DMII MNRB SCHOLARSHIP & PUBLIC PROGRAM [ NOVEMBER 2011 INTAKE ] SUBJECT 105 LAW

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an offer can be made in writing, orally of by conduct it can be made to one person, a group of persons or the public at large as in the case of Carlill v Carbolic Smoke Ball Co (18 !"# it must be distinguished from an invitation to treat (i#e# an invitation to male offers" e#g# circulars, advertisements and display of price$marked goods

%n &isher v Bell (1 '(" a shopkeeper who was charged with offering for sale a flick$knife, contrary to the )estriction of offensive *eapons +ct 1 , escaped conviction when the court held that displaying the knife in his shop window was not an offer but merely an invitation to treat (this was a criminal case, and thus further legislation -uickly followed to close this loophole"# %n .harmaceutical Society of /reat Britain v Boots Cash Chemists 1 ,! it was held that a customer did not accept an offer when he took items from the shelves of a self$service store# 0aking the goods to the cashier was the offer to buy, which the cashier accepted when money was taken in payment# +n advertisement can be an offer in law if it is aimed at the public at large# %n Carlill v Carbolic Smoke Ball Co (18 !" the manufacturer of carbolic smoke balls (a medicine which they claimed would prevent all sorts of illnesses" were held to have made an offer (to the public at large" when they promised in an advertisement to pay 1(( pounds to any person who caught influen1a after having used one of their smoke balls as instructed# .5 H,/ (" ,77$* #(6 $"8: ;10 #(*4s5

+n offer does not remain open indefinitely# 2nce it comes to an end, it can no longer be accepted# 0he ways an offer may end are3 + time limi or a 4reasonable time5 o 6apse of 0ime 7 an offer will lapse if the offeror imposes a time limit for acceptance and the other party does not accept within that time 8eath o death of either party before acceptance will usually terminate the offer# 8eath after acceptance will not affect most contracts, unless they are for personal services

+cceptance o acceptance of an offer will complete the contract and bring the offer to an end )evocation o the offer may be revoked (ie# withdrawn" by the offeror at any time before acceptance o the offeror may do this even if he has promised to keep the offer open for a definite period of time o %n )outledge v /rant (1898" $ /rant offered to buy )outledge5s house, giving him si: weeks in which to decide whether to accept# *hen /rant withdrew his offer before the end of the si:$week period, the court held that he was entitled to revoke at any time before acceptance o the situation will be different if the offeree has paid a sum of money or given something of value in return for the promise to keep the offer open (ie# buying the option"# %f the offeror withdraw in this circumstance, he will be in breach of a subsidiary contract to keep negotiations open, and may have to pay damages o revocation must be communicated to the offeree either by words or by conduct (e#g# selling goods to a person other than the original offeree when the offeree learn of the sale" o communication of the revocation may be made by the offeror or by any other reliable source o %n 8ickinson v 8odds (18;'" the defendant offered to sell his house to the claimant but, before the claimant accepted, sold the house to another person# 0he claimant learned of the sale from a friend and the court held that since the friend was a reliable source, the offer had been duly revoked and could no longer be accepted 23 (5 B* $706 $=)0( " /'(% s %'$ >),s% "! *20$?: S2)),*% 6,2* ("s/$* / %' @(s$ 0(/s3 ;10 #(*4s5 where the 4posting rule5 applies o acceptance is effective when it is posted and not when it is received o the letter must be properly addressed, stamped and posted and it must be reasonable to use the post o the rule would not apply where the offeror made it clear that an instant or urgent response was re-uired or that acceptance must be communicated to them 7 <olwell Securities v <ughes (1 ;=" o the rule applies only to acceptance, not to an offer, revocation or re>ection of the offer o Byrne v ?an 0ienhoven (188(" 7 defendants, a firm in Cardiff, offered by letter on 1 2ct to sell tin plate to a firm in @ew Aork# 2n 11 2ct, the claimants received the letter and accepted immediately by telegraph# 2n 8 2ct the defendants sent a letter of revocation which the claimants received on 9( 2ct# the court held that a good contract was formed on 11 2ct# to be effective the revocation had to be communicated before acceptance o the rule applies to telegrams or telemessages but not to instantaneous methods of communication like telephone or tele: o Bntores v Ciles &ar Bast Corporation (1 ,," 7 an acceptance sent by tele: from +msterdam to 6ondon was held to be effective only on receipt in 6ondon# 0he effect was that the contract was deemed to be made in Bngland and could, therefore, be brought before the Bnglish Courts the rule could possible apply to an acceptance

