Law of Contract

Robert Mackay

OFFER AND ACCEPTANCE
‡ A simple contract (that is, a contract made not under seal) requires an offer made by one party and accepted by the other, valuable consideration given by either side, or a common intention that the agreement should be legally binding

OFFER AND ACCEPTANCE
‡ An offer is made when one party makes it clear, by words or actions, that he is prepared to be bound as soon as the offer is accepted by the person to whom it is made. An offer is thus quite different from an invitation to treat, though it is not always easy to distinguish the two.

Grainger v Gough [1896]
‡ Grainger v Gough [1896] AC 325, HL ‡ AA were London agents for a French wine merchant X; they distributed catalogues and accepted orders which they passed on to X, X reserving the right to refuse any order. The case turned on whether X was liable for tax on contracts made by his agents in England. The House of Lords held that the distribution of catalogues was an invitation to treat and that the offer was made by the intending purchaser. This offer was transmitted by AA to X, and the contract was not made until X accepted the offer in France.

Gibson v Manchester CC [1979]
‡ Gibson v Manchester CC [1979] 1 All ER 972, HL ‡ A local council write to tenants inviting them to apply to purchase their homes. One such tenant P did apply, and a price was agreed. Following a change of party control, the new council DD refused to go ahead with the sale. The House of Lords said there was no binding contract: P had made an offer which DD had not yet accepted. Phrases in the correspondence such as "may be prepared to sell" and "please complete the enclosed application form" were indicative of an invitation to treat.

Display of goods
‡ A display of goods in a shop window, or on the shelves of a self-service shop, is generally regarded as an invitation to treat rather than as an offer to sell.

Pharmaceutical Society v Boots [1953]
‡ Pharmaceutical Society v Boots [1953] 1 All ER 482, CA ‡ Certain products that were to be sold only under the supervision of a registered pharmacist were displayed on shelves in a self-service shop. The Pharmaceutical Society of Great Britain (who are responsible for enforcing this legislation) brought a prosecution against the shop for allowing customers to buy these products by helping themselves, but the Court of Appeal said they had no case. The customer having selected the goods made an offer to purchase when he took them to the cash desk, and there was a registered pharmacist supervising that point at which the sale took place.

Fisher v Bell [1960]
‡ Fisher v Bell [1960] 3 All ER 731, DC ‡ It was a statutory offence under the Restriction of Offensive Weapons Act 1959 to offer for sale any of various items, including flick-knives. A Bristol shopkeeper R displayed such a knife in his window, with a ticket reading "Ejector knife - 4s." [4 shillings = 20p], and was prosecuted for an offence under the Act. The Divisional Court took a literal interpretation of the statute and said he had committed no offence: the display was an invitation to treat, not an offer to sell.

‡ This analysis of the transaction leaves both parties free to change their minds. The shopkeeper can refuse to sell to a customer whom he does not like (for example, one who is under age or drunk), and the customer having taken goods from a supermarket shelf can return them if he changes his mind before going to the till.

‡ An advertisement is usually an invitation to treat but can be an offer, depending on its wording and on the circumstances.

but the High Court said he must be acquitted.25] each". HC QBD ‡ The appellant placed an advertisement in a magazine: "Bramblefinch cocks and hens. [25 shillings = £1. not an offer to sell. He was charged with offering for sale a wild bird. (If the advertiser indicated that he was willing to sell only to the first person accepting. there would be no such problem.Partridge v Crittenden [1968] ‡ Partridge v Crittenden [1968] 2 All ER 421.) . contrary to statute. 25s. with limited stock the advertiser could not reasonably intend to be bound to sell to all those who might accept. The advertisement was an invitation to treat.

the wording of the advertisement clearly showed an intention to be bound to anyone accepting. used it as directed. . The Court of Appeal said the advertisement in this case was an offer. she sued for the £100 promised. P bought a smoke ball. CA ‡ The makers DD of a health product published newspaper advertisements promising to pay £100 to anyone who contracted flu after buying one of their smoke balls and using it as directed.Carlill v Carbolic Smoke Ball Co [1893] ‡ Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. and still caught flu. The advertisement also said DD had deposited £1000 in a named bank to show their sincerity in this matter.

his action for damages turned on the validity of an exclusion clause printed on the ticket. and that the contract must be completed at that time. and the motorist accepted the offer when he put the necessary coins in the slot. CA ‡ P parked his car in DD's car park. Lord Denning MR said a motorist buying a ticket [or presumably any other goods] from a machine is irretrievably committed when he puts the money in the machine. paying his money and taking a ticket from the automatic machine at the entrance. there was an accident in which he was seriously injured. When P returned later to collect his car. . The car park owners made an offer when they held out the machine as ready to receive money.Thornton v Shoe Lane Parking [1971] ‡ Thornton v Shoe Lane Parking [1971] 1 All ER 686.

] .Wilkie v London Passenger Transport Board [1947] ‡ Wilkie v London Passenger Transport Board [1947] 1 All ER 258. He was travelling on a free pass subject to wide exclusions of liability. and it would certainly make it difficult (unless the offer is regarded as conditional) for the bus driver to refuse to allow a drunk or abusive passenger to board. [This analysis has been doubted by some writers. CA ‡ P was an employee of DD and was injured through the negligence of the driver when travelling on one of DD's buses. and so was unable to claim. But Lord Greene MR said obiter that when a public bus plies for hire it is making an offer accepted by the passenger on boarding.

Auction Sales ‡ At an auction sale.57(2) of the Sale of Goods Act 1979 confirms the common law rule that a prospective buyer makes an offer by bidding. which the auctioneer accepts when he drops his hammer. s. however. The special rules for auctions. Thus a buyer may withdraw his bid until the hammer falls. mean that the lot cannot legally be sold at the auction to anyone other than the highest bidder. or an item may be withdrawn from the sale even after bidding has begun. .

but the only bid (of £200 each) was made by C.Barry v Davies (2000) ‡ Barry v Davies (2000) Times 31/8/00. Although there had been no contract between vendor and purchaser. The auctioneer D refused to accept the bid and withdrew the machines from sale. . there was a collateral contract between auctioneer and bidder. C sued. whose list price would have been £14000 each. and the judge's award of £27600 damages was affirmed on appeal. CA ‡ A sale of machinery by auction was advertised as being "without reserve". Two machines were put up.

so good. So far. £100 as a misprint for £1000) in the published details. If the company sets up an automatic e-mail reply system.g. and the customer makes an offer by sending in an order. this (again depending on its wording) may amount to an acceptance of the offer. .Internet Shopping ‡ The growth of internet shopping has led to further developments in this area of law. Where a company advertises goods or services on its web site this is normally (depending on the wording used) an invitation to treat. and this may have unfortunate consequences for the company if there is any error (e.

. and some other bodies do so even when not so required. The offer in such cases is clearly made by the tender or and accepted by the authority. but the situation is more complex than it might seem.Invitation to Tender ‡ Public authorities are required by law to invite tenders for many services.

whichever is higher". The House of Lords said the referential bid was ineffective and that PP's cash bid should have been accepted. The use of referential bids. HL ‡ Two parties were invited to bid secretly for a block of shares. PP bid $2 175 000. on the understanding that the shares would be sold to whoever bid higher. . or $10 000 more than any other cash bid. while the other party bid "$2 100 000. they said. defeated the whole purpose of confidential competitive tendering and was not to be encouraged.Harvela Investments v Royal Trust [1985] ‡ Harvela Investments v Royal Trust [1985] 2 All ER 966.

DD argued that PP had merely made an offer which they (for whatever reasons) had not accepted. . CA ‡ PP and six other parties were invited to submit tenders for the concession to run pleasure flights from Blackpool Airport. but this was not considered owing to a clerical error. PP submitted a tender in due form. and had set out in detail the procedure to be followed.Blackpool & Fylde Aero Club v Blackpool BC [1990] ‡ Blackpool & Fylde Aero Club v Blackpool BC [1990] 3 All ER 25. The Council had selected the parties invited to tender and thus knew them all. this implied that any invitee conforming with that procedure would be entitled to have his tender properly considered. but the Court of Appeal said there was an implied collateral warranty.

WITHDRAWL ‡ WITHDRAWL ‡ As a general rule. any purported acceptance after withdrawal is ineffective . an offer can be withdrawn at any time before it has been accepted.

Best CJ ‡ D offered to take a lease of P's premises. the other has six weeks to put an end to it. The judge said the acceptance was too late.Routledge v Grant (1828) ‡ Routledge v Grant (1828) 130 ER 920. if one party has six weeks to accept an offer. One party cannot be bound without the other. ‡ . and just within the six weeks P purported to accept it. a definite answer to be given (by P) within six weeks. After three weeks D withdrew his offer.

and before the option was exercised. The token payment was valuable consideration. CA ‡ D offered to sell P his house for £10 000. Before the end of that time. P then exercised the option. D purported to withdraw his offer. exercisable within six months.Mountford v Scott [1975] ‡ Mountford v Scott [1975] 1 All ER 198. however small. and P paid him £1 for an option to purchase at that price. and the Court of Appeal said he was entitled to specific performance. and made the offer irrevocable until the option expired .

.Withdrawal ‡ Withdrawal must normally be communicated to the offeree. and does not take effect until such communication is received: the special rule for postal acceptances (below) does not apply to withdrawals.

Lindley J ‡ DD posted a letter on 1 October offering to sell PP a quantity of tinplate. by which time the offer had been accepted and it was too late for DD to withdraw. then posted another letter on 8 October withdrawing the offer.Byrne v Van Tienhoven (1880) ‡ Byrne v Van Tienhoven (1880) LR 5 CPD 344. The second letter purporting to withdraw the offer arrived on 20 October. . following with a confirmatory letter four days later. The first letter reached PP on 11 October and they accepted the offer at once by telegram.

but then heard from another person that D had contracted to sell to a third party.Dickinson v Dodds (1876) ‡ Dickinson v Dodds (1876) LR 2 ChD 463. and subsequently sought specific performance. leaving the offer open until Friday. On Friday P accepted the offer. . and the purported acceptance was therefore ineffective. On Thursday P decided to buy the house. CA ‡ D offered to sell P his house. The Court of Appeal said the news (conveyed by a reliable third party) that the house had been sold was sufficient notice of the withdrawal of the offer for sale.

The Supreme Court said that since the offer had been made by general advertisement rather than to him personally. Five months after that. . Supreme Court (USA) ‡ An advertisement was published in several newspapers advertising a reward to be paid for information leading to the arrest of any of several named criminals. he should have realised that it might be withdrawn in the same way. Six months later the President issued a proclamation cancelling the reward.Shuey v United States (1875) ‡ Shuey v United States (1875) 92 US 73. P (who was aware of the original advertisement but not that the reward had been cancelled) identified one of the wanted men and claimed the reward. and this was published in a similar manner.

but returned it two days later saying he had changed his mind. giving another reason for their purported acceptance to be ineffective. the car was stolen from the dealer's forecourt during the five days and was recovered in a damaged state. and that PP's purported acceptance five days after the car was returned was too late. D paid a first instalment and took the car away. PP were thus unable to fulfil their part of the bargain to supply the car as originally seen.Financings Ltd v Stimson [1962] ‡ Financings Ltd v Stimson [1962] 3 All ER 386. (In fact. The court said this was an effective withdrawal.) . CA ‡ D decided to buy a car on hire purchase and signed a form supplied by the dealer which declared that the HP agreement became binding only when signed by the finance company PP.

but heard nothing. . and purported to accept D's offer.Ramsgate Victoria Hotel v Montefiore (1866) ‡ Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Exch 109. it would expire after "a reasonable time". Exchequer ‡ D made an offer in June to buy shares in PP's company. and given the fluctuating nature of the subject matter the ‡ time interval had gone beyond what was reasonable. but D refused to go ahead. PP made an allocation of shares in November. The court said that although the offer had not been formally withdrawn.

R found a buyer and a sale was agreed "subject to contract".Luxor (Eastbourne) v Cooper [1941] ‡ Luxor (Eastbourne) v Cooper [1941] 1 All ER 33. and should therefore have realised that AA might wish to withdraw. but AA then decided not to complete the deal and disposed of the cinemas elsewhere. R was being offered a substantial sum for comparatively little effort. R sued for his commission but lost: the House of Lords found for AA on the basis that there was no reason to infer an undertaking by not to revoke their offer. HL ‡ Vendors AA promised an estate agent R £10 000 as a fee for selling a cinema. .

This is particularly important to rewards and "challenges" (e.Acceptance by Conduct ‡ Where an offer is to be accepted by conduct.g. £10 000 to the first person to swim the Atlantic): although such offers can certainly be withdrawn . .that is only reasonable .it is unfair if the offeror can withdraw his offer moments before the other party "accepts" by completing the task. then it is not clear what rules govern its withdrawal.

and his widow P sued for possession of the house. but if they did so that father was bound to transfer the house to them in accordance with his promise. . Denning LJ said (perhaps obiter) that a unilateral contract cannot be revoked once the potential acceptor has embarked upon performance.Errington v Errington & Woods [1952] ‡ Errington v Errington & Woods [1952] 1 All ER 149. The house was put into the father's name. CA ‡ A father bought a house for his son and daughter-in-law DD to live in. paying £250 in cash and borrowing the other £500 from a building society. After some fifteen years the father died. The Court of Appeal said there was a unilateral contract: DD were not bound to go on paying. but he said that as long as DD paid the instalments he would transfer it to them as soon as the mortgage was discharged.

and that obligation arises as soon as the offeree starts to perform. ‡ . CA ‡ PP sought to buy various properties from DD. but Goff LJ said obiter that while the offeror of a unilateral contract is entitled to require full performance of his condition and short of that is not bound. PP obtained the bankers' draft and attended at DD's offices before the deadline. but DD refused to go ahead.Daulia v Four Millbank Nominees [1978] ‡ Daulia v Four Millbank Nominees [1978] 2 All ER 557. and draft contracts were prepared.40. PP's claim for damages was dismissed by Brightman J and the Court of Appeal because the collateral contract (relating to an interest in land) did not conform with the Law of Property Act 1925 s. there must be an implied obligation on his part not to prevent the condition becoming satisfied. but once the offeree has embarked on performance it is too late for the offeror to revoke his offer. DD undertook that if PP produced the draft contract and a bankers' draft by a certain time they would enter into a full contract. Until then the offeror can revoke the whole thing.

ACCEPTANCE .

that acceptance is communicated to the offeror. . in most cases.ACCEPTANCE ‡ No contract comes into existence until an offer is accepted and.

J did not reply.75]. but D forgot this instruction and sold the horse elsewhere. and the horse remained in J's possession.Felthouse v Bindley (1863) ‡ Felthouse v Bindley (1863) 142 ER 1037. . J decided to sell the horse to P and told an auctioneer D to withdraw it from a sale. no money was paid. I consider the horse is mine at £30-15-0" [£30. The Court of Common Pleas (whose judgment was affirmed on appeal) said there was no contract: P's letter was an open offer that had not been accepted. Exch Ch ‡ P discussed the purchase of a horse from his nephew J. On 2 January P wrote to J saying "If I hear no more about him. claiming the horse was his property. and prices were discussed. P now sued D in conversion.

.Silence ‡ Although the offeror cannot stipulate that the offeree's silence is to be taken as a sign of his acceptance of the offer. he can generally specify the method by which acceptance is to be communicated.

The Court of Appeal said there was no valid acceptance and hence no binding contract. AA accepted by letter and then sought to cancel their acceptance. . and RR made an offer with a stipulation that acceptance be notified only on a pre-printed form. expressly or ‡ by their conduct. CA ‡ AA negotiated to buy some steel from RR. but added obiter that it might be possible to say in some cases that those in RR's position had waived the condition as to the mode of acceptance.Compagnie de Commerce v Parkinson Stove [1953] ‡ Compagnie de Commerce v Parkinson Stove [1953] 2 Lloyds Rep 487.

and the court supported his view. but a different address and a substantial delay were enough to invalidate the acceptance. and wrote asking for a reply "by return of wagon". which took considerably longer. by the time the letter arrived D had already bought from other sources all the flour he needed. The court said that the actual mode of reply was unimportant. D refused to accept the purported contract as binding. Supreme Court (USA) ‡ D offered to buy a quantity of flour from P. P replied by post to D's other address.Eliason v Henshaw (1819) ‡ Eliason v Henshaw (1819) 4 Wheaton 225. . and that any means might be used as long as the reply was received no later than would be expected by the method specified.

‡ P wrote to D asking for a price on 800 tons of iron. D offered the iron at 69s [69 shillings. or £3.45]per ton and asked for a reply "by return". It was conceded that since the offer was not in fact accepted by return of post there was no contract.Tinn v Hoffman (1873) ‡ Tinn v Hoffman (1873) 29 LT 271. Exch. . but Honeyman J said obiter that a telegram or verbal message or any other means at least as fast as a letter written by return of post would have been sufficient.Ch.

That approval was given in November. . The question arose as to when a contract had been concluded. Buckley J ‡ ‡ PP were the owners of property to be sold by tender. and in September they notified DD's surveyor of this acceptance subject to the formal approval of the Secretary of State. and so (although the postal rule below would not apply) any other means by which PP's acceptance was actually communicated would be sufficient. DD submitted a tender which PP decided to accept. and in January PP wrote to DD at the given address to confirm the agreement. and the judge said it was in September: the means of acceptance specified in the tender document was not stated to be the only means of acceptance. the tender form included a statement that the successful tenderer would be notified by a letter sent by post to the address given in the tender document.Manchester Diocesan Council v Commercial & General Investments ‡ Manchester Diocesan Council v Commercial & General Investments [1969] 3 All ER 1593.

However.Brogden v Metropolitan Railway (1877) ‡ Brogden v Metropolitan Railway (1877) LR 2 AC 666. . A supplied coal and RR paid for it for some time thereafter as if the draft contract had come into force. HL ‡ A regularly supplied RR with coal. A contract was drafted by RR and sent to A. The House of Lords said that mere mental assent to the contract would not have been enough. who returned it with comments. from the placing of the first order after the return of the draft). and suggested after some years that they should enter into a formal contract. but it was never formally executed. but the fact that both parties acted upon it was enough to show acceptance of its terms as from the completion of the first delivery (or possibly.

CA ‡ The makers DD of a health product published newspaper advertisements promising to pay £100 to anyone who contracted flu after buying one of their smoke balls and using it as directed. The Court of Appeal said P had accepted DD's offer by buying the smoke ball and using it in accordance with the instructions given. The advertisement also said DD had deposited £1000 in a named bank to show their sincerity in this matter. because the advertisement had made no mention of notification and had implied that all the customer need do was to buy and use the smoke ball. she sued for the £100 promised.Carlill v Carbolic Smoke Ball Co [1893] ‡ Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. It was not even necessary for P to notify DD of her acceptance. used it as directed. and still caught flu. . P bought a smoke ball.

no matter what might have been ABTA's private intention. The words ".Bowerman v ABTA [1995] ‡ Bowerman v ABTA [1995] NLJ 1815. The Court of Appeal said the notice displayed in the company's office. ABTA reimbursed their payments subject to a deduction of £10 insurance. ABTA arranges for you to be reimbursed . CA ‡ PP booked a ski trip with a company that subsequently went out of business.. even though the buyer's contract is with the retailer . describing the ABTA protection scheme. [The reasoning adopted in this case would probably make a manufacturer's guarantee legally enforceable." would be understood by the ordinary reader as clearly promising a legally enforceable agreement. and PP sued for that balance... was sufficient to create a binding contract when PP accepted its unilateral offer by booking with an ABTA member..

DD began to process the track. CC sent DD the track with an invoice. Lewison J ‡ CC owned the copyright in a particular piece of music. and CC then changed their minds and e-mailed DD purporting to withdraw their consent. but agreed "subject to contract" that it might be included on an album to be produced by DD. The judge said that in the light of the earlier agreement.Confetti Records v Warner Music (2003) ‡ Confetti Records v Warner Music (2003) Times 12/6/03. CC by sending the track and invoice had made an offer which DD had accepted by conduct. the contract was complete at that point and the purported withdrawal came too late. .

since a person cannot be said to have accepted an offer of which he was not aware.‡ Acceptance by conduct can raise questions as to the acceptor's motives. .

that is quite enough. It does not say. The jury found as a fact that she had been motivated by revenge and public duty. but the court said she was entitled to the reward nevertheless. and her actual motive was immaterial. P was severely beaten by M.. If the person knows of the reward and does the thing. KB ‡ D offered a reward to anyone giving information leading to the arrest of a murderer M.".. "whoever will come forward in consequence of this notice . and not by the thought of the reward. She was aware of the offer.Williams v Cawardine (1833) ‡ Williams v Cawardine (1833) 172 ER 1101. said Littledale J. . which had been widely advertised. and subsequently gave information that led to M's arrest and conviction of the murder.

There cannot be assent without knowledge of an offer. said Higgins J. and ignorance is the same thing whether it comes from never having heard of the offer or having forgotten about it. where appropriate) to anyone giving information leading to the arrest and conviction of certain murderers. C.R v Clarke (1927) ‡ ‡ R v Clarke (1927) 40 CLR 227. He admitted that his only motive was to clear himself of a charge of murder and that he had no thought of claiming the reward at the time. distinguishing Williams v Cawardine on the basis that Mrs Williams had at least had the offer in mind. An offer of £100 to the first person to swim 100 yards in the harbour on New Year's Day would not be satisfied by a person who fell overboard and swam the distance merely to save his life. Isaacs ACJ said there were many instances in which an act done with reference to an offer would be acceptance of the offer by performance. even if it was not her primary motive. High Court (Australia) The Government of Western Australia offered a reward (and a pardon. The High Court reversed a decision of the Full Court of Western Australia allowing his subsequent claim against the Crown. but the same act done with reference to a different object would not. . saw the advertisement and subsequently gave evidence leading to the conviction of the others. an accomplice.

COUNTER OFFERS ‡ A counter-offer is not an acceptance. ‡ The majority of the court in Tinn v Hoffman above thought this would be true even where the counter-offer contains exactly the same terms as the original offer. . though a minority dictum of Honeyman J suggests the contrary. and actually kills the original offer.

D said he was not prepared to accept the lower offer.Hyde v Wrench (1840) ‡ Hyde v Wrench (1840) 49 ER 132. which D took time to consider. whereupon P purported to accept D's original offer and brought an action for specific performance. After a fortnight. . Lord Langdale MR ‡ D wrote to P offering to sell his farm for £1000. the judge said there was no contract: by making his own offer P impliedly rejected the offer made by D and could not subsequently revive and accept it. P immediately responded with an offer of £950. In the Rolls Court.

for delivery over two months. . P telegraphed back asking whether D would accept 40s. and the judge said there was no counter-offer.Stevenson v McLean (1880) ‡ Stevenson v McLean (1880) LR 5 QBD 346. P sued for breach of contract. net cash. P telegraphed accepting the original offer. what time they would give. to find D had already sold the iron elsewhere. merely an enquiry that should have been answered. having had no reply. Lush J ‡ D wrote to P offering a quantity of iron at 40s [40 shillings] a ton. or if not. Four hours later.

. and this was signed and returned by PP. said Lord Denning MR.Butler Machine Tool v Ex-Cell-O [1979] ‡ Butler Machine Tool v Ex-Cell-O [1979] 1 All ER 965. it will be found in most cases that the contract is complete as soon as the last form is sent and received without objection being taken to it. The order form incorporated a tear-off slip which read "We accept your order on the terms and conditions stated thereon". The Court of Appeal said DD's order on different terms constituted a counter-offer. in which some of the terms were significantly different and there was no price variation clause. When there is a "battle of forms". which were said to prevail over any other terms in the buyers' order. which was accepted by PP when they returned the tear-off slip without further amendment. DD replied by placing an order on their standard order form. CA ‡ PP offered to sell a machine to DD on certain fixed terms including a price variation clause.

there must inevitably be a period of uncertainty for one party or the other. . Because of the time a letter spends in the postal system. and since the offeror can always protect himself by stipulating a different mode of acceptance the rule of default is one that protects the acceptor.‡ Acceptance is normally effective and the contract complete when it is received by the offeror. but special rules have been devised to cover acceptance by post.

The court said P was entitled to damages: his acceptance was complete when his letter was posted. . and consequently P's acceptance was late in coming back. before the wool was sold to the third party. D sold the wool elsewhere. and asked for a reply "in course of post". This offer was delayed two days in the post. Lord Ellenborough ‡ D wrote to P offering to sell some wool. On the day before it arrived (but after it had been expected).Adams v Lindsell (1818) ‡ Adams v Lindsell (1818) 106 ER 250.

not to withdrawals or other communications. but applies even if the letter is lost or delayed in the post unless the loss or delay is caused by the acceptor's error.Postal Rule ‡ This "postal rule" applies only to acceptances. however. It is a special principle limited to letters sent by ordinary post. . and is restricted to situations in which the parties would reasonably have expected acceptance to be signified in that way.

The sender of a Telex message knows almost immediately whether or not it has been received. CA ‡ PP in London sent an offer by Telex to DD in Amsterdam. as some writers suggest. but it seems wrong that the acceptor should bear the risk of a faulty receiving machine or negligence on the offeror's part. so there is no period of uncertainty requiring a special rule. it would seem that the same should apply to fax messages. and the offer was accepted by Telex. but the status of telephone answering machines has yet to be determined. For technical reasons it became important to know where the contract had been made. Entores suggests that acceptance should take place only on receipt of the message. that a telephone answering machine is to be regarded as the subscriber's agent for the receipt of messages?] . [By analogy. Can it be. The Court of Appeal said it had been made in London: the postal rule applies only to ordinary letters.Entores v Miles Far East [1955] ‡ Entores v Miles Far East [1955] 2 All ER 493.

Tenax Steamship v The Brimnes (The Brimnes) [1974] ‡ Tenax Steamship v The Brimnes (The Brimnes) [1974] 3 All ER 88. but differed as to the legal rule to be applied. Cairns LJ. The Court of Appeal agreed on the facts that the withdrawal was effective from its arrival. and that in some circumstances a notice arriving late in the working day might quite legitimately not be "received" until the following morning.45 one afternoon but not read until the next day even though the receiving office had been staffed until 6. it was sent at around 5.30. Megaw LJ said that if a notice arrives at the address of the person to be notified. ‡ . felt that the sender should not rely on the recipients' reading every communication at once. however. at such a time and by such a means that it would in the normal course of business come to his attention on its arrival. CA ‡ An offeror sent by Telex a notice of withdrawal. he cannot rely on his own or his servants' failure to act in a businesslike manner to postpone the effective time of the notice.

and in some cases to a judgment as to where the risks should lie. Lord Wilberforce said there was no general rule that could cover all the possible situations that might arise with the use of Telex machines: each case must be resolved by reference to the intention of the parties. . in Vienna). to sound business practice. HL ‡ AA in London sent a telex to RR in Vienna accepting RR's offer and terms of sale.e. and subsequently had occasion to sue for breach of contract. and the House of Lords agreed.Brinkibon v Stahag Stahl [1982] ‡ Brinkibon v Stahag Stahl [1982] 1 All ER 293. The Court of Appeal said the claim must be set aside because the contract had been made outside the jurisdiction (i.

. CA ‡ D gave PP an option to purchase certain property. never arrived. exercisable by notice in writing to D within six months. although properly addressed. and the Court of Appeal agreed. The wording of the offer was enough to make it clear that acceptance without actual notification would not be enough. PP wrote to D exercising their option but their letter. Templeman J dismissed PP's claim for specific performance or damages. Within the required time.Holwell Securities v Hughes [1974] ‡ Holwell Securities v Hughes [1974] 1 All ER 161.

On the one hand. there are those who argue that e-mail is virtually simultaneous and that the postal rule should not apply. The majority of academic commentators have therefore tended to the view that email should be treated as a form of mail to which the postal rule should normally apply (subject to its exclusion by the parties' clear intention). but this takes no account of the fact that e-mail messages are sometimes rejected by the server and that the recipient may not read the message immediately it arrives.Electronic Communication ‡ The growth of electronic communication has raised new (and as yet unanswered) questions about the applicability of the postal rule to communications by e-mail and via the world-wide web. .

Web site that includes a reply form ‡ Where the offeror sets up a web site that includes a reply form. normally constitutes an invitation to treat rather than an offer). there are strong policy reasons for ensuring that the rules for electronic acceptance are the same no matter which particular form of software is being used. There is a substantial body of opinion to the effect that the postal rule should not apply here (and a quite sustainable view that a web page. But given the speed at which electronic communication is still developing. like a shop window. this comes closer to instantaneous communication because the offeree can tell at once whether his acceptance has been received. .

CONSIDERATION .

. loss or responsibility given. but the courts have consistently refused to look at its adequacy. Consideration must be of some value. profit or benefit accruing to one party. or some forbearance. interest.CONSIDERATION ‡ CONSIDERATION ‡ A contract not made under seal must be supported by valuable consideration. detriment. In Currie v Misa (1875) LR 10 Exch 153 Lush J defined this as "some right. suffered or undertaken by the other".

and that was enough to complete the contract. This was a very small sum even in those days.Thomas v Thomas (1842) ‡ Thomas v Thomas (1842) 114 ER 330. ‡ . who before his death had instructed his executors to convey to her a cottage for the rest of her life in return for a payment of £1 a year towards the ground-rent. QB ‡ P was the widow of J. The £1 a year was valuable consideration. but the court found there was an enforceable contract. and the executors' motive in agreeing was no doubt respect for J.

the question was whether the wrappers were part of the sale price. a contracting party (said Lord Somervell) can stipulate for what consideration he chooses.Chappell v Nestlé [1959] ‡ Chappell v Nestlé [1959] 2 All ER 701. . In an action to recover royalties. HL ‡ PP were the owners of a musical copyright. and a peppercorn does not cease to be valuable consideration just because the promisee intends to throw it away. and DD as part of a promotion offered records featuring this tune in exchange for 1s 6d [7½p] and three chocolate wrappers. The House of Lords said they were.

even though it was manifestly inadequate. The £500 was valuable consideration. HL ‡ A farmer granted his son an option to purchase the farm at a low price. but then sold the farm worth at least £40000) to his wife for £500. . The son sought to recover the farm from the wife.Midland Bank v Green [1981] ‡ Midland Bank v Green [1981] AC 513. but the House of Lords said the wife took free of the option because it was void (for the purposes of the Law of Property Act 1925) against the purchaser of a legal estate for money or money's worth.

and past consideration is generally unacceptable.Past Consideration ‡ Consideration must be clearly associated with the promise. .

