Chapter 4-Formation of Contract I

Offer An offer is a definite promise to be bound on specific terms An Express or implied statement of the term on which the maker is prepared to be contractually bound if its is accepted unconditionally. The offer may be made to one person, to a class of person or to the world at large, and only the person or one of the person to whom it is made may accept it Calil v Carbolic Smoke Ball Co. Influenza The offer may be made to one person, to a class of persons or to the world at large. Offer cannot be vague Vague statement cannot be an offer

Gunthing v Lynn

Lucky Horse

An offer must be distinguished from invitation to treat or a mere supply of information. Supply Of Information Harvey v Facey Price of Bumper Hall pen Quick Sale A statement which sets out possible term of a contract is not an offer unless this is clearly indicated. In the course of negotiations for sale, vendors statement may be an offer

Bigg v Boyd Gibbons

An invitation to treat An indication that a person is prepared to receive offer with a view to entering into a binding contract" Auction Sales Payne v Cayne Advertisement Patridge v Crittenden Bramble finch cocks An advertisement of goods for sale is usually an attempt to induce offers.
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Bid

Bid itself is the offer, which the auctioneer is free to accept or reject

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Exhibition of Goods for Sale Fisher v Bell Pharmaceutical Society of Great Britain v Boots Cash Chemists Invitation to a tender Offensive Weapon Display of drugs in a self service shop Goods on display is not an offer Displaying goods on the open shelves of a self service shop is an invitation to treat

Termination of Offer An Offer may only be accepted when it is still open. In the absence of an acceptance an offer may be terminated. Rejection Hyde v Wrench Counter Offer Counter offer is the final rejection of the original offer Request for information It is possible to respond to an offer by making a request for information; it is not a counter offer. Lapse of time An offer may be expressed to last for a specified time. If , however, there is no express time limit set, it expires after a reasonable time. Revocation of an offer Routledge v Grant Offer to buy house, acceptance required within 6 weeks If the offer remains open for acceptance for a specified time he may still revoke it within that time. Sale of Property, Counter Offer Outright rejection terminates an offer.

Failure of a Condition Financing Ltd v Stimson Condition An offer may be conditional and if this condition is not satisfied the offer is not capable of being accepted.

Termination by Death

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Bradbury v Morgan

Death

The death of offeree terminates the offer, unless the offeree accepts the offer in the ignorance of the death.

Acceptance A positive act by a person to whom an offer has been made which, if conditional, brings a binding contract into effect Acceptance may be by express words, by action or inferred from conduct. Silence Felthouse v Bindley Nephews Horse There must be some act on the part of the offeree to indicate his acceptance.

Acceptance subject to contract Means that the offeree is agreeable to the terms of the offer but proposes that the parties should negotiate a formal contract Letters of intent Letters of intent are an indication be one party to another that they may place a contract with them. Acceptance of Tender (A tender to perform one task) Great Northern Railways v Witham Supply of stores in series A tender to supply or perform a series of things, is not accepted until an order is placed (Standing Offer)

Communication of Acceptance Acceptance must be communicated to the offeror and that it is not effective until this has been done. Waiver of Communication Prescribed mode of communication No mode of Communication prescribed

The Postal Rule Acceptance is complete as soon as letter is posted Page 3

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Adam v Lindsell

Post on Different dates

Where the use of the post is within the comtemplation of both parties, the acceptance is complete and effective as soon as the letter is posted, even though it may be delayed or even lost altogether in the post. The intention to use the post for communication of acceptance may be deduced from the circumstances.

Household Fire and Carriage Accident Insurance v Grant Cross Offer

Application for shares

If two offers, identical in terms, cross in the post, there is no contract Unilateral Contract R v Clarke Williams v Carwardine Reward for information Criminals book There could not be acceptance without knowledge of the offer Acceptance may still be valid even if the offer was not the sole reason for the action.

Collateral Contracts Where consideration in provided by the making of another contract.

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Chapter 5-Formation of Contract II

Consideration A consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detrement, loss or responsibility given, suffered or undertaken by the other Executed consideration is that which takes place at the present time Executory consideration is a promise given for a promise. That which takes place at some future time.

