Contract Law

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  • 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.

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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 LairdHELD: ex-captain failed to communicate offer to ship owner; ∴ No Binding Contract.

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'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.

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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 FaceyTelegram; "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

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Methods of Terminating an Offer

Methods of TERMINATING an Offer?

REVOCATION by OfferorDickinson 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 OffereeHyde v Wrench: HELD: counter-offer TERMINATES original offer.

LAPSE of TIMERamsgate Victoria Hotel v Montefiore: Offer to buy shares in hotel; accepts 5 months later; HELD: lapse of time terminated the offer.

FAILURE of ConditionFinancing Ltd. v Stimson: HELD: agreed precondition car was in 'good condition' NOT met.

DEATH of OfferorBradbury 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 PerformanceErrington v Errington: HELD (Denning LJ): once couple began paying, offer could not be revoked.

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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

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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).

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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.

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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."

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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
       legal
duty
∴ 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!

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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
Forbearancerefraining 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

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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 CombeHusband 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}

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Intention to Create Legal Relations

TWO PRESUMPTIONS:

1) DOMESTIC / SOCIAL settings: NO intention to create legal relations.
    - (Parent + Child, Husband + Wife)
    - Balfour v BalfourHusband 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!

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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).

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'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 KNOWLEDGEOscar 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) RELIANCEEcay 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.

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'Terms' & 'Representations' (2/2)

4) DELAYHarling v Eddy: GREATER the delay, LESS LIKELY word/phrase/statement is a TERM.

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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}

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Implied Terms

• (a.k.a 'GAP FILLING')

• implied by STATUTE(s.12-15) Sale of Goods Act 1979

• implied by CUSTOMHutton 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!

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'Conditions', 'Warranties', 'Innominate Terms'

  • CONDITION: ESSENTIAL term of contract. {the root}
    • breach of condition = terminate contract & damages

  • WARRANT: LESSER term of contract.
    • breach of warranty = damages ONLY {must continue contractual obligations}

  • INNOMINATE Term: UNCLEAR whether Condition / Warrant?
    • gives court REMEDIAL FLEXIBILITY
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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) SignatureL'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 NoticeThompson 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 DealingsMcCutcheon v MacBrayne Ltd.: 'C's car sank in ferry; used ferry many times before; sometimes signed exclusion clause sometimes not; HELDNO CONSISTENCY in previous dealings; 'D' must pay damages.

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Exclusion Clause (2/2)

2) INTERPRETATION does exclusion clause cover the loss arisen?

'Contra Preferentum' Ruleany 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

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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:

  • Minorss.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.
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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!

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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
}

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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

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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.

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Illegality

(i) Illegality at FORMATION: contract illegal from time of formation.

(ii) Illegality in PERFORMANCE: contract is valid, but performed in an 'illegal manner'.

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'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

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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.

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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 = BENEFICIALWhite 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.)
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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.
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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.

  • ILLEGAL:
    • Illegal to perform act: Fibrosa v Fairbairn: New SANCTION making it ILLEGAL for UK companies to trade
                                                                                         with Poland (due to war).

  • RADICALLY CHANGED CIRCUMSTANCE:
    • Krell v Harry: 'P' hired flat to view King's Coronation; KING becomes ILL, event CANCELLED.
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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
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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'.

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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'.

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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."

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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).

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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.

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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)
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