QB ‡ P bought a horse from D. the only consideration he had given (the sale price of the horse) was past by the time the promise was made.Roscorla v Thomas (1842) ‡ Roscorla v Thomas (1842) 114 ER 496. The court said he had no case. and after the sale D promised that the horse would be "sound and free from vice". and the contract was merely that D would deliver the horse on request. and P sued for breach of contract. In fact the horse proved to be vicious and very hard to control. .

and after the work was completed the beneficial owners of the house promised to pay for this work. ‡ . CA ‡ The occupants of a house carried out various repairs and improvements.Re McArdle [1951] ‡ Re McArdle [1951] 1 All ER 905. When they did not do so the occupants sued. but without success: the consideration for that promise was past and there was no contract.

P sued in assumpsit and won. and (after the service is performed) promises to pay for it. When he did not pay. The majority of the bench said that where the promisor makes a request that the other do him some service. the promise and the request go together and the contract is binding. whereupon D promised to pay him £100. who had killed a man. . Common Bench ‡ D. P went to the King and was successful in obtaining the pardon.Lampleigh v Braithwait (1615) ‡ Lampleigh v Braithwait (1615) 80 ER 255. asked P to try to get him a royal pardon.

" They later transferred the patents to D during some fruitless negotiations. CA ‡ P1 and P2 wrote to D. we hereby agree to give you one-third share of the patents. claiming his one-third share. to take effect from this date. Re Casey's Patents [1892] 1 Ch 104..Stewart v Casey. Re Casey's Patents [1892] ‡ Stewart v Casey. when you get in the subsequent document a promise to pay that promise may be treated . D refused.. and the executors sued. and after the death of P1 his executors sought the return of the patents. and if it was a service that was to be paid for.. as a positive bargain which fixes the amount of the reasonable remuneration on the faith of which the service was originally rendered. "In consideration of your services as the practical manager in working our patents . .. Bowen LJ in the Court of Appeal said the fact of a past service raises an implication that at the time it was rendered it was to be paid for.

Existing public or contractual duty ‡ Similarly. the performance of an existing public or contractual duty cannot normally be offered as consideration. .

his doing so was not consideration that could support D's promise. but was not in fact called to give evidence. KB ‡ An expert witness P attended court for six days under D's subpoena. and P sued.30] for his time. Lord Tenterden CJ said that since the subpoena imposed a legal duty on P to appear at court. ‡ .Collins v Godefroy (1831) ‡ Collins v Godefroy (1831) 109 ER 1040. but did not do so. D subsequently promised to pay him a fee of six guineas [£6.

They asked the police to provide them with extra protection. and counterclaimed for the cost of feeding and housing the police at the colliery.Glasbrook v Glamorgan CC [1925] ‡ ‡ Glasbrook v Glamorgan CC [1925] AC 270. the House of Lords said the police undoubtedly have a general duty to do what they think necessary to keep the peace and prevent crime. and feared that the strikers would bring out the safety men. they were entitled to treat that as a special duty and charge for it. AA then refused to pay. HL AA were the owners of a colliery affected by a strike. the local inspector said he thought the existing mobile force was sufficient. If the inspector believed in good faith that the garrison at the colliery was unnecessary and agreed to provide it only to meet AA's request. But when individuals desire special services which although not within the obligations of the police can most effectively be rendered by them. and remained until the end of the strike. Affirming the decision of Bailhache J and the Court of Appeal. . the police authorities may "lend" the services of constables for that purpose in consideration of payment. The extra police were sent to the mine. but eventually agreed to provide 70 men in exchange for a written promise to pay for the services provided. which would result in flooding. and no one can be made to pay extra for that.

weddings clearly "extra". and football matches in between) and whether officers must be brought in who would otherwise be off duty or engaged elsewhere. whether violence has already occurred or is thought to be imminent (making it a public duty). . the nature of the event (elections are clearly public. the club contended that the police were merely fulfilling their existing duty to enforce the law. The Court of Appeal upheld the judge's decision in favour of the police. CA ‡ A police authority claimed for the expense of providing officers to supervise football matches. and said that in deciding whether police services are "special" and chargeable the court should consider whether the officers are required to be in a private place (making it something "extra").Harris v Sheffield United [1987] ‡ Harris v Sheffield United [1987] 2 All ER 838.

CA ‡ The unmarried parents of a child separated. and thereby derived a factual if not a legal benefit. who said P had provided consideration inasmuch as D had obtained what he wanted without the trouble of enforcing it in court. The Court of Appeal disagreed: by promising to "keep it happy" she had gone beyond her statutory duty to maintain the child. After some time D stopped paying. and the father D offered to pay her £1 a week provided the child was well looked after and happy.Ward v Byham [1956] ‡ Ward v Byham [1956] 2 All ER 318. and finds an echo in the more recent decision in Williams v Roffey below. the mother P took the child. Such an explanation certainly avoids the rather forced ratio of the majority. An alternative explanation was offered by Denning LJ. and when P tried to enforce the payments he claimed there was no consideration for his promise: P had undertaken to do only what she was already legally bound to do. and that was consideration enough. .

‡ . KB ‡ Following the desertion of two seamen and great difficulty in finding replacements. They were entitled to their wages originally agreed at the start of the voyage. but the court found against them. By staying at their work they did no more than their existing duty. but occasional desertions were among the normal hazards of the sea and they could not demand any extra payment. When the ship reached London the seamen sought to enforce this promise. and so had given no new consideration for the new promise. the remaining members of a ship's crew were promised extra wages if they would work the ship home.Stilk v Myrick (1809) ‡ Stilk v Myrick (1809) 170 ER 1168.

The court said this promise was enforceable: the crew was so reduced that it was dangerous to sail on and the captain would have had no right to demand it. including just five able seamen. . The original contract had come to an end. QB ‡ A ship left England with a crew of 36. and the seamen were free to make a new contract on whatever terms might be agreed. who were promised extra pay if they would help to sail the ship back to England. but as a result of desertions these were reduced to only 19.Hartley v Ponsonby (1857) ‡ Hartley v Ponsonby (1857) 119 ER 1471.

X sold the cargo and directed PP to deliver it to D. . The court said that although PP were already contractually bound to X. and D alleged that the agreement was unsupported by any consideration. but failed to do so. and that was consideration for D's promise.Scotson v Pegg (1861) ‡ Scotson v Pegg (1861) 158 ER 121. P sued. Exch ‡ PP contracted with X to deliver a cargo of coal to X's order. the new agreement with D was potentially disadvantageous to them (since D as well as A could now sue if they failed to deliver) and advantageous to D for the same reason. D then made an agreement with PP that in consideration of their delivering the coal he would undertake to unload it at 49 tons per day.

the main contractors DD. then a further promise by P to perform that contract might be consideration for DD's offer of extra money so long as the offer was not obtained by P's fraud or economic duress. When P sought to enforce this promise.Williams v Roffey Bros [1990] ‡ Williams v Roffey Bros [1990] 1 All ER 512. CA ‡ Having agreed to refurbish a block of flats. a unanimous Court of Appeal said that if DD doubted whether P would perform his contractual obligation. fearing that a sub-contractor P would fail to meet deadlines and so cause penalties to be incurred on the main contract. There may have been no legal benefit to DD. but they secured the practical benefit of getting the work completed on time without the trouble of hiring a new subcontractor and risking P's bankruptcy if they sought to recover the costs and penalties . offered him extra payments for prompt completion.

He has given no consideration for the creditor's promise to cancel the balance of the debt.Debt by part payment ‡ Special problems arise when a debtor (with his creditor's agreement) seeks to settle a debt by part payment. and so cannot enforce this promise if the creditor subsequently changes his mind. .

g.11] in October and P accepted this in full settlement. Payment of a lesser sum on the day of satisfaction of a greater.50]in November. with the creditor's agreement.Pinnell's Case (1602) ‡ Pinnell's Case (1602) 77 ER 237. the court will generally assume without enquiring too deeply that the creditor derived some benefit from the change sufficient to provide consideration for his agreement to forgive the balance of the debt. but where payment is made in a different form (e. CP ‡ D owed a debt to P and was due to pay £8-10-0 [£8. P then sued for the balance and succeeded on a technicality of pleading. at P's request he paid £5-2-2 [£5. ‡ . goods instead of cash) or at an earlier time or a different place from that previously specified. cannot satisfy the debt as a whole. but the whole court made some further points of importance.

in the same manner as the whole ought to be paid. . if for money you give a negotiable security. It is undoubtedly true. but the court said he must fail. Exch ‡ D owed P £1000. After one of the notes had been met. P sued again for the original debt. said Alderson B. you pay in a different way. The security may be worth more or less: it is of uncertain value. is payment only in part. that payment of a portion of a liquidated demand. a horse worth £5 but not £5 itself. But if you substitute a piece of paper or a stick of sealing-wax it is different. but an action for debt was settled when P agreed to accept promissory notes for £300 in full satisfaction. A man may give in satisfaction of a debt of £100. In the present case.Sibree v Tripp (1846) ‡ Sibree v Tripp (1846) 153 ER 745. and the bargain may be carried out.

D claimed the interest added automatically to a judgment debt not paid promptly. but agreed to accept payment by instalments over five years and not to take any further proceedings to enforce the judgment. P had given no consideration for D's promise not to make such a claim. When all the instalments had been paid. and the House of Lords reluctantly upheld her claim.Foakes v Beer (1884) ‡ Foakes v Beer (1884) LR 9 AC 605. HL ‡ D obtained a judgment debt against P. . and D could not be held to that promise.

unsupported by any further consideration. but the other two partners went bankrupt and W sought to enforce the whole judgment against C. the Court of Appeal said C might have an arguable case in promissory estoppel (below). but W allegedly agreed to accept instalments totalling one-third of the sum from each of them. including the appellant C. . cannot discharge the debt. but reaffirmed the rule in Pinnel's Case that part-payment of a debt. Each of the partners was jointly and severally liable for the whole debt. C paid his agreed instalments.Collier v Wright [2007] ‡ Collier v Wright [2007] EWCA Civ 1329 ‡ The respondents W obtained a judgment for some £50 000 against three partners. In preliminary proceedings.

.Promissory Estoppel ‡ The equitable principle of promissory estoppel provides a limited exception to the rule requiring consideration to be given in exchange for an undertaking not to enforce a debt.

and in April.Hughes v Metropolitan Railway (1877) ‡ Hughes v Metropolitan Railway (1877) LR 2 AC 439. The House of Lords held as a fundamental principle of equity that the landlord's entry into negotiations amounted to a waiver of his right to insist on repairs according to the lease. A purported to forfeit the lease and sought to take possession. RR replied. . at the expiry of the original six months. Negotiations were opened in November but broken off in December. this right was resumed and the six months recommenced when the negotiations broke down. the lease being forfeit if they failed to do so. HL ‡ In October the landlord A of a house gave the tenants RR six months' notice to carry out certain repairs. suggesting that A might like to buy back the lease and indicating that no repairs would be done while negotiations took place.

the equitable principle of promissory estoppel makes that promise binding on him until such time as he gives reasonable notice of his intention to resume those rights. and PP then claimed for the "arrears". Denning J said that although PP were once again entitled to the rent originally agreed after the war ended. ‡ . they could not go back on their promise to accept a reduced rent for the earlier years. When war broke out. When a party to a contract makes a promise to the other. and PP agreed to reduce the rent by half. that he will not enforce his strict legal rights.Central London Property v High Trees House [1947] ‡ Central London Property v High Trees House [1947] KB 130. which he knows will be acted on. DD paid the reduced rent until the end of the war. Denning J ‡ In 1937 the owners PP leased a block of flats in London to DD at an agreed rent. many flats were left empty as people moved out to escape the bombing.

H promised to allow her £100 per annum after tax by way of maintenance. H made no payments and W sued. though that is not to say that it can only ever be used by a defendant. After the divorce was final. Birkett and Asquith LJJ were equally clear that promissory estoppel must be used as "a shield and not a sword". and so W did not apply to the court for a formal maintenance order.Combe v Combe [1951] ‡ Combe v Combe [1951] 1 All ER 767. Denning LJ said the principle stated in High Trees does not create new causes of action where none existed before. it only prevents a party from insisting on his strict legal rights when it would be unjust to allow him to enforce them. CA ‡ W was granted a divorce nisi from her husband H. . Byrne J gave judgment in her favour. but the Court of Appeal said this was not a case in which promissory estoppel could be used.

the House of Lords said forbearance by one party to insist on his rights does not amount to a new contract. this could be formal or informal or even the occurrence of a particular event. After the war. but DD said no new agreement restoring the original royalties had been reached. Allowing PP's claim. PP sought to recover the full royalties from 1945 onwards. no particular form of notice was required. who licensed DD to deal in the protected products subject to the payment of certain royalties. So long as reasonable notice was given that the first party intended to insist on his full legal rights again (for the future. When war broke out. HL ‡ PP were the owners of certain patents. not for the past). Although equity required that the other party be made aware that a temporary concession was to be terminated.Tool Metal v Tungsten Electric [1955] ‡ Tool Metal v Tungsten Electric [1955] 2 All ER 657. . PP agreed to accept reduced royalties because of the importance of the products to the war effort.

The Court of Appeal upheld their claim. distinguishing Sibree v Tripp and disapproving some later decisions. CA ‡ PP were a small firm in some financial difficulties. and saying that a cheque was no different from cash. PP reluctantly agreed. Where a genuine agreement was reached that the creditor would accept a lesser sum in settlement of a debt. but subsequently sued for the balance. equity might then intervene to prevent his insisting on his full legal rights if it would be unjust and unreasonable for him to do so. saying that if this was not accepted nothing would be paid. said Lord Denning MR. . but this was not such a case.D & C Builders v Rees [1965] ‡ D & C Builders v Rees [1965] 3 All ER 837. who were owed nearly £500 by D for work they had done. Eventually D's wife offered to pay £300 in full settlement.

Lord Denning MR said ‡ In Alan v El Nasr [1972] 2 All ER 127. concurring in the decision on the facts. intending that the other should act on that belief. left open the question whether the other party's action could be any alteration of his position or must be to his detriment. Stephenson LJ. promissory estoppel under another name) is that if one party by his conduct leads another to believe that the strict rights arising under the contract will not be insisted upon. then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so. a rather complicated commercial case. . Lord Denning MR said the principle of waiver (that is. and he does act upon it.

known as privity of contract. This doctrine. .PRIVITY ‡ PRIVITY ‡ It is a fundamental principle of English law that no one can derive rights or obligations from a contract to which he has given no consideration and is hence not a party. is still substantially valid but has been modified in various ways.

P sued G's father's executor for the promised money. ‡ .Tweddle v Atkinson (1861) ‡ Tweddle v Atkinson (1861) 121 ER 762. but both fathers died before G's father had paid up. but the court said he was not privy to the contract and his action must therefore fail. QB ‡ A man P married a woman G. P's father and G's father agreed between themselves that they would give £100 and £200 respectively to P as a marriage portion and dowry.

Dunlop v Selfridge [1915] ‡ Dunlop v Selfridge [1915] AC 847. Dunlop were unable to enforce the agreement: they had not been party to the contract with Selfridge. HL ‡ Dunlop and Dew made a contract for the sale and purchase of motor tyres. When Selfridge broke their agreement and sold the tyres to the public at less than the agreed price. . Dew and Selfridge then made a contract containing a similar terms. with a condition that they should not be resold below a certain price.

even though at the end the bill is settled by just one of the party. who should be regarded as the parties to a contract particularly where the contract itself is implied from conduct. then it is arguable that each of them individually has made a contract and undertaken to pay for the meal. If several people go to a restaurant and each orders a meal. of course.‡ It is not always obvious. .

The Road Traffic Act 1972 allows an injured third party in certain circumstances to claim directly on the contract between a negligent driver and his insurance company.Road Traffic Act 1972 ‡ Certain statutes create exceptions to the doctrine. .

.Married Women's Property Act 1882 ‡ Similarly. the Married Women's Property Act 1882 allows a widow or orphan to enforce against the company a life assurance contract taken out for her benefit by her husband or father.

.Concurrent action in tort. ‡ A third party may also be able to pursue a concurrent action in tort.

The House of Lords said the manufacturers had a duty of care to the consumer of their product . HL ‡ P went to a café with a friend. so she sued the manufacturers in delict (the Scottish equivalent of tort).Donoghue v Stevenson [1932] ‡ Donoghue v Stevenson [1932] AC 562. After drinking most of it. P had no contract with the café. P found a decomposed snail in the bottle and became ill. who bought her a bottle of ginger beer.

which may be implied rather than explicit . an action may be based on a collateral contract.Collateral Contract ‡ Alternatively.

PP had given consideration by instructing the contractors to use DD's paint. and that was sufficient consideration.Shanklin Pier v Detel Products [1951] ‡ Shanklin Pier v Detel Products [1951] 2 All ER 471. and the court found a collateral contract under which PP could recover damages. . McNair J ‡ The owners PP engaged contractors CC to paint the pier and specified DD's paint. the paint (bought by CC) did not wear as well as DD had promised.

Assignment takes place automatically when a person dies .Chose in Action ‡ A party to a contract may assign to a third party his right to enforce the contract and so obtain the benefits there under: the right thereby transferred is known as a "chose in action".the contracts to which he is party can (with a few exceptions) be enforced by or against his personal representatives .or when he becomes bankrupt and most of his contractual rights devolve upon his trustee in bankruptcy .

such loss was damage for which the original buyer (if he had not assigned his rights to the purchaser) could sue on the purchaser's behalf. HL ‡ MH removed the asbestos from a building under a contract with SC. so that defective work could lead a third party to suffer loss of essentially the same nature as the original buyer would suffer if the building were not sold. . The House of Lords held that where the original contractor was aware that the building was to be sold on.Linden Gardens v Lenesta Sludge [1993] ‡ Linden Gardens v Lenesta Sludge [1993] 3 All ER 417. who then sold the building to PP. The work was defective and PP suffered financial loss as a result.

and where the contracting party's rights against the builder were assigned to the third party. The work was badly done. can sue the builder for substantial damages for defects in the building work. where it was the parties' intention that the contract should be for the benefit of the third party. and in preliminary proceedings the Court of Appeal overruled the Official Referee and held that a third party to a building contract. CA ‡ PP arranged for a finance company to arrange for the contruction of a building for PP's use. .Darlington BC v Wiltshier Northern [1995] ‡ Darlington BC v Wiltshier Northern [1995] 3 All ER 895.

and s. although he may not be named as a party to the conveyance or other interest..56 of the Law of Property Act 1925 ‡ Covenants over land may operate in favour of (or against) future owners of the land involved.. interest in land or other property ..56 of the Law of Property Act 1925 provides that a person may take an . which clearly saw certain rights and obligations as belonging to the land rather than to any individual. ..s. This consolidates some of the earlier common law rules relating to real property.

the Court of Appeal allowed the new owner and lessee of the land to enforce this agreement. . since it was clearly intended to attach to the land rather than to the individual who originally made it.Smith & Snipes Hall v River Douglas Catchment Board [1949] ‡ Smith & Snipes Hall v River Douglas Catchment Board [1949] 2 All ER 179. CA ‡ D had contracted with the former owners of a piece of land to keep the river banks in good repair.

. can be bound by a restrictive covenant to which he was not an original party. and the Lord Chancellor upheld the Master of the Rolls' order to this effect. P brought an action to restrain D from building on the land. Lord Cottenham LC ‡ P sold to X a piece of land in Leicester Square. After several conveyances the land was conveyed to D. A purchaser of land.Tulk v Moxhay (1848) ‡ Tulk v Moxhay (1848) 41 ER 1143. taking covenants that (inter alia) the land would not be built upon. he said. who knew of the original covenants even though they were not included in his conveyance. so long as he has notice of the covenant and the original promisee still has some interest to be protected.

‡ Several cases have turned on the question of the validity or otherwise of a third party exclusion clause .

the carrier must clearly be acting as agent for the subcontractor (in making the contract) as well as on his own account. The clause must clearly extend to the subcontractor. and the subcontractor must have provided some consideration for a contract between himself and the owner. such agency must be authorised or ratified by the subcontractor. making this limitation effective. if four conditions were satisfied. so the clause was ineffective.Scruttons v Midland Silicones [1962] ‡ Scruttons v Midland Silicones [1962] 1 All ER 1. Lord Reid said that there might be a contract between owner and subcontractor. . In the instant case the fourth condition was not satisfied and the contract could not be shown to exist. HL ‡ A contract between the owner of goods and a carrier purported to limit the liability of the carrier's subcontractor.

this obligation was to the carrier and not to the owner. PC ‡ The facts were similar to those in Scruttons. Although they were already under a contractual obligation. . and so could form new consideration in respect of a "third party".New Zealand Shipping v Satterthwaite [1974] ‡ New Zealand Shipping v Satterthwaite [1974] 1 All ER 1015. but in this case the subcontractors had performed their part of the agreement and unloaded the ship.

When fire damage was caused through the sub-contractor's negligence and the owner sued in tort. CA ‡ A contract for a major shopping development provided that the owner (not the contractor) was to bear all fire risks. and a sub-contractor had dealt with the main contractor on that basis. the court said it would not be just and reasonable to exclude the sub-contractor from the protection of the clause. . even though he was not party to the contract in which it was contained.Norwich CC v Harvey [1989] ‡ Norwich CC v Harvey [1989] 1 All ER 1180.

existing third-party rights. .Contracts (Rights of Third Parties) Act 1999 ‡ The Contracts (Rights of Third Parties) Act 1999 now provides that a third party has the right to enforce a contract if the contract expressly states that it is to be enforceable by that third party or if it purports to confer a benefit on him. and not in substitution for. but otherwise are additional to. The third party's rights are subject to the same defences as the parties have against one another. and that the third party's right to enforce cannot be taken away without his consent once he has informed the contracting parties of his acceptance of the contract or has acted in reliance on the contract.

INTENTION TO CREATE LEGAL RELATIONS .

and that it is not the intention in respect of domestic and social agreements. It is presumed that this is the intention in normal commercial contracts. .INTENTION TO CREATE LEGAL RELATIONS ‡ INTENTION TO CREATE LEGAL RELATIONS ‡ The courts will not enforce any contract unless it is clear that the parties intended to be legally bound by their agreement. but each of these presumptions is rebuttable.

Balfour v Balfour [1919] ‡ Balfour v Balfour [1919] 2 KB 571. leaving his wife P in England. ‡ . The Court of Appeal said that although there was consideration in P's promise. Agreements such as these are outside the realm of contracts altogether. There are many agreements. there was no contract. D promised to pay P £30 a month until he returned. CA ‡ A civil servant D was about to return to his work in Ceylon. which the parties never intended they might be sued upon. in exchange for her agreement to support herself without calling on him for any other maintenance. including most agreements between husband and wife. They subsequently divorced. said Atkin LJ. and P sought to enforce D's promise.

the agreement between mother and daughter was a family arrangement not intended to be legally enforceable . The house was in P's name. Two years later P offered to buy a house in England. and began her studies. The Court of Appeal said she should succeed. that P would maintain D if D came to England to read for the Bar.Jones v Padavatton [1969] ‡ Jones v Padavatton [1969] 2 All ER 616. and three years later P claimed possession. CA ‡ A woman P made an offer to her daughter D. and again D agreed. D agreed and moved to England. to be occupied partly by D and partly by tenants whose rent would go to D in lieu of the maintenance payments. then in a wellpaid job in the USA.

On one occasion.Buckpitt v Oates [1968] ‡ Buckpitt v Oates [1968] 1 All ER 1145. Stephenson J ‡ P and D were 17. and each commonly rode in the other's car. giving rise to no legal obligations or rights except those which the general law of the land imposes. P was injured through D's careless driving. . The judge said there was not: there was merely a friendly agreement to go on this particular trip. and it was necessary to decide whether there was a contract of carriage. P had paid 10s [50p] towards the cost of petrol. and claimed against D's insurance.

CA ‡ A husband H left his wife W and went to live with another woman. H promised to pay D £40 a month. ‡ . and they made a written agreement that in consideration of W's paying off the mortgage on their jointly-owned house. H would transfer it to her sole ownership. said Lord Denning MR. The Court of Appeal upheld Stamp J's ruling that this was a legally enforceable contract. In these cases. the court looks at the situation in which they were placed and asks whether reasonable people would regard this agreement as one intended to be binding.Merritt v Merritt [1970] ‡ Merritt v Merritt [1970] 2 All ER 760.

. The judge said this was a binding contract. and it was G's selection that had won. the entry had been sent in D's name. but it was understood that whichever line won they should share the prize equally.Simpkins v Pays [1955] ‡ Simpkins v Pays [1955] 3 All ER 10. D's granddaughter G and D's paying lodger P won £750 in a fashion competition in a Sunday newspaper. Sellers J ‡ A football pool syndicate consisting of D. and P was entitled to one-third of the winnings. Each had filled in one line.

HL ‡ DD. The House of Lords said there is a strong presumption that commercial agreements are intended to be legally binding. The agreement contained a clause stating that it was not entered into as a legal agreement but was a definite expression of the intention of the parties to which they honourably pledged themselves.Rose & Frank v Crompton [1925] ‡ Rose & Frank v Crompton [1925] AC 445. but orders placed and accepted under the agreement were separate contracts legally enforceable in their own right. The agreement was therefore unenforceable. entered into an agreement making PP their sole agents in the USA for a period of three years. who manufactured paper tissues. Five years later. subsequently extended to seven years. but the wording of this agreement made it quite clear that it was not so intended. The Court of Appeal said there was no contract. ‡ . DD refused to supply goods ordered by PP.

The judge said the agreed conditions prevented P from succeeding in his claim. there was clearly no intention to create legal relations. and it was consequently unnecessary to decide the issue of fact. Atkinson J ‡ The conditions of entry of a football pool competition stated that the sending in of the coupon should not give rise to any legal relationship and that the arrangements of the pool were binding in honour only. it was conceded that had it been received it would have won a prize.Jones v Vernon's Pools [1938] ‡ Jones v Vernon's Pools [1938] 2 All ER 626. . P claimed to have sent in an entry but DD denied having received it.

Edwards v Skyways [1964] ‡ Edwards v Skyways [1964] 1 All ER 494. The judge said that since it related to business matters DD had the burden of showing that it was not. The use of the words "ex gratia" he took to mean simply that DD did not admit any pre-existing liability. P subsequently sued for this payment (for which it was conceded he had given consideration) but DD claimed the agreement was not intended to be binding. and P was among those given notice in accordance with his contract. Megaw J ‡ An airline DD found it necessary to make some pilots redundant. DD agreed that pilots made redundant would each receive a certain ex gratia payment. After discussions with the relevant trade union. ‡ . not that their promise once accepted should have no effect in law. and they had not discharged that burden.

said the motorist had contracted to buy four gallons and a coin. the Excise claimed that these coins were being sold and so were liable to tax. dissenting. HL ‡ A petrol company AA offered a free "world cup coin" to any motorist buying four gallons of petrol. Viscount Dilhorne and Lord Russell said AA had not intended to enter into legal relations and there was no contract. Lord Fraser. and the House of Lords dismissed RR's appeal. Lords Simon and Wilberforce said there was a contract. per Lord Denning MR) that the coins were not sold but were distributed as free gifts. and the coin was no more a free gift than a baker's offer of a thirteenth "free" bun to anyone who bought twelve. but not a contract of sale: the motorist's consideration was his offer to buy four gallons of petrol.Esso Petroleum v Customs & Excise [1976] ‡ Esso Petroleum v Customs & Excise [1976] 1 All ER 117. . and millions of such coins were distributed. The Court of Appeal held (as a matter of common sense.

The letters contained a statement of present intention. not an undertaking as to future conduct. Hirst J said the ambiguous language of the letters was not sufficient to rebut the presumption that commercial agreements (in this case. CA ‡ A company DD issued "letters of comfort" asserting that their policy was to ensure that a subsidiary company had at all times sufficient resources to meet its obligations.Kleinwort Benson v Malaysia Mining Corporation [1989] ‡ Kleinwort Benson v Malaysia Mining Corporation [1989] 1 All ER 785. . but the Court of Appeal disagreed. and in the absence of misrepresentation could not be interpreted as giving rise to any binding obligation. they said. an implied guarantee) are legally binding.

said Peter Gibson LJ. and P was entitled to damages in respect of the breach. It was an enforceable collateral contract.Pitt v PHH Asset Management [1993] ‡ Pitt v PHH Asset Management [1993] 4 All ER 961. The Court of Appeal said this agreement was enforceable even though the sale had been agreed "subject to contract". and this was not itself a contract for the sale of land subject to the Law of Property (Miscellaneous Provisions) Act 1989. . Each side had given and received consideration. CA ‡ An intending house buyer P was the victim of "gazumping". but produced correspondence showing that DD had agreed not to consider any other offers on the understanding that P would exchange contracts within two weeks of receiving the draft contract.

and P sought a declaration that he was entitled to X's residuary estate. X subsequently made three wills in which P was her residuary legatee. Refusing the declaration. not to refrain from revoking it. X died. Even if there were an agreement. and hence no agreement capable of amounting to a binding contract. but in a fourth will she left the residue to someone else. there was no intention to create a legal relationship. X's obligation was merely to make a will in P's favour. but no offer and acceptance. . P said he would not accept any payment for the gardening he did or other help he gave. the judge said there had been a statement by either side. And in any case.Taylor v Dickens (1997 ‡ Taylor v Dickens (1997) Times 24/11/97. Judge Weeks QC ‡ A woman X told her part-time gardener P that she intended to leave him her house in her will.

not of the courts.R (Wheeler) v Prime Minister [2008] ‡ R (Wheeler) v Prime Minister [2008] EWHC 1409 (Admin) ‡ In 2004 the then Prime Minister promised both inside and outside Parliament that the government would not ratify the EU Constitutional Treaty unless and until it was approved by a referendum. That treaty was abandoned following its rejection by France and the Netherlands. The applicant sought to challenge the government's decision to ratify this new treaty without a referendum. and the question whether the government should be held to such a promise is a political rather than a legal matter. Rejecting the challenge on several grounds. but a new Treaty of Lisbon (containing many similar provisions) was agreed in 2007 and put forward for ratification in 2008. nature and context of a promise of this kind place it in the realm of politics. the Administrative Court said the subject-matter. .

consideration. and an intention to be legally bound.THE NEED FOR CERTAINTY ‡ In addition to the above elements: offer. there must be certainty: the courts will not enforce any contract unless it is sufficiently clear and complete . acceptance.