Past Consideration Re McArdle Improvements to house Royal Pardon Past consideration is something which has already been done at the time the contract is made When a request is made for a service this request may imply a promise to pay for it

Lamleigh v Braithwaite

Adequacy and sufficiency of consideration Adequacy Thomas v Thomas Rent 1 per annum It is presumed that each party is capable of serving his own interest, and the court will not seek to weigh up the comparative value of the promises or act exchanged

Sufficiency Chappell & co v Nestle co Wrappers of chocolate Consideration is sufficient if it has some identifiable value

Performance of exiting contractual duties Collins v Godefory Provide evidence Performance of an existing obligation imposed by statue is no consideration for a promised of reward If extra service is given that is sufficient consideration

Glasbrook bros v Glamorgan Promise of additional reward

Extra Police force

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Stilk v Myrick

Two members of crew

The promise for an additional reward to perform existing contractual duties in not binding as there is no extra consideration If a claimant does more than to perform an existing contractual duty, this may amount to consideration Practical benefit is also a valid consideration

Hartley v Ponsonby

17 out of 36 crew members deserted Refurbish a block of flats

William v Roffey Bros & Nicholls (Contractors) Ltd Waiver of existing rights Foakes v Beer

Interest claimed

Waiver of any part of a partys right should be supported by consideration

Promissory Estoppel If a creditor (Y) makes a promise (unsupported by consideration) to the debtor (X) that Y will not insist on the full discharge of the debt, and the promise is made with the intention that the X should act on it and he does so, Y stopped from retracting his promise, unless Z can be restored to his original location Central London Property Trust v High Trees House Combe v Combe Half rent in war time Maintenance payment If someone has made a promise they can be prevented from denying it Promissory estoppels is a shield not a sword it does not create new causes of action where none existed before

Intention to create legal relation An agreement will only become a legally binding contract if the parties intend this to be so. This will be strongly presumed in the cases of business agreements but not presumed if the agreement is of a friendly, social or domestic nature Husband and Wife Balfour v Balfour For health reasons wife would not return Mortgage Payment The fact that the parties are husband and wife does not mean that they cannot enter into a contract Invitation to treat was to be inferred

Merritt v Merritt Relatives Jones v Padavatton

Barrister, allowance Page 6

Agreement between other family members may also be examined by the

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courts Commercial Agreements Rose and Frank v Crompton Distributor in USA In commercial agreements it is presumed that there was an intention to enter into a legally binding contract

Transaction binding in honor only Jones v Vernons Pools Football pools coupon If the parties state that an agreement is binding in honor only these amounts to an express denial of intention to create legal relations

Privity of Contract As a general rule, only a person who is a party to a contract has enforceable rights or obligations under it. Third parties have no right of action save in certain exceptional instances Tweddle v Atkinson Pay sum of money to married daughter Do not sell tires at lower rate than agreed A promises B that A will confer a benefit on C. Therefore, C cannot as a general rule enforce As promise since C has given no consideration. A person cannot recover damages under a contract to which it was not a party

Dunlop v Selfridge

Exceptions Beswick v Beswick X transfer his business to his nephew Confirmed the paints suitability The third party can sue in another capacity. Collateral Contracts

Shanklin Pier Ltd v Detal Products Ltd

Forseeable loss to the third party Original beneficiary could claim full damages on behalf of the third party Statutory Exceptions: Road Traffic Act 1972 Married womans Property Act 1882 Contract (Rights of third parties) Act 1999

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Contract (Rights of third parties) Act 1999 a) Where the contract itself expressly so provides b) Where the term confers a benefit of the third party, unless it appears that the contracting parties did not intend him to have the right to enforce it

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Chapter 6- Terms of Contract

Contract Terms Statements made by the parties may be classified as terms or representations Bannerman v White Sulphur Term is an important part of the contract, the party misled can claim for breach of the contract A representation is something which includes the formation of the contract but which does not become a term of the contract

Routledge v McKay

Sale of Motorcycle (wrong model)

Express and Implied Terms Terms clearly include in the contract are express terms. The law may complement or replace terms by implying terms into a contract Implied Terms A term is the term expressly agreed by the parties to the contract Terms implied by custom Hutton v Warren Tenant Farmer The parties may enter into a contract subject to custom of their trade. Any express term overrides a term which might be implied by custom

Terms Implied by Statute Sales of Good Act 1979 Terms implied by the courts Liverpool City Council v Irwin Inter Alia the lifts did not work Terms may be implied if the court concludes that the parties intended those terms to apply to the contract

Conditions and Warranties Terms may be further classified as conditions and warranties A condition is the vital term, going to the root of the contract, breach of which entitles the injured party to treat the contract as discharged and claim damages. Page 9

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A warranty is a term subsidiary to the main purpose of the contract, breach of which only entitles the injured party to claim damages.

