Download GDL Contract Law Notes: Formation, Breach, and Remedies and more Exams Law in PDF only on Docsity!
GDL Contract Law Revision Notes
(Distinction)2023 GRADED A
CONTRACT LAW REVISION NOTES
GDL (University of Law)
Flowcharts
Formation of Contracts Breach
of Contract – Express TermsBreach of
Contract – Implied Terms
Exemption Clauses
Doctrine of Frustration
False Preliminary Statements
Undue Influence
Economic Duress
Key Authorities
Formation of Contracts
Breach of Contract
Remedies for Breach
Discharge of Contract
Preliminary Statements
Consent to Contract
Agency
Negotiations and Tenders
All notes correct and Distinction worthy as of academic year 2019/
Is there an agreement?
“An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed” – Professor Treitel
Distinguished from an ‘invitation to treat’
OFFER
“A final and unqualified expression of assent to the terms of an offer” – Professor Treitel
This must be communicated by the offeree or their authorised agent, unless a unilateral contract or specified that silence = acceptance
ACCEPTANCE
There must be certainty of offer and acceptance – Scammell v Ouston The offer must not have been revoked or lapsed
Was there contractual intention?
There is a presumption of intention to create legal relations ( Edwards v Skyways)
But this may be rebutted if there is specific wording ( Rose & Frank Co v Crompton Bros)
COMMERCIAL AGREEMENTS
There is a presumption of no intention to create legal relations ( Balfour v Balfour)
But this may be rebutted in specific circumstances ( Merritt v Merritt)
NON-COMMERCIAL AGREEMENTS
Has consideration been provided?
“The price you pay for another’s promise”
It need not be adequate but must be sufficient ( Chappell v Nestle) What is provided should either be of benefit to the receiver, or detriment to the giver ( Currie v Misa) It must have some economic value ( Thomas v Thomas)
CONSIDERATION
Identify any issues with the consideration provided
Is not normally sufficient ( Roscorla v Thomas ) unless: Act at promisor’s request ( Lampleigh v Brathwait) AND understanding of reward ( Re Casey’s Patents) AND otherwise a valid contract
PAST CONSIDERATION
Is not normally sufficient ( Stilk v Myrick ) unless: Duties are exceeded ( Hartley v Ponsonby) OR extra benefit is conferred on promisor ( Williams v Roffey Bros)
CONTRACTUAL DUTY
Is not normally sufficient ( Collins v Godfrey) unless: Public duty is exceeded ( Glasbrook Bros v Glamorgan CC) OR would not be contrary to public policy ( Williams v Williams)
LEGAL DUTY
FORMATION OF CONTRACTS
Who are the parties to the contract?
What is the cause of action?
This will be breach of the express contractual term
What remedies are available?
The rationale behind the award of contractual damages is to compensate the loss of the innocent party
The claimant can claim damages for any breach
The loss may be any harm to the person or property of the claimant, or injury to his economic position
Can the claimant prove that they suffered a loss?
Damages may be awarded to place a claimant in the same financial position as they would’ve been if the contract had been fulfilled
- Robinson v Harman
EXPECTATION LOSS
Damages may be awarded for expenses incurred in reliance on a contract which was breached
- Anglia TV v Reed
RELIANCE LOSS
Damages may be awarded for disappointment if a significant part of a contract was for enjoyment or peace of mind
- Farley v Skinner
DISAPPOINTMENT
Apply the Hadley v Baxendale test Can it be fairly and reasonably considered that the loss arose naturally from the breach? Was the loss reasonably within the contemplation of both parties when the contract was entered into?
Can the claimant prove that the damage was not too remote?
A claimant cannot recover damages for avoidable loss
- British Westinghouse v Underground Electric
Did the claimant take reasonable steps to mitigate their loss?
Apply the Dunlop test: Is the sum extravagant in comparison with the greatest loss? Does the breach only consist of paying money, and the sum is higher than what should have been paid? Is the sum a lump, payable on the happening of several events? Apply the Cavendish Square test: Does the clause impose a detriment out of all proportion to any legitimate interest of the innocent party?
Did the contract contain a specified damages / penalty clause?
BREACH OF CONTRACT – EXPRESS TERMS
Who are the parties to the contract?