‡ . KB ‡ P bought a horse for £63 and promised D an extra £5 "if the horse is lucky". Lord Tenterden CJ said the promise was too vague to be a legally enforceable contract.Guthing v Lynn (1831) ‡ Guthing v Lynn (1831) 109 ER 1130.

Hillas v Arcos (1932) ‡ Hillas v Arcos (1932) 38 Com Cas 23. and the ports to which it was to be shipped. it showed a clear intention to be bound. HL ‡ A detailed agreement for the supply of timber by RR to AA during 1930 also contained an option clause. The House of Lords said there was still a binding contract in respect of the later year. the sizes required. . allowing AA to buy more timber during 1931 but omitting details such as the type of wood. and the details not resolved in the document could be supplied by reference to the previous dealings between the parties and the normal practices of the timber trade.

but that determination must not depend on the further agreement of the parties.May & Butcher v R [1934] ‡ May & Butcher v R [1934] 2 KB 17n. The House of Lords said that there was no concluded contract between the parties: an agreement in which some critical part of the contract matter is left undetermined is no contract at all. . subject to arbitration if no agreement could be reached. The alleged contract stipulated that the prices and dates should be agreed upon from time to time between the parties. HL (speeches 1929) ‡ PP brought a petition of right (an old form of legal action against the Crown) claiming it had been agreed they should be permitted to purchase all the surplus tentage to be disposed of up to March 1923. A contract may leave something still to be determined.

Megaw J ‡ An airline DD found it necessary to make some pilots redundant. It was agreed in negotiations that if P withdrew his own contributions from the company pension scheme. and gave up his pension rights.Edwards v Skyways [1964] ‡ Edwards v Skyways [1964] 1 All ER 494. as he was entitled to do. The judge said this did not make the agreement too vague: on the evidence. and on that basis P should succeed. and P was among those given notice in accordance with his contract. DD would pay him an amount approximately equal to the amount of their contributions. he took it to mean at most a reduction of a few pounds to give a round figure. ‡ .

Lightman QC at first instance said even a firm undertaking to publish P's work could not be construed as a contract because of the absence of any agreement as to its format. Had just one detail been missing the court might have used its discretion to infer a reasonable term. ‡ ‡ . but here the omissions were simply too great.Malcolm v Oxford University (1990) ‡ Malcolm v Oxford University (1990) Times 19/12/90. CA ‡ P brought an action against publishers DD claiming they had failed to publish a book of his as had agreed in a telephone conversation. price. number of copies and so on. The Court of Appeal disagreed: there was a common practice even in formal contracts that such matters were left to the publisher's discretion. and it was enough that "a fair royalty" had been promised.

Each side had the right to pursue its own best interests. but "good faith" was too subjective a concept for the courts to enforce. HL Two groups negotiating over the sale of a business agreed that so long as AA provided a bankers' letter by a certain date RR would not negotiate with any third party. but an agreement to negotiate only with AA "for a reasonable period" was too vague. The House of Lords said the agreement was unenforceable for lack of certainty. An agreement to "use best endeavours" to negotiate might be enforceable since it set an objective standard. and could not in any case impose a positive duty to negotiate. AA claimed the obligation to negotiate only with them continued until such time as RR had "a good reason" to break off. an agreement not to negotiate with any other party during a fixed period was prima facie enforceable. Similarly. but Lord Ackner said this was inherently repugnant to the essentially adversarial position of parties in negotiation.Walford v Miles [1992] ‡ ‡ Walford v Miles [1992] 1 All ER 453. and would continue to negotiate with AA in good faith. ‡ . and the right to withdraw from further negotiation was an essential bargaining tool. giving the necessary certainty.

or a mixture. but the modern tendency is to admit evidence of other oral terms where this is appropriate.g. of beneficial interests under a trust) the terms of a contract may be written. contracts relating to interests in land.FORM ‡ FORM ‡ Although there are some exceptions (e. or oral. . A written contract was traditionally regarded as complete in itself.

Eight weeks later the heifer died as a result of an early pregnancy. and P bought it.e. virgin).Couchman v Hill [1947] ‡ Couchman v Hill [1947] 1 All ER 103. but the conditions of sale excluded any warranty as to the condition of any of the lots. The Court of Appeal said the verbal warranties were a part of the contract and P was entitled to damages. and P sued. ‡ . the owner D confirmed orally that it was unserved. CA ‡ The catalogue at an auction described a heifer as unserved (i. While the heifer was in the ring.

claimed he was entitled to receive the full amount.O'Brien v Mirror Group [2001] ‡ O'Brien v Mirror Group [2001] EWCA Civ 1279. C. Times 8/8/01. the Court of Appeal said the rules had been properly incorporated into the contract. the paper chose one claimant at random to receive £50 000 and provided an extra £50 000 to be shared between the other claimants (about £35 each). In accordance with the competition rules. . and the game was designed to produce one or two winners each week. through a printing error. who had had a "winning card" but who received only £35. which had not been printed in that day's paper but which had appeared previously and were referred to on the card. Dismissing his claim. On one particular day. CA ‡ A scratch-card game in the Daily Mirror offered a top prize of £50 000. over a thousand winning cards were printed and 1473 people claimed the prize.

EXPRESS AND IMPLIED TERMS ‡ EXPRESS AND IMPLIED TERMS ‡ In addition to the express terms of any contract. whether verbal or written. other terms may be implied by the court in various ways.. .

As a general rule. the parties may by agreement (explicit or implicit) exclude any such implied terms. obvious gaps in which could be filled by the terms normally expected in such contracts. by custom. . Other writers say terms may be implied according to the presumed intention of the parties.Ashmore v Lloyds [1992] ‡ Ashmore v Lloyds [1992] 2 All ER 486Gatehouse J said a term might be implied if it was necessary for business efficiency. or by common law. or if the contract were one of a common type. though there are certain statutory limitations on this. or if it was obvious that the parties would have included it had their minds been directed to the point. by statute. and the contract could not work without it.

and agreed that it should be used by R's ship for loading cargo. it was an implied term that they had taken reasonable steps to ensure the river bed adjacent to their wharf was safe. CA ‡ AA were the owners of a wharf. .The Moorcock (1889) ‡ The Moorcock (1889) LR 14 PD 64. The court said AA were liable for this damage. The ship grounded and was damaged because of the condition of the river bed. which was not under AA's control.

HL ‡ P was appointed as managing director of DD's company for a period of ten years. [1940] AC 701. . In the Court of Appeal. McKinnon LJ said a clause to be implied in a contract should be such that had an officious bystander asked while the contract was being made "But what about so-and-so?". CA. Majorities in the Court of Appeal and the House of Lords said there was an implied term that DD would not remove P from his directorship during that period. the parties would testily suppress him with "Oh. since any such removal would automatically terminate his appointment as managing director. of course".Shirlaw v Southern Foundries [1939] ‡ Shirlaw v Southern Foundries [1939] 2 All ER 113.

claiming an implied term in the membership contract that the Bridlington agreement should be complied with. the member's reply would not have been "Oh. Sachs ‡ A trade union DD admitted P to membership in breach of the inter-union "Bridlington agreement". When their attention was drawn to the breach they sought to expel P. . of course" but rather "What's that?". The claim failed: the judge said that had an officious bystander asked P "What about the Bridlington agreement?".Spring v National Amalgamated Society of Stevedores & Dockers ‡ Spring v National Amalgamated Society of Stevedores & Dockers [1956] 2 All ER 221.

The Court of Appeal declined to imply a term in the agreement that the offer was conditional on his passing the examinations. CA ‡ A final year law student P was offered employment with a firm of solicitors DD. because it could have been that the parties had they considered the point would have made some other equally reasonable arrangement . even though such a clause was reasonable and quite usual. to begin when he completed his studies.Stubbes v Trower Still & Keeling [1987] ‡ Stubbes v Trower Still & Keeling [1987] IRLR 321. He failed his final exams and DD refused to take him on.

he felt. .Gatehouse J ‡ A Lloyds "name" P claimed the Committee of Lloyds were at fault in allowing him to entrust his entire fortune to an underwriter.Ashmore v Lloyds [1992] ‡ Ashmore v Lloyds [1992] 2AllER 486. and alleged an implied term in the contract that they would warn him of the dangers of so doing. would not have been "oh. of course" but (after reference to their lawyers) most likely an uncompromising "no". The judge refused to imply such a term: Lloyds' response to the officious bystander.

always on the same terms. and a series of contracts between the same two parties. .Custom of a particular trade ‡ Terms may also be implied by the custom of a particular trade. will usually lead the court to imply the same terms (insofar as they are not inconsistent with the express terms) in the present contract.

In commercial transactions. . he claimed an allowance (again according to custom) for the seeds and labour he had put into the land. and gave him notice to that effect. Exch ‡ The landlord D of a farm gave his tenant P notice at Michaelmas to quit the farm at Lady Day following. The Court of Exchequer said both these customs had been incorporated into the lease. said Parke B. When P left the farm in the spring. In October D insisted that P was bound by custom to continue to cultivate the farm.Hutton v Warren (1836) ‡ Hutton v Warren (1836) 150 ER 517. extrinsic evidence of custom and usage is admissible to annex incidents to written contracts in matters with respect to which they are silent.

but the ship was requisitioned by the French government and never entered into service under the charterparty.Affréteurs Réunis v Walford [1919] ‡ Affréteurs Réunis v Walford [1919] AC 801. The owners AA showed a custom of the sea that commission was payable only on hire duly earned. HL ‡ A charterparty negotiated by R provided that the broker's commission was payable on signing the charter. but the House of Lords said the express terms of the charterparty were enough to override this implied term. ‡ .

but the judge said the provincial run had come to an end and the custom of the theatrical profession was that 14 days' notice was what was normally given. Cassels J ‡ P was a musician engaged to perform for the run of a play produced by D. After 11 weeks' run in the provinces D gave P 14 days' notice that the run was to end. and sold the play to another producer who produced it in London with different musicians. P sued for breach of contract. P therefore lost his case. ‡ .Gubertini v Waller [1947] ‡ Gubertini v Waller [1947] 1 All ER 746.

and D had dealt with them on many occasions. but admitted that he had often received similar documents from PP in the past. The Court of Appeal said there had been a consistent course of dealing. CA ‡ PP were warehousemen. and terms from the previous contracts could be implied in the present case as long as they were not inconsistent with express provisions. .Spurling v Bradshaw [1956] ‡ Spurling v Bradshaw [1956] 2 All ER 121. and was sent a receipt which he did not read. When he came to collect the barrels he found them empty. D argued that this clause could not be part of the contract because he had not been sent it until after the contract had been concluded. but PP pointed to an exemption clause on the receipt. He delivered to them eight barrels of orange juice.

P now claimed the fees due for the term the pupils had missed. that a parent wishing to withdraw his child from school must give a term's notice or pay a term's fees in lieu.Mount v Oldham Corporation ‡ Mount v Oldham Corporation [1973] 1 All ER 26. and the Court of Appeal (reversing the judge) held he was so entitled. . CA ‡ P was the proprietor and headmaster of a small independent school for maladjusted children. to which DD sent four pupils. When P was accused of sexual abuse the other staff continued to run the school. It is a well-known custom in the educational world. said Lord Denning MR. but DD withdrew their pupils until P was completely exonerated some five months later.

.TERMS IMPLIED BY STATUTE ‡ TERMS IMPLIED BY STATUTE ‡ Most of these implied terms are much older than they seem. having been derived from common law and then contained in earlier statutes consolidated and replaced by later Acts.

Sale of Goods Act 1979 ‡ 8(2) Where the price is not determined [by the contract or by the course of dealing between the parties] the buyer must pay a reasonable price. .

Sale of Goods Act 1979 ‡ 12(1) In a contract of sale there is an implied condition that the seller has a right to sell the goods .

there is an implied term that the goods will correspond with the description .Sale of Goods Act 1979 ‡ 13(1) Where there is a contract for the sale of goods by description.

there is an implied term that the goods supplied under the contract are of a satisfactory quality. 14(2A) Goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory. taking account of any description of the goods.Sale of Goods Act 1979 ‡ 14(2) Where the seller sells goods in the course of a business. the price (if relevant) and all the other relevant circumstances .

and (e) durability. (b) appearance and finish. . (c) freedom from minor defects.Sale of Goods Act 1979 ‡ 14(2B) The quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of the goods: (a) fitness for all the purposes for which goods of the kind in question are commonly supplied. (d) safety.

which would have been apparent on a reasonable examination of the sample.Sale of Goods Act 1979 ‡ 14(2C) The term implied by subsection (2) above does not extend to any matter making the quality of goods unsatisfactory (a) which is specifically drawn to the buyer's attention before the contract is made. which that examination ought to reveal. . or (b) where the buyer examines the goods before the contract. or (c) in the case of a sale by sample.

Sale of Goods Act 1979 ‡ 14(2D) If the buyer deals as consumer .. the producer or his representative. the relevant circumstances mentioned in subsection (2A) above include any public statements on the specific characteristics of the goods made about them by the seller. particularly in advertising or on labelling.. .

Sale of Goods Act 1979
‡ 14(3) Where the buyer sells goods in the course of a business and the buyer, expressly or by implication, makes known any particular purpose for which the goods are being bought, there is an implied condition that the goods are reasonably fit for that purpose.

Sale of Goods Act 1979
‡ 15(2) In the case of a contract for sale by sample there is an implied condition ... that the bulk will correspond with the sample in quality.

Sections 8-11 of the Supply of Goods (Implied Terms) Act 1973
‡ Sections 8-11 of the Supply of Goods (Implied Terms) Act 1973 apply ss.12-15 of the 1979 Act above mutatis mutandis to hire purchase contracts.

Part I of the Supply of Goods and Services Act 1982
‡ Part I of the Supply of Goods and Services Act 1982 applies ss.12-15 of the 1979 Act above mutatis mutandis to hire contracts and to other contracts under which goods are to be transferred. Part II includes three further implied terms in contracts for services.

Supply of Goods and Services Act 1982
‡ Supply of Goods and Services Act 1982 ‡ 13 In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill. 14(1) Where the time for the service to be carried out is not fixed by the contract, there is an implied term that the supplier will carry out the service within a reasonable time. 15(1) Where the consideration for the service is not determined by the contract or by the course of dealing there is an implied term that the party will pay a reasonable charge.

Satisfactory quality and fitness for purpose
‡ Satisfactory quality and fitness for purpose ‡ The concept of satisfactory quality was introduced by the Sale and Supply of Goods Act 1994, and replaces the older notion of "merchantable quality". Goods were considered to be of merchantable quality ... if they were as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances. One disadvantage of this definition was that if it became known that goods of a certain type were commonly shoddy, it would arguably be unreasonable to expect otherwise. A new case law on "satisfactory quality" will no doubt develop in due course; until it does, some of the older cases on merchantable quality may still be relevant if treated with some caution.

Wren v Holt [1903]
‡ Wren v Holt [1903] 1 KB 610, CA ‡ A pub run by D was tied to a particular brewery; a customer P became ill after drinking large amounts of the beer, and tests showed that the beer contained a quantity of arsenic. The Court of Appeal upheld a decision of Wills J and a jury that D was liable in contract for supplying beer not of merchantable quality.

Grant v Australian Knitting Mills [1936]
‡ Grant v Australian Knitting Mills [1936] AC 85, PC (Australia) ‡ P contracted dermatitis from chemicals still in a pair of underpants manufactured and sold by DD. The Privy Council said that where an article sold is clearly meant for just one purpose, it is not of merchantable quality unless it is fit for that purpose. Simple washing would have removed the chemicals, but it was not reasonable to expect P to wash the pants before wearing them.

Heil v Hedges [1951]
‡ Heil v Hedges [1951] 1 TLR 512, McNair J ‡ P suffered trichinosis as a result of a parasite in a pork chop. The judge found the chop was of merchantable quality: there would have been no danger if P had cooked the chop properly before eating it, and the importance of cooking pork properly was well known. Unlike the situation in Grant, here a customer was expected to cook raw meat before eating it. ‡

Wilson v Rickett Cockerell [1954]
‡ Wilson v Rickett Cockerell [1954] 1 All ER 868, CA ‡ A housewife P was injured by the explosion of a detonator delivered in a sack of Coalite. The Court of Appeal said that although the contract specified a ton of Coalite (which P had received) and said nothing about detonators, it was part of the consignment delivered in purported fulfilment of the contract and so was covered by the Act. The consignment as a whole was not of merchantable quality, and P was entitled to damages.

In fact it had been immersed in water for some time. . and had been written off by an insurance company.Shine v General Guarantee [1988] ‡ Shine v General Guarantee [1988] 1 All ER 911. but the Court of Appeal said the car was not of merchantable quality and allowed P's claim for damages equivalent to the difference between the true value and the price paid. CA ‡ P obtained an "enthusiasts' car" from a finance company DD on a hire purchase agreement. and although it had been repaired and restored a fair price to anyone knowing its history would have been much lower. There was no misrepresentation. the car having been described as being in good condition.

There was no breach of the implied condition of fitness for purpose . They argued that since they had specified that the camshafts were to be installed in that particular vessel. they could not exercise care and skill to deal with them. HL(S) ‡ Camshafts supplied by DD for use in PP's fishing boat failed because of excessive torsional resistance caused by some unknown external factor. and PP sued under s.14(3). The House of Lords agreed with the Court of Session in dismissing the claim: since DD had not been made aware of the vessel's peculiarities.Slater v Finning [1996] ‡ Slater v Finning [1996] 3 All ER 398. DD were obliged to supply goods fit for use in that vessel with all its peculiarities.

who subsequently refused to pay for them. In preliminary proceedings. the deputy judge said the test is whether a hypothetical "reasonable person" would consider them satisfactory. The fact that they worked satisfactorily was not enough: a reasonable person would have said that a new form of boiler claiming to provide efficient low-cost home heating should demonstrably meet that claim. .Jewson v Kelly (2002) ‡ Jewson v Kelly (2002) Times 3/10/02. claiming they were not of satisfactory quality. Foskett QC ‡ CC sold twelve electric boilers to D. taking into account inter alia the circumstances in which they were bought.

Dismissing the claimant's appeal. goods are unsatisfactory only if they do not meet the standard that a reasonable person would regard as satisfactory. The defendants denied that there was any such fault. and the judge (after hearing expert evidence) found in their favour. .Egan v Motor Services Bath [2007] ‡ Egan v Motor Services Bath [2007] EWCA Civ 1002 ‡ The claimant bought a car from the defendants. Ward LJ said it was not enough that the vehicle was unsatisfactory to the purchaser: for the purposes of s. He found it had a tendency to veer to the left and purported to reject the car as being of unsatisfactory quality.14(2A) of the Sale of Goods Act 1979.

and that the employer on the other hand will not require the performance of any illegal act.TERMS IMPLIED BY COMMON LAW ‡ TERMS IMPLIED BY COMMON LAW ‡ Other terms may be implied by common law in certain types of contract where such terms are likely to make those contracts efficacious. In a contract of employment. for example. it is implied that the employee has undertaken to perform his duties with reasonable skill and care. .

Liverpool CC v Irwin [1976] ‡ Liverpool CC v Irwin [1976] 2 All ER 39. a tenant D alleged that PP were in breach of an implied term that they would keep the common areas in good repair. and since on the facts the problems were at least partly the fault of the tenants or of outside vandals. there was no breach of the landlord's obligations . lifts and rubbish chutes in good repair. The House of Lords said since the contract contained no covenants by the landlord. There was an implied term that the landlord would maintain the stairs. HL ‡ When the landlords PP of a block of flats sought possession for non-payment of rent. the court could imply the necessary terms taking into account all the circumstances. but there was also an implied term that the tenants would behave reasonably.

HL ‡ An employer DD in Northern Ireland agreed with the BMA (representing the employed doctors) a new pension scheme under which the doctors had the right to buy in added years during its first twelve months of operation. . where employees were given a valuable right that they could not otherwise be expected to know. The House of Lords said an implied term of the new pension contract that the Board would publicise the right was not essential to its efficacy. The Board failed to publicise this right. but was nevertheless to be implied in the class of contracts based on collective bargaining.Scally v Southern Health Board [1991] ‡ Scally v Southern Health Board [1991] 4 All ER 563. and as a result a number of doctors lost the opportunity of buying in.

CONDITIONS AND WARRANTIES ‡ CONDITIONS AND WARRANTIES ‡ Not all statements made by the parties are necessarily part of the contract. even if they are relevant: some are representations rather than terms (and some are both). .

HL ‡ The owner D of a horse told a prospective purchaser P that it was perfectly sound. The House of Lords said this was a warranty and part of the contract: the essence of a warranty is that it is made plain by words and/or deeds that the vendor takes upon himself responsibility for the truth of the statement made. and P stopped examining it. and subsequently found it was unfit. ‡ .Schawel v Reade [1913] ‡ Schawel v Reade [1913] 2 IR 81. Three weeks later P bought the horse.

P subsequently discovered the error and sued for breach of contract. CA ‡ A motor cycle was first registered in 1930. D told P that it was a 1941 model and pointed to the logbook. . but through an error its documents gave the date of registration as 1941.Routledge v McKay [1954] ‡ Routledge v McKay [1954] 1 All ER 855. and this not being fraudulent (before the 1967 Act) P had no remedy. the Court of Appeal said there was no warranty but only a misrepresentation. and a week later P bought the motor cycle in a written contract making no reference to its age.

and offered an uncompleted house to P with the verbal promise that it would be as good as the show house. the house was not as good as the show house. CA ‡ DD were the developers of an estate. P later agreed to buy the house. and P was entitled to damages . and the written contract made no reference to this promise. The Court of Appeal had no trouble in regarding the earlier verbal promise as part of the contract.Birch v Paramount Estates (1956) ‡ Birch v Paramount Estates (1956) 16 Est Gaz 396.

CA ‡ A private seller D innocently misstated the age of a car to a dealer P.Oscar Chess v Williams [1957] ‡ Oscar Chess v Williams [1957] 1 All ER 325. relying on a previously altered date in the logbook. the Court of Appeal said that in spite of its importance this was not a term of the contract but a mere misrepresentation. and on this basis PP took the car in part exchange. Allowing D's appeal from the decision of the trial judge. . The seller had relied upon the logbook and (having no special expertise) had not taken on himself the responsibility for the truth of the statement.

In Oscar Chess. and P bought the car. In fact the car had done more than 100 000 miles and proved unsatisfactory. said Lord Denning MR. and P sued for damages. the seller had been able to show that his misrepresentation was innocent of any fault. the truth of the statement. CA ‡ A private purchaser P asked a dealer D to find him a "wellvetted" Bentley car. or at least to find out. The Court of Appeal said this statement was a warranty and hence a term of the contract. D found a car and told P it had done 20 000 miles on its current engine. . since the dealer D was clearly in a better position than P to know. but here the dealer should have known better.Dick Bentley v Harold Smith Motors [1965] ‡ Dick Bentley v Harold Smith Motors [1965] 2 All ER 65.

Conditions and warranties ‡ Conditions and warranties ‡ The terms of a contract may be conditions or warranties. The Sale of Goods Act 1893 defined a condition as a term (in a contract of sale) that would. Since the distinction is important primarily in determining the available remedies. this is a circular definition! The creation of a third category of so-called "innominate terms". . complicates matters further. however. entitle the other party to repudiate the contract. in which the remedy depends on the seriousness of the actual consequences. if broken. whereas breach of a warranty could lead only to damages.

and D refused to proceed. The judge said this was not a fundamental condition and D could not terminate the contract. and the contract stipulated that he should arrive six days before the first performance for rehearsals. Blackburn J ‡ A singer P agreed to perform for D. Due to illness P missed the first three rehearsals. ‡ .Bettini v Gye (1876) ‡ Bettini v Gye (1876) LR 1 QBD 183. although he was entitled to damages.

P sued for wrongful dismissal.Poussard v Spiers & Pond (1876) ‡ Poussard v Spiers & Pond (1876) LR 1 QBD 410. . Owing to illness she could not attend the last rehearsal or the first four performances. and when she offered to take her part in the fifth performance DD refused. DC ‡ An actress P agreed to play the leading role in an opera to be produced by DD. and its breach by P entitled DD to treat the contract as terminated. but the court said her participation in the first four performances was a condition fundamental to the contract.

but which in fact was in a poor state of repair and incompetently crewed. . CA ‡ DD chartered a ship which was to be "in every way fitted for ordinary cargo service".whether the other party is deprived of substantially the whole benefit which it was intended he should obtain . DD sought to terminate the contract. and the proper remedy was an award of damages. and that this rather than any prior classification should decide whether the term was to be treated as a condition or a warranty.should determine whether repudiation or damages was the more appropriate remedy. but the Court of Appeal said this was a warranty rather than a condition. Diplock LJ said in such cases the seriousness of the consequences of a breach of contract .Hong Kong Fir v Kawasaki [1962] ‡ Hong Kong Fir v Kawasaki [1962] 1 All ER 474.

‡ . and P sued. being unable to get a cargo. and the contract said the charterer D should have the right to cancel if the ship was not ready by 20 July. but D argued a second reason. Mocatta J found as a fact that P was indeed in breach of this implied term. Without expressly disapproving Hong Kong Fir.Maredelanto v Berghau-Handel (The Mihailis Angelos) [1970] ‡ Maredelanto v Berghau-Handel (The Mihailis Angelos) [1970] 3 All ER 125. D cancelled the charter. that P had no reasonable grounds for believing the ship would be ready on 1 July. CA ‡ A shipowner P undertook to provide a ship "expected ready to load on or about 1 July". It was acknowledged in court that this reason for cancelling was not sufficient. On 17 July. and in commercial agreements it is best if both parties can say with assurance when they draw up their contract which breaches will give a right to terminate and which will not. and the Court of Appeal said this term was a condition. Megaw LJ said it would tend towards certainty in the law if terms such as these were treated as conditions regardless of their consequences.

but the House of Lords said there were exceptions to this. Here the contract itself expressly stipulated that time conditions must be strictly complied with. HL ‡ A contract for the sale of soya bean meal provided for a delivery to be made in June. . and the sellers claimed the right to repudiate for breach of an essential term. that right would be upheld.Bunge v Tradax [1981] ‡ Bunge v Tradax [1981] 2 All ER 513. the buyers giving fifteen days' notice of their readiness to collect it. They gave such notice on 17 June. and since it was the parties' intention that a breach of these conditions should give a right to terminate. Section 41 of the Law of Property Act 1925 says a stipulation as to the time of performance is not to be regarded as being of the essence of the contract.

The Court of Appeal upheld their claim. saying that there was a clear breach of a term expressly declared to be a condition. . under which he was to pay a deposit and nineteen quarterly instalments. The contract expressly made prompt payment "of the essence" and entitled the finance company PP to terminate and recover their loss of profit if payments were not made punctually.Lombard North Central v Butterworth [1987] ‡ Lombard North Central v Butterworth [1987] 1 All ER 267. CA ‡ D obtained a computer on a hire purchase contract. and PP exercised their right to terminate. and there might well have been a good commercial reason for a clause which at first sight seemed unreasonable. D was late with a number of payments.

but the courts and Parliament do not look favourably on exclusion clauses and have found various ways of limiting their effect. The general rule is that the parties are free to determine the terms of their own contract. a limitation clause similarly seeks to limit liability for any breach of such a term. and it is not part of the contract unless both parties agreed to it at the time. ‡ Incorporation and notice ‡ Clearly no exclusion clause is valid if it is not part of the contract.EXCLUSION AND LIMITATION CLAUSES ‡ EXCLUSION AND LIMITATION CLAUSES ‡ An exclusion clause is one that seeks to exclude from a contract some term (such as one imposing a duty of care) that would otherwise be implied. .

Parker v South Eastern Railway (1877) ‡ Parker v South Eastern Railway (1877) LR 2 CPD 416. and in this case they had. . and DD relied on the exclusion clause. on the back of the ticket was a notice excluding liability for any package worth over £10. paid 2d (twopence). CA ‡ P left his bag in a railway cloakroom. The court said it was a matter of fact whether or not DD had done all that was reasonably necessary to give notice of the clause. and was given a ticket on which were the words "See back". There was also a notice to the same effect visible in the cloakroom. P sued. The bag was lost.

On the back was a notice referring customers to the conditions printed in the company's timetables (which cost 6d each). The Court of Appeal said the ticket was a contractual document. P was injured on the journey. She should have realised that the special excursion price might imply special conditions. . these conditions excluded liability for any injury. and was given a ticket with the words "Excursion: for conditions see back". but lost her claim.Thompson v LMS [1930] ‡ Thompson v LMS [1930] 1 KB 41. and the fact that P could not read did not alter the legal position. CA ‡ P went on a railway excursion.

The machine did not work. The court found against her: in the absence of misrepresentation.L'Estrange v Graucob [1934] ‡ L'Estrange v Graucob [1934] 2 KB 394. CA ‡ P ordered a slot machine from DD. . a party who signs a document is normally bound by its contents whether or not he has read them. and signed a standard printed order form including (in very small print) a clause excluding any kind of warranty. and P claimed not to be bound by the exclusion clause which she had not read.

