LA1040 Contract law

Pre-exam update 2023

The following developments should be noted.

TOPIC 2: AGREEMENT: OFFER AND ACCEPTANCE

2.1 The offer
Cases raising the issue of ‘snapping up’ i.e. where a party is not allowed to accept a
mistaken offer do not arise often but this issue was discussed obiter dicta in Longley v
PPB Entertainments [2022] EWHC 977 (QB) in the context of telephone betting. A
customer wanted to place a bet on a horse of £1300 each way (£2600 total). When the
customer called to place the bet, higher approval was needed and obtained by the
operator. In error, the operator said that £26,000 not £2,600 would be taken from the
customer’s account to which he replied ‘yeah’. The horse won at odds of 16–1 and the
issue was whether the stake was £2600 or £26,000. The Judge held that n nothing in the
conversation could reasonably be construed as an offer by PPB to increase the bet to
£26,000. However, Mrs Justice Ellenbogen went on to say that if (hence the statement is
obiter) there were such a counteroffer by PPB then it could not be accepted Mr Longley
because he was aware that there was a mistake as to the terms that were being offered.
The Judge further said that the so-called doctrine of ‘snapping up’ only operated to prevent
a party from accepting an offer that he knows to be mistaken as in the Hartog case and
would not apply where the offeree should have known, but did not in fact know, that the
offer was mistaken (where the offeree has so called ‘constructive knowledge’) thus
contradicting Scriven Bros v Hindley discussed in the module guide. It must, however, be
remembered that the fact that a party should be aware of the other’s mistake may be
evidence from which the court can conclude that the other party was in fact aware of the
mistake so as to come within the doctrine of ‘snapping up’.

2.3 Acceptance of the offer

The situation where parties exchange differing standard form contracts is often described
as the ‘battle of the forms’. Usually the terms of the last form sent (‘the last shot’) will
prevail because this communication will be considered the last counteroffer to be made
that was then accepted by the conduct of the other party performing the contract.
However, the Court of Appeal in TRW Ltd v Panasonic Industry Europe GmbH [2021]
EWCA Civ 1558 held that this will not always be the case. Rather by skilfully drafting its
initial standard form to prevent other terms from superseding it and also securing the
agreement of the other party, the contractor firing ‘the first shot’ might instead prevail.

TOPIC 5: THE TERMS OF THE CONTRACT

5.2.1 Implied terms in common law
Re Force India Formula One Team Ltd [2022] EWHC 933 (Ch) provides a recent example
of the implication of a term on the basis of business efficacy and that its implication was
‘obvious’ from the other terms in the contract. Force India owned the Formula 1 team and
entered a five-year merchandising contract. The High Court held that it was an implied

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LA1040 Contract law Pre-exam update 2023

term of that agreement that Force India would continue to operate the F1 team and this
term was breached when the F1 team was sold following Force India’s liquidation. The
disposal of the F1 team effectively robbed the agreement of its entire commercial purpose.

TOPIC 6: THE REGULATION OF THE TERMS OF THE

CONTRACT
6.1.2 Construction
Although there is a clear modern tendency not to give strained interpretations to provisions
in commercial contracts that seek to exclude liabilities, it is still the case that clear words
should be used when this is the parties’ intention. In Soteria Insurance v IBM [2022]
EWCA Civ 440 the Court of Appeal held that a contract clause that excluded liability for
‘loss of profit, revenue, savings’ was not effective to exclude a £120 million claim for
wasted expenditure when a project to deliver a new IT system failed. The CA said that
‘wasted expenditure’ was simply not listed as one of the categories of loss that were
excluded from recovery.

TOPIC 9: MISREPRESENTATION
9.1.2 Unambiguous false statement of existing fact or law that induces a contract
It is a requirement of an action for misrepresentation that the untrue statement must
induce the contract. Where there is a misrepresentation and a subsequent contract
between the representor and representee it is presumed that it was the misrepresentation
that induced the contract. However, this presumption may be rebutted in certain
circumstances one of which is described by the Court of Appeal in SK Shipping Europe v
Capital VLCC [2022] EWCA Civ 231 at [61] as ‘whether the claimant would have entered
into the contract on the same terms even if the misrepresentation had not been made’ (cf.
the slightly different formulation in the module guide discussing the case of The Lucy). On
this basis, the Court of Appeal held that false information relating to a ship’s performance
did not give rise to an actionable misrepresentation because it was not relied upon.

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