What is the cause of action?
s.8 unless agreed otherwise, price must be reasonable s.13 if sale is for goods by description, goods must match s.14(2) goods must be of satisfactory quality s.14(3) goods must be fit for purpose
SALE OF GOODS ACT 1979
s.13 services must be performed with reasonable care and skill s.14 unless agreed otherwise, supplier must carry out service in reasonable time s.15 unless agreed otherwise, consideration must be given by way of reasonable charge
SUPPLY OF GOODS & SERVICES 1982
s.9 goods must be of satisfactory quality s.10 goods must be fit for purpose s.11 goods must match description s.49 services must be performed with reasonable care and skill s.51 reasonable price for a service s.52 services performed in reasonable time
CONSUMER RIGHTS ACT 2015
What remedies are available?
Consider whether a reasonable person would think the parties intended a term to be a condition or a warranty
How can the term be classified?
A major term which would allow the innocent party to terminate the contract as it is deemed not to have been fully performed
CONDITION
A minor term, which if breached will not allow the innocent party to terminate, but they may still pursue other remedies
WARRANTY
Termination possible if the breach substantially deprives them of the benefit of the contract
- Hong Kong Fir Shipping
INNOMINATE TERM
Are there any statutory remedies available?
s.11(3) if a condition is broken, buyer may terminate the contract, reject the goods, and sue s.35 the right to terminate is lost if the buyer accepts the goods (or the breach is slight)
SGA 1979
ss.20 & 22 short-term (30 day) right to reject s.23 right to repair or replacement ss.20 & 24 right to price reduction s.55 right to repeat performance s.56 right to price reduction if repeat impossible s.54 right to claim damages
CRA 2015
See ‘breach of express terms’
The claimant can also claim damages for any breach
Could an action be brought under negligence?
In which case, defences including contributory negligence could be available
BREACH OF CONTRACT – IMPLIED TERMS
Downloaded by: harveyelias | [email protected] Distribution of this document is illegal
Stuvia.co.uk - The Marketplace for Revision Notes & Study Guides
Is there an exemption clause incorporated into the contract?
If so, it will usually be incorporated provided it is legible
- L’Estrange v Graucob And not misrepresented
- Curtis v Chemical Cleaning & Dyeing
SIGNED CONTRACT
If so, it must be: Contractual in nature
- Chapelton v Barry UDC The claimant knew of the clause or the other party took reasonable steps to make them aware
- Parker v South Eastern Railway Steps were done in reasonable time
- Olley v Marlborough Court
UNSIGNED DOC / NOTICE
If so, must be: Course of dealings
- Spurling v Bradshaw Consistent dealings
- McCutheon v David MacBrayne
CONSISTENT DEALINGS
If a clause is unusual or onerous, attention must be drawn to it in a specific way
- Thornton v Shoe Lane Parking
Is the clause unusual or onerous?
Follow the Canada Steamship Lines v the King guidelines: Express exemptions from negligence will be effective If there is no express reference to negligence, court must decide whether the wording could include negligence and exclude other damage
Does the clause cover the breach and damage alleged?
Are there any statutory provisions which apply?
Schedule 2 Courts should have regard to: Relative bargaining positions of parties Inducement to agree to exemption clause Knowledge of exemption clause If same goods/service could have been received without accepting the exemption clause Whether it was reasonable to expect a condition would have been complied with
s.11 Does the clause pass the reasonableness test?
s.62(4) a term is unfair if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer” s.62(5) the courts will consider the nature of the contract and the circumstances under which the term was agreed to See Schedule 2 Part 1 for unfair terms
s.62 Does the clause pass the fairness test?
Stuvia.co.uk - T E he X M E a M rke P tp T la I c O e N for C R L ev A is U ion S N E o S tes & Study Guides
s.31(1) liabilities for breaches of ss.9- 11 cannot be restricted or excluded s.31(2) terms are not binding if they exclude/restrict remedy or make it subject to restrictive or onerous conditions s.57 liability cannot be excluded or restricted for s.49 breach
CONSUMER RIGHTS ACT 2015
s.2(2) businesses cannot exclude/restrict liability for personal injury or death s.2(3) businesses may exclude/restrict liability for negligence if this passes the reasonableness test ss.6 & 7 clauses for terms with breach SGA or SGSA valid if they pass the reasonableness test
UNFAIR CONTRACT TERMS ACT 1977
Stuvia.co.uk - The Marketplace for Revision Notes & Study Guides
Demonstrate that there is a contract
Offer, acceptance, intention, consideration
Is the statement a term or a representation?