.Chapelton v Barry UDC ‡ Chapelton v Barry UDC [1940] 1 All ER 356. The Court of Appeal said the ticket was not a contractual document . and took a ticket without reading it. CA ‡ P hired a deckchair belonging to DD. The chair collapsed and P was injured.so the clause had not been incorporated in the contract. DD relied on a clause printed on the ticket excluding liability for any injury. paid the hire fee.no reasonable person in the circumstances would have thought it anything more than a receipt .

Olley v Marlborough Court Hotel [1949] ‡ Olley v Marlborough Court Hotel [1949] 1 All ER 127. which was concluded at the reception desk before P entered the bedroom. The Court of Appeal said this notice could not have been part of the contract. In the bedroom was a notice excluding liability for theft of articles not handed to the manageress for safe keeping. CA ‡ P was a guest at DD's hotel. and DD relied on this. and her fur coat was stolen from her bedroom. .

Curtis v Chemical Cleaning & Dyeing [1951] ‡ Curtis v Chemical Cleaning & Dyeing [1951] 1 All ER 631. . P signed without reading the document. before signing. and P sued. the dress was stained during cleaning. The Court of Appeal found in her favour: the assistant's innocent misrepresentation of the effects of the document had the effect of excluding the clause from the contract. she asked what the document was and was told that it excluded liability for damage to beads or sequins. She was asked to sign a document containing a clause excluding DD's liability for damage of any kind. CA ‡ P took a satin wedding dress to DD to be cleaned.

On the ticket. paying his money and taking a ticket from the automatic machine at the entrance. including one excluding liability for any injury to a customer. and were quite lengthy. .Thornton v Shoe Lane Parking [1971] ‡ Thornton v Shoe Lane Parking [1971] 1 All ER 686. there was an accident in which he was seriously injured. before there could be any possibility of reading the conditions. The Court of Appeal struck out this exclusion clause. holding (i) that so wide-ranging and unusual an exclusion called for exceptionally clear and explicit notice. was a notice referring to conditions displayed in the car park. When P returned later to collect his car. the contract was complete when the money was put into the machine at the entrance. and (ii) that in any case. in small print. and he sued. CA ‡ P parked his car in DD's car park. these were not visible from outside.

including a "holding fee" of £5 per photograph per day for lateness. The Court of Appeal applied Thornton and said that where a contract includes any unusually onerous condition the party seeking to rely on it must show that it was fairly and reasonably brought to the notice of the other. or a separate covering note sent drawing attention to it. for example. the photographs were supplied with a delivery note stating that they were to be returned within 14 days and setting out a number of conditions. The term should have been printed in bold type. DD kept the photographs for nearly a month.Interfoto v Stiletto [1988] ‡ Interfoto v Stiletto [1988] 1 All ER 348. and PP claimed the holding fee. . CA ‡ DD were an advertising agency who hired nearly fifty photographs from PP.

D argued that this clause could not be part of the contract because he had not been sent it until. He delivered to them eight barrels of orange juice. . and terms from the previous contracts could be implied in the present case as long as they were not inconsistent with express provisions. and D had dealt with them on many occasions. and was sent a receipt which he did not read. The Court of Appeal said there had been a consistent course of dealing. CA ‡ PP were warehousemen.Spurling v Bradshaw [1956] ‡ Spurling v Bradshaw [1956] 2 All ER 121. but PP pointed to an exemption clause on the receipt. When he came to collect the barrels he found them empty.

Previous contracts had been written. said Lord Pearce. but the course was not consistent: sometimes McS had been asked to sign a risk note and sometimes he had not.McCutcheon v McBrayne [1964] ‡ McCutcheon v McBrayne [1964] 1 All ER 430. RR alleged that McS knew of the conditions from a previous course of dealings. A sued for its value. there is no reason why it should still produce an invariable contractual result. and RR sought to rely on an exclusion in their printed conditions of carriage. . HL ‡ A asked his brother-in-law McSporran to send A's car via RR's ferry. but neither A nor his agent McS had read these conditions (the receipt in any case having been given only after the oral contract had been concluded) and McS had not been asked to sign the "risk note" on which the conditions were repeated. The ferry sank during the voyage and the car was lost. These conditions were printed on the receipt and displayed in the office. paid the freight charge and was given a receipt. but this one was oral. there was no implication that the conditions would necessarily be the same. McS took the car to the ferry terminal. Where conduct is not consistent.

and the game was designed to produce one or two winners each week. the paper chose one claimant at random to receive £50 000 and provided an extra £50 000 to be shared between the other claimants (about £35 each). claimed he was entitled to receive the full amount. C. The term was not particularly onerous or outlandish . over a thousand winning cards were printed and 1473 people claimed the prize.and DD had done enough to bring it to his attention. On one particular day.O'Brien v Mirror Group (2001) ‡ O'Brien v Mirror Group (2001) Times 8/8/01. CA ‡ A scratch-card game in the Daily Mirror offered a top prize of £50 000. through a printing error. who had had a "winning card" but who received only £35. Dismissing his claim.C had done very little to win his prize . In accordance with the competition rules. which had not been printed in that day's paper but which had appeared previously and were referred to on the card. ‡ . the Court of Appeal said the rule had been properly incorporated into the contract.

however contrived the ambiguity might be. is normally construed contra proferentem .Contra proferentem ‡ Contra proferentem ‡ Any ambiguity or uncertainty in the interpretation of an exclusion clause. .against the party seeking to rely on it.

P was injured when the saddle tilted forward. The exclusion clause was construed so as to exclude only the concurrent liability that would otherwise have arisen under the contract. CA ‡ P hired a bicycle from DD under a written agreement which included a provision that "nothing in this agreement shall render the owners liable for any personal injuries".White v Warwick [1953] ‡ White v Warwick [1953] 2 All ER 1021. and the Court of Appeal found DD liable in negligence. .

Houghton v Trafalgar Insurance [1953] ‡ Houghton v Trafalgar Insurance [1953] 2 All ER 1409. at the relevant time. The policy excluded liability for anything that might occur while the car was "conveying any load in excess of that for which it was constructed". it did not apply here and P should succeed. . with one sitting on another's knee in the back. the car was carrying six people. The Court of Appeal said this clause was to be construed as applying only to vehicles such as lorries for which a maximum loading weight was specified. CA ‡ P's five-seater car was damaged in a collision and he claimed on his insurance policy.

whose contract with AA included a clause limiting their liability "for any loss or damage of whatever nature arising out of . but so long as the clause is clear and unambiguous there is no reason to doubt that the other party assented to it. Lord Fraser said the strict principles applied when construing exclusion clauses are not applicable in their full rigour when considering clauses merely limiting liability. The main issue at the trial was the third party liability of Securicor. The contra proferentem rule still applies..Ailsa Craig v Malvern [1983] ‡ Ailsa Craig v Malvern [1983] 1 All ER 101. The House of Lords unanimously upheld the validity of this limitation. failure in the provision of the services contracted for" to £1000. HL ‡ Securicor agreed to provide a security service for AA's boats in Aberdeen harbour.. ‡ . Because of their negligence one of the boats sank and took with it another boat belonging to RR.

but excluded the consequences of "wilful exposure to needless peril". CA ‡ A young man P had a personal accident policy that covered death or serious injury. and he had not wilfully exposed himself to serious injury. P's parents as PRs sought payment under the policy. The policy was intended to cover against serious injury. and the Court of Appeal said they should succeed. he was thrown off and suffered injuries from which he died. In a momentary act of stupidity P was standing on the rear bumper of a car while his girl friend drove away at no more than 20 mph.Morley v United Friendly Insurance [1993] ‡ Morley v United Friendly Insurance [1993] 3 All ER 47. .

Following his wrongful dismissal P sought damages for the loss of this option.Micklefield v SAC Technology [1991] ‡ Micklefield v SAC Technology [1991] 1 All ER 275. Mowbray QC ‡ P's contract of employment with DD included a share option which was to lapse with no compensation payable if for any reason the employee ceased to be employed with the company. The judge said the express contractual term was clear enough to exclude P's claim. .

CA ‡ In separate cases. . In cases of ambiguity where other rules of construction fail. but the insurers DD refused to pay the exemplary damages element. an instrument should be construed more strongly against its maker. PP claimed all these damages against their indemnity insurance. damages (including exemplary damages) were awarded against the County Council for abuse suffered by a number of children in care and against the Chief Constable for wrongful arrest and assault by police officers.Lancashire CC v Municipal Mutual Insurance [1996] ‡ Lancashire CC v Municipal Mutual Insurance [1996] 3 All ER 545. The Court of Appeal affirmed the trial judge's decision in favour of PP. The policy covered all sums awarded "as compensation". and this was open to more than one interpretation.

In consumer contracts this common-law rule has been strengthened by s. but in purely commercial contracts the courts are inclined to take a broader view if they are satisfied that the clause represents the parties' true intentions.3(2) of the Unfair Contract Terms Act 1977 (below). .Fundamental breach ‡ Fundamental breach ‡ No exclusion clause can protect a party who is "in fundamental breach" of the contract.

. and the exclusion clause could not cover a fundamental breach of this nature. but when it was delivered two weeks later it was in very poor condition and incapable of being driven under its own power. CA ‡ D examined a second-hand car at a showroom and decided to buy it on hire purchase. The car was then in excellent condition. The Court of Appeal found in D's favour. the vehicle supplied was not a useable car at all. The finance company PP sued for payment and relied on a term in the contract that no warranty was given as to the condition or fitness of the vehicle.Karsales v Wallis [1956] ‡ Karsales v Wallis [1956] 2 All ER 866.

there is everything to be said for leaving the parties free to apportion the risks as they think fit and respecting their decisions. and when risks are normally borne by insurance. where the parties are of approximately equal bargaining power. said Lord Wilberforce.‡ ‡ Photo Production v Securicor [1980] 1 All ER 556. A security guard M on night duty started a small fire. which got out of control and destroyed the factory. Photo Production v Securicor [1980] . HL ‡ DD were engaged to provide security guards at PP's factory. with a provision that DD should not under any circumstances be responsible for any unforeseen act of an employee. and they relied on the exclusion clause. The House of Lords said they were entitled to do so. There was no evidence that DD had been negligent in employing M.

In the case of an individual that is enough. It deals with both exclusion and limitation clauses. nor purport to do so. where the buyer is a corporate body the goods must be of a type normally supplied for private consumption. while the other party does. marine contracts. land.STATUTORY RESTRICTIONS ‡ ‡ STATUTORY RESTRICTIONS Various statutory provisions invalidate or limit purported exclusion clauses. contracts for insurance. ‡ . and a consumer is defined in s. The definition excludes a person (even an individual) buying second-hand goods at public auction. The most important parts of the Unfair Contract Terms Act 1977 (which in spite of its name applies to tort as well as contract). patents and copyrights. Much of the Act is concerned with the protection of consumers. but international contracts. as well as a person who obtains goods (even for private use) by using a cash-and-carry card at a wholesale warehouse. or for the formation of companies.12 as amended as a legal person who does not make the contract in the course of business. apply only to business liability. This includes government departments and other public authorities. is largely excluded. including those which impose restrictive conditions such as clauses which deny liability unless notice of any complaint is given within a specified time.

The Court of Appeal said that where a transaction is only incidental to a business activity.R & B Customs Brokers v UDT [1988] ‡ R & B Customs Brokers v UDT [1988] 1 All ER 847. and the contract excluded any implied conditions as to the car's fitness in relation to any business transaction. and PP sued. . CA ‡ PP bought a car from a finance company DD. PP were buying a car for only the second or third time were entitled to be regarded as consumers. a degree of regularity is needed before the transaction can be said to be "in the course of business". The car proved to be faulty.

Unfair Contract Terms Act 1977 ‡ 2(1) A person cannot by reference to any contract term exclude or restrict his liability for death or personal injury resulting from negligence. .

liability cannot be excluded or restricted by reference to a guarantee of the goods. .Unfair Contract Terms Act 1977 ‡ 5(1) Where loss or damage arises from goods proving defective while in consumer use.

Unfair Contract Terms Act 1977 ‡ 6(1) Liability for breach of the obligations arising from s.12 of the Sale of Goods Act 1979 [or the corresponding term in relation to hire purchase] cannot be excluded by reference to any contract term. .

liability for breach of the obligations arising from s.Unfair Contract Terms Act 1977 ‡ 6(2) As against a person dealing as consumer.14 or s.13. s. .15 of the 1979 Act [or the corresponding terms in relation to hire purchase] cannot be excluded or restricted by reference to any contract term.

Consumer Protection Act 1987 ‡ Consumer Protection Act 1987 ‡ 7 Liability to a person who has suffered loss or damage caused wholly or partly by a defect in a product shall not be limited or excluded by any contract term. .

Road Traffic Act 1988 ‡ Road Traffic Act 1988 ‡ 149(2) If any other person [other than the driver] is carried in or upon the vehicle any agreement (whether intended to be legally binding or not) shall be of no effect so far as it purports to negative or restrict any liability of the user [for death or bodily injury to the passenger]. .

Unfair Contract Terms Act 1977 ‡ 2(2) In the case of other loss or damage [other than death or personal injury] a person cannot exclude or restrict his liability for negligence except in so far as the term satisfies the requirements of reasonableness .

Unfair Contract Terms Act 1977 ‡ 3(2) As against [a person dealing as consumer. or on the other's written standard terms of business] the other cannot by reference to any contract term exclude or restrict any liability of his [in respect of his own breach of contract]. . except in so far as the contract term satisfies the requirements of reasonableness. or claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him.

.Unfair Contract Terms Act 1977 ‡ 4(1) A person dealing as consumer cannot be made to indemnify another person except in so far as the contract term satisfies the requirement of reasonableness.

14 or s. .15 of the 1979 Act or the corresponding terms in relation to hire purchase] can be excluded or restricted by reference to a contract term. but only in so far as the term satisfies the requirement of reasonableness.13. s. [liability for breach of the obligations arising from s.Unfair Contract Terms Act 1977 ‡ 6(3) As against a person dealing otherwise than as consumer.

Misrepresentation Act 1967 ‡ Misrepresentation Act 1967 (as amended) ‡ 3 A term which would exclude or restrict any liability to which a party to a contract may be subject by reason of any misrepresentation made by him or any remedy available to another party shall be of no effect except in so far as it satisfies the requirement of reasonableness. ‡ .

Unfair Contract Terms Act 1977 ‡ 11(2) In determining whether a contract term satisfies the requirement of reasonableness. regard shall be had to the strength of the bargaining positions of the parties relative to each other. [and] whether the goods were manufactured to the special order of the customer . whether it was reasonable to expect that compliance with any special condition would be practicable. whether the customer knew or ought to have known of the existence of the term. whether the customer received an inducement to agree to the term.

Unfair Contract Terms Act 1977 ‡ 11(4) Where a person seeks to restrict liability to a specified sum of money regard shall be had to the resources which he could expect to be available to him and how far it was open to him to cover himself by insurance. ‡ .

these being the only photographs taken at the wedding in question. but there was no alternative service available for the minority who might be prepared to pay more for greater protection. ‡ . Judge Clarke ‡ P took photographs at a friend's wedding. and P sued for the distress caused by the loss. The judge said the limitation was unreasonable. and took the film to DD for processing. The films were lost through DD's negligence. A sign on the counter limited DD's liability for lost or damaged films to the cost of replacement. it allowed DD to provide a cheap service for the majority of photographers whose films were not valuable.Woodman v Photo Trade Processing (1981) ‡ Woodman v Photo Trade Processing (1981) 131 NLJ 933.

It was not fair and reasonable in the circumstances to allow the valuer to disclaim liability to the purchaser for negligence where he was dealing with property at the lower end of the market and knew that the purchaser was unlikely to instruct another independent surveyor. the comparative simplicity (by professional standards) of the job to be done.Smith v Eric Bush [1989] ‡ Smith v Eric Bush [1989] 2 All ER 514. the cost and trouble to first-time buyers of obtaining independent advice. the House of Lords said an exclusion notice in the agreement was void under the Unfair Contract Terms Act 1977. . and the ease with which the surveyor (but not the buyers) could have insured against the consequences of negligence. HL ‡ In an action brought by first-time house buyers against a surveyor who had negligently overvalued the property. Lord Griffiths drew attention to the evident inequality in bargaining power.

‡ . The driver caused damage and PP sued. The Court of Appeal upheld this decision on the basis that the trial judge's decision was not clearly wrong.Phillips v Hyland [1987] ‡ Phillips v Hyland [1987] 2 All ER 620. CA ‡ PP hired an excavator and driver from DD under a contract providing that the hirer was to be responsible for all damage arising from the driver's work. and Kenneth Jones J said he was not satisfied that the term was fair and reasonable. and added that in deciding whether a clause was reasonable the courts would look at its effect rather than its form.

P sued both the owners and the hirers of the excavator.Thompson v Lohan [1987] ‡ Thompson v Lohan [1987] 2 All ER 631. CA ‡ The contract was essentially the same as in Phillips v Hyland. The Court of Appeal said s. and the indemnity clause as between two businesses was not unreasonable. and P's husband was killed through the driver's negligence.2(1) of UCTA did not apply to arrangements made to share liability with a third party. ‡ . and succeeded against the hirer.

St Alban's DC v ICL [1996] ‡ St Alban's DC v ICL [1996] 4 All ER 481. and the loss would otherwise be borne by a surcharge on the local taxpayers.3 million in poll tax collection. CA ‡ PP sued for damages in respect of faulty software. They had insurance cover up to £50 million. The Court of Appeal agreed with Scott Baker J that a limitation clause limiting DD's liability to £100k was not shown to be fair and reasonable. which had led to losses of £1. ‡ .

However. and the relevant UK regulations took effect six months later. and revised regulations (the Unfair Terms in Consumer Contracts Regulations 1999. SI 1999/2083) were made to replace them. . it subsequently appeared that the original regulations had not properly implemented the Directive.EUROPEAN LAW ‡ EUROPEAN LAW ‡ The Directive on Unfair Terms in Consumer Contracts (Directive 93/13) came into effect on 1 January 1995.

it may for various reasons be void or voidable or unenforceable. ‡ .VITIATING FACTORS ‡ VITIATING FACTORS IN CONTRACT ‡ Even when a contract has apparently been properly made. and the consequences of any such occurrence. On this page we consider the reasons why such a thing might happen. and its terms are clear.

An illegal contract. and it is probably better to regard all void contracts as forming a spectrum with illegal contracts falling towards one end.VOID AND ILLEGAL CONTRACTS ‡ The distinction between illegal and simply void contracts was formerly thought important not because of any criminal penalty attached to the illegality .in many cases there was none . . it was said.but because of their different consequences. is wholly void while a simply void contract is void only in respect of the offending clause. Recent cases cast doubt on the validity of such a distinction. however.

. and illegal too unless the chances are fair. The Restrictive Trade Practices Act 1976 extends the common-law limitation on contracts in restraint of trade.VOID AND ILLEGAL CONTRACTS ‡ A contract may be illegal either by statute or at common law. making restrictive trading contracts void unless they are approved by the Director General of Fair Trading. The Gaming Act 1845 makes all gaming and wagering contracts void.

and any contract prejudicial to the interests of justice. to defraud the Revenue. . such as the buying and selling of honours. such as an agreement not to prosecute. any contract likely to encourage corruption in public life. or a fraud on a third party. including a contract with an enemy aliens in time of war or one likely to impair relations with a friendly state.VOID AND ILLEGAL CONTRACTS ‡ Contracts said to be illegal at common law include any contract to commit a crime. or to allow a party to benefit from any such act. a tort. any contract prejudicial to the interests of the state. any contract likely to encourage sexual immorality.

The insurers had proved (to the civil standard) that X's death was not the result of an "accident" as that word is normally understood. The Court said it would be contrary to public policy to enforce a contract releasing him from the consequences of his crime. and that released them from any obligation to pay. He claimed an indemnity under a personal insurance policy covering all sums he might be required to pay in respect of bodily injury caused by an accident.Gray v Barr [1971] ‡ Gray v Barr [1971] 2 All ER 949. and D was ordered to pay some £7000. CA ‡ D made a violent attack on X and accidentally killed him. following his acquittal on charges of murder and manslaughter the victim's widow sued for damages. . but his claim failed.

and if the driver is not insured (as was the case here) the MIB must pay.Hardy v Motor Insurers' Bureau [1964] ‡ Hardy v Motor Insurers' Bureau [1964] 2 QB 745. CA ‡ A security guard P was injured while trying to stop a van carrying stolen property. . and when he failed to pay the compensation ordered by the magistrates P sought payment from the MIB. The driver X was convicted (inter alia) of causing grievous bodily harm. The Court of Appeal said those injured by motor vehicles are covered by motorists' insurance even where "ordinary" crimes are involved.

Armhouse Lee v Chappell (1996)
‡ Armhouse Lee v Chappell (1996) Times 7/8/96, CA ‡ DD were pornographers who operated a number of telephone sex chatlines; their advertising agents PP sued for £¾m in unpaid advertising charges. DD argued that since the contract was for the promotion of immorality they should not be required to pay, but the courts disagreed. However shocking some ordinary decent people might find the advertisements, said Simon Brown LJ, they could hardly be said to be "destructive of the very fabric of society", and to call the defence unmeritorious would seriously understate the unattractiveness of DD's case!

‡ Any contract prejudicial to the status of marriage, such as an agreement never to marry, is traditionally regarded as "simply void" at common law. A contract that purports to oust the jurisdiction of the courts is also generally regarded as void, although "arbitration-first" clauses have been upheld and "honour-only" agreements are treated as unenforceable.

Scott v Avery (1856
‡ Scott v Avery (1856) 10 ER 1121, HL ‡ A marine insurance policy contained a provision that the amount payable in the event of loss was to be determined first by a certain committee and then (if necessary) by arbitration; the insurer undertook not to bring a civil action until the arbitrators had given their decision. The House of Lords said the undertaking was binding and the contract lawful.

Jones v Vernon's Pools [1938]
‡ Jones v Vernon's Pools [1938] 2 All ER 626, Atkinson J ‡ The conditions of entry of a football pool competition stated that the sending in of the coupon should not give rise to any legal relationship, and that the arrangements of the pool were binding in honour only. P claimed to have sent in an entry but DD denied having received it; it was conceded that had it been received it would have won a prize. The judge said the agreed conditions prevented P from succeeding in his claim; there was clearly no intention to create legal relations, and it was consequently unnecessary to decide the issue of fact.

RESTRAINT OF TRADE
‡ RESTRAINT OF TRADE ‡ A contract is "in restraint of trade" if one party restricts his future liberty to carry on his trade, business or profession in such manner or with such persons as he may choose, and such a contract may be void under some circumstances. The most common examples of such contracts occur where a skilled employee undertakes not to set up his own business in competition with his former employers, and where the seller of a business undertakes not to compete with the buyer.

Nordenfeldt v Maxim Nordenfeldt [1894]
‡ Nordenfeldt v Maxim Nordenfeldt [1894] AC 535, HL ‡ A gunmaker A sold his business to DD, and agreed not to carry on any competing business for the next 25 years. When RR sought to enforce that agreement the House of Lords said any restraint of trade clause is prima facie void, and the party seeking to enforce it must show its validity. To do this, he must show that the restraint is reasonable, both as between the parties and as regards the public interest; the test of what is reasonable will vary from one case to another. Any restraint will be upheld only insofar as it protects a legitimate ‡ interest of the other party.

Leng & Co v Andrews [1909]
‡ 1 Ch 763, CA ‡ A reporter D agreed never in the rest of his life to work for any other paper within 20 miles. This contract was held to be unreasonable and therefore void. ‡

White v Francis [1972]
‡ White v Francis [1972] 3 All ER 857, CA ‡ A hairdresser agreed not to work within ½ mile for 12 months: the aim was to ensure that the employee did not unfairly steal his former employer's business, and this clause was upheld as valid. ‡

Clarke v Newland [1991]
‡ Clarke v Newland [1991] 1 All ER 397, CA ‡ A doctor agreed not to practise within the defined practice area within three years of terminating the partnership, and the clause was held to be reasonable on the basis that it meant "practise as a GP" (i.e. in direct competition with the former partnership).

Lansing Linde v Kerr [1991]
‡ Lansing Linde v Kerr [1991] 1 All ER 418, CA ‡ A regional director left a firm making fork-lift trucks and went to a competitor. The former employer sought to enforce a clause in his contract prohibiting him from working for any directly competing firm worldwide for the next twelve months, and the Court of Appeal said customers' names could be a trade secret as well as chemical formulae. However, they refused an interim injunction pending the full trial; given the courts' timetable this supposedly interim measure would in fact give PP nearly all they asked for, and there was quite a strong case for thinking that the prohibition was too wide.

Scott J ‡ A boxer made a contract giving his manager exclusive control over the selection of his fights. .Watson v Prager [1991] ‡ 3 All ER 487. particularly with a potential conflict of interest between the manager's role as such and his role as a fight promoter. This was held to be an unreasonable restraint on his right to work.

the interest to be protected.‡ In determining whether a restraint is reasonable. . and any special inducement given to the employee to accept the restriction. the extent of time and distance. the courts take into account the nature of the restriction.

Allied Dunbar v Weisinger [1988] ‡ Allied Dunbar v Weisinger [1988] IRLR 60. ‡ since he had received an extra two years' salary in compensation. Millett J ‡ The judge upheld an agreement that W would not deal in insurance for two years. ‡ .

. reversing the trial judge and overruling a decision of Laws J in D v M 1996. The Court of Appeal. the defendant sought an injunction to enforce the restrictive term. justifying the employee in treating the contract as being at an end so that he was no longer bound by it. said such a clause was not necessarily unreasonable. CA ‡ The plaintiff entered a contract of service with the defendant. If an employee was wrongfully dismissed. this might amount to a repudiation of the contract on the employer's part. This did not make the clause generally unreasonable.Rock Refrigeration v Jones [1997] ‡ Rock Refrigeration v Jones [1997] 1 All ER 1. under which the plaintiff's future conduct was purportedly restricted after the termination of the contract "howsoever occasioned". After the plaintiff left that employment.

The restraint must still be no more than is needed to protect B's legitimate business interests. the sale must be genuine: if the purported "business" in fact has no substantial goodwill then B has no legitimate interest to protect and the restraint is void. and the factors listed above are again relevant. Moreover. . however.‡ A wider test of reasonableness is applied when A sells a business to B as a going concern and undertakes not to set up nor work in any directly competing business.

but become legitimate if they pass through one of eight public interest "gateways" specified in the Act and cause no undue detriment to third parties. They are initially presumed to be void.‡ In contrast to restraints imposed in employment contracts. restraints voluntarily accepted by members of trade associations will normally be upheld unless manifestly unreasonable. though the Restrictive Trade Practices Act 1976 requires all such agreements to be registered with the Director General of Fair Trading. .

‡ Tied-house and "solus" agreements. are a common feature of modern business. They are generally regarded as legitimate in principle. but their validity depends on circumstances . in which (for example) a garage agrees to sell only one brand of petrol.

] ‡ . but declared void another (for different premises) lasting 21 years. [EEC legislation now suggests that 10 years for such agreements may be the point of division. HL ‡ The House of Lords upheld a "solus" agreement lasting 4 years.Esso Petroleum v Harper's Garage [1967] ‡ Esso Petroleum v Harper's Garage [1967] 1 All ER 699. saying that the latter was unreasonable.

for example.money paid cannot be recovered. or where both parties intend that it shall be performed in an illegal way or for an illegal purpose. and the court will veto any attempt at enforcement even though the defendant may be just as guilty as the plaintiff.CONSEQUENCES OF ILLEGALITY ‡ Where a contract is illegal from the beginning. then it is wholly illegal and void. because it requires one party to do an illegal act. . Neither party can generally assert any right or remedy under such a contract .

The guilty party loses any legal rights and remedies he might have sought under the contract. Even a guilty party may not always be wholly without remedies. the remedies of the innocent party are preserved. . but the innocent party is protected in respect of anything he does before learning of the illegality. and one party (unknown to the other) executes it for an illegal purpose or in an illegal way. however.CONSEQUENCES OF ILLEGALITY ‡ Where a contract is prima facie lawful.

. CA ‡ DD were seed merchants who had bought seed from a third party T and sold it to P without complying with certain legal formalities. The contract was thus illegal. but the Court of Appeal allowed P to sue when the seed was found to be defective. and DD in turn were allowed to refer to this suit when claiming an indemnity under their (entirely legal) contract with T.Marles v Philip Trant [1953] ‡ Marles v Philip Trant [1953] 1 All ER 651.

nor reason to know of it. and only the manner of its performance was illegal. The contract was prima facie legal when it was made. ‡ . in fact D was not licensed to carry such a load and the contract was therefore illegal.Archbolds (Freightage) v Spanglett [1961] ‡ Archbolds (Freightage) v Spanglett [1961] 1 All ER 417. CA ‡ PP contracted with D for the transport of a load of whisky. but since PP had no knowledge of the illegality. they were able to sue on the contract.

.Shaw v Groom [1970] ‡ Shaw v Groom [1970] 2 QB 504. CA ‡ A landlord who failed to provide a rent book as required by law was still allowed to sue for the rent. The Court said that although the criminal law imposed penalties for noncompliance. the rent book was not an essential feature of the contract of letting and there was no reason why the landlord should not be entitled to claim his rent.

or because the illegality derives from a statute designed to protect him rather than the other) the less blameworthy may be allowed to recover anything he has transferred to the other. where the two parties are not in pari delicto (e. he may recover what he has paid as long as he acts to repudiate the contract in good time.‡ Even where a contract is illegal.g. because one was subject to duress. where the illegality is only minor and can be severed from the rest of the contract as above. Second. recovery of money or goods transferred may be possible in any of four situations. through an action in tort). Finally. the party in whose favour the illegal clause would have operated may be allowed to enforce the rest of the contract. it will be considered on its merits. where a case can be made out for recovery without reference to the contract (e. Third. where a party to an illegal executory contract repents before performance. First. .g.

