RESERVED ONLY for those who are unable to read document (e.g. BLIND, ILLITERATE, OLD AGE).
(b) Reasonable Notice: Thompson v L.M.S Railway: 'C' injured stepping off train; 'D' put visible notices on platform excluding liabilty to personal injury; HELD: 'D' took REASONABLE STEPS to INFORM CLAIMANT.
(c) Previous Dealings: McCutcheon v MacBrayne Ltd.: 'C's car sank in ferry; used ferry many times before; sometimes signed exclusion clause sometimes not; HELD: NO CONSISTENCY in previous dealings; 'D' must pay damages.
Exclusion Clause (2/2)
2) INTERPRETATION - does exclusion clause cover the loss arisen?
'Contra Preferentum' Rule: any AMBIGUITY in exclusion clause, Court will INTERPRET the clause
AGAINST party who inserted it into the contract.
3) LEGAL CONTROLS - any 'RULE of LAW' that would INVALIDATE the clause?
Statutes: - Sale of Goods Act 1977
- Unfair Contract Terms Act 1977 {UCTA}
- Unfair Terms in Consumer Contract Regulations 1999
Vitiating Factors
- VOID contract: transaction was null. no contract exists.
- VOIDABLE contract: valid contract...until one party tries AVOID it.
- UNENFORCEABLE contract: contract exists, but CANNOT be ENFORCED in court, because one party REFUSES to carry out terms.
INCAPACITY:
- Minors: s.3(1) Minors' Contract Act 1987: "Minor can sue, but CANNOT be sued."
- Mentally Incapacity:
- s.2 Mental Incapacity Act 2005: "If person is UNABLE to make decisions for himself due to impairment."
- s.7: "If NECESSARY GOODS supplied to someone with mental incapacity, he must PAY a REASONABLE PRICE.
Misrepresentation (1/2)
What is an 'Misrepresentation?
• A FALSE statement of fact, which induced Representee to enter a contract.
• {Misrep renders contract VOIDABLE.}
'Misrepresentation' must be...
• Misrepresentation must be STATEMENT OF FACT.
• Misrepresentation must be ADDRESSED to PARTY MISLED.
• Misrepresentation must have INDUCED Representee into making contract.
4 TYPES of 'Misrepresentation':
1) FRAUDULENT misrep: "false statement made by Representor, knowing it was wrong or
careless whether it was true/false." - As Per Derry v Peek
> REMEDIES for Fradulent Misrep: ALL Damages!
2) NEGLIGENT misrep at 'COMMON LAW': "there must be a DUTY OF CARE, based on
'Special Relationship between Rep'or and Rep'ee." - As Per Esso Petrol v Mardon
> REMEDIES for Negligent Misrep at 'Common Law': ALL Damages!
Misrepresentation (2/2)
3) NEGLIGENT misrep under 's.2(1) Misrepresentation Act 1967:
'BURDEN of PROOF' on Representor to demonstrate they had REASONABLE GROUNDS to believe their statement was TRUE. - As Per s.2(1) Misrep Act 1967
> REMEDIES for Negligent Misrep under 's.2(1) Misrep Act 1967: ALL Damages!
4) INNOCENT misrep: "when Representor demonstrates they actually DID have REASONABLE GROUNDS to believe their statement to be TRUE." - As Per s.2(1) Misrep Act
> REMEDIES for Innocent Misrep: 'RESCISSION' or 'DAMAGES in Lieu of rescission'.
{s.2(2) Misrep Act}
Rescission
[2 TYPES of Remedies for Misrep: 'DAMAGES' and 'RESCISSION']
What is 'Rescission'?
• Aims to RESTORE parties (as far as possible) back to original position, BEFORE entering contract.
'Right to Rescind' may be LOST in 4 WAYS:
i) Affirmation:
- If Rep'ee goes ahead with contract, DESPITE being aware of Misrep, will lose right to rescind.
ii) Lapse of Time:
iii) Restoration to 'Original Position' Impossible:
- Impossible to restore parties back to pre-contractual position.
iv) 3rd Party acquires Rights:
- If 3rd Party acquires rights to good (e.g. goods sold on to 3rd party), rescission NOT POSSIBLE as it'll PREJUDICE 3rd Party. - As Per Phillips v Brooks
Mistake
2 TYPES of 'Mistake':
1) MUTUAL Mistake: BOTH parties make SAME mistake. (e.g. Mutual Mistake about QUALITY)
Leaf v International Galleries: BOTH parties mistakenly believed panting to be by Famous Artist;
HOWEVER...HELD: NOT Void because Quality is NOT a FUNDAMENTAL Mistake.
('C' wanted a painting, he got a painting).
Courts RELUCTANT to render Mistake contracts 'VOID'!
There must be a 'FUNDAMENTAL' Mistake.
(What classifies as 'Fundamental'? No one knows because cases with action against Mistake are RARELY successful!)