Determine the common intention of the parties by considering what an intelligent bystander would reasonably infer
The statement is repeated in a written document The party making the statement had greater skill
- Dick Bentley v Harold Smith Motors It was under that party’s control - Birch v Paramount Estates The recipient made its importance clear - Bannerman v White The recipient was not advised to verify it - Schawel v Reade
FACTORS SUGGESTING A TERM
The statement was not repeated in writing
- Routledge v McKay The party making it had the same or less skill/ knowledge - Oscar Chess v Williams The recipient was advised to verify it - Ecay v Godfrey There was a lapse of time before contract made - Routledge v McKay
FACTORS SUGGESTING A REPRESENTATION
If a term – consider the remedies for breach
If a representation – was it a misrepresentation?
A misrepresentation is: A statement, made orally, in writing, or by conduct Which is of fact rather than opinion And more than silence Made by one party to the other And constituted at least one of the factors which induced the recipient to enter into the contract
Consider the remedies
The innocent party can rescind the contract by giving notice or applying to the court, unless: They have affirmed the contract There has been undue delay It would be impossible for goods or property to be substantially restored An innocent purchaser has acquired an interest in the property
RESCISSION
For fraudulent misrepresentation, the innocent party may sue in the tort of deceit For non-fraudulent misrepresentation, the innocent party may sue under s.2(1) Misrepresentation Act 1967 Damages will be calculated according to the rules of tort i.e. to put the party back to their original position
DAMAGES
Consider negligent misstatement
FALSE PRELIMINARY STATEMENTS
Stuvia.co.uk - The Marketplace for Revision Notes & Study Guides
If the statement was a by a third party, they can be sued in negligenceDfoowrnplouadreed^ ebyc:ohnarovmeyeiclialso|shsaruvenydeeliars H^1 @ a g d m le a y il.c v om Baxendale Distribution of this document is illegal
Who are the parties to the contract?
Has there been a binding variation?
A binding variation would require offer, acceptance, intention, and consideration
Performance of an existing contractual duty is insufficient ( Stilk v Myrick ) unless that duty is exceeded ( Hartley v Ponsonby ) or a practical benefit is conferred ( Williams v Roffey Bros )
Has consideration been given for the promise?
Was the promise made under economic duress?
Apply the Carillon Construction v Felix guidelines: There is pressure whose effect is compulsion or lack of practical choice for the innocent party Which is illegitimate And a significant factor inducing the innocent party to enter into the contract
What is the effect of duress?
A contract (or variation) can be rescinded by notification or application to the court if it was made under duress
Rescission will be barred if there has been affirmation, delay, an innocent party has acquired an interest in the property, or it is impossible to substantially restore goods or property
Are there bars to rescission?
ECONOMIC DURESS
FORMATION OF CONTRACTS
Bilateral contract: where one party makes a promise in return for a promise from the other party – both parties are immediately bound
Unilateral contract: arises where a promise is made in return for an act
Legally enforceable contracts will have agreement (comprised of offer and acceptance), contractualintention, and consideration
Offer: “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed” (Professor Treitel)
Smith v Hughes : The courts adopt an objective approach to the intentions of the offeror, determiningon the basis of the reasonable person
Allied Marine Transport : The offeree must also believe that the offeror intended to make an offer
Invitation to treat: a statement which implies negotiation
Pharmaceutical Society of GB v Boots : Goods on display in self-service shops are regarded as invitations to treat and not offers to sell – the customer offers to buy the goods at the payment point, and acceptance takes place when the shop takes payment
Partridge v Crittenden : Advertisements are usually regarded as invitations to treat
Carlill v Carbolic Smoke Ball : Some advertisements may constitute an offer to the world, and due to the way they are stated, waive the need for communication of acceptance prior to a claim being made under it (unilateral contract)
Williams v Carwardine : Advertisements of a reward are regarded as offers
Auction: where special rules apply – the call for bids is an invitation to treat, and the auctioneer is an agent of the owner of the goods
s.57(2) Sale of Goods Act 1979 a sale by auction is complete at the fall of the auctioneer’s hammer, which constitutes the acceptance
Barry v Davies : When a lot is advertised as ‘without reserve’ there is a contract between the auctioneer and the highest bidder to sell
Termination : where an offer ends due to revocation, rejection, or lapse of time
Revocation: withdrawal of the offer by the offeror – which can generally happen at any time
Routledge v Grant : Promises by the offeror are not binding if they are gratuitous i.e. if the offeree hasnot promised or given anything in return
Mountford v Scott : However if the offeree has given consideration, offers are binding
Bryne & Co : Notice of revocation must be given and communicated to the offeree, unless: Notice was given to the offeree’s last known address, where a change was not communicated The offeree received the notice but chose not to read it With regards to offers made to the public – when a notice at least as prominent as the original advertisement has been made