Knox J ‡ An insurer made an insurance contract that he was not authorised to make.Re Cavalier Insurance [1989] ‡ Re Cavalier Insurance [1989] 2 Lloyds Rep 430. ‡ . The judge said the innocent policyholder could not enforce a claim. but could obtain the return of his premiums.

Saunders v Edwards [1987] ‡ Saunders v Edwards [1987] 2 All ER 651. This made the contract illegal (as a fraud on the revenue). and P and D together then agreed prices for the flat and its contents in such a way as to avoid stamp duty. ‡ . but the Court allowed P to sue on the misrepresentation because his cause of action was independent of the fraudulent contract. CA ‡ D fraudulently misrepresented the size of a flat.

‡ . and claimed a common intention that the property should belong to both of them. The House of Lords said the respondent could still assert her equitable rights because her claim was based on a resulting trust and not on the illegal contract per se. that is enough. Miss Milligan claimed under a resulting trust: she had provided part of the purchase money. Lord Browne-Wilkinson said property in chattels and land can still pass under a contract which is illegal and therefore unenforceable as a contract. That was enough to establish her case: the reason for this common intention was irrelevant. The maxim that equity would assist only those with clean hands was no longer applicable: equity and law had been fused for more than a hundred years.Tinsley v Milligan [1993] ‡ ‡ Tinsley v Milligan [1993] 3 All ER 65. It is irrelevant whether the illegality of the underlying agreement is pleaded or emerges in evidence: if the plaintiff has acquired legal title under the illegal contract. and English law now had a single law of property made up of legal and equitable interests. and a plaintiff can enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right. HL Two women together had bought a house. but legal title had been vested in the appellant alone to assist in a fraud on the Department of Social Security.

will not be enforced by the courts unless in the proper form. Moreover. even though they are quite valid and theoretically binding.UNENFORCEABLE CONTRACTS ‡ There are certain types of contract . and even though it is itself unenforceable its validity may be important in some other case.must be supported by evidence in writing. A promise not thus supported is unenforceable rather than void.principally third party guarantees. however. the contract itself need not normally be set down in writing as long as there is a written note or memorandum incorporating the essential details. . a special promise to answer for the debt or default of another person . All contracts for the sale of land (or interests in land) must be made in writing and signed by both parties. consumer credit agreements and contracts for the sale of land . and following the Statute of Frauds 1677 as amended.a "guarantee" in modern terms .which.

but such is unlikely to be given unless the formal defect is trivial .but this time the agreement itself must be in writing and a mere memorandum is insufficient .it can be enforced by a court order. the consumer having signed and having received a copy together with notice of his rights to cancel. Once again the agreement not in due form is unenforceable rather than void .UNENFORCEABLE CONTRACTS ‡ The Consumer Credit Act 1974 makes hire purchase and credit sale agreements generally unenforceable unless they are "properly executed".

. the court has a discretionary power to amend the terms to what it considers fair. at the consumer's home). If the terms of a credit agreement are "grossly extortionate". the consumer has a five-day "cooling-off period" within which he may change his mind and cancel the agreement.g. the agreement is unenforceable. Where the agreement is signed outside trade premises (e. if not.UNENFORCEABLE CONTRACTS ‡ All credit agreements must be in writing using approved forms.

UNENFORCEABLE CONTRACTS ‡ If the consumer does not keep up the repayments. If the consumer voluntarily returns the goods. the lender cannot repossess without a court order. . where one-third or more of the total amount has already been paid. the lender must warn him and allow him seven days to make good the default before taking steps to repossess the goods. he need not pay more than half the agreed total price.

but as yet there has not been time for any substantial body of case law to be developed. . This clearly requires more than just evidence of a verbal contract: it seems that the written contract will be conclusive and any verbal agreement wholly void rather than just unenforceable. a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms (expressly or by reference) in a single document.Law of Property (Miscellaneous Provisions) Act 1989 ‡ Under the Law of Property (Miscellaneous Provisions) Act 1989. to be signed by or on behalf of each party.

A contract made by a minor may be valid and enforceable. The Infants' Relief Act 1874 made certain classes of contract "absolutely void". but earlier case law dating from the time when legal infancy ended at 21 is still relevant.CONTRACTS BY MINORS ‡ A minor in law is a young person under the age of 18. or may alternatively be voidable at the minor's option in any other case. if it is for the supply of "necessary" goods or services or is a "beneficial contract of service". . but this was repealed by the Minors' Contracts Act 1987 and such contracts are now merely voidable.

the Sale of Goods Act 1979 refers to "things which are suitable to the station in life of the infant and to his actual needs at the time of sale and delivery". . "Necessary" is taken broadly.CONTRACTS BY MINORS ‡ A contract made by a minor for the supply of necessary goods or services is binding on both parties. but under the Sale of Goods Act 1893 the minor need pay only a reasonable price and not necessarily the contracted price.

The trial judge left it to the jury to decide whether or not these were necessaries. ‡ .Peters v Fleming (1840) ‡ Peters v Fleming (1840) 151 ER 314. and upheld the finding that the contract was enforceable. The Court of Exchequer said it was a matter of fact properly left to the jury. and the jury said they were. Exchequer ‡ A jeweller P sued an undergraduate D for an unpaid bill (incurred while under 21) for a gold watch-chain and other items.

including an antique silver goblet as a gift for a friend. The jeweller P sued for payment. but the Court of Exchequer Chamber said there was no evidence on which the jury could properly have found that the goblet was a necessary.Ryder v Wombwell (1869 ‡ Ryder v Wombwell (1869) LR 4 Exch 32. . ‡ The contract was therefore voidable. Exchequer Chamber ‡ A minor D bought various items of jewellery.

Nash v Inman [1908] ‡ Nash v Inman [1908] 2 KB 1. including eleven fancy waistcoats. and P's appeal was dismissed. At trial. . CA ‡ An undergraduate D ordered various clothes from a tailor P. The evidence showed that D was already well supplied with clothes suitable to his position in life. and consequently the contract could not be said to be for necessaries. Ridley J directed the jury to find in D's favour. when he did not pay P sued.

"necessary" ‡ The decision as to whether particular goods are "necessary" is a mixture of law and fact. if it contains terms which are unduly harsh and onerous to the minor. and depends on the particular circumstances. Even a contract for necessaries is void. . however.

and not merely the offending clause .Fawcett v Smethurst (1914) ‡ Fawcett v Smethurst (1914) 84 LJKB 473. and accordingly the contract was voidable. Atkin J ‡ A minor D hired a car from P. During the journey the car caught fire through no fault of D. it was not necessary for him to enter a contract containing such an onerous clause as this. (Note that it is the entire contract which is voidable. and P sued for the damage. under a verbal contract allegedly containing a term making D liable for all damage however caused. His claim failed: although it might have been necessary for P to hire a car to collect his luggage.

contract of apprenticeship ‡ A minor may bind himself by a contract of apprenticeship or service which is for his benefit on the whole. . even though some terms of the contract may be to his disadvantage.

Fry J ‡ A contract for dancing training was set aside because of its overall unreasonableness .De Francesco v Barnum (1890) ‡ De Francesco v Barnum (1890) LR 45 ChD 430. but made no guarantee of any engagements arranged by D. .it required that B should not marry nor accept outside engagements for 7 years.

Roberts v Gray [1913] ‡ Roberts v Gray [1913] 1 KB 520. The contract was in effect for D's education and training. and its terms were reasonable. so D's repudiation of the contract (following a dispute over the type of ball to be used) was a breach of contract. agreed to play a series of exhibition matches with a more experienced player P. . CA ‡ The Court of Appeal upheld a contract under which a minor D. a talented billiard player.

CA ‡ A young boxer P obtained a licence from the British Boxing Board of Control. The Court said the licence agreement was closely analogous to a contract of employment. P competed for the British heavyweight title but was disqualified. and was (on the whole) for his benefit. he claimed his prize money nevertheless and argued that he was not bound by the contract. . and was thus valid and enforceable.Doyle v White City Stadium [1935] ‡ Doyle v White City Stadium [1935] 1 KB 110. one of its terms being that his prize money might be withheld if he were disqualified.

contracted with publishers DD for the publication of C's life story. C subsequently repudiated the contract. to be written by ghost writers. The Court said the contract had been for C's benefit at the time it was made .and could thus be enforced against him. and sought an injunction to restrain DD from going ahead with publication. CA ‡ Charlie Chaplin's son C.Chaplin v Leslie Frewin [1966] ‡ Chaplin v Leslie Frewin [1966] Ch 71. a minor. claiming that the book contained libellous matter. . Having initially passed the proofs.he would have benefited financially .

or property representing it.‡ All other contracts entered into by a minor are valid initially (and can be enforced by either party). and cannot recover any money he has paid over unless there has been a total failure of consideration by the other party. . but may be repudiated by the minor (not by the other party) at any time during minority or "within a reasonable time" after attaining the age of 18. However. the minor may be ordered (if the court thinks it just and equitable) to restore any property acquired under the contract.

and his appeal was dismissed. His claim failed in the County Court. He subsequently avoided the contract. HC ‡ A minor P entered a contract for the lease of a flat. . and sought to recover the money he had already paid towards the purchase of the furniture. and since he could not return this benefit he was not entitled to the return of his own consideration.Valentini v Canali (1889) ‡ Valentini v Canali (1889) LR 24 QBD 166. Coleridge CJ said P had had the use of the furniture for several months. and agreed to buy the furniture in it.

Pearce v Brain [1929] ‡ Pearce v Brain [1929] 2 KB 310. DC ‡ A minor P traded in his motor-cycle in partexchange for a car. Affirming the decision of the County Court judge. Swift J said P could not recover his motor-cycle because he had had the use of the car and that was consideration enough. ‡ . but later repudiated the contract.

but which is not itself part of the contract. A misrepresentation is a untrue statement of fact which induces a party to enter a contract.MISREPRESENTATION ‡ Statutes such as the Trade Descriptions Act 1968 and the Property Misdescriptions Act 1991 create offences relating to certain types of misrepresentation in the course of business. There must therefore be a statement of some kind. but our concern here is with the civil rather than the criminal consequences. subject to three qualifications . Mere silence cannot constitute misrepresentation even when it is obvious that the other party is mistaken as to the facts. although a representation need not always be verbal: payment by cheque implies a representation that the bank will honour the cheque.

and in potential "undue influence" cases (see below) similar good faith is required of the party supposed to be in the stronger position. if a party makes any representation on a particular matter. it must be full and frank. where the contract requires uberrima fides (utmost good faith) the party is bound to disclose all material facts. where the insured party is required to disclose all material facts whether or not he is asked about them. The best-known uberrima fides contracts are those of insurance. and silence may not be used to distort a positive representation. A company is in a similar position in respect of the sale of shares. ‡ Second.MISREPRESENTATION ‡ First. .

. and the assistant's statement was held to be a misrepresentation. In fact it excluded all forms of damage. CA ‡ An assistant in a dry-cleaners' shop told a customer that a certain exclusion clause limited liability for damage to beads and sequins.Curtis v Chemical Cleaning [1951 ‡ Curtis v Chemical Cleaning [1951] 1 All ER 631.

since the representation is deemed to continue up to the time that the contract is made. the number of "panel" patients had fallen to 1260 and four months had passed during which there had been almost no income. and told P that the annual income for the past three years had been about £2000 and that there were 1480 patients on the "panel". When P discovered these facts (which D had not disclosed) he sought to rescind the contract. CA ‡ A doctor D sought to sell his medical practice.With v O'Flanagan [1936] ‡ With v O'Flanagan [1936] 1 All ER 727. . The Court said a party who makes a representation and then discovers that the situation has changed is under a duty to disclose that fact. These statements were true when they were made. By the time the contract was signed. but D then fell ill and was unable to work.

the courts have tended to bend the rule. however. or by a person supposed to have special knowledge of the facts. Where a statement of opinion is made by a supposed expert. saying that a statement made in such circumstances carries an implication of fact that there are reasonable grounds for holding that opinion. .‡ A representation must be a statement of fact and not of opinion.

Bisset v Wilkinson [1927] ‡ Bisset v Wilkinson [1927] AC 177. This turned out not to be the case. and the purchaser A sought the return of his purchase money. ‡ . Rejecting his appeal. the Privy Council said the statement had not been a representation of fact but merely an expression of R's honestly held opinion. PC ‡ The vendor R of a farm that had never run sheep gave it as his opinion that it would support about 2000 of them.

Smith v Land & House Property (1884) ‡ Smith v Land & House Property (1884) LR 38 ChD 7. thus offering a first class investment"... and the Court of Appeal held that since P was in a position to know the true facts. his statement was a statement of fact rather than of opinion. . In fact F was in arrears and close to bankruptcy. CA ‡ A vendor P described his property as "let to F. a most desirable tenant .

P took debentures in the company. partly in reliance on the prospectus. Bowen LJ said the state of a man's mind is as much a fact as the state of his digestion.Edgington v Fitzmaurice (1885) ‡ Edgington v Fitzmaurice (1885) LR 29 ChD 459. and a false statement about the maker's intentions is thus a misrepresentation of fact. ‡ . but was subsequently able to rescind the contract for misrepresentation. knowing that it was false as to the purpose for which money was sought. CA ‡ D produced a company prospectus.

Esso Petroleum v Mardon [1976] ‡ Esso Petroleum v Mardon [1976] 2 All ER 5. forecasting that sales of petrol would be roughly 200 000 gallons per year. CA ‡ PP sold a new garage. but PP claimed their forecast was mere opinion as in Bisset v Wilkinson. and since they had not exercised reasonable care it was a negligent misrepresentation . the experience and skill of PP's market analysts created a different position. saying that while the vendor in Bisset had no special knowledge and the parties were equally able to form their own views. Actual sales turned out to be less than half of this. The Court rejected their claim. Their expert forecast was to be treated as a statement of fact.

did not believe it. A misrepresentation is quite irrelevant if the supposed representee did not know of it.MISREPRESENTATION ‡ Third. or for any other reason was not influenced by it. The question of reliance is particularly important where the party to whom the statement is made is in a position to check its truth for himself . there must have been reliance by the representee: misrepresentation does not affect the validity of a contract unless it induced the other party to enter the contract.

HL ‡ A prospective purchaser sent his own agents to check the owner's statements about a mine. and was held to have relied on their report rather than on the original (false) representation. .Attwood v Small (1838) ‡ Attwood v Small (1838) 7 ER 684.

JEB Fasteners v Marks Bloom [1983] ‡ JEB Fasteners v Marks Bloom [1983] 1 All ER 583. CA ‡ PP decided to take over another company in order to gain the services of two of its directors. but the Court of Appeal denied misrepresentation because PP would have made the contract in any event. were substantially inaccurate owing to the accountants DD's negligence. . The company accounts which they looked at.

PP's silence as to some relevant facts amounted in these circumstances to a misrepresentation. as PP claimed. be circumstances in which the true import of what was said or written is distorted by what is left unsaid. it is no answer to a claim founded on it that had the other taken the trouble to enquire he could have discovered that it was untrue. and the particulars viewed as a whole clearly conveyed that the tenant was running a wine bar in the premises. it is nevertheless misleading. There may. however. Mustill LJ said the question whether one party has made a representation in the course of negotiations depends on what he has actually conveyed by writing. so that even if the representation is literally true. words or conduct such as a nod or a wink. CA PP sold at auction a property described as a wine bar. and their claim for specific performance was denied. a party has no ground for complaint simply because the other has not disclosed a fact that would influence him. In fact the pictures were old ones: the tenant had lost his liquor licence and was in arrear with the rent. and the premises were no longer used as a wine bar. supported by pictures to the same effect. but except where the nature of the contract is such as to require certain facts to be disclosed. . If one party has made a representation. In the instant case D was entitled to rescind the contract for misrepresentation: the description did not apply simply to the bricks and mortar.Atlantic Estates v Ezekiel (1991) ‡ ‡ Atlantic Estates v Ezekiel (1991) 33 Est Gaz 118.

a contract term purporting to exclude or limit liability for misrepresentation is void except insofar as it satisfies the reasonableness test in the Unfair Contract Terms Act 1977. .3 of the Misrepresentation Act 1967 as amended.‡ Under s.

‡ . and the judge found in their favour: a clause excluding liability for errors was not reasonable in the circumstances. Boggis QC ‡ At a sale of land by auction.St Marylebone Property v Payne (1994) ‡ St Marylebone Property v Payne (1994) 45 Est Gaz 156. The successful bidders claimed misrepresentation and the return of their deposit. the photograph in the brochure showed far more land than was actually for sale.

. In such a case the innocent party may affirm the contract and claim damages for consequential loss. or repudiate the contract and claim damages and/or rescission.Types of misrepresentation ‡ Types of misrepresentation ‡ Fraudulent misrepresentation occurs when a party makes a false statement without honestly believing it to be true: it may be a deliberate lie. or it may be a statement made recklessly. suing for the tort of deceit.

. The Board subsequently refused consent to the use of steam. HL ‡ A tramway company obtained a private Act of Parliament authorising them to use animals or (with the consent of the Board of Trade) steam as the source of motive power.Derry v Peek (1889) ‡ Derry v Peek (1889) LR 14 AC 337. They issued a prospectus drawing particular attention to their right to use steam power. and P bought shares in reliance on this prospectus. but P's action in deceit failed: DD had honestly believed that the necessary consent would be forthcoming.

but may exist in other cases too.Negligent misrepresentation ‡ Negligent misrepresentation may occur when a false statement is made by a person having a duty of care. Such proximity is clearly present between the parties to a contract. but it is now clear that some proximity or relationship is needed. and that everyone owed everyone else such a duty. It was thought at one time that the last phrase was redundant. so giving the aggrieved party two possible lines of action. .

.Hedley Byrne v Heller [1963] ‡ Hedley Byrne v Heller [1963] 2 All ER 575. HL ‡ PP were advertising agents who booked TV time on behalf of E Ltd. PP lost money and (having no contractual relationship with DD) sued them in tort. E went into liquidation. The House of Lords said DD owed PP a duty of care and could in principle have been liable for the consequences of their negligent misstatement. but they escaped liability ‡ because of a disclaimer in their letter. They asked their bankers to obtain a reference from E's bankers DD. and the latter replied favourably.

alleging negligent misrepresentation. He counterclaimed for his own losses. and succeeded on tortious as well as on contractual arguments. .Esso v Mardon [1976] ‡ Esso v Mardon [1976] 2 All ER 5. CA ‡ D was induced to lease a new filling station on the basis of PP's estimate of its likely turnover. This estimate turned out to be substantially too high. and D was unable to make a profit or even to pay for the petrol that had been supplied to him.

The shares then fell in value. HL ‡ PP bought shares in F plc with a view to taking it over. The House of Lords said the auditors did not owe a duty of care to investors thinking of buying shares: the damage suffered by PP was foreseeable. and PP sued the auditors for their negligence in preparing their report.Caparo v Dickman [1990] ‡ Caparo v Dickman [1990] 1 All ER 568. but there was no sufficient proximity to give rise to a duty of care where the loss was purely economic. ‡ . and bought more after seeing F's auditors' report.

. HL ‡ P and other Lloyds "names" sued their underwriting agents for negligent mismanagement of their affairs.Henderson v Merrett Syndicates [1994] ‡ Henderson v Merrett Syndicates [1994] 3 All ER 506. and the House of Lords held in interlocutory proceedings that their claims in tort should go for trial. is free to choose whichever appears to him to be the most advantageous so long as the contract does not expressly preclude this. A claimant who has parallel remedies available in tort and in contract. said Lord Goff.

Innocent misrepresentation ‡ Innocent misrepresentation occurs when neither of the other two applies and the misrepresentation was made without any fault .

‡ In general. and takes effect from that moment. A decision to rescind must be communicated to the other party within a reasonable time. negligent or innocent. the other party may affirm or rescind the contract. . no matter whether fraudulent. but this decision once made is irrevocable. explicitly or by his conduct. On discovering the misrepresentation. a misrepresentation makes a contract voidable rather than void.

CA ‡ D sold a car to a fraudulent purchaser F and accepted F's payment by cheque. [This decision has subsequently been doubted but not overruled. The cheque bounced. By the time the car was eventually found. D was allowed to rescind his contract with F and recover the car: M had never had good title and so could not transfer ownership to PP.] . notice to the relevant authorities may be sufficient. Where it is impracticable to notify the other party of an intention to rescind. and D immediately notified the police and the AA.Car & Universal Finance v Caldwell [1964] ‡ Car & Universal Finance v Caldwell [1964] 1 All ER 290. who had bought it in good faith. F had sold it to M (who knew of its history) and M had sold it on to PP.

who owned a pub. In any event. and rescission for innocent misrepresentation would not allow C to rescind one term but keep the rest of the lease. ‡ .2(1) of the Misrepresentation Act 1967. Park J ‡ CC. C's case for misrepresentation had not been made out on the facts.Inntreprenneur v Sweeney (2002) ‡ Inntreprenneur v Sweeney (2002) Times 26/6/02. is limited to damages. D contended that the effect of the clause had been misrepresented to him at the time of signing and that he should be released from it. sought an injunction to compel the tenant D to comply with a "tie" clause in the lease. whether at common law or under s. The judge said the remedy for negligent misstatement.

ownership or nature of the subject-matter of the contract). we shall say. We distinguish three kinds of mistake. . and they are not all treated the same. A mutual mistake occurs when each party is mistaken as to the intentions of the other in respect of the contract. occurs when both parties make the same mistake (eg as to the existence. or as to the nature of a document being signed. and a unilateral mistake occurs when just one party is mistaken as to the identity or intention of the other.MISTAKE ‡ Various mistakes may occur in the negotiations leading to the formation of a contract. though different writers use different names and different classifications. A common mistake.

or which never existed at all .that is. If the contract concerns res extincta . subject matter which at the time of the contract no longer exists.Common Mistake ‡ Two kinds of common mistake render the contract void. .the contract is void.

Couturier v Hastie (1856) ‡ Couturier v Hastie (1856) 10 ER 1065.but denied the seller's claim for payment.it is common commercial practice to buy "a risk" rather than a cargo as such . . HL ‡ A contract was made for the sale of a cargo of corn which (unknown to either party) had already been sold. The House of Lords did not declare the contract void directly .

CA ‡ A person took out an insurance policy on the life of a person who (unknown to either party) was already dead.Scott v Coulson [1903] ‡ Scott v Coulson [1903] 2 Ch 249. . and the Court of Appeal held the contract was void.

The "seller" is giving no value for the consideration given by the "buyer". is also void. .Res Sua ‡ A contract involving a common mistake as to res sua. where the subject matter already belongs to the supposed buyer.

HL ‡ P leased from D a salmon farm which. was P's property all the time. it later emerged. but made an order in its equitable jurisdiction that D should have a charge on the property based on the value of the improvements he had made.Cooper v Phibbs (1867) ‡ Cooper v Phibbs (1867) LR 2 HL 149. . The House of Lords held the contract void for common mistake.

‡ In general.will not invalidate a contract even if it relates to a matter of fundamental importance. for example . any other common mistake .as to the quality of goods sold. .

HL ‡ A manager was made redundant and compensation was agreed.Bell v Lever Brothers [1932] ‡ Bell v Lever Brothers [1932] AC 161. The House of Lords said the contract was valid in spite of the common mistake as to the security of his employment: there was no deliberate deception and the common mistake as to quality was not enough. it then emerged that he could have been dismissed for misconduct. .

.but only as to its authorship. CA ‡ P bought a painting which both parties believed to be by Constable but turned out not to be.a particular painting . saying that there was no mistake as to the subject matter . the Court of Appeal upheld the validity of the contract.Leaf v International Galleries [1950] ‡ Leaf v International Galleries [1950] 1 All ER 693.

and that was not enough to make the contract void. not its essential nature. .Harlington & Leinster v Christopher Hull [1990] ‡ Harlington & Leinster v Christopher Hull [1990] 1 All ER 737. There was no "sale by description". CA ‡ A dealer making no claim to any special expertise sold a painting which both he and the purchaser (on expert advice) believed to be by Münter. nor was the picture of "unmerchantable quality". The common mistake was as to its value. because it could still be appreciated as a painting no matter who had painted it. The Court of Appeal said that the contract was still binding when the picture was found to be a fake: the purchaser had seen the picture and bought it as seen. and which was described as such in the invoice.

. Refusing his application. the risk was clearly on the buyer and there was no room for the doctrine of mistake. and he sought rescission for common mistake. Hoffmann LJ said the first question was whether the contract expressly or impliedly allocated the risk of such a discovery. Since the property was sold "subject to all easements". This caused considerable disruption to P's development plan.Sindall v Cambridgeshire CC [1994] ‡ Sindall v Cambridgeshire CC [1994] 3 All ER 932. CA ‡ A developer P bought a site from DD and then found an unsuspected sewer running under the land.

a recent decision of the Court of Appeal casts grave doubt on this. Specific performance might be refused. for example. or rescission ordered on such terms as the court considers just.‡ It was formerly thought that the courts' equitable discretion might be called into play to relieve the hardship of the common law in cases where a common mistake is not enough to invalidate the contract. However. .

[But see now Great Peace below.] ‡ . The tenant should be given the choice of surrendering the lease or of continuing it at the agreed rent as soon as this had been legitimated. D's claim to avoid the contract for common mistake failed in the Court of Appeal even though the mistake was clearly fundamental to the negotiations. when they discovered the mistake. CA ‡ The parties negotiated the lease of a flat they believed was not rent-controlled. P sought repayment of the excess rent and succeeded. but the Court agreed that it might be set aside in equity on such terms as the court considered just and reasonable.Solle v Butcher [1949] ‡ Solle v Butcher [1949] 2 All ER 1107.

and D then claimed common mistake as to the validity of the former policy. CA ‡ P's motor insurance policy was in fact void for innocent misrepresentation. ‡ . but ordered its rescission in equity. The Court of Appeal held that the contract for £385 was valid at common law.Magee v Pennine Insurance [1969] ‡ Magee v Pennine Insurance [1969] 2 All ER 891. the parties settled a claim for £600 by a payment of £385. When this was discovered.

said Lord Phillips MR. CA ‡ DD made a contract to hire CC's vessel to assist a damaged ship.Great Peace v Tsavliris Salvage [2002] ‡ Great Peace v Tsavliris Salvage [2002] 4 All ER 689. It was impossible to reconcile Solle v Butcher (CA) with Bell v Lever Brothers (HL). DD and CC both believing at the time that it was close by. and Solle v Butcher could not stand. The Court of Appeal rejected DD's claim both in common law and in equity. and DD sought to repudiate the contract. ‡ . This turned out not to be the case.

Mutual mistake ‡ Where each party is mistaken as to the intentions of the other. there is no consensus ad idem and hence no contract: a mutual mistake of this kind may be distinguished from a unilateral mistake (below) by the absence of any objective right answer. .

In fact there were two ships of that name. sailing from Bombay some months apart. The court held the contract was void for mutual mistake. and the parties had understood things differently. ‡ .Raffles v Wichelhaus (1864) ‡ Raffles v Wichelhaus (1864) 159 ER 375. Exchequer ‡ PP sought to enforce a contract for a cargo of cotton "ex Peerless out of Bombay". and gave judgment for DD.

. but the courts have increasing used equity to set aside a contract where the other party took unfair advantage. Such a mistake may be the result of misrepresentation or may be a mere error by the mistaken party. a unilateral mistake does not generally invalidate a contract.Unilateral mistake ‡ A unilateral mistake occurs when just one party is mistaken as to some aspect of the contract. and the other is or is presumed to be aware of this mistake. At common law. in the absence of any misrepresentation.

a sample of which D had inspected . and the buyer has every opportunity of inspecting the goods for himself. .it was for a quantity of oats. said Cockburn CJ. the principle caveat emptor applies.Smith v Hughes (1871) ‡ Smith v Hughes (1871) LR 6 QB 597. The contract was quite clear .and there had been no misrepresentation. D wanted old oats and thought that was what he was getting. QB ‡ P offered some oats for sale. Where a specific article is offered for sale without any express or implied warranty. since the two minds were ad idem on the purchase and sale of oats. The Court of Queen's Bench said the contract was valid. and D agreed to buy them: P knew they were new oats and thought that was what D wanted. and at variance only as to their quality. so P could not rely on a mistake induced by his own carelessness.

found it to be hemp. the judge found a mutual mistake in that one could not state with certainty which commodity formed the basis of the contract. the auctioneer realised the mistake but said nothing. The catalogue description of the lots was not clear and a reasonable person could easily have believed that two bales of hemp were being offered. in that the second bale did objectively contain tow. and put up two lots with identical markings. and bid for the other on the assumption that it was hemp too. Lawrence J ‡ PP offered various amounts of hemp and tow at auction. Although at first this appears to be a unilateral mistake.Scriven Bros v Hindley [1913] ‡ Scriven Bros v Hindley [1913] 3 KB 564. Since the price of hemp is considerably higher than that of tow. . the contract was therefore void. D inspected one.

and must have known it to be a mistake. This was an error: the price should have been "per piece". and PP accepted. and since all the preliminary negotiations had been on a "per piece" basis (as was the custom of the trade). and quoted a certain price "per pound". Singleton J ‡ DD offered to sell P 30000 hare skins. The judge dismissed P's claim for delivery at the quoted price: he could not reasonably have supposed that the offer expressed DD's real intention.Hartog v Colin & Shields [1939] ‡ Hartog v Colin & Shields [1939] 3 All ER 566. ‡ .