Poussard v Spiers

Failure to sing in a an opening night

A Vital term of the contract was breached, which entitled the injured party to treat the contract as discharged Only a minor term of the contract was breached, the injured party was not allowed to treat the contract as discharged but only claim damages

Bettini v Gye

3 out of 6 rehearsals

Innominate Terms When it not possible to determine whether a term is a condition or a warrant, such terms are classified as innominate terms If the consequences of the breach is not so serious the term cannot be treated as condition, hence injured party could not treat the contract as breached Exclusion Clauses An exclusion clause may attempt to restrict one partys liability for breach of contract or for negligence A claue in a contract which purports to exclude liability altogether or to restrict it by limiting damages or by imposing other onerous conditions a) Exclusion Clause must be incorporated into a contract before they have legal effect b) Exclusion Clauses are interpreted strictly Contractual Document Chapelton v Barry UDC Pile of deck chairs Where the exclusion clause is contained in an unsigned document it must be shown that this document is integral part of the contract

Signed Document LEstrange v Graucob Slot Machine, Small Print If a person signs a document containing a term, he is held to have agreed to the term even if he had not read the document

Unsigned contracts and notices

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Olley v Marlborough court Ltd

Notice in Bedroom

Each party must be aware of the contracts term before or at the time of entering into the agreement if they are to be binding

Onerous Terms Interfoto picture library Ltd v Stiletto visual programmers Ltd Holding fee of 5 plus VAT Where a term is particularly unusual is should be highlighted otherwise it wont be incorporated into the contract

Interpretation of Exclusion Clauses The main purpose rule By this, the court presumes that the clause was not intended to prevent the main purpose of the contract Fundamental Breach Photo Productions v Securicor Transports Small Fire by guard A properly drafted exclusion clause can cover any breach of contract under common law

The Unfair Contract Act 1977 Clauses which are void If an exclusion clause is made void by statute it is unnecessary to consider how other legal rules might affect it Clauses which are subject to a test of reasonableness George Mitchell Ltd v Finney lock seeds Ltd Dutch winter cabbage seeds Courts decides relying exclusively on the statutory ground of reasonableness

The statutory ground of reasonableness Smith v Eric S Bush Surveyors Report It is sometimes unreasonable to disclaim liability

The Unfair Terms in Consumer Contracts Regulations 1999 This deals with consumer contracts and terms which have not been individually negotiated

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A consumer is defined as a natural person who, in making a contract to which these regulations apply, is acting for purposes which are outside his business An Unfair term is any term which causes a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer

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Chapter 7- Breach of Contract

Repudiatory Breach A repudiatory breach occurs where a party indicates, either by words or by conduct, that he does not intend to honour his contractual obligations or commits a breach of condition or commit a breach which has very serious consequences for the injured party. It only occurs when performance is due Anticipatory Breach Where one party declares in advance that he will not perform his side of the bargain when the time for performance arrives, the other party may treat the contract as discharged forthwith, or continue with his obligations until actual breach occurs. His claim for damages will then depend upon what he has actually lost Hochester v de la tour White & Carter (Councils) v McGregor European tour Litter bins The claimant can sue as soon as the anticipatory breach occurs Repudiation does not, of itself, bring the contract to an end. It gives the innocent party the choice of affirmation or rejection

Affirmation after repudiation Damages Damages are a common law remedy intended to restore the party who has suffered the loss to the same position he would have been in if the contract had been performed The two tests applied to a claim for damages relate to remoteness of damage and measure of damages. Remoteness of Damages Hadley v Baxendale Crank Shaft The loss must arise naturally form the breach and in a manner which the parties may reasonably be supposed to have contemplated A loss outside the natural course of events will only be compensated if the exceptional circumstances are within the defendants knowledge when he

Victoria Laundry (Windsor) v Newman Industries

Large Boilers

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made the contract Measure of Damages The measure of damages is that which will compensate for the loss incurred. It is not intended that the injured party should profit from a claim. Damages may be awarded for financial and non financial loss C & P Haulage v Middleton Renewable license A claimant may seek to have his reliance interest protected, i.e. the position he would have been in had he not relied on the contract. This compensates for wasted expenditure If a contract is speculative, it may be unclear what profit might result.