2) UNILATERAL Mistake: ONE parties makes mistake only. (e.g. Unilateral Mistake about TERMS)
Smith v Hughes: Buyer needs OLD oats; mistakenly chooses NEW oats; Seller AWARE of mistake, but doesn't mention it; Buyer sues on mistake of terms; HELD: NOT Void - mistake was NOT about FUNDAMENTAL Terms , but about Quality.
Illegality
(i) Illegality at FORMATION: contract illegal from time of formation.
(ii) Illegality in PERFORMANCE: contract is valid, but performed in an 'illegal manner'.
'Duress' & 'Undue Influence'
{'Duress' and 'Undue Influence' render a contract VOIDABLE}
What is 'Duress'?
• PHYSICAL Duress: entered a contract due to THREATS of PHYSICAL VIOLENCE.
Barton v Armstrong: 'D' made DEATH THREATS to 'C', forcing 'C' to agree to contract; HELD: contract VOIDABLE.
• ECONOMIC Duress: PRESSURED ECONOMICALLY to enter a contract.
Pao On v Lau Long (Privy Council): PRIVY COUNCIL identified 'FACTORS of ECONOMIC DURESS':
> Did Victim PROTEST?
> Did Victim TAKE STEPS TO AVOID CONTRACT?
What is 'Undue Influence'?
• One party uses their INFLUENCE over the other party to INDUCE them into a contract.
Lloyds Bank v Bundy: 'Son' urgently needs loan for his failing business; 'Lloyds' and 'Son' approach 'Father' and say the only way to save Son's business is to 'guarantor' his house; 'Father' signs contract; Later...'Son's company goes BANKFRUPT and 'Lloyds' SEIZE 'Father's house; HELD: Und
Discharge by PERFORMANCE
- {DISCHARGE: Contract brought to an END}.
- (4 WAYS Contract can be DISCHARGED: Performance, Contract, Agreement, FrustratIon).
• 'ENTIRE OBLIGATION RULE': established in Cutter v Powell: "Completion of Performance required BEFORE able to Discharge contract" {NO Completion, NO Discharge!}.
• HOWEVER...'Obligation Rule' HARSH!
• EXCEPTIONS to 'Obligation Rule':
> SUBSTANTIAL Performance: Court awards agreed price, & DEDUCT amount NOT performed.
What defines 'Substantial' Performance?: Hoeing v Isaacs (CoA): 'C' agreed to decorate 'D's house for £750; 'D' found MINOR problem with part of bookcase (-£55 to fix); 'D' refused to pay;
HELD: 'C' SUBSTANTIALLY Performed contract (most of it performed satisfactorily);
∴ Money PAID, MINUS cost of defects (-£55).
> PARTIAL Performance: Party agrees to accept PARTIAL performance & pay for 'Partial' work performed/completed.
Sumpter v Hedges (CoA): 'C' agreed to build houses for 'D' for £500; HALFWAY...'C' ran out of money; 'D' had to finish rest of work himself; HELD: 'C' only received payment for PARTIAL Performance.
Discharge by BREACH of Contract
- BREACH of Contract: party fails to perform what is expected of him under contract.
- Breach of Condition: TERMINATE contract & DAMAGES.
- Breach of Warranty: Damages ONLY.
- 'ANTICIPATORY' Breach: one party INFORMS other party of their INTENTION NOT to perform their contractual obligation.
- once informed...
- innocent party can terminate contract immediately (no need to wait for breach to happen).
OR - continue with contract and wait for breach to happen to take action.
- (wait = BENEFICIAL: White v Carter: 'D' informed 'C' he didn't want to perform contract; 'C' waited for breach to happen and took action; HELD: 'C' entitled to DAMAGES.)
- innocent party can terminate contract immediately (no need to wait for breach to happen).
- once informed...
Discharge by AGREEMENT
- Discharge by AGREEMENT: BOTH parties AGREE to bring contract to an end, releasing each other from their contractual obligations.
- For Discharge by AGREEMENT, there must be...
- CONSIDERATION - both parties provide consideration to give up their rights under the contract.
OR - DEED - no need for consideration if agreement in form of deed.
- CONSIDERATION - both parties provide consideration to give up their rights under the contract.
Discharge by FRUSTRATION (1/2)
- Discharge by FRUSTRATION: contract 'frustrated' when EVENTS occur which makes performance of contract:
- IMPOSSIBLE
- ILLEGAL
- RADICALLY CHANGED CIRCUMSTANCE
(& is NOT fault of either parties)
- IMPOSSIBLE:
- DEATH: Whincup v Hughes: Party DIES.
- DESTRUCTION: Taylor v Cadwell: Venue DESTROYED by FIRE.
- INCAPACITY: Condor v Baron Knights: Party suffered MENTAL BREAKDOWN.
- DEATH: Whincup v Hughes: Party DIES.
- ILLEGAL:
- Illegal to perform act: Fibrosa v Fairbairn: New SANCTION making it ILLEGAL for UK companies to trade
with Poland (due to war).