The Court of Appeal upheld Wheeler QC in ordering rectification. When the time came for the next rent review. PP therefore sought rectification of the contract. DD refused either to agree to PP's proposed rent or to submit to arbitration. Where one party knew the document did not give effect to the parties' intention. the second renewal omitted the reference to arbitration: DD were aware of this omission but said nothing. Through a clerical error on PP's part. CA ‡ DD held a lease from PP. . and DD counterclaimed for a declaration that they were entitled to occupy the premises rent free until the lease expired. he was estopped from resisting rectification in order to take advantage of the other's error.Bates v Wyndham's Lingerie [1981] ‡ Bates v Wyndham's Lingerie [1981] 1 All ER 1077. whose terms included an option to renew at a rent agreed between the parties or determined by arbitration.

on the pretence (falling short of misrepresentation) that those additional rights were trivial. the Court of Appeal said that where one party intends the other to be mistaken as to the terms of their agreement. and the other may be entitled to rectification . and makes false and misleading statements to divert the other's attention from that mistake. CA ‡ A company DD who had acquired a lease of property owned by PP induced PP to enter a new contract granting them additional rights. he may be bound by the agreement which the other party thought was being made. Dismissing DD's appeal.New Towns Commission v Cooper [1995] ‡ New Towns Commission v Cooper [1995] 2 All ER 929.

this was a double error. as the letter should have repeated the original offer of $155k. particularly where the results were grave. But in the instant case. but PP refused. PP sued for the agreed payment. which PP accepted. DD accepted liability for the delay and offered $155k in compensation. was delayed in port while it was searched by Nigerian officials. Mance J ‡ A ship owned by PP. carrying arms exported by DD. the error was not so obvious as to make the contract void. DD's solicitors then sent a letter offering £150k. ‡ ‡ . and the judge said equitable relief was available in principle in cases such as this.OT Africa v Vickers [1996] ‡ OT Africa v Vickers [1996] 1 Lloyds Rep 700.

Mistaken identity ‡ A special situation arises where one party makes a unilateral mistake as to the identity of the other because of a deliberate deception. that at the time of the contract he regarded this matter of identity as being of crucial importance. that the other was aware of this intention. even as a misrepresentation. A party seeking to avoid a contract on grounds of mistaken identity. Although remedies for misrepresentation may then be available. the law has imposed a fairly stringent test in order to protect an innocent third party to whom the goods in question may have been resold. must therefore show that he intended to contract with some particular person other than the one with whom he contracted in fact . and that he took reasonable steps to verify the other's identity.a mere false name is not sufficient. although in cases of deception this is usually fairly obvious. .

.Mistaken identity ‡ It is in respect of the third requirement that avoidance most often fails. but in most contracts for the sale of goods the seller will sell happily to anyone who is prepared to pay the price. Five cases show the difficulties the courts have encountered in this area. Where the contract is one involving some particular skill (eg ability as a painter) then it is fairly easy to show that it was considered important to contract with Picasso and no one else.

purported to represent the highly respectable firm of Blenkiron & Co (123 Wood Street) and so obtained goods from RR without paying for them. because they thought they were dealing with Blenkiron & Co. HL ‡ A rogue Blenkarn. selling them on to AA who bought in good faith. .Cundy v Lindsay (1878) ‡ Cundy v Lindsay (1878) LR 3 AC 459. When RR sought to recover the goods (which had never been paid for) the House said they were entitled to do so: they had no contract with Blenkarn. writing from 37 Wood Street.

pretending to be Sir George Bullough. He selected about £3000 worth and wrote out a cheque. Horridge J ‡ A man X went into a jeweller's shop and asked to see some jewellery. The judge distinguished Cundy v Lindsay as dealing with contracts made by post. and property had therefore passed. even though he was mistaken as to X's identity. in the instant case P had intended to sell to X face-to-face.Phillips v Brooks [1919] ‡ Phillips v Brooks [1919] 2 KB 243. The jeweller P checked the address X gave in a directory and then allowed X to take the jewellery. . but failed. who had bought it from X in good faith. X (a rogue) then vanished and the cheque bounced: P sought to recover the jewellery from D.

CA ‡ A man X called on two sisters PP advertising a car for sale and agreed to buy it. PP reluctantly took the cheque and allowed X to take the car. The Court of Appeal distinguished Phillips v Brooks (without actually overruling it in view of its age) and said the offer to sell by cheque had been made only to Mr Hutchinson. and PP sought to recover the car from an innocent third party D to whom X had sold it. the contract of sale was therefore void and PP were entitled to the car. .Ingram v Little [1960] ‡ Ingram v Little [1960] 3 All ER 332. Having checked the address in the telephone directory. the cheque bounced. X disappeared. persuading PP to accept a cheque by claiming to be a Mr Hutchinson of a certain address.

P agreed to accept a cheque and let X take the car away. showing a studio pass as evidence of his identity. following Phillips v Brooks and distinguishing and doubting Ingram v Little. The Court of Appeal rejected P's claim. and a man X came to see it. the cheque bounced. X disappeared. X said he would like to buy it and introduced himself as Richard Green (a well-known actor).Lewis v Averay [1971] ‡ Lewis v Averay [1971] 3 All ER 907. who had bought it in good faith. CA ‡ A Bristol postgraduate student P advertised a car for sale. ‡ . and P sought to recover the car from D.

and subsequently approved the loan. . [Note: the Hire Purchase Act 1964 provides that a person who buys in good faith from a "hire purchaser". The rogue sold the car to an innocent purchaser D and subsequently defaulted on the loan. believing him to be an outright owner.] The Court of Appeal (by 2-1) and the House of Lords (by 3-2) decided that CC were entitled to repossess the car: they clearly intended to hire the car only to the person whose credit they had checked. acquires a good title.Shogun Finance v Hudson [2004] ‡ Shogun Finance v Hudson [2004] 1 All ER 215. and the rogue had not acquired any title that could be transmitted to the purchaser D. HL ‡ A rogue bought a car on hire purchase from a dealer. producing a driving licence (probably stolen) that showed a false name. The finance company CC carried out the normal credit checks against the name on the licence.

and it is wrong that the courts should resort to very technical distinctions to decide essentially similar cases in different ways. frauds of this sort almost always result in a conflict between two quite innocent parties. The law should be clear one way or the other. and that cannot happen unless the doctrine of stare decisis is properly applied . and there will always be hard cases. Sedley LJ (dissenting in Shogun v Hudson) said the law is still unclear: this is evidently true.‡ As Lord Denning MR pointed out in Lewis v Averay.

which in turn requires that the document should have been radically different in nature from the one the signer believed he was signing. . and that his mistake was not due to his own carelessness.Non est factum ‡ A special situation arises when a person signs a document (often because of deception) believing it to be other than what it is. In order to invalidate a contract unwittingly entered in this way. In general such a mistake has no effect on the validity of the contract: in L'Estrange v Graucob [1934] 2 KB 394 the Court of Appeal confirmed the general rule that any person who signs a document is taken to have agreed to its terms whether or not he has actually read it."not my deed" . the signer must therefore show non est factum .

which P now sought to enforce. The court said the notes were void: D had believed (without negligence on his part) that the document he was signing was wholly other than what it really was. under the belief that he was witnessing to a deed executed by someone else. Russell CJ ‡ D signed a document partly covered with blotting paper.Lewis v Clay (1897) ‡ Lewis v Clay (1897) 67 LJQB 224. . In fact he had signed four promissory notes.

HL ‡ A woman A signed a transfer of lease in the belief that it was a deed of gift of the same property. . and sought to avoid the document. The House of Lords said she was bound by her signature: the difference between the two documents was not sufficiently radical for non est factum to apply.Saunders v Anglia Building Society ‡ Saunders v Anglia Building Society (Gallie v Lee) [1970] 3 All ER 961.

but D claimed his knowledge of English was so poor that he did not know what he was signing. but also of the awareness that he did not understand it. But a person who knowingly signed a document in a language which he could not read or could not understand had only himself to blame. When the companies failed the bank PP sought to invoke the guarantees. Mental incapacity or drunkenness might deprive a party not only of his understanding of the contract. CA ‡ A man D signed a number of personal guarantees to secure loans to a group of companies of which he was the principal director. said Millett LJ. ‡ . even if the other party was aware of his disability. The Court of Appeal upheld the judge's order in PP's favour: even assuming the truth of D's claim (about which their Lordships had grave doubts) he had no defence in law.Barclays Bank v Schwartz (1995) ‡ Barclays Bank v Schwartz (1995) Times 2/8/95.

and makes the contract voidable: the threatened illegality may be either criminal or tortious.DURESS AND UNDUE INFLUENCE ‡ Duress is an illegal threat applied to induce a party to enter a contract. and although physical violence is the most obvious form of duress a threat to property or profits is in principle also sufficient. .

When the international value of the dollar dropped. Eight months later they sought to recover the excess. ‡ . but had delayed before taking action and so affirmed the later contract by their conduct. Mocatta J ‡ DD had agreed to build a tanker at a price to be paid in five instalments in dollars. but failed: the judge said PP had a good argument based on duress.North Ocean Shipping v Hyundai (The Atlantic Baron) ‡ North Ocean Shipping v Hyundai (The Atlantic Baron) [1978] 3 All ER 1170. DD demanded an increase in the agreed payments and threatened not to complete the ship unless such an increase was given. PP made the extra payments under protest and then took delivery.

The Court of Appeal said the test to be applied in such a case was whether the conduct of the stronger party was oppressive or unconscionable. CA ‡ The owners PP of a garage made a leaseleaseback agreement with an oil company on terms which placed them at a disadvantage. and sought to have the agreement set aside. not whether the bargain was fair. .Alec Lobb v Total Oil [1985] ‡ Alec Lobb v Total Oil [1985] 1 All ER 303. and declined to intervene.

knowing that had he not done so his carrier P would have refused to fulfil his existing contract and so lost D a major customer. but held that economic duress was established where a producer D had reluctantly signed a contract with revised terms of carriage.Atlas Express v Kafco [1989] ‡ Atlas Express v Kafco [1989] 1 All ER 641. In cases where an existing contract is to be varied. the courts have often been able to apply the strict rules of consideration and so avoid the new contract in cases where there was no real agreement. Tucker J ‡ The judge was careful to distinguish between economic duress and legitimate commercial pressure. . however.

it was still capable of amounting to unlawful duress so far as the English courts were concerned.Dimskal Shipping v ITWF (The Evia Luck) ‡ Dimskal Shipping v ITWF (The Evia Luck) (No. but once at sea sought a declaration that the contracts were void and orders for repayment and additional damages. Having established that English law applied to the situation (because of the terms of the disputed "agreement"). HL ‡ A ship in a Swedish dock was visited by representatives of the ITWF. The owners reluctantly agreed.2) [1990] 1 Lloyds Rep 319. who threatened to "black" the ship and its cargo unless the captain and owners agreed to certain conditions including new contracts for the crew and payments to the ITWF. ‡ . the House of Lords said that although industrial action of this kind was lawful in Sweden.

CTN Cash & Carry v Gallaher [1994] ‡ CTN Cash & Carry v Gallaher [1994] 4 All ER 714. and there were policy reasons for not doing so. To extend the law to cover "lawful act duress" would be going too far. CA ‡ A threat to withdraw credit facilities if PP did not pay for a consignment of goods stolen from a warehouse was unattractive and questionable business practice. . but was not enough to constitute duress making the agreement to pay void. said Steyn LJ.

but is best described as improper pressure short of duress. Undue influence is not precisely defined . it leaves a broad discretion to the court to do what is just and reasonable in the circumstances . .‡ The equitable counterpart of duress is undue influence. allowing the weaker party to avoid the contract as long as he does so without prior affirmation or undue delay.like most equitable doctrines.

The House of Lords held this was improper pressure. HL ‡ A son forged his father's signature on several promissory notes. though not duress.) ‡ . (A second reason for the decision was the illegality of a contract to suppress a prosecution. and that the mortgage contract was consequently invalid.Williams v Bayley (1866) ‡ Williams v Bayley (1866) LR 1 HL 200. and the bank threatened to prosecute the son (the possible penalty being transportation for life) unless the father gave them a mortgage covering the value of the notes.

Each case would turn on its own facts. and this risk (coupled with the fact that the wife's guarantee is not on its face to her financial advantage) should put the lender on enquiry. said Lord Browne-Wilkinson. The House of Lords said the informality of business dealings between spouses raises a substantial risk that the husband has (negligently or otherwise) not accurately stated to his wife the nature of the liability she is undertaking. at which she should be warned of the risk she was taking and urged to take independent legal advice. but it would generally be sufficient for the creditor to insist that the wife attend a meeting in the absence of her husband. When the loan was not repaid and the bank sought possession of the house. should apply to other cohabitees tied by an emotional relationship. The same principles. HL ‡ A wife who was joint owner of the family home signed documents agreeing to its being put up as collateral for a loan made to the husband's failing business. . he said.Barclays Bank v O'Brien [1993] ‡ Barclays Bank v O'Brien [1993] 4 All ER 417. she alleged undue influence by her husband acting as the bank's agent.

a solicitor over his client (Wright v Carter [1903] 1 Ch 27. CA). The burden of proof is generally on him. and perhaps also a husband over his wife (Barclays Bank v O'Brien [1993] 4 All ER 417.‡ Even given a manifestly disadvantageous contract. . it may be presumed subject to contrary evidence that a religious leader has exercised undue influence over his disciple (Allcard v Skinner (1887) LR 36 ChD 145. a parent over his child (Powell v Powell [1900] 1 Ch 243). for example. HL) or a banker over his customer (Lloyds Bank v Bundy [1974] 3 All ER 757. the weaker party must show that the other did in fact exert undue influence upon him. CA). but he is powerfully assisted by a rebuttable presumption of undue influence in cases where a confidential relationship exists in which the other party is clearly dominant. CA). Once given the manifest disadvantage.

‡ The rule therefore appears to be that a contract will be set aside for undue influence where actual undue influence can be proved. . or where undue influence is rebuttably presumed because of a relationship such as solicitor/client or doctor/patient. or because of a demonstrable relationship of actual trust and confidence.

The bank advised her in writing to take independent legal advice. PP could not be said to have taken reasonable steps to avoid being fixed with constructive notice of E's undue influence over her. but she did not do so. and the bank sought possession of D's flat. agreed to put up her flat as collateral security for an overdraft. D had committed herself to an unlimited guarantee of the company's debts and obtained next to nothing in exchange. CA ‡ E's travel company was in financial difficulties. In the absence of any explanation. Millett LJ said the transaction was not merely to the manifest disadvantage to the defendant. with whom he was on friendly terms. . but was one which (in the traditional phrase) "shocks the conscience of the court". Affirming the decision of Mr Recorder Harrod in the County Court.Credit Lyonnais v Burch [1997] ‡ Credit Lyonnais v Burch [1997] 1 All ER 144. The overdraft was granted but the company went into liquidation shortly afterwards. and an employee D. given the manifest disadvantage to D.

In a contract of employment. which in turn precedes the employer's duty to pay wages. but with an executory contract there may be room for manoeuvre. . of course.DISCHARGE OF A CONTRACT ‡ A contract may provide or imply that performance is due from each party at a certain time. In the case of an executed contract. the employer's obligation to provide safe working conditions comes before the employee's duty to do the work. one party has already performed his obligations and it only remains for the other to reciprocate. for example.

He may claim.g. or has become impossible to perform in circumstances falling short of frustration (e. for example. or that it has been frustrated. that the contract has been discharged or varied by agreement between the parties.DISCHARGE OF A CONTRACT ‡ Where a party fails to perform his obligations. when an employee is temporarily too sick to attend work). he may offer one of a number of excuses which will prevent his being in breach of contract. or that he has exercised his right to terminate the contract in view of the other party's prior or anticipated breach . or that there is an express contractual provision allowing non-performance.

PERFORMANCE ‡ The old common-law rule is that one party to a contract is entitled to insist on the other's performing his obligations to the letter. .

Lord Atkin said that while the law might ignore microscopic deviations. HL ‡ A contract was made for the supply of barrel staves half an inch thick.Arcos v Ronaasen [1933] ‡ Arcos v Ronaasen [1933] AC 470. . and the House of Lords held the purchaser (who could by then have got the staves more cheaply elsewhere) was entitled to reject the consignment even though the extra sixteenth would make no difference to the staves' usefulness. and if a seller wanted a margin he should stipulate for it. The staves were about 9/16 inch thick when delivered. "half an inch" did not mean "about half an inch".

Lord Wilberforce suggested that the decision in Arcos is excessively technical and is due for re-examination. Obiter. HL ‡ A shipping line chartered a ship described in the charterparty as having been built by a particular company and having a particular hull number. The House of Lords said the rule of strict compliance applied to sale of goods cases but not to cases like the present one: the words in the charterparty were meant to identify the ship.Reardon Smith v Hansen-Tangen [1976] ‡ Reardon Smith v Hansen-Tangen [1976] 3 All ER 570. and PP claimed the right to reject. . The ship delivered had in fact been built by subcontractors and its hull number was different. not to provide essential conditions to be complied with.

41 of the Law of Property Act 1925 says a stipulation as to the time of performance is not to be regarded as being of the essence of the contract. They gave such notice on 17 June. or where a party who has been subjected to unreasonable delay gives notice to the party in default. or where the nature of the subject matter or the surrounding circumstances show clearly that time should be of the essence (which will commonly be the case in mercantile contracts). this being the parties' intention. The House of Lords said that although s. the buyers giving fifteen days' notice of their readiness to collect it. HL ‡ A contract for the sale of soya bean meal provided for a delivery to be made in June. making time of the essence from that point .Bunge v Tradax [1981] ‡ Bunge v Tradax [1981] 2 All ER 513. there are exceptions where the contract itself expressly stipulates that time conditions must be strictly complied with. and the sellers claimed the right to repudiate for breach of an essential term.

and only 6 ft deep at the point where the depth was required for diving. and counter-claimed in damages. D refused to pay the balance of the price. The pool was duly built. but declined to award any other damages because there was no significant difference in value between a 7 ft 6 in pool and a 6 ft pool. HL ‡ A houseowner D agreed with PP that they would build a covered swimming pool in his garden. but was shallower than specified. The judge (later upheld by the House of Lords) awarded £2500 general damages for D's loss of pleasure and amenity. to specifications including a depth of 7 ft 6 in. .Ruxley Electronics v Forsyth [1995] ‡ Ruxley Electronics v Forsyth [1995] 3 All ER 268.

not an open offer that can be withdrawn prior to its full acceptance.‡ If the promisee prevents the promisor from completing performance. the situation changes and the promisor can generally sue for breach of contract if the court is ready to imply a term that he would not be so prevented. [Note the distinction between this and the "offer of reward" cases: here there is a completed contract.] .

. and were entitled to be paid. and attempted to do so at 8. PP had fulfilled their part of the bargain by tendering the oil before the end of March. but DD refused to accept delivery at that late hour.30 pm on 31 March. Rolfe B ‡ PP agreed to deliver a consignment of oil to DD before the end of March.Startup v Macdonald (1843) ‡ Startup v Macdonald (1843) 134 ER 1029. The judge awarded PP the agreed price of the oil on the basis that "tender is equivalent to performance" so long as the tender is made under circumstances allowing the recipient a reasonable opportunity to examine the goods or money tendered.

that s.29(5) of the Sale of Goods Act 1979 provides that tender of delivery. . what is reasonable being a matter of fact. however.‡ Note. must be made at "a reasonable hour". to be effective.

that a party performs part of his obligation but fails to complete it.Partial performance ‡ It may be. of course. Once again. the common-law rule in such cases is that he cannot claim any payment or performance from the other party. .

for an agreed wage of 30 guineas. Kenyon CJ ‡ A seaman Cutter signed on a second mate on a voyage from Jamaica to Liverpool.Cutter v Powell (1795) ‡ Cutter v Powell (1795) 101 ER 573. he had not performed his obligations and that defeated his estate's claim . He died en route and his widow sued for a proportion of his wages. Her claim failed: the terms of the contract were clear. and although C's failure to complete his part of the bargain was clearly not due to any fault on his part.

g. by acceptance of a short delivery of goods). First. This latter doctrine. less than substantial) but is impliedly accepted by the promisee (e. a party who has substantially performed his contractual obligations is permitted to sue on the contract while remaining liable in damages to the extent of his non-performance. however.overlapping equitable principles ‡ Two overlapping equitable principles have been developed to mitigate the effects of the common law rule. applies only where the promisee is in a position to accept or reject the partial performance . the promisor may generally claim proportionate remuneration quantum meruit. if performance is partial (that is. Second.

he was entitled to a quantum meruit payment of £50 for the work he had already done. a fee of £100 being payable on completion. D undertook a substantial amount of research and began writing. however. Tindal CJ ‡ A historian P was engaged to write a volume for a series of children's books to be published by DD. The judge found that by declining to go ahead with separate publication (perhaps because the style of the work if published separately would injure his reputation as a serious historian) P had accepted this abandonment as discharging the contract.Planché v Colburn (1831) ‡ Planché v Colburn (1831) 172 ER 876. but then DD abandoned the entire project. .

it was impossible to describe the contract as having been substantially performed. CA ‡ A builder P contracted to install central heating in D's house. they said. and the estimated cost of repairs being about a quarter of the total price. was limited to cases where the contract had been substantially performed. and D had not had a realistic opportunity of accepting or rejecting the incomplete performance offered. The Court of Appeal set aside the trial judge's order for payment subject to a deduction for the cost of putting right the defects: a plaintiff's right to recover subject to set-off. but the work when completed was seriously defective. Here the system simply did not heat the house adequately.Bolton v Mahadeva [1972] ‡ Bolton v Mahadeva [1972] 2 All ER 1322. .

but where the contract is executed then other consideration must be found. since each party gives consideration by releasing the other from future obligations. In the case of an executory contract there is no difficulty. the same applies to any discharge. but the contract does not itself become void. It remains alive. If a contract is discharged. all further obligations arising thereunder are annulled. . PC. or supported by written evidence.Discharge and waiver ‡ An agreement between the parties can extinguish an existing contract as long as this agreement is made under seal or is supported by new consideration. Where the law requires a contract to be in writing. said Lord Sumner in Hirji Mulji v Cheong Yue [1916] AC 497. for the purpose of vindicating rights already acquired under it by either side.

Lindley J said that where a term of a contract is waived by one party at the request of the other. to be delivered during June. D asked P to delay the delivery and P agreed. In August P pressed D to accept delivery. At the beginning of that month. the party for whose benefit the waiver was granted cannot subsequently repudiate the waiver even if he gave no consideration. Common Pleas ‡ P agreed to supply D with a quantity of iron. D claimed that since P had not tendered delivery in June the contract could no longer stand. and in October P sued for breach.Hickman v Haynes (1875) ‡ Hickman v Haynes (1875) LR 10 CP 598. The court found for P. . and again two weeks later.

but D agreed to wait another three months. Three months after that. the car was delivered and D refused to accept it.Rickards v Oppenheim [1950] ‡ ‡ Rickards v Oppenheim [1950] 1 All ER 429. he could resume his rights on giving reasonable notice. But having granted the extension. and D gave notice that he would not now accept the car unless it was delivered within the next four weeks. Denning LJ said that whether it be called waiver or forbearance or agreed variation or substituted performance does not matter: it is a kind of estoppel. By the agreed date the work had not been completed. but a few cases are repeated here. ‡ . The rules governing the finality of part-payment in satisfaction of a debt are discussed elsewhere in the context of consideration. CA D placed an order with PP for a new car. and having made a promise intending it to be relied upon he could not have gone back on it. to be built specially and completed within seven months. The work was still not done after that time. The Court of Appeal upheld his right so to refuse. he could not have refused delivery merely on the grounds that the original date had not been met. although he had waived his rights to insist on compliance with the original date.

Payment of a lesser sum on the day of satisfaction of a greater. P then sued for the balance and succeeded on a technicality of pleading. but where payment is made in a different form (e.50]in November. with the creditor's agreement. CP ‡ D owed a debt to P and was due to pay £8-10-0 [£8. but the whole court made some further points of importance. .11] in October and P accepted this in full settlement.Pinnell's Case (1602 ‡ Pinnell's Case (1602) 77 ER 237. at P's request he paid £5-2-2 [£5. the court will generally assume without enquiring too deeply that the creditor derived some benefit from the change sufficient to provide consideration for his agreement to forgive the balance of the debt. cannot satisfy the debt as a whole.g. goods instead of cash) or at an earlier time or a different place from that previously specified.

and D could not be held to that promise. D claimed the interest added automatically to a judgment debt not paid promptly. but agreed to accept payment by instalments over five years and not to take any further proceedings to enforce the judgment. When all the instalments had been paid. HL ‡ D obtained a judgment debt against P. P had given no consideration for D's promise not to make such a claim. .Foakes v Beer (1884) ‡ Foakes v Beer (1884) LR 9 AC 605. and the House of Lords reluctantly upheld her claim.

which he knows will be acted on. . and PP then claimed for the "arrears". When a party to a contract makes a promise to the other. and PP agreed to reduce the rent by half. When war broke out. the equitable principle of promissory estoppel makes that promise binding on him until such time as he gives reasonable notice of his intention to resume those rights. that he will not enforce his strict legal rights. Denning J ‡ In 1937 the owners PP leased a block of flats in London to DD at an agreed rent. many flats were left empty as people moved out to escape the bombing. they could not go back on their promise to accept a reduced rent for the earlier years. Denning J said that although PP were once again entitled to the rent originally agreed after the war ended.Central London Property v High Trees House [1947] ‡ Central London Property v High Trees House [1947] KB 130. DD paid the reduced rent until the end of the war.

CA ‡ PP were a small firm in some financial difficulties. Eventually D's wife offered to pay £300 in full settlement. but subsequently sued for the balance. The Court of Appeal upheld their claim.D & C Builders v Rees [1965] ‡ D & C Builders v Rees [1965] 3 All ER 837. said Lord Denning MR. . Where a genuine agreement was reached that the creditor would accept a lesser sum in settlement of a debt. saying that if this was not accepted nothing would be paid. PP reluctantly agreed. equity might then intervene to prevent his insisting on his full legal rights if it would be unjust and unreasonable for him to do so. and saying that a cheque was no different from cash. distinguishing Sibree v Tripp and disapproving some later decisions. but this was not such a case. who were owed nearly £500 by D for work they had done.

it must be shown that the creditor undertook (for valuable consideration) to accept less than the full amount due. Although a contract can be discharged by accord and satisfaction. and the Court of Appeal upheld their right to claim the balance. ‡ . D considered the bill too high and sent a cheque for a lower amount "in full and final settlement". the test was what the creditor had led the debtor as a reasonable person to believe. PP cashed the cheque but then informed D that they would not accept it as a full and final settlement. CA ‡ A building firm PP sent D an invoice for work done.Stour Valley Builders v Stuart (1993) ‡ Stour Valley Builders v Stuart (1993) Times 9/2/93.

The original theory was that frustration discharged the contract through an implied term to that effect.FRUSTRATION ‡ The old common law. had a doctrine of absolute contract under which contractual obligations were binding no matter what might occur. as illustrated in Paradine v Jane (1647) 82 ER 897. . but the modern view is that the parties' actual intentions are irrelevant and that it is up to the courts to impose a just and reasonable solution. The fact that land was occupied by a foreign army during the English Civil War did not excuse the tenant from his obligation to pay rent for the land. The doctrine of frustration was developed as a way of easing the hardship this rule might cause in cases where the contract could not be properly fulfilled through no fault of either party.

. Blackburn J ‡ PP agreed to hire DD's music hall for a series of concerts on certain dates. but before those dates arrived the hall was destroyed by fire. and PP could not recover damages for non-completion.Taylor v Caldwell (1863) ‡ Taylor v Caldwell (1863) 122 ER 309. The judge said there was an implied term of the contract that it would be discharged by the destruction of the hall.

and six weeks later (with the ship still aground) the charterers repudiated the contract. .Jackson v Union Marine Insurance (1874) ‡ Jackson v Union Marine Insurance (1874) LR 10 CP 125. dangers and accidents of navigation excepted. the length of the delay (which in fact continued for another six months) was beyond what the parties would have contemplated and frustrated the contract. Exch Ch ‡ A ship was chartered to proceed with all dispatch. The court held that while the express words of the exception might cover the interruption. from Liverpool to Newport and thence to San Francisco with cargo. The day after sailing the ship ran aground. A voyage made after the ship had been repaired would have been a quite different enterprise from that originally contracted for.

the fleet was assembled but the royal review was cancelled because of the King's illness. because the review was not the sole foundation of the agreement and the cruise around the fleet could still have taken place.Herne Bay Steamboat v Hutton [1903] ‡ Herne Bay Steamboat v Hutton [1903] 2 KB 683. The Court of Appeal said the contract had not been frustrated. CA ‡ An agreement was made that PP's ship would be at DD's disposal on a certain date "for the purpose of viewing the naval review and for a day's cruise around the fleet". . On the day in question.

The coronation was postponed at short notice owing to the King's illness. and the sole foundation of the contract had been destroyed . CA ‡ D agreed to hire briefly from P a flat in Pall Mall. although the purpose of the hire had not been stipulated in the contract. The Court of Appeal turned down the claim and said the contract had been frustrated. but P sought to recover the agreed hiring fee.Krell v Henry [1903] ‡ Krell v Henry [1903] 3 KB 740. the circumstances were such that both parties clearly knew it. intending to use it with friends to watch the coronation procession as it passed.

the interruption was so serious that any resumption of the contract when it became possible would be fundamentally different from performance as originally envisaged. . The House of Lords agreed that government action had frustrated the contract. and this order was still in effect eighteen months later. and made provision for this period to be extended if there were difficulties or delays. In 1916 the Minister of Munitions ordered DD to stop work and to disperse and sell the plant. HL ‡ The parties agreed in 1914 that DD would construct a reservoir for PP within six years.Metropolitan Water Board v Dick Kerr & Co [1918] ‡ Metropolitan Water Board v Dick Kerr & Co [1918] AC 119.

there was no frustration in this case because the likely delay (ten years or so) in DD's being able to carry out their plans was small in comparison with the period of the lease. The House of Lords were divided as to whether the doctrine of frustration could be applied to a long-term lease. but agreed that even if it could in principle. HL ‡ In 1936 DD had taken a 99-year lease on property belonging to PP with the intention of building a shopping centre.Cricklewood Property v Leightons [1945] ‡ Cricklewood Property v Leightons [1945] 1 All ER 252. . With the outbreak of war such building was prohibited by wartime regulations. and when PP claimed for the ground rent DD refused to pay and claimed the contract had been frustrated.

but decided to ignore his doctor's advice and carried on working. and the group had had to take in a replacement. The judge said the contract had been frustrated. and P sued. Thompson J ‡ A member P of a pop group DD had a contract requiring him to be available for work seven nights a week if required. He fell ill and was advised to reduce his workload.Condor v Barron Knights [1966] ‡ Condor v Barron Knights [1966] 1 WLR 87. P's illness meant he could have broken down at any time. The group replaced him with another performer. .