sent by fa:, a contract would come into e:istence when the message was transmitted, even though it was illegible when received# 0here would be no contract if the sender knew that the transmission had failed# .5 B* $706 $=)0( " ',/ ("8 /'$" %'$ )* "@ )0$ " P*,# ss,*6 Es%,))$0 @(" .$ ())0 $8: ;10 #(*4s5 .romissory estoppel is a special rules under Consideration# + promise made without consideration cannot be enforced and will not complete a contractD it may be used as a defence# %n Central 6ondon .roperty 0rust v <igh 0rees <ouse (1 =;" $ the landlords of a block of flats had let them to the defendants at a rental of 9,,(( pounds a year# 2wing to the outbreak of war, the defendants could find few tenants for the flats and considered ending the lease# 0he claimants then agreed in writing to reduce the rental to 1,9,( pounds a year, with effect from 1 =1# 0he defendants continued with the lease under these circumstances but in 1 =,, the claimants claimed again the original rent from 1 =1 on the basis that no consideration had been given for their agreement to reduce it# 0he >udge held that the claimants were entitled to the full rent from 1 =, (since the agreement implied that the full rent should be payable when the abnormal war$time situation ended" but that it would be ine-uitable to allow them to go back on their promise and recover the full rent from 1 =1# 0he defendants had relied on the promise to accept a lower rent and had acted upon it by reducing the rent payable by their own tenants during the period in -uestion 0his principle operates only 4as a shield and not a sword4# %t is also an e-uitable principleD hence the defendant will not be allowed to claim relief unless they have acted fairly 8 E C Builders 6td v )ees (1 ''" 7 the claimants, a small firm of builders, were owed =89 pounds by Crs )ees# Fnowing they were in desperate of money, she offered them a che-ue for !(( pounds and said that if they did not take it they would receive nothing# 0hey reluctantly accepted but later sued for the balance# %t was held that they could recover, since no consideration had been given for their promise to accept a smaller sum and the were not estopped from claiming the balance because Crs )ees had herself acted ine-uitably in putting pressure on the builders and the defence is not allowed#

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(5 B* $706 $=)0( " /'(% s %'$ 8 77$*$"@$ .$%/$$" -, 89 -, 8(.0$ ("8 2"$"7,*@$(.0$ @,"%*(@%s: ;10 #(*4s5 + void contract has no binding effect in either party# Because a void contract is no contract at all, the e:pression is really a contradiction in terms# <owever, the e:pression is useful to describe agreements which neither party can fully enforce# + voidable contract is binding but one or possibly both of the parties will have the right, if they wish to set it aside# Contracts may be voidable on a number of different grounds, such as misrepresentation, drunkenness or insanity# +n unenforceable contract is valid but it cannot be enforced in a court if one party refuses to keep to the agreement# Such a contract may nevertheless be useful for other purposesD it may for instance be used as a defense to a claim#

.5 W'(% s %'$ 8 77$*$"@$ .$%/$$" U"7( * C,"%*(@% T$*#s A@% 1ABB ("8 U"7( * T$*#s C,"s2#$* C,"%*(@% R$!20(% ,"s 1AAA: ;5 #(*4s5 0he relationship between 0he Gnfair Contract 0erms +ct 1 ;; (GC0+" and the Gnfair 0erms %n Consumer Contract )egulations 1 (G0CC)" is rather complicated# 0o a large e:tend, they are separate regimes with different scopes of application and different concepts and terminology# 8ifferences between GC0+ and G0CC) are3$ GC0+ applies to consumer and business$to$business contracts, is restricted mainly to e:clusion and limitation clauses, and makes fre-uent reference to 4reasonableness5 test, with the burden of proof of reasonableness on the party seeking to rely on it# G0CC) apply only to consumer contracts, cover all types of term (e:cept 4core5 terms" and sub>ect to a 4fairness5 test, with the burden of proof (of unfairness" on the consumer

@5 E=)0( " %'$ %$*# C "",# "(%$D " *$0(% ," %, @,"8 % ," ("8 /(**("% $s: ;5 #(*4s5 0he classification is based on the importance of the terms in -uestion and the conse-uences if they are broken# *arranty (in contract law" is a term that affects only some relatively minor aspect of the agreement, giving the in>ured party the right to claim for damages but not to avoid the contract# Condition (in contract law" is a term that relates to an important aspect of the agreement and goes to the 4root of the contract5 allowing the victim to sue for damages and to avoid the agreement# Case e:amples3 .oussard v Spiers E .ond (18;'" 7 6eading female soprano prevented by illness from singing on opening night was held a breach of condition and dismissal was >ustified Bettini v /ye (18;'" 7 0enor engaged to sing for a season at Covent /arden missed four out of si: days in rehearsals due to illness was held to be a mere breach of warranty and dismissal was un>ustified 0he courts have adopted a fle:ible approach and focus on the effects of a breach on the in>ured party to ascertain whether a condition or warranty has been broken# 0his has led to the recognition of a third class known as 4intermediate5 or 4innominate5 terms# %nnominate terms $ there cannot be classified as either conditions or warranties in advance and it is only when the effects of a breach are considered that the true nature of the term is revealed Case e:amples of %nnominate term3 <ong Fong &ir Shipping Co 6td v Fawasaki Fisen Faisha 6td (1 '9" 7 0he courts held that the defendant had wrongly terminated the contract on the grounds that the ship chartered from the claimants was 4unseaworthy5 for twenty weeks out of a two year charter# 0he -uestion asked by the court was whether, looking at the events which had occurred as a result of the breach, the defendants had been deprived of the whole benefit of the contract# %n this case they had not# 0he <ansa @ord (1 ;'" 7 %t was held that even in a contract for sale of goods, it is wrong to assume that a term is necessarily either a condition or a warranty +3 B* $706 $=)0( " /'(% s %'$ @,##," 0(/ 8$7$"@$ ,7 >"," $s% 7(@%2#? (.,2%: ;20 #(*4s5 Non est factum means Hit is not his deedI# %t is the common law defence which permitted a person who had e:ecuted a written document in ignorance of its character, to plead that notwithstanding