Anglia Television Ltd v Reed Market Price Rule

Film Making

The seller would have to compensate the buyer for any additional cost the buyer incurred over the contract cost and vice versa (when buying or selling the equivalent goods at market price) Non Financial Loss Jarvis v Swan Tours Holiday accommodation at a winter sports centre Repair of Rolls Royce Damages could be recovered for mental distress where that is the main result of the breach Breach of contract to repair a car did not give rise to any liability due to distress

Alexander v Rolls Royce Motor cars Ltd Cost of Cure Ruxley Electronics and Construction Ltd v Forsyth

Swimming Pool

If the claimant is seeking cost of cure for the defect which constituted the breach, he may be denied if it is wholly disproportionate to the breach

Mitigation of loss In assessing the amount of damages it is assumed that the claimant will take any reasonable steps to reduce or mitigate his loss

Liquidated Damages and Penalty Clause

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Liquidated damages can be defined as a fixed or ascertainable sum agreed by the parties at the time of contracting, payable in the time of breach A penalty clause can be defined as a clause in a contract providing for a specified sum of money to be payable in the event of a subsequent breach. If its purpose is merely to deter a potential difficulty, it will be held void and the court will proceed to asses un liquidated damages

Action for Price A simple action for the price to recover the agreed sum should be brought if breach of contract is failure to pay the price Quantum Meruit De Barnardy v Harding Advertise and sell tickets Quantum Meruits aim is to restore the claimant to the position he would have been in if the contract had never been made and is likely to be sought where one party performed part of his obligations and other party repudiates

Equitable Remedies Specific Performance The party in breach is ordered to perform his side of the contract Injunction Warner Bros Pictures Inc v Nelson Film star Bette Davis An injunction may be used to enforce a contract of personal service for which an order of specific performance would be refused

Recission It is a right which exists in certain circumstances, such as where a contract is voidable

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Chapter 8- The Law of Torts

Tort A tort is a civil wrong and the person wronged sues in a civil court for compensation or an injunction. The tort of negligence Negligence is the most important modern tort. To succeed in an action for negligence the claimant must prove that: The defendant had a duty of care There was a breach of that duty In consequence the claimant suffered injury, damage or loss Duty of care Donoghue v Stevenson Decomposed snail A person might owe a duty of care to another with whom he had no contractual relationship. Every person owes a duty of care to his neighbour. Development of the doctrine (Two stages must be tested) Auditors Auditors do not owe a duty of care to public at large (Three stage test)

Anns v Merton London Borough Council Caparo Industries plc v Dickman

Breach of duty of care The standard of reasonable care requires that the person concerned should do what a reasonable man would do. The following factors should be considered. Probability of Injury Glasgow Corporation v Taylor Seriousness of the risk Paris v Stepney Borough Council Protective goggles There was a higher standard of care owed to the employee because an injury to remaining good eye would blind him. Poisonous berries A warning notice was not considered to be sufficient to protect children.

Issues of practicality and cost Latimer v AEC Ltd Slippery floor Duty of care is not breached because

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reasonable step was taken. Common Practice Where an individual can prove their actions in line with common practice or custom it is likely that they would have met their duty of care Social Benefit Where an action if of some benefit, defendants may be protected from liability Professions and skill Persons who hold themselves out to possess a particular skill should be judged on what a reasonable person possessing the same skill would do in the situation Res ipsa loquitur Richley v Fould Mahon v Osborne Skidded car Leaving a swab The thing speaks for itself. Leaving a swab inside a patient after and operation was not negligent

Causality and remoteness of damages The claimant must demonstrate that he suffered injury or loss as a result of the breach The But for test Barnett v Chelsea Arsenic poisoning The claimant must prove that if it was not but for the others actions they would not have suffered damge

Multiple Causes Multiple causes: Wilsher v Essex AHA Premature baby Court could not ascertain a direct casual link due to the presence of multiple causes

Novus actus intervieniens McKew v Holland Leg injury The actions of the claimant may break the chain of causation (Act of Claimant) Where a third party intervenes in the course of events the defendant will normally only be liable for damage until the intervention (Act of a third

Lamb v Camden LBC

Damaged house

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party) Carslogie Steamship Co Ltd v Royal Remoteness of Damage The Wagon Mound Furnace oil Liability is limited to damage that a reasonable man could have foreseen Damaged ship Where the natural event is unforeseeable, the chain will be broken (Natural events)

Defences to negligence Contributory Negligence Sayers v Harlow UDC Defective lock A court may reduce the amount of damages paid to the claimant if the defendant establishes that they contributed to their own injury or loss.