CA ‡ P was a man of formerly good character.] . as below. so that P would be in breach. The Court of Appeal said since it had become impossible for P to fulfil his contractual obligations the contract had been terminated. but the consequences would have been much the same. sentenced to twelve months' imprisonment for an assault unrelated to his employment. [It is arguable that this should have been treated as self-induced frustration.Hare v Murphy Bros [1974] ‡ Hare v Murphy Bros [1974] 3 All ER 940. and both parties were discharged from further obligations from the beginning of the sentence.

the extent to which it was capable of being performed was inordinately small compared with that contracted for. . but a lengthy strike at the loading port in Canada reduced the maximum number of voyages to two. HL ‡ A ship was chartered for six or seven voyages between Canada and Europe during a ninemonth period. The House of Lords upheld the arbitrator's decision that the contract had been frustrated.Pioneer Shipping v BTP Tioxide (The Nema) [1981] ‡ Pioneer Shipping v BTP Tioxide (The Nema) [1981] 2 All ER 1030.

a loss of use for two years out of ten was not serious enough to amount to a frustrating event. . The House of Lords said this did not constitute frustration. but the street forming the only access to the warehouse was closed for almost two years of that period because of the dangerous condition and subsequently the demolition of another building.National Carriers v Panalpina [1981] ‡ ‡ National Carriers v Panalpina [1981] 1 All ER 161. although there could in some circumstances be frustration when it was impossible to use premises for the specific purpose originally envisaged. HL ‡ PP leased a warehouse from DD for a term of ten years.

.‡ There is no frustration (and the contract remains in force) where supervening events do not render the contract impossible but merely cause extra expense or inconvenience.

the direct sea route from Finland was no longer available and such timber became very difficult to obtain. . DD might have had the timber in stock at their depot in Hull. CA ‡ Under a contract made early in 1914.Blackburn Bobbin v Allen [1918] ‡ Blackburn Bobbin v Allen [1918] 2 KB 467. for all they knew. When war broke out. timber merchants DD agreed to supply PP with a quantity of Finnish timber during the autumn of that year. Allowing PP's claim for breach of contract and denying DD's defence of frustration. the Court of Appeal said PP had no reason to know that war would interfere with delivery. The means of DDs' obtaining the timber was not something that was at the basis of the contract in the minds of the parties when it was made.

. The Privy Council said PP's claim that the contract had been frustrated could not succeed.Maritime National Fish v Ocean Trawlers [1935] ‡ Maritime National Fish v Ocean Trawlers [1935] AC 524. PC ‡ PP chartered a trawler from DD to use for otter fishing. the lack of a licence for the chartered boat was a matter of PP's own choice. which they allocated to three other vessels. knowing that they would need to obtain a licence for this use. They applied for five licences and were granted three. and a party cannot rely on frustration that is wholly or partly self-induced.

an unexpected national shortage of skilled labour meant that the contract took 22 months to complete and cost considerably more than had been envisaged. within eight months and at a pre-determined price. Through no fault of PP. the contract had not become impossible to perform. ‡ .Davis Contractors v Fareham UDC [1956] ‡ Davis Contractors v Fareham UDC [1956] 2 All ER 145. and the rise in costs was a risk that PP must have accepted when making the contract. PP claimed the original contract had been frustrated and sought a quantum meruit payment over and above the contract price. HL ‡ PP agreed to build some houses for the Council. The House of Lords said there had been no frustration.

and the fact that this route was considerably longer and more expensive was irrelevant . The House of Lords disagreed: the route around the Cape of Good Hope was still open.this was a commercial risk taken by the shippers. . HL ‡ In 1956 PP agreed to supply DD with 300 tons of Sudanese groundnuts. A few weeks later the Suez Canal was closed by Israel's invasion of Egypt.Tsakiroglou v Noblee & Thorl [1961] ‡ Tsakiroglou v Noblee & Thorl [1961] 2 All ER 179. to be shipped to Hamburg. and PP claimed this frustrated the contract.

but the contract is not avoided ab initio and past obligations generally remain in force. Section 1(2) gives a right to recover money already paid under such a contract and to withhold anything still payable. but allows the court (if it considers it just) to permit the payee to retain (or claim) an amount not exceeding any expenses he has incurred before termination in pursuance of his obligations. . Section 1(3) then provides that where a party has received some valuable benefit under the contract before its discharge. which applies only to frustrated contracts and not to those terminated in other ways. The common-law rule was that any losses lay where they fell. the court may order him to make an appropriate payment to the other party. and that payments in advance were not recoverable except (partially) through the equitable doctrine of quasi-contract. All further obligations are then annulled. ‡ A contract which is frustrated comes to an end as soon as the frustrating event occurs. Substantial and long overdue changes were made by the Law Reform (Frustrated Contracts) Act 1943. automatically and without further action by either party.Law Reform (Frustrated Contracts) Act 1943.

1m). but may have been of the order of $450k by PP and $50k by DD. The public authorities at short notice withdrew permission for the use of the stadium.Gamerco v ICM/Fair Warning [1995 ‡ Gamerco v ICM/Fair Warning [1995] 1 WLR 1226. PP sought an order for the return of their advance payment. while PP claimed a complete refund. and it was agreed the contract had been frustrated. The court said the Act gave a broad discretion. DD sought to retain the full $50k. The expenses already incurred were disputed. Garland J ‡ A performance contract between promoters PP and agents DD for the pop group "Guns n Roses" required an advance payment by PP of $412k (on a total fee of $1. ‡ . and ordered DD to repay the whole of the advance.

The innocent party can choose to treat the contract as still in force (in which case its terms remain binding on both sides) and sue for damages. or can treat the contract as terminated from the moment he communicates that fact to the other. but past obligations remain in force and past transactions are not reversed. either a breach of a condition or a breach of an innominate term causing very serious consequences. In the latter case.BREACH OF CONTRACT ‡ An innocent party has the right to terminate a contract if the other is in fundamental breach .that is. . all future obligations are then annulled.

unless the buyer has had a reasonable opportunity to examine the goods or (if the contract is for sale by sample) to compare the bulk with the sample . If he accepts the goods. the right to reject is lost and the buyer is limited to damages. Deemed acceptance does not occur. or when after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that he has rejected them. however. the buyer has the right to reject the goods and terminate the contract if the goods supplied are not up to standard. or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller.BREACH OF CONTRACT ‡ In contracts for the sale or supply of goods. Acceptance is deemed to take place when the buyer intimates to the seller that he has accepted the goods. however.

The judge said P had accepted the vehicle by keeping it for three weeks without sending it back. Rougier J ‡ P bought a new car. a reasonable time for inspection and trying out the vehicle had passed. he added.Bernstein v Pamsons Motors [1987] ‡ Bernstein v Pamsons Motors [1987] 2 All ER 220. The engine then seized up because of a drop of sealant that had got into the lubrication system when the car was being assembled. What was reasonable timewise. and over the next three weeks made two or three short trips totalling 140 miles to try it out. depended on the nature of the goods: longer would be needed for a nuclear submarine than for a bicycle. .

Rogers v Parish [1987]
‡ 2 All ER 232, CA ‡ PP bought a new Range Rover; after a few weeks it proved unsatisfactory and was replaced. The replacement was equally unsatisfactory, and attempts to repair various faults were unsuccessful. After five months PP purported to reject the car on the grounds that it was not of merchantable quality and the court of Appeal said they were entitled to do so: the expectations of the purchaser of a Range Rover were higher than those of the purchaser of an ordinary car.

Clegg v Olle Anderson [2003]
‡ Clegg v Olle Anderson [2003] 2 Lloyds Rep 32, CA ‡ CC bought a yacht from DD, but found it was not of satisfactory quality. They complained to DD, and after some inconclusive discussions as to the work that would be needed to rectify the faults, CC rejected the yacht three weeks later and sought return of their money. The Court of Appeal said that if goods are not of satisfactory quality, the buyer's rejection does not have to be reasonable: he can reject for any reason at all, and the only question is whether he has lost that right by accepting the goods. As to that, the time taken in ascertaining what repairs would be needed is to be taken into account in determining "a reasonable time". Bernstein v Pamsons has been much criticised and was decided before the Act was amended in 1994: it no longer represents the law.

‡ Acceptance is not deemed merely because the buyer has asked for or agreed to the repairing of the goods by or under an arrangement with the seller. Moreover, since 1995 the buyer can reject just part of a consignment and accept the rest: specifically, he can reject all the goods, or accept those which conform with the contract and reject the rest, or accept those which conform and some of those which do not, and reject the rest, or accept all the goods.

Ritchie v Lloyd [2007]
‡ Ritchie v Lloyd [2007] UKHL 9 ‡ C bought an agricultural seed drill and harrow from DD. It soon became apparent that it was faulty, and C took it back to DD for repair. DD repaired it by replacing two missing bearings; they told C it was now of "factory gate standard", but would not give any further details. C (who was concerned that he would not be able to test it properly until the same time next year) now sought to reject it even though in fact it was now in good working order. The House of Lords implied a term entitling C to know what the fault had been - without that information he could not make a properly informed choice - and said that in these circumstances C was entitled to reject the goods. ‡ Where one party repudiates the contract before full performance, indicating by his words or deeds that he has no intention of honouring his future obligations, the other has the same choice as before and (if choosing termination) need not wait for an actual breach but can act at once.

Federal Commerce v Molena Alpha [1979]
‡ Federal Commerce v Molena Alpha [1979] 1 All ER 307, HL ‡ The charterers of a ship deducted certain disputed sums from their hire payments, and the owners retaliated by instructing the ship's master not to issue pre-paid bills of lading, thus making the ship practically useless to the charterers. They mistakenly thought they were entitled to do this, but the House said the owners' action was a wrongful repudiation of the contract for which the charterers were entitled to damages. The owners' subjective desire to maintain the contract was irrelevant: it was the overt act amounting to repudiation that counted. ‡

Woodar v Wimpey [1980]
‡ Woodar v Wimpey [1980] 1 All ER 571, HL ‡ The terms of a land contract gave Wimpey the right to rescind the contract under certain circumstances; they honestly but mistakenly believed those circumstances had arisen and purported to exercise their right. Woodar sought damages, but a bare majority in the House of Lords distinguished Molena Alpha and said there was no repudiation. If Wimpey honestly believed they were exercising a contractual right, said their Lordships, they were not disregarding the requirements of the contract and could not be said to have repudiated it.

‡ Most commentators have found it hard to explain these two contrasting decisions. One possibility is that in Woodar the other party relied on an express term of the contract while in Molena Alpha the claim was that there was nothing to prevent their action; another is that in Woodar (and not in Molena Alpha) there was time for the disputed legal question to be settled in court before the contract was due to be completed

White & Carter v McGregor [1961
‡ White & Carter v McGregor [1961] 3 All ER 1178, HL ‡ PP were a company who made litter bins and contracted to advertise DD on these bins. DD attempted to cancel the contract before any part of it had been performed, but PP ignored the cancellation and went ahead, displaying DDs' now unwanted advertisements and making no attempt to seek other advertisers. The House of Lords held by a bare majority that PP were entitled to affirm the contract and claim damages, but even the majority were unhappy with the decision they felt compelled to reach. Lord Reid suggested that a plaintiff should not be allowed to affirm unless he could show that he had a legitimate interest (financial or otherwise) in performing the contract going beyond the mere claiming of damages. ‡

Clea Shipping v Bulk Oil International (The Alaskan Trader)
‡ Clea Shipping v Bulk Oil International (The Alaskan Trader) [1984] 1 All ER 129, Lloyd J ‡ PP repairing and crewing a ship contracted to DD, knowing it was no longer required and that DD had repudiated the contract. The judge applied Lord Reid's dictum above and said this went beyond what was recoverable; he awarded not the full contract price but only damages for the loss of profit. Although an innocent party has in general an unfettered right to decide whether or not to accept repudiation, he said, the court in the exercise of its equitable discretion might exceptionally refuse to allow the enforcement of that party's full contractual rights where that party had no legitimate interest in seeking performance rather than damages.

Fercometal v MSC Mediterranean (The Simona) [1988]
‡ Fercometal v MSC Mediterranean (The Simona) [1988] 2 All ER 742, HL ‡ A charterparty allowed the charterers to cancel should the ship not be ready to load by 9 July. On 2 July the owners asked for an extension to 13 July in order to load another cargo, whereupon the charterers promptly cancelled the charterparty and chartered another ship elsewhere. The owners refused to accept this repudiation and affirmed the contract, giving notice that the ship would be available by 9 July as required. In fact the ship was not ready to load by 9 July, and the charterers went ahead with their alternative. The House of Lords held that the owners having affirmed the contract were in breach by not having the ship ready to load at the proper time, and that the charterers' first wrongful repudiation did not prevent their exercising their right to cancel as originally provided by the contract.

though this communication may be by conduct. and must be communicated to the other party.‡ The innocent party's decision to terminate for anticipatory breach must be clear. .

and that was a matter of fact within his exclusive jurisdiction. HL ‡ AA agreed to buy from RR a cargo of propane. the arbitrator had found as a fact that RR's conduct showed an intention to treat the contract as ended. for delivery within certain dates. AA sent a telex to RR saying that because of that breach of condition they would reject the cargo and repudiate the contract. finding AA in breach of contract. The arbitrator allowed their claim. RR took no further action on the contract. In the instant case. but later sold the cargo elsewhere at a lower price. because of a falling market. Reversing the Court of Appeal and restoring the decision of the arbitrator and Phillips J in the Commercial Court.Vitol v Norelf (The Santa Clara) [1996] ‡ Vitol v Norelf (The Santa Clara) [1996] 3 All ER 193. mere failure to perform a contractual obligation can constitute acceptance of an anticipatory repudiation. and AA appealed. On hearing from another source that delivery would be late. . and claimed the difference. Lord Steyn said that as a matter of law. depending on the circumstances of the case.

but the contract remains effective as regards past transactions and. in particular. neither side need perform any further obligations.‡ Where a contract is terminated for fundamental breach or repudiation. the party in default cannot generally recover any money he may have paid to the other. .

and the judge said he should succeed. P sued for the return of his advance. P then refused delivery. . No executed consideration had been given for this payment. subject to an appropriate deduction to represent the damages to which DD were entitled. Stable J ‡ P ordered goods worth £270k and paid £100k in advance. so DD were not entitled to keep it. and DD elected to terminate the contract and claimed to keep the advance.Dies v British & International Mining [1939] ‡ Dies v British & International Mining [1939] 1 KB 724.

and PP sued for the return of their first payment. so PP were not entitled to its return. DD elected to terminate the contract. and paid a substantial sum on a partly-built hull. Market conditions then changed and PP cancelled their order. . not conditional on any subsequent performance.Hyundai v Papadopoulos [1980] ‡ Hyundai v Papadopoulos [1980] 2 All ER 29. The House of Lords distinguished Dies and said PP's payment was an unconditional payment for work already completed. HL ‡ PP ordered a ship from builders DD.

. it would often be inequitable for the seller to be allowed to keep all the earlier instalments and the goods as well.‡ Equity may intervene where prompt payment of instalments is made a condition of the contract: if most of the instalments are paid on time before one is late.

. P defaulted on a payment and D purported to exercise his rights under the contract. a majority of the Court said more general relief might be given if the forfeiture clause were construed as penal. with payment being made by instalments. since the term in question was not so severe as to be a penalty clause (see below). The agreement said that if P was in default by more than 28 days on any payment. D could retake possession of the machinery and retain the payments already made. After two years. CA ‡ D agreed to sell P certain machinery. Romer LJ said there was no sufficient ground for interfering with the contractual rights of a vendor under forfeiture clauses while the contract was still subsisting. The Court of Appeal said he was entitled to do this. But obiter. beyond giving a purchaser who is in default but able and willing to proceed a further opportunity of doing so.Stockloser v Johnson [1954 ‡ Stockloser v Johnson [1954] 1 All ER 630.

An action for damages is possible in almost every case.REMEDIES FOR BREACH OF CONTRACT ‡ Where one party is in breach of his contractual obligations. but where the breach is serious the innocent party may prefer to abandon the contract altogether. There is also the possibility of rescission in some cases of mistake or misrepresentation . and in some cases an order for specific performance. the remedies open to the other depend in part on the seriousness of the breach.

Causation is largely a matter of fact. . the court must decide whether the breach actually caused the loss.DAMAGES ‡ Where an innocent party has suffered financial loss following another's breach of contract. whether the party at fault is legally liable for it (which is not the same thing). and how much compensation is payable. and the rules in contract are similar (but not identical) to those in tort.

C & P Haulage v Middleton
‡ C & P Haulage v Middleton [1983] 3 All ER 94, CA ‡ P hired a garage for six months and equipped it to meet his own particular needs: D terminated the contract ten weeks early, and P sued for the expense of equipping the garage. This part of his claim was rejected: he would have incurred that expense in any event, and the early termination had merely accelerated (not caused) the loss.

Quinn v Burch Bros
‡ Quinn v Burch Bros [1966] 2 All ER 283, CA ‡ D failed to supply a ladder to a sub-contractor who used an unsuitable trestle as a substitute and was injured when it slipped. Paull J said P's own act broke the chain, but (obiter) had the claim been in tort, he would have found the chain unbroken but reduced the damages for contributory negligence. The Court of Appeal upheld his judgment without commenting on the reference to tort. [The Law Commission have criticised this argument as lacking principle: in contract, it seems, judges apply the old all-or-nothing contributory negligence test.]

‡ Even with causation, a party in breach of contract is not always legally liable for the entire loss.

Hadley v Baxendale
‡ Hadley v Baxendale (1854) 156 ER 145, Alderson B ‡ PP were a firm of millers who contracted with carriers DD to take a broken mill-shaft to a foundry for repair. The shaft was delayed in transit through DD's negligence and the mill lost five days' production. PP claimed damages for their lost profits. Alderson B said in the Court of Exchequer that the damages allowable were such as may fairly and reasonably be considered to arise naturally (i.e. in the ordinary course of things) from the breach of contract, or such as might reasonably be supposed to have been in the contemplation of both parties at the time of the contract as a probable result of the breach. In this case, the total stoppage of production was not a natural consequence of delay - the mill might well have had a spare shaft in stock - and the carriers had not been aware of the special circumstances, so that in this respect the claim failed.

Victoria Laundry v Newman Industries
‡ Victoria Laundry v Newman Industries [1949] 1 All ER 997, CA/dt> ‡ A laundry PP ordered a large boiler from DD, on whose premises it was currently installed. It was damaged by DD's contractors while being dismantled, and delivery was delayed about five months while the boiler was repaired. PP claimed for their lost profits, arising from the expected increase in business following their increased capacity (the demand for laundry services at that time being particularly heavy), and from a lucrative dyeing contract they would have been able to bid for. Streatfield J said those claims must fail because they had not drawn the special purpose of acquiring the boiler (i.e. to expand their business) to DD's attention, but the Court of Appeal said it was enough that DD knew PP were in the laundry business and knew in general terms the state of the market. PP were entitled to recover the lost profits from the expected general increase in trade, but not those from the dyeing contract which would not have been in the reasonable contemplation of the other party.

Koufos v Czarnikow ( The Heron II) [1967]
‡ Koufos v Czarnikow ( The Heron II) [1967] 3 All ER 686, HL ‡ RR chartered a ship from AA to carry a cargo of sugar to Basrah. The ship made various unauthorised deviations during the voyage, and consequently arrived about nine days later than it should have done. During those nine days the price of sugar had dropped significantly, and RR sued for the difference. The House of Lords dismissed AA's appeal from the Court of Appeal and upheld judgment in favour of RR. It is not enough, said Lord Reid, that a consequence may have been foreseeable as "a serious possibility" or "liable to result" (which is the rule in tort); the consequence must have been "quite likely" or at least "not unlikely". But the Court of Appeal had been wrong to suggest in The Parana (1877) LR 2 PD 118 that the consequence must have been "reasonably certain" - that would be too strict a test.

‡ If the kind of damage is within reasonable contemplation, however, then it is immaterial that the resulting damage is far more serious than was anticipated.

Parsons v Uttley Ingham
‡ Parsons v Uttley Ingham [1978] 1 All ER 525, CA ‡ DD supplied a pigs' feeding hopper in a condition which caused the food to go mouldy; this led to internal illnesses from which more than 250 pigs died. The Court of Appeal held unanimously that since the parties could reasonably be supposed to have contemplated illness as a serious possibility resulting from such a breach, DD's liability extended to liability for the pigs' death even though the quantum of damage was greater than the parties might have contemplated. Orr and Scarman LJJ applied this principle to both physical loss and loss of profit, but Lord Denning MR felt that in cases of physical loss the courts should apply the more generous tort standard and award damages for any loss whose type could reasonably have been foreseen even as a slight possibility. Moreover, Denning and Scarman agreed that where all parties had the same actual or imputed knowledge, and there was no limitation clause in the contract, the remoteness test should be the same in contract as in tort.

‡ Once D's liability for P's losses has been established, the court must then consider an appropriate measure of damages. Three possible measures are applicable: expectation damages putting P in the position he would have been had the contract been completed, reliance damages restoring P to the position he would have been in had the contract never been made, or restitution damages compelling D to restore any benefits he may have received from P.

‡ Contract law generally awards damages for P's loss of expectation. If P pays £100 for a painting worth £200, and D fails to deliver it, he is liable in damages for the value of the painting rather than for the amount paid; the same is true if the painting is found to be worth only £50. In cases such as this, the valuation normally applied is the open market price at the time of the breach, or a previously agreed resale price if there is no open market. But where an expected profit is incalculable, or in any case where it seems just and reasonable, the judge may award reliance damages instead. Restitution damages are not generally awarded in contract.

The Court of Appeal said that had PP been properly advised they would not have gone ahead with the purchase at all.Hayes v Dodd ‡ Hayes v Dodd [1990] 2 All ER 815. but satisfactory rear access was essential to the its success. CA ‡ PP planned to buy new premises for a garage business. although in fact the owner of the adjoining land disputed the supposed right of way. the damages were assessed on a reliance basis to restore PP to the position they would have been in had there been no transaction. PP sued their own solicitors for breaching an implied contractual term promising reasonable care and skill by not having made adequate enquiries. The vendors VV said the right of way was secure. PP made the purchase. and won. . and a few days later the owner quite lawfully blocked off the access road.

‡ .East v Maurer ‡ East v Maurer [1991] 2 All ER 733. but rather "as if the contract had never been made" and the plaintiffs had opened a similar business elsewhere in the area. CA ‡ The owner of two hairdressing salons sold one of them on the fraudulent misrepresentation that the sale included all the goodwill of the business. but then lured many customers away to the other salon. The Court of Appeal said damages for loss of profit should be calculated not "as if the representation had been true".

. contracts were then exchanged. but D subsequently refused to complete. The judge said P could recover the expenses of having the caravan installed and removed (as well as the legal costs of preparing the contract &c). the contract said that P would build a bungalow to be occupied by D.Lloyd v Stanbury ‡ Lloyd v Stanbury [1971] 2 All ER 267. and would provide a caravan for D's use until the bungalow was completed. P obtained a caravan and had it parked on the land. Brightman J ‡ D agreed to sell P a piece of land including D's farmhouse. even though it had been obtained in anticipation of the contract.

that would compensate him twice for the same loss. These were reliance damages. ‡ . Lord Denning MR made it clear. and PP were unable to find a suitable substitute and so cancelled the play. D then repudiated the contract. The Court of Appeal said PP could recover all their prior wasted costs. however. because it must have been within D's contemplation that there would have been such costs and that repudiation might lead to abandonment. and contracted with Oliver Reed to play the leading role.Anglia TV v Reed ‡ Anglia TV v Reed [1971] 3 All ER 690. CA ‡ A television company PP incurred various expenses in preparing a TV play. any calculation of expectation damages would of course have been highly speculative. that an injured party cannot have both expectation and reliance damages .

Surrey CC v Bredero Homes ‡ Surrey CC v Bredero Homes [1993] 3 All ER 705. increasing their profits substantially. CA ‡ A local authority sold land to a building firm and took covenants that no more than a certain number of homes would be built on the site. . The builders broke the covenants and built more than the agreed number of homes. and they had suffered no other loss. Their claim for a share in the excess profits was wholly unfounded. Ferris J and the Court of Appeal said the Council were entitled to nominal damages for the breach of covenant but no more: their remaining land had not lost value because of the breach.

White Arrow v Lamey's Distribution ‡ White Arrow v Lamey's Distribution [1995] NLJ 1504. and paid extra for an enhanced level of service. and claimed damages equivalent to the difference in price between the two services. but PP2's claim in contract could not stand. In interlocutory proceedings. CA ‡ A mail order firm PP2 contracted with DD for the distribution of their goods. An equitable claim in quasicontract might be possible. the Court of Appeal upheld the judge's ruling that such a claim was unfounded and that only nominal damages could be awarded. Bingham MR said it is elementary that a breach of contract without actual loss does not entitle the innocent party to more than nominal damages. . PP2 then alleged that DD had in fact provided only the basic service.

who escaped after being imprisoned as a Soviet spy and now lived in Moscow. . CA George Blake. But where there is "skimped performance". or has enabled him to make a more profitable contract with someone else. the law is now sufficiently mature to recognise in exceptional cases a restitutionary claim for loss of profits where compensatory damage would be inadequate.Attorney-General v Blake ‡ ‡ Attorney-General v Blake [1998] 1 All ER 833. or where (as here) D has obtained his profit by doing the very thing he contracted not to do. describing inter alia his work as a member of the British intelligence services. wrote an autobiography (in breach of his contract of employment and in clear violation of the Official Secrets Act). The fact that D's breach of contract is deliberate and cynical. The Court of Appeal granted an injunction restraining B from receiving or authorising anyone to receive on his behalf any profits resulting from the sale of the book. is not in itself a good reason for departing from the normal basis in which contract damages are awarded. Lord Woolf MR said obiter that although in general damages for breach of contract are compensatory. his profit flows directly from the breach and restitutionary damages may be needed to defend P's legitimate interest in having the contract properly performed. and ordered that formal notice of this be given to B's publishers.

‡ If P agrees to sell his car for £500 to a buyer who then refuses to go through with the deal. the situation may be a little different. . P's damages are usually limited to the difference between £500 and the market price of the car (if that is lower). since he is presumed to be able to sell to another buyer and has a duty to try to do so. P has lost nothing except perhaps his out-of-pocket expenses and will be awarded very little. If the market price is £500 or above. If P is a dealer who relies on trade for his living.

Thompson v Robinson ‡ Thompson v Robinson [1955] 1 All ER 154. Upjohn J ‡ D agreed to buy from a dealer P a certain model of Vanguard car. P claimed damages for his lost profit and succeeded: the supply of Vanguard cars at that time exceeded the demand. but then refused to go through with the deal. so D's repudiation represented a lost sale. ‡ .

the Court of Appeal said he was entitled to nominal damages only. the demand for which was well in excess of the supply. . Since P would have had no difficulty in selling the car to another customer and had not in fact lost a sale. CA ‡ The facts were almost identical except that the car was a Hillman.Charter v Sullivan ‡ Charter v Sullivan [1957] 1 All ER 809.

and the judge decided that had the colt been correctly described its value at that time would have been £24700. it did poorly and its value fell to £1500. and awarded damages equal to the difference between the original price and the horse's present value. Waller J ‡ PP bought a colt for £27300 and entered it in a number of races. . DD offered only the difference between the actual and proper sale prices. They found its pedigree had been misrepresented at the time of the sale.Naughton v O'Callahan ‡ Naughton v O'Callahan [1990] 3 All ER 191. PP claimed rescission of the contract together with all expenses incurred in the care and training of the horse. The judge said the animal sold was "altogether different" from that contracted for.

it is not the appropriate award where reinstatement is on the facts unreasonable. The pool was duly built. The Court of Appeal reversed this decision and awarded the cost of having the pool deepened. Judge Diamond QC awarded general damages of £2500 for D's loss of pleasure and amenity. is that they are compensatory and not punitive. and only 6 ft deep at the point where the depth was required for diving. and counter-claimed in damages. .Ruxley Electronics v Forsyth ‡ Ruxley Electronics v Forsyth [1995] 3 All ER 268. but was shallower than specified. Although the cost of reinstatement is the usual measure of damages for non-performance of a building contract. D refused to pay the balance of the price. HL ‡ A houseowner D agreed with PP that they would build a covered swimming pool in his garden. particularly in contract. In the County Court. The basic rule of damages. but the House of Lords restored the trial judge's award. said Lord Lloyd. but declined to award any other damages because there was no significant difference in value between a 7'6" pool and a 6' pool. to specifications including a depth of 7 ft 6 in.

.‡ In matters other than direct financial loss. a valuation must often be little more than a shot in the dark. though now contract claims are no longer tried by juries there is greater chance of consistency.

they said. to be chosen by the promoters D from the fifty winners of regional competitions. The jury estimated the value of P's loss at £100 and the Court of Appeal refused to interfere with this award. The right to be one of a limited group of competitors. P won her regional competition. and since its value could not be determined exactly the jury had arrived at a reasonable figure. was something of value that had been taken away.Chaplin v Hicks ‡ Chaplin v Hicks [1911] 2 KB 786. but was not then given a reasonable chance to audition for a place in the last twelve. CA ‡ A newspaper advertisement promised three-year acting engagements to twelve women. .