- Illegal to perform act: Fibrosa v Fairbairn: New SANCTION making it ILLEGAL for UK companies to trade
- RADICALLY CHANGED CIRCUMSTANCE:
- Krell v Harry: 'P' hired flat to view King's Coronation; KING becomes ILL, event CANCELLED.
Discharge by FRUSTRATION (2/2)
- When is there NO Frustration?
- lmpossibility is FAULT of a party.
- If Frustrating Event is FORESEEN.
- EFFECTS of Frustration?
- Where contract is FRUSTRATED, Contract is TERMINATED and both parties RELEASED from their Contractual Obligations.
- Allocation of Losses: Law Reform (Frustrated Contracts) Act 1943
- s.1(2): losses with money
- s.1(3): losses other than money
Damages (1/3)
{DAMAGES = LEGAL Remedy}
What are 'Damages'?
• Legal remedies for 'Breach of Contract'.
• Award of money to COMPENSATE innocent party.
What is the AIM of 'Damages'?
• To put innocent party in position they would've been, had contract been performed properly.
What is 'EXPECTATION Loss'?
• DIFFERENCE in VALUE between Claimant's EXPECTATION and what he ACTUALLY RECEIVED.
> COST of CURE: cost of 'curing' a badly done work - Ruxley v Forsyth (HoL): 'D' built swimming pool for 'C'; 'pool NOT as deep as specified in contract, but still adequate for diving; COST of CURE UNJUST to award 'C' damages for full cost of rebuilding pool over a few inches; HELD: HoL ordered smaller compensation for 'LOSS of AMENITY' INSTEAD.
> LOSS of OPPORTUNITY: - Chaplin v Hicks (CoA): 'C' made it to beauty contest finals, but didn't receive letter of invite, and when she did, it was too late; HELD (CoA): 'C' awarded £100 for 'LOSS of OPPORTUNITY'.
Damages (2/3)
What is 'RELIANCE Loss'?
• EXPENSE Innocent Party INCURRED in RELIANCE on Defendant's PROMISE that he'd perform, but he does NOT!
• Anglia TV v Reed: 'C' hired 'Reed' as MAIN ACTOR; 'Reed' pulls out of contract; 'C' could NOT find replacement actor, so ABANDONED the show (incurred £2000 as a result); HELD: 'C' recovered expenses from 'Reed' due to 'RELIANCE LOSS'.
Damages (3/3)
FACTORS to consider for 'Damages'?
- Causation: did 'D's Breach of Contract cause 'C's Loss?
- Remoteness: was type of loss reasonably foreseeable?
- Mitigation: had 'C' taken reasonable steps to mitigate (reduce) his losses?
- Contributory Negligence: was 'C's loss caused, in part, by 'C's own act? {Law Reform (contributory negligence) Act 1945}
What is a 'LIQUIDATED DAMAGES Clause'?
• an agreed remedy built into contract, to be paid in event of breach - COVER LOSSES ONLY
• Dunlop Tyres v New Garage: 'LIQUIDATED DAMAGES Clause': "If you sell our tyres BELOW retail price, you'll BREACH and must pay us £5/tyre to cover losses."
Specific Performance
{SPECIFIC PERFORMANCE = EQUITABLE Remedy}
What is a 'Specific Performance'?
• COURT ORDER ordering one party to perform their contractual obligation.
• (where 'Damages' is an INADEQUATE remedy, use 'Special Performance'.)
• Nutbrown v Thornton: 'C' agreed to purchase LIMITED EDITION washing machine; 'D' REFUSED to deliver; HELD: Court ordered 'SPECIFIC PERFORMANCE' ORDERING 'D' to deliver (because 'C' can't buy machine anywhere else).
Injunction
{INJUNCTION = EQUITABLE Remedy}
What is an 'Injunction'?
• COURT ORDER ordering a party NOT to do something.
• Warner Bros. v Nelson: 'D' agreed to EXCLUSIVELY act for 'Warner Bros.' for 2 years; 'D' breached contract by acting for another company; HELD: 'INJUNCTION' to PREVENT 'D' from acting elsewhere.
Rectification
{RECTIFICATION = EQUITABLE Remedy}
What is 'Rectification'?
• COURT ORDER ordering a CHANGE in written contract to REFLECT what the parties ought to have meant.
• Frederick v Pim (Denning LJ): "To get 'RECTIFICATION', parties must show they were in COMPLETE AGREEMENT on Rerms of contract, BUT...due to an ERROR, WROTE them down WRONGLY."
______________________DIFFERENCE between 'LEGAL' & 'EQUITABLE' Remedies______________________
- LEGAL Remedies:
- e.g. 'Damages'
- Monetary compensation
- (more often used)
- EQUITABLE Remedies:
- used when 'Legal Remedies' (e.g. damages) INEQUIATABLE.
- e.g. 'Specific Performance', 'Injunctions'
- Non-monetary compensation
- (rarely used)
Comments
No comments have yet been made