The Brimnes : Revocation sent to a business is effective on receipt where it is reasonable to expect that a member of staff would be available to read the notice
Dickinson v Dodds : Revocation may be communicated by a reliable third party
Chappell v Nestle : Consideration can be something of little/no economic value, provided it has somevalue to the party
Thomas v Thomas : However consideration must be something of value in the eyes of the law
Contractual variation : where one party wants to vary the terms of the contract
Roscorla v Thomas: Past consideration is no consideration
Lampleigh v Brathwait & Re Casey’s Patents : An exception to this rule applies if: The act was done at the promisor’s request The parties understood from the outset that the act was to be rewarded in some way All the other requirements for a binding contract are satisfied (intention is key here)
Collins v Godefrey : Performance of a legal duty is not usually sufficient consideration in exchange for apromise of payment
Williams v Williams : Unless it would be within the public interest to allow a performance of a legalduty to be regarded as consideration
Glasbrook Bros Ltd v Glamorgan County Council : Exceeding a legal duty can provide consideration
Stilk v Myrick : Performance of an existing contractual duty is not normally sufficient consideration
Hartley v Ponsonby : However if an contractual obligation is exceeded, this would provide consideration
Williams v Roffey Bros : Where there is additional practical or commercial benefit to the promisor then this would provide sufficient consideration
Pinnel’s Case & Foakes v Beer : Part payment of a debt is not usually consideration for a promise to forgo the balance due, unless the debtor can show they gave something different for the creditor’s agreement to accept a lesser sum
Promissory estoppel : an equitable doctrine which stop a person going back on a promise which was not supported by consideration
High Trees : Established the equitable doctrine of promissory estoppel which is a good defence to a claim brought under Foakes v Beer and applies where A party to a contract has made a promise to the other to forgo a legal right The other party has acted on this promise And it is inequitable/unjust for the promisor to go back and insist on their full legal rights Alan v El
Nasr: Detrimental reliance is not necessary
Tool Metal Manufacturing v Tungsten : Going back on a promise was held to be inequitable, but as promissory estoppel suspends rather extinguishes legal rights, if notice is served a promise to acceptless money may be ended
Combe v Combe : Promissory estoppel cannot be brought as an action to enforce a promise, it can onlybe a defence
D&C Builders v Rees : There must be a true agreement to pay less, not acquired through bad faith
BREACH OF CONTRACT
Express terms : those which are specifically agreed upon by the contracting parties
Implied terms : terms which have not been agreed but may be implied into a contract by customs of an industry, a court, or statute
Hutton v Warren : A term may be implied through custom within a particular trade
The Moorcock : A term may be implied if it is necessary to give the contract business sense
Shirlaw v Southern Foundries : A term may be implied if it would have been obvious to the officiousbystander that it should be included
Liverpool City Council v Irwin : A term may be implied in law in contracts of a defined type to protect a weaker party
Condition : a term which, if breached, allows the innocent party to terminate the contract and claimdamages
Warranty : a term which, if breached, only allows the innocent party to claim damages
Schuler v Wickman Tools : Even if the contract states a term is a condition, it may still be a warranty
Innominate term : a term which cannot easily be classified as one or the other
Hong Kong Fir Shipping : An innocent party may terminate a contract if the breach of an innominateterm has deprived them of substantially the whole benefit of the contract
Sale of Goods Act 1979 applies to contracts for the sale of goods with the exception of those madebetween a trader and consumer s.8 a price must be reasonable s.13 where a contract is for sale of goods by description, the goods must match that description s.14(2) where the seller sells goods in course of a business, it is implied that the goods will be ofsatisfactory quality with regards to the reasonable standard set by the circumstances i.e. fit for purpose, safe, durable, free from minor defects This does not apply if the quality is brought to the buyer’s attention, or ought to have been noticed in examination prior to purchase s.14(3) where the buyer makes known to the seller the purpose the goods are being sold for, this implies a condition that the goods are reasonably fit for purpose – unless it would be unreasonablefor the buyer to rely on the seller’s judgement Liability for these conditions is strict and the buyer does not have to prove the seller was at fault
Where they are broken the buyer may terminate, reject the goods, and sue for damages However, the right to terminate the contract will be lost if: The buyer has accepted the goods i.e. has retained them beyond a reasonable time without imitating rejection The breach is so slight that rejection will be unreasonable
Harlingdon & Leinster Enterprises v Christopher Hull Fine Art : In order for s.13 to apply, the buyer must rely on the seller’s description
Beale v Taylor : This may be the case even where the buyer has also inspected the goods