‡ The general rule is that contract damages cannot be awarded for any mental distress associated with the breach of contract. and the exceptions to this rule are limited. .

together with £340 estimated to be the value of his lost commission and £600 for the humiliation and distress of his wrongful dismissal. HL ‡ P was employed by DD as a manager on salary and commission. and could not be given merely for mental distress in circumstances such as these. The House of Lords allowed an appeal against the final element of this award: Lord Atkinson said damages in contract are meant to compensate. ‡ . In the High Court he was awarded damages for his lost salary.Addis v Gramophone Co ‡ Addis v Gramophone Co [1909] AC 488. and was dismissed in circumstances making clear DD's lack of confidence in him. not to punish.

Lord Denning MR said damages for reasonably foreseeable psychiatric illness could be recovered just as in tort for breach of a contractual duty to use due care. . her solicitor D negligently failed to enter a defence or cross-petition. or to ask for maintenance. CA ‡ A woman P was sued for divorce by her husband. Upholding the judge's award of damages without a "nervous shock" element.Cook v Swinfen ‡ Cook v Swinfen [1967] 1 All ER 299. but on the facts of this case the damage was too remote. P consequently suffered an anxiety neurosis and was unable to work.

and that had been denied him.Jarvis v Swans Tours ‡ Jarvis v Swans Tours [1973] 1 All ER 71. in fact the holiday fell well short of the promise. and P sued for (inter alia) his disappointment. the Court of Appeal said damages for P's disappointment and distress could be awarded in circumstances such as these. . CA ‡ P booked a holiday from DD's brochure promising an enjoyable time. said Lord Denning MR. The prohibition in Addis was out of date. P had not contracted only for travel and accommodation. Reversing the trial judge. congenial company. he had contracted for an enjoyable holiday. &c. and there should be exceptions for holiday contracts and other contracts promising entertainment and enjoyment.

The solicitors were negligent in not obtaining and enforcing such an injunction. . and P suffered further harassment. CA ‡ A young woman P who was being persistently harassed by a man asked her solicitors DD to obtain an injunction against him. The whole point of her contract was that she should be free of such distress. The trial judge said P's remedy against DD was limited to the return of her costs. and it was right that she should be compensated for DD's failure to deliver. but the Court of Appeal said she was also entitled to £150 for mental distress.Heywood v Wellers ‡ Heywood v Wellers [1976] 1 All ER 300.

Dillon LJ said damages for distress arising from a breach of contract were limited to those cases in which the contract broken was itself a contract to provide freedom from distress or peace of mind. . Reaffirming the decision in Addis. and since DD had no right to make such a demand they were in breach of contract. The trial judge awarded damages including a sum for the humiliation and distress of the suspension. and his employers DD required him to undergo psychiatric examination. but the Court of Appeal struck out this part of the award. P refused and was suspended.Bliss v South East Thames HA ‡ Bliss v South East Thames HA [1987] ICR 700. CA ‡ Relationships between a surgeon P and his colleagues deteriorated seriously. or at least some comfort or pleasure over and above that which might incidentally arise from a commercial transaction.

‡ . nor anything for mental distress other than that caused directly by the physical discomfort. and subsequently had to undergo some inconvenience while defects were remedied.Watts v Morrow ‡ Watts v Morrow [1991] 4 All ER 937. CA ‡ P bought a house on the strength of a negligent survey. but allowed £750 (in addition to other quantifiable damages) for the discomfort he had suffered. The Court of Appeal said he was not entitled to damages (claimed at £4000) for inconvenience as such.

and P was awarded some £10000 in damages.Alexander v Rolls Royce ‡ Alexander v Rolls Royce [1996] RTR 95. CA ‡ DD were in breach of their contract to repair P's Rolls Royce car within a certain time. Beldam LJ said a contract such as this was not within the narrow class of contracts in which damages for distress might be awarded. P's appeal against the judge's refusal to allow further damages for loss of enjoyment (deriving from the display of ownership of such a prestigious car) was dismissed. ‡ .

Employers had an implied duty not to conduct their business in such a manner as to seriously damage the relationship of confidence and trust between employer and employee. Addis was decided before this implied term was recognised as such. In preliminary proceedings the judge struck out this claim as disclosing no reasonable cause of action. said Lord Nicholls. which had made it hard for him to find other employment commensurate with his ability and experience. it does not exclude damages for financial loss where these flow directly from the breach. but the House of Lords (reversing the Court of Appeal) distinguished Addis and restored it.Malik v BCCI ‡ Malik v BCCI [1997] 3 All ER 1. HL ‡ A former employee P of a bank DD which had gone into liquidation in suspicious circumstances claimed damages for inter alia the stigma attached to his having worked there. and while it is still authority on injury to feelings and damage to reputation per se. ‡ . and an employee who learns that his employer is fundamentally corrupt is entitled to treat that as a repudiation of his contract.

reversing the Court of Appeal and restoring the decision of the Employment Appeal Tribunal. where he doubted the correctness of this rule. and this decision had been followed for the past thirty years. were obiter and should not be followed. ‡ . held that in cases of unfair dismissal an Employment Tribunal has no jurisdiction to award damages for nonpecuniary losses such as hurt feelings.Dunnachie v Hull CC ‡ Dunnachie v Hull CC [2004] 3 All ER 1011. In Norton Tool Co v Tewson [1973] 1 All ER 183 the National Industrial Relations Court had applied the common-law rule in Addis to the new statutory framework. Lord Hoffmann's comments in Johnson v Unisys. HL ‡ The House of Lords.

Eady J allowed the man's claim for twelve days' hotel. and for a robbery he suffered during the time he was delayed in Nigeria (which was a supervening event not caused by the delay). but denied his claims for expenses incurred by his fiancée who had arranged to meet him at Stansted (but who had no contract with the airline). for the additional expenses of W's Nigerian friends who had come to see him off (which were too remote). . for W's hurt feelings and the alleged damage to his reputation (which are not recoverable under the Addis rule). for the breakdown of their relationship (which is not a recoverable type of damage even if it were caused by the breach of contract).Wiseman v Virgin Atlantic ‡ Wiseman v Virgin Atlantic [2006] EWHC 1566 (QB) ‡ A man W was prevented from boarding his plane at a Nigerian airport when he refused to pay a bribe to an airline employee who accused him of having a false passport. the airline admitted liability but disputed the damages claimed. taxi and telephone bills while he was trying to arrange an alternative flight. restaurant.

‡ Where D is in breach of contract. and if a purchaser refuses to accept delivery the vendor should try to sell it to someone else at the market price. the law expects P to take reasonable steps to mitigate any loss resulting from the breach. In particular. if a seller fails to deliver goods as promised the purchaser should try to obtain similar goods at a reasonable price elsewhere. This is the basis on which damages are normally calculated. as already discussed . and although this is not a positive duty he is unlikely to be awarded damages in respect of additional loss resulting from his failure to mitigate.

British Westinghouse v London Underground ‡ British Westinghouse v London Underground [1912] AC 673. is qualified by P's duty to take all reasonable steps to mitigate his loss. This RR had done. that P should be compensated for all monetary loss naturally flowing from the breach of contract. HL ‡ The appellants agreed to supply turbines to certain specifications. and the new turbines they obtained were so good they rapidly paid for themselves. but the turbines when supplied were not up to the required standard. they could have nothing for the already-recovered costs of the replacement . The respondents therefore had to replace them sooner than expected. so although they could have compensation for the losses incurred while the inefficient turbines for in use. Lord Haldane LC said the fundamental principle.

In Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852. Hobhouse J suggested that D's liability might arise from a strict contractual provision. from a contractual duty of care not corresponding to any tortious duty of care.‡ Contributory negligence is not a defence in contract. or from a duty of care which would exist in tort independently of the contract. and said there could be apportionment under the Law Reform (Contributory Negligence) Act 1945 only in the third of these situations .

The Official Referee reduced the assessed damages by 40% because PP had failed to exercise adequate supervision to ensure the work was carried out. Where the breach is of a strict term (rather than one requiring the exercise of reasonable care and skill). but the Court of Appeal said unanimously that such a reduction was inappropriate. . contributory negligence is wholly irrelevant. CA ‡ DD were builders who failed to carry out certain terms of their contract. they said.Barclays Bank v Fairclough ‡ Barclays Bank v Fairclough [1995] 1 All ER 289.

with an option to exclude any such provision by an express term to that effect. subject to the usual limits on exclusion clauses. .‡ The Law Commission have proposed extending the rules of contributory negligence to all contractual duties to take reasonable care or exercise reasonable skill.

Where they are clearly in excess of the actual loss. they are treated as a penalty and the court has an equitable jurisdiction to reduce them if it thinks it desirable. however. . they are treated as liquidated damages and will be enforced irrespective of the actual loss suffered. and such a provision is prima facie a valid and enforceable term of the contract. Insofar as such payments represent a genuine estimate at the date of the contract of the loss likely to be suffered by the innocent party.‡ A contract may provide for payments in the event of a breach.

HL ‡ Motor parts manufacturers AA supplied various goods to RR under an agreement that RR would (inter alia) not sell below list price. The agreement also specified that RR would pay £5 "by way of liquidated damages and not as penalty" for each item sold in breach of the agreement. Reversing the Court of Appeal (who had reversed the Master). ‡ ‡ . the House of Lords said the clause was enforceable.Dunlop Pneumatic v New Garage ‡ Dunlop Pneumatic v New Garage [1915] AC 79. and that was good enough. The use or non-use of the words "liquidated damages" and "penalty clause" were not conclusive either way. but the sum specified in the contract was a genuine estimate of the approximate damages likely to be suffered.

EQUITABLE REMEDIES ‡ ‡ ‡ ‡ EQUITABLE REMEDIES Specific performance Rectification Rescission .

It is in such cases that the equitable decree of specific performance comes into play. whereby the offending party is ordered (on pain of imprisonment) to fulfil his part of the bargain .Specific performance ‡ There are a limited number of cases in which a breach of contract cannot adequately be compensated by purely monetary damages.

The man died and the nephew refused to pay. so she sued as the executrix of her husband's estate. Damages would not have been a satisfactory remedy. because the loss to the estate was negligible.Beswick v Beswick ‡ Beswick v Beswick [1967] 2 All ER 1197. . in return for which the nephew promised to pay an annuity to the man's widow after his death. because she was not privy to the contract. so she was granted an order directing the nephew to perform his part of the contract. HL ‡ The elderly owner of a small business agreed to transfer the business to his nephew. The widow could not sue in her own right.

PP were to buy their petrol only from DD. and damages would not be an adequate remedy. The judge said that although the petrol was not a unique item he would make the order: because of the international situation PP had no hope of finding supplies elsewhere. Goulding J ‡ Under a ten-year contract. DD terminated the contract for an alleged breach. who were to supply all that PP might require.Sky Petroleum v VIP Petroleum ‡ Sky Petroleum v VIP Petroleum [1974] 1 All ER 954. . and PP sought an interim order for specific performance pending determination of the action.

CA ‡ The Council DD (at that time under Conservative control) agreed to allow the National Front to hold their Annual Conference in a hall owned by the Council. the Council (now Labour-controlled) purported to cancel the contract. including the risk of disorder and the importance of free speech.Verrall v Great Yarmouth BC ‡ Verrall v Great Yarmouth BC [1980] 1 All ER 839. and had exercised his discretion properly. the judge (Tasker Watkins J) had considered all the relevant factors. After a local election. The Court of Appeal upheld an order for specific performance. . and accepted a payment of £6000.

since the buyer of land can claim specific performance. like all equitable remedies. since such a decree could not be enforced against him if the roles were reversed.‡ Specific performance is discretionary. even though he could have been awarded damages instead. a decree of specific performance will not be granted to a minor. . and the exercise of discretion is governed by a principle of mutuality which operates in several ways. For example. the courts have held it to be equitable to give the same relief to the seller. And again.

it follows that it cannot be granted in favour of an infant against another.Flight v Bolland ‡ Flight v Bolland (1828) 38 ER 817. Since specific performance cannot be granted against an infant. a person under 21) sought specific performance of a contract. the Master of the Rolls said it is a general principle of courts of equity to interpose only where the remedy is mutual. Leach MR ‡ An infant P (i. Dismissing his application.e. ‡ .

these events coincided with the births of two more children. and D herself contracted bone cancer and had to have a leg amputated. . D's husband became bankrupt. The Court of Appeal set aside an order for specific performance and awarded damages instead. CA ‡ D and her husband were co-owners of a house which they agreed to sell to P. D spoke little English and relied heavily on the support of her friends and relatives. even though this did not relate directly to the subject matter of the contract.Patel v Ali ‡ Patel v Ali [1984] 1 All ER 978. saying that in all the circumstances such a decree would cause undue hardship.

The 35-year lease contained a covenant by DD that they would keep the premises open for retail trade during normal trading hours. when the defendant may suffer far greater losses from compliance than the plaintiff would suffer from the breach.Co-Operative Insurance v Argyll Stores ‡ ‡ Co-Operative Insurance v Argyll Stores [1997] 3 All ER 297. After some 15 years DD found the store unprofitable and closed it. and the injustice of allowing the plaintiff to enrich himself at the defendant's expense. Only in exceptional circumstances should this practice be departed from. and display windows properly dressed in suitable manner. The House of Lords reversed the majority judgment of the Court of Appeal and restored the trial judge's order for damages alone. . This is based on sound reasons: the need for constant supervision and the impossibility of enforcing the order except by threats of imprisonment. Lord Hoffmann said it is the courts' settled practice of not granting specific performance to require someone to operate a business. the risk of repeated arguments as to whether the defendant is trying hard enough. PP sought specific performance because of the effect DD's closure would have on the general tone of the area. HL PP were the owners of a major shopping development. and leased some 30% of it to DD as a "Safeway" store.

also an equitable remedy and therefore discretionary. It may be prohibitory (to enforce a contract not to sell beer brewed by any other firm. for example) or mandatory (to knock down a wall built in breach of a restrictive covenant). . but the court will consider what is reasonable in the circumstances.‡ An alternative to specific performance in some cases may be an ordinary injunction.

Buckley J ‡ A farmer P sold part of his land to DD. DD covenanted that they would not raise the level of the track above the level of the surrounding land. during which time DD might undertake other remedial work to resolve the problem. and DD (admitting liability) offered damages in lieu. In this case he took the unusual step of granting an injunction suspended it for three years. but when they surfaced the track they actually raised it by several inches and thus interfered with the use of P's farm machinery. P sued for an injunction requiring DD to remove the surfacing. he should not be entitled to insist on a form of relief that would be materially detrimental to D while conferring no appreciable benefit on himself. but retained for himself a right of way over a track on the land sold giving access to his retained land.Charrington v Simons & Co ‡ Charrington v Simons & Co [1970] 2 All ER 257. . The judge said that although P should not be denied a legitimate remedy merely because it would be disadvantageous to D.

nor where P gave no consideration for a contract under seal. since "equity will not assist a volunteer". unless they are unique objects of special value. nor in employment contracts or other contracts for personal services (though an injunction may be granted forbidding similar performance for a competitor).‡ Neither an order for specific performance nor an injunction will normally be granted where damages would be an adequate remedy. nor for the delivery of goods bought. ‡ .

.Rectification ‡ Where it can be shown clearly that a document such as a will or a contract does not reflect the true intentions of the parties (or where one party to a contract took unfair advantage of a mistake made by the other) the court has power to rectify the document to make it show the true position.

with whom T lived. . was married to someone else and was not T's legal wife. though in fact the woman concerned.Re Posner ‡ Re Posner [1953] 1 All ER 1123. Karminski J ‡ A testator T left most of his property to "my wife Rose Posner". In interlocutory proceedings the judge said that unless fraud could be proved the words "my wife" could be deleted so that T's intentions could be carried out.

Wheeler QC ordered rectification to restore the reference to arbitration. At the next review.Bates v Wyndham's Lingerie ‡ Bates v Wyndham's Lingerie [1981] 1 All ER 1077. whose terms included an option to renew at a rent to be agreed or determined by arbitration. Through a clerical error on PP's part. and the Court of Appeal agreed: where one party knows the document does not reflect both parties' intention. DD refused to agree to PP's proposed rent or to submit to arbitration. he is estopped from resisting rectification to take advantage of the other's error. . DD claimed the right to remain in occupation rent free for the duration of the lease. CA ‡ DD held a lease from PP. the renewal lease omitted the reference to arbitration: DD saw this but said nothing. and when PP sought possession of the premises.

Graham J ‡ D1 was the registered owner of a house subject to an unregistered trust in favour of D1 and P.Peffer v Rigg ‡ Peffer v Rigg [1978] 3 All ER 745. D1 sold the house for £1 to his wife D2. The court rejected this claim and ordered that the register be rectified to show the house held on trust for P and D2. ‡ . who knew of the trust but who (since the trust was not registered) claimed to take free of P's interest.

explicitly or by his conduct. and the parties are restored to their original positions. . or the victim of a misrepresentation. may affirm or rescind the contract. then it is as if it had never existed.Rescission ‡ If a contract is rescinded. A party discovering a relevant mistake. but this decision once made is irrevocable.

but retracted when he discovered the true position. CA ‡ A solicitor P advertised for a partner.Redgrave v Hurd ‡ Redgrave v Hurd (1881) LR 20 ChD 1. giving an exaggerated account of the firm's profitability. . The court refused damages but said D was entitled to rescission of the contract. P sued for specific performance. D defended and counterclaimed for rescission and damages. D answered the advertisement and (after negotiations) agreed to join the firm. which had been entered into because of P's misrepresentations.

and takes effect from that moment. The court said the agreement to pay was binding in common law. but then refused to pay up when they discovered the invalidity. DD agreed to pay a claim. .Magee v Pennine Insurance ‡ ‡ Magee v Pennine Insurance [1969] 2 All ER 891. but ordered its rescission in equity. CA ‡ P's motor insurance policy was actually invalid but neither P nor his insurers DD knew this. ‡ A decision to rescind must generally be communicated to the other party within a reasonable time.

but it shifts the loss from Caldwell (who was innocent but foolish) to a third party who was entirely blameless. and the car was still Caldwell's property. who in turn sold it on to an innocent third party. CA ‡ Caldwell sold a car to Norris in exchange for a cheque. Rescission had therefore taken place before the sale to the third party. Norris sold on the car to a dealer who knew of the fraud.] .and since Norris was taking good care not to be found he had done all he reasonably could by notifying the police. and the Court of Appeal said he should succeed. which bounced when presented. [This decision has been much criticised: not only is it an exception to the general rule of notification. Norris could no longer be traced.there was no doubt about that . so Caldwell informed the police and the AA.Car & Universal Finance v Caldwell ‡ Car & Universal Finance v Caldwell [1964] 1 All ER 290. but it may well be limited to its particular facts. Caldwell sought to repossess his car from the third party. He was entitled to rescind for misrepresentation . It has never been directly overruled.

The right to rescind for misrepresentation is lost if the representee has affirmed the contract. or if rescission would unfairly damage an innocent third party. if restitutio in integrum is impossible. The courts interpret this fairly widely. it is available only where restitutio in integrum is possible and the parties can be restored to their original positions. however. and are prepared to make consequential orders as necessary. .‡ Since the effect of rescission is to nullify the contract. if too much time has elapsed (though what is "too much" will depend on the circumstances). as is appropriate in matters of equity.

there was no alternative award of damages for innocent misrepresentation. CA ‡ D innocently advertised a lorry as being in good condition.Long v Lloyd ‡ Long v Lloyd [1958] 2 All ER 402. The next day. Two days later various defects appeared. The Court of Appeal said it was too late for P to rescind the contract: he had affirmed it by his acceptance of D's offer of payment after he had become aware of the misrepresentation. [Before the 1967 Act. D offered to pay half the cost of replacing the dynamo. further defects appeared and the lorry broke down completely. and P accepted. and sold it to P on that basis.] .

so P's claim to rescind was denied. ‡ . it was impossible to put the parties back into the position they had been in before the contract. The judge said P's shares in a limited company were quite different in their nature and status from a share in a partnership. the partnership had been turned into a limited company. By the time P discovered the misrepresentation. Crompton J ‡ P bought a share in a partnership on the strength of D's misrepresentations.Clarke v Dickson ‡ Clarke v Dickson (1858) 120 ER 463.

and was worth considerably less than had been thought. expert examination showed that it was not by Constable at all. five years was too long a gap. Five years later. P sought to rescind the contract either for misrepresentation or for common mistake.Leaf v International Galleries ‡ Leaf v International Galleries [1950] 1 All ER 693. CA ‡ P bought a picture from a gallery DD. and although this was not precisely defined. A party wishing to rescind must take action within a reasonable time. but the Court of Appeal said he could not do so. . they said. both parties believing it to be by Constable.

CA ‡ P advertised a car and sold it to X in exchange for a cheque. X had acquired a voidable title and D's title was thus established before the purported rescission. who bought it in good faith. The Court of Appeal said a contract based on misrepresentation is voidable rather than void ab initio. It would be unfair to disturb D's title now. of course. and P's claim against D must be denied. but when X's cheque bounced P sought to rescind the first sale and recover the car.Lewis v Averay ‡ Lewis v Averay [1971] 3 All ER 907. always supposing that X could be traced and had assets worth suing for. have a good claim for damages against X. (P would. X sold the car to D.) .

. The judge said their claim must fail: it was really a claim for damages. This turned out not to be so.Whittington v Seale-Hayne ‡ Whittington v Seale-Hayne (1900) 82 LT 49. Farwell J ‡ PP took a lease on premises to be used for poultrybreeding. and PP sought an indemnity for the loss of valuable stock and the medical expenses of the manager and his family. which were not then available except in cases of fraud. relying on DD's representation that the premises were sanitary and in a good state of repair. resulting from the state of the premises. PP could claim expenses such as rent. rates and repairs incurred as a requirement of the contract. However.

where he would have the burden of showing negligence.‡ Section 2(1) of the Misrepresentation Act 1967 now provides for an award of damages for loss resulting from a misrepresentation made not fraudulently but without reasonable grounds for belief in its truth. A plaintiff party to the relevant contract is therefore usually well advised to follow this line rather than seek damages in tort. The burden of proving the existence of "reasonable grounds" is on the representor. .

The true figures were given in the barges' own documents. and the Court of Appeal said they should succeed. On the evidence. the owners had shown no reasonable grounds for their having consulted Lloyd's Register rather than the original document. CA ‡ A rare error in Lloyd's Register of Shipping led the owners of several barges to overstate their capacity in pre-contract negotiations with a prospective hirer. . the hirers sought damages under the 1967 Act.Howard Marine v Ogden ‡ Howard Marine v Ogden [1978] 2 All ER 1134. which the owners did not consult. and under the wording of the Act that was enough to establish PP's case. On discovering the misrepresentation.

Not only does this open up the possibility of exemplary damages (though these are unlikely where mere negligence is involved) but it means tortious rather than contractual tests of remoteness are to be applied. D was liable for all the losses flowing from his misrepresentation whether foreseeable or not.2(1) and said damages were to be assessed as in tort rather than as in contract..Royscot Trust v Rogerson ‡ Royscot Trust v Rogerson [1991] 3 All ER 294. sued the dealer for their losses. .. he shall be so liable notwithstanding that it was not. The statute says that if the representor would be liable to damages . The Court of Appeal considered the wording of s. and the dishonest sale of the car by the customer was not novus actus interveniens breaking the chain of causation. and the Court said this meant that damages were to be assessed as if in the tort of deceit. The customer subsequently sold the car and disappeared without completing his payments and the finance company. had the misrepresentation be made fraudulently. having discovered the misrepresentation. CA ‡ A dealer sold a car to a customer and gave false information to the finance company as to its price and the deposit paid.

‡ It is not absolutely clear whether damages can be awarded where rescission would be impossible: a dictum of Mustill J in Atlantic Lines v Hallam.‡ Under s. but there are some writers who disagree. The Lucy [1983] 1 Lloyds Rep 188 suggests not. and may refuse rescission unless it can be shown to be fair and equitable. where damages would not otherwise be available.2(2) of the Misrepresentation Act 1967 the courts have a further power in cases of non-fraudulent misrepresentation to award damages in lieu of rescission if it would be equitable to do so. This may include even cases of innocent misrepresentation. .

s. but acknowledged rescission was impossible because the business had been restructured since the takeover.2(1).2(1).Thomas Witter v TBP Industries ‡ Thomas Witter v TBP Industries [1996] 2 All ER 573.2(2) is independent of s. but only on the plaintiff's having had such a right in the past.2(2) does not depend on the right to rescission still being extant. However. so that damages can be awarded in lieu of rescission even where the defendant can rely on the "innocence" defence in s. he said. . Jacob J ‡ A company PP took over DD's carpet business and later alleged negligent misrepresentation in various statements made to them before the takeover concerning the profitability of the business. Moreover. The judge found the allegations proved on the facts. the power to award damages "in lieu of rescission" in s. though their amount is in the discretion of the court and in the absence of negligence would probably be lower.

where fraud or negligence can be shown. and can be claimed as well as rescission only in tort. .‡ In any event. damages are strictly an alternative in respect of innocent misrepresentation.

unless the buyer has had a reasonable opportunity to examine the goods or (if the contract is for sale by sample) to compare the bulk with the sample. or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller. the buyer retains the goods without intimating to the seller that he has rejected them. or when. If he accepts the goods. Acceptance is deemed to take place when the buyer intimates to the seller that he has accepted the goods. however. . the right to reject is lost and the buyer is limited to damages. after the lapse of a reasonable time. however. Deemed acceptance does not occur.RIGHT TO REJECT ‡ In contracts for the sale or supply of goods. the buyer has the right to reject the goods and terminate the contract if the goods supplied are not up to standard.

The judge said P had accepted the vehicle by keeping it for three weeks without sending it back. depended on the nature of the goods: longer would be needed for a nuclear ‡ submarine than for a bicycle. Rougier J ‡ P bought a new car. What was reasonable timewise. and over the next three weeks made two or three short trips totalling 140 miles to try it out.Bernstein v Pamsons Motors ‡ Bernstein v Pamsons Motors [1987] 2 All ER 220. The engine then seized up because of a drop of sealant that had got into the lubrication system when the car was being assembled. a reasonable time for inspection and trying out the vehicle had passed. ‡ . he added.

CA ‡ PP bought a new Range Rover. and attempts to repair various faults were unsuccessful. .Rogers v Parish ‡ Rogers v Parish [1987] 2 All ER 232. After five months PP purported to reject the car on the grounds that it was not of merchantable quality and the court of Appeal said they were entitled to do so: the expectations of the purchaser of a Range Rover were higher than those of the purchaser of an ordinary car. after a few weeks it proved unsatisfactory and was replaced. The replacement was equally unsatisfactory.

Clegg v Olle Anderson ‡ Clegg v Olle Anderson [2003] 2 Lloyds Rep 32. the buyer's rejection does not have to be reasonable: he can reject for any reason at all. The Court of Appeal said that if goods are not of satisfactory quality. Bernstein v Pamsons has been much criticised and was decided before the Act was amended in 1994: it no longer represents the law. and after some inconclusive discussions as to the work that would be needed to rectify the faults. . CC rejected the yacht three weeks later and sought return of their money. As to that. CA ‡ CC bought a yacht from DD. the time taken in ascertaining what repairs would be needed is to be taken into account in determining "a reasonable time". but found it was not of satisfactory quality. They complained to DD. and the only question is whether he has lost that right by accepting the goods.

and reject the rest. Moreover. or accept those which conform and some of those which do not. since 1995 the buyer can reject just part of a consignment and accept the rest: specifically. he can reject all the goods. But the buyer must still reject within "a reasonable time". the duration of which is a matter .‡ Acceptance is not deemed merely because the buyer has asked for or agreed to the repairing of the goods by or under an arrangement with the seller. or accept those which conform with the contract and reject the rest. or accept all the goods.

the claimant wrote complaining that the colour of the cupboard doors did not match that of the existing furniture. . but nothing more was said about the colour until the claimants began legal proceedings some five months after installation. and there was some further correspondence about other matters. but decided on the facts that more than "a reasonable time" had elapsed and dismissed the claim to reject. The trial judge found that there had been a breach of contract in respect of the colour. as had been promised. rejecting the kitchen for this reason and claiming repayment and other expenses.Jones v Gallagher ‡ Jones v Gallagher [2004] EWCA Civ 10 ‡ The claimant had a kitchen supplied and installed by the defendant. The defendants replied a week later. A week after completion of the work. This finding was upheld on appeal.

or if the seller fails to repair or replace within a reasonable time as required. These remedies are additional to the right of rejection already discussed (and. the buyer generally has the right to require the seller to repair or replace (at the buyer's choice) the goods within a reasonable time. of course. to the ordinary right to seek damages). ‡ . the buyer may require the seller to reduce the purchase price by an appropriate amount. If this would be impossible or disproportionately difficult or expensive. and the goods do not conform to the contract of sale (particularly. Where the buyer deals as consumer. but not only. or may rescind the contract and claim repayment of the purchase price subject to an appropriate deduction for the use he may have had of the goods in the mean time. in relation to the terms implied by the Act). but a buyer who asks for repair or replacement must give the seller a reasonable time to comply before exercising his right to reject.‡ Regulations made in 2002 add significantly to the buyer's remedies in consumer contracts by inserting a new section 48A into the Sale of Goods Act 1979.

or by a release under seal.EXTINCTION OF REMEDIES ‡ The remedies for breach of contract are extinguished by accord and satisfaction. or by lapse of time. . where one party agrees (for valuable consideration) not to enforce his rights against the other.

‡ Limitation Act 1980 s. ‡ .11 ‡ (1) This section applies to any action for damages for negligence. (2) None of the time limits given in the preceding provisions of this Act shall apply to an action to which this section applies. nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently) where the damages claimed by the plaintiff include damages in respect of personal injuries to the plaintiff or any other person.EXTINCTION OF REMEDIES ‡ Limitation Act 1980 s. (3) An action to which this section applies shall not be brought after the expiration of [three years].5 ‡ An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

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