the e:ecution, it is not his deed#1( %t is a plea which denies that a deed is that of the defendant e#g# where there has been a failure by the illiterate party in understanding the nature of the transaction# 0he doctrineJplea of non est factum started life as a device for the protection of illiterates and blind contractors# %n modern times, however, it has been modified and adapted for the protection of a person, who in the absence of negligence on its part, has been fraudulently induced to sign a document radically different from that which he was made to believe he was signing# 0he application of the doctrine to persons who can read in the 1 th Century has been -ualified by the fact that it should not apply to persons of full age and capacity# But this very narrow view of the doctrine was re>ected by the <ouse of 6ords in /allie v# 6ee# %n the words of 6ord )eid it may apply to3 Those who are permanently or temporarily unable, through no fault of their own, to have without explanation any real understanding of the purport of a particular document whether that be from defective education, illness or innate incapacity# Cistaken signing of written documents 0he general rule is that a person is bound by the terms of a document which they signed, whether they have read it or not# <owever, in situations where the signer is illiterate and the contents of a document have been read to them wrongly, common law developed a defence known as 4non est factum5 or 4not my deed5# 0he scope of this defence is very limited# Saunders v +nglia Building Society (1 ;1" 7 held that the defence of 4non est factum5 is available only when3 the signer has 4no real understanding5 of the document because of 4defective education, illness or innate capacity5D there is a fundamental difference between the document actually signed and the one which the signer believed it to beD the signer can show that they were not careless in signing the document Cistakes in recording statements 7 rectification %f the parties put their contract in writing but make an error in recording what they have agreed, the court may rectify the document to make it accurately reflect the true agreement# 0he mistake must be that of both parties# 0he courts can only rectify documents, not contracts# 53 (5 B* $706 $=)0( " /'(% (*$ %'$ "!*$8 $"%s 7,* (@% ,"(.0$ # s*$)*$s$"%(% ,": ;10 #(*4s5

+ misrepresentation is a false statement of fact which induces the other party to enter into the contract# %t may be fraudulent, innocent or negligent# 0he following re-uirements must be met, to have a damaging effect on the contract3 0he misrepresentation must be one of fact $ 0his is to be contrasted with statements of law and statements of opinion or belief, re-uirement o Statement of opinion or belief may amount to actionable misrepresentation if the maker does not actually hold the opinion or belief, since they misrepresent their own state of mind# o

%n Bdgington v &it1maurice (188," per Bowen 6K 7 0here must be a misstatement of e:isting factD but the state of a man5s mind is as much a fact as the state of his digestion# + misrepresentation as to the state of a man5s mind is therefore, a misstatement of fact# 0he misrepresentation must be made by a party to the contract $ statements made by a third party is not actionable, re-uirements the misrepresentation must be material o misrepresentation must concern something which would influence a reasonable person in deciding whether to proceed with the contract or what terms to accept# 0his re-uirement of materiality does not apply if the representation is fraudulent the misrepresentation must induce the contract o the person seeking redress must have relied and acted upon the statement in -uestion the claimant must suffer damage as a result of the misrepresentation

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0he broad effect of misrepresentation is to make the contract voidable, not void as in mistake# <owever the remedies depend to a certain e:tent on whether the misrepresentation was fraudulent or innocent# &raudulent misrepresentation is where the person making in knows that it is false, has no belief in its truth or makes it recklessly not caring if it is true or false# %nnocent misrepresentation is a false statement which the maker honestly believes to be true# 0he remedies are3 rescission, damages, refusal of further performance or affirmation R$s@ ss ," 0he claimant may bring an action to rescind (or cancel" the contract# 0his remedy is available for any type of misrepresentation but S 9(9" Cisrepresentation +ct 1 '; allows the courts to award damages in lieu of rescission at its discretion, where there is no fraud# 0his is an e-uitable remedy and must be e:ercised reasonably promptly# 0he remedy will be lost if the parties cannot be restored to their original position before the contract e#g# where the goods have been resold by the buyer# D(#(!$s %n the case of fraud, damages are based on the tort of deceit, not on contract, in addition to rescission# %n the case of innocent misrepresentation, an award of damages in lieu of rescission# 8amages and rescission are alternatives, where there is no fraud# R$72s(0 ,7 72*%'$* )$*7,*#("@$ *here the in>ured party refuse to perform their part and if sued, misrepresentation can be raised as a defence# A77 *#(% ," Since the contract is voidable, the in>ured party may choose to affirm the contract# <owever once affirmed, the contract cannot be rescinded#

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