Supply of Goods and Services Act 1982 applies to contracts for services and work and materialwhich are not made between trader and consumer s.3 where a transferor agrees to transfer goods by description, goods will match the description
s.2(3) businesses may exclude or restrict liability for negligence where it causes other damage, if the clause passes the reasonableness test s.3 applies in situations where there has been a breach of an express term established in the written standard terms of business, and the party in breach seeks to rely on an exemption clause If it applies, a business may exclude or restrict liability if it satisfies the reasonableness test; if not, the exemption clause in question will be upheld if it is valid at common law ss.6 and 7 exemption clauses are valid for breaches of terms implied by the SGA 1979 and SGSA respectively if they satisfy the reasonableness test s.11 sets out the reasonableness test i.e. the exemption clause was fair and reasonable with regards to the circumstances – it is on the party relying on the clause to prove this
Schedule 2 sets out that courts should have regard to: The relative strength of the bargaining positions of the parties Whether the customer received an inducement to agree to the exemption clause Whether the customer could have received the same goods/service without having accepted an exemption clause, but chose not to Whether the customer knew, or ought to have known, of the existence and extent of the clause Whether it was reasonable at the time of the contract being agreed to expect that acondition in question would have been complied with Whether goods were manufactured, processed, or adapted to the special order of the customer
Stewart Gill v Horatio Myer & Co : Exemption clauses should be considered as a whole, not just the part being relied on in court
Watford Electronics v Sanderson CFL : However if there are multiple parts to a term which servedistinct purposes, these parts may be judged separately
Goodlife Foods v Hall Fire Protection : If parties are of equal bargaining power and the claimant hadbeen best placed to obtain relevant insurance, an exemption clause is likely to be reasonable
Smith v Eric Bush : Courts should consider the difficulty of the task undertaken, the practical consequences of a decision on reasonableness, and the issue of insurance
St Albans CDC v International Computers : Courts should consider the resources of the defendant, and whether a type of clause was common in the industry
Adler v Dickson: Generally an exemption clause will not be able to protect a third party to a contract from liability
Contracts (Rights of Third Parties) Act 1999 provides an exception to this if the contract expressly provides that the third party can benefit, and the exemption clause purports to confer a benefit on him
REMEDIES
Damages : intend to compensate claimants for loss suffered following a breach of contract
Robinson v Harman : “where a party sustains loss by reason of a breach of contract, he is so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed”
Nominal damages : awarded where the claimant is the innocent party but has not suffered any loss
Obagi v Stanborough Developments : In a case where only nominal damages are awarded, the claimant may have to pay the defendant’s legal costs
Breach date rule : the damages should be assessed at the date of the breach
The Golden Victory : Example of a case where the court took into account subsequent events and theirconsequences at the date of assessment
Expectation loss: where damages are calculated based on the position the parties would have beenif the contract was performed
Reliance loss: where damages are calculated based on expenses incurred in reliance of the contract The
claimant must have suffered loss, and a type of loss which can be claimed for
Mamola Challenger : For a claim of damages to be successful, it must be proven that the claimantsuffered loss – in this case, there was no loss
Anglia TV v Reed : An example of damages awarded based on reliance loss
Chaplin v Hicks: Damages can be claimed for lost opportunity
Addis v Gramophone Co : Damages cannot be claimed for injured feelings, distress, or disappointment
Ruxley Electronics v Forsyth : A small amount of damages may be claimed for loss of pleasure (pool case)
Jarvis v Swans Tours : Damages can be claimed for disappointment if the contract was for entertainment or enjoyment e.g. a holiday
Bailey v Bullock : Damages may be claimed for actual physical inconvenience and discomfort
Farley v Skinner : For this to apply, sole object of the contract need not be to provide pleasure or enjoyment, provided this was an important object of it
Causation must be proven
Monarch Steamshop v Karlshamns Oljefabriker : Causation must be proven, and if an intervening event was foreseeable it does not break the chain of causation
The loss must not have been too remote
Hadley v Baxendale : Damages will not be awarded for a loss which is too remote – parties should be responsible for loss which should be fairly and reasonably considered as arising naturally from the breach, or which would have reasonably been in the contemplation of both parties when the contractwas entered in to
Balfour Beatty v Scottish Power : Contracting parties are not assumed to have knowledge of the techniques in each other’s businesses
Victoria Laundry v Newman Industries : A defendant will be not be liable for loss of profit associated with special lucrative contracts if they are not aware of or expected to be aware of this possibility
The Heron II : The test for remoteness is higher in contract than in tort because it is possible for partiesto make each other aware of potential issues