Volenti non fit injuria ICI v Shatwell Detonators Where a defendants actions carry the risk of a tort being committed they will have a defense if it can be proved that the claimant consented to the risk

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Chapter 9-Professional negligence

Professional negligence Professional individuals and organizations have a special relationship with their clients and those who rely on their work. This is because they act in an expert capacity Special relationship If someone possessed of a special skill undertakes.to apply that skill for the assistance of another person who relies on that skill, a duty of care will arise

Candler v Crane, Christmas & Co

To establish a special relationship the person who made the statement must have done so in some professional or expert capacity. Statement about financial resources Claim for negligence cannot succeed if there is a disclaimer even if the special relationship existed and duty of care is breached

Hedly Byrne & Co v Heller and Partners Ltd

The Caparo Decision Auditors do not owe a duty of care to the public at large or to shareholders increasing their stakes Caparo Industries plc v dickman and others Auditors Takeover Bid Directors (the dickman brothers) Joint auditor True & Fair view Potential buyer Meeting Difference &Interest The auditors duty did not extend to potential investors nor to existing shareholders increasing their stakes. It was a duty owed to the body of shareholders as whole. The courts expect a higher standard of care from accountants when giving advice on company acquisition since the losses can be so much greater.

ADT Ltd v BDO Binder Hamlyn

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Chapter 10- Employment Contract

An Employee is an individual who has entered into, or works under a contract of employment. A Contract of Employment is a contract of service or apprenticeship, whether express or implied, and ( if it is express) whether it is oral or in writing. Builders laborer In order to distinguish between employment and independent contractor the court will look at the reality of situation rather than the arrangements Where there is some doubt as to the nature of the relationship the courts will then look at any agreement between the parties

Ferguson v John Dawson & Partners

Massey v Crown Life Assurance

Insurance Co.

Tests It is very important to know whether an individual is an employee or an independent contractor. The court will apply a series of tests: Control Test Mersey Docks & Harbour Board v Coggins & Griffiths Integration Test Cassidy v Ministry of Health Medical officer The courts consider whether the employee is so skilled that he cannot be controlled in the performance of his duties. Lack of control indicates that an employee is not integrated into the employers organization, and therefore not employed. Stevedores The court will consider whether the employer has control over the way in which the employee performs his duties

Multiple ( economic reality ) Test Ready Mixed concrete v Ministry of Pension & National Insurance Driver Liquid concrete Courts also consider whether the employee was working on his own account and this requires numerous factors to be taken into account.

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Agency workers Two cases are considered (a)Length of Service (b)Control over the worker Other Relevant factors: Own tools & equipment Selection or appointment Payment of salary Delegation of work Waiter It depends entirely on the facts of each case. When there is no mutuality of obligations, there is no contract

OKelley v trusthouse forte plc

Why distinguishing is important? Social Security Taxation Employment protection Tortuous acts Common Law Duties Employees duties: Fundamental duty of faithful service Reasonable competence Obedience Duty to account for all money and property Reasonable care and skill Personal service Implied terms VAT Bankruptcy Health and Safety

Hivac Ltd v Park Royal

Spare time Directly competed

Even though the employees had not passed on any confidential information, they were still in breach of their duty of fidelity to the claimants. The gardener was in breach of his implied duty to obey as the instructions were lawful and

Pepper v webb

Gardener

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reasonable. Boston Deep Sea Fishing and Ice Co.v Ansell Commissions The company was justified in dismissing the claimant and he must account to it for the commissions.

Employers duties Pay remuneration Indemnify the employee Health and safety Provide work Duty of mutual trust and confidence

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Chapter 11- Dismissal and Redundancy

Summary dismissal Summary dismissal is where the employer dismisses the employee without notice. He may do this if the employee has committed a serious breach of contract Wilson v Racher Gardener Action succeeded because it was employers own conduct that provoked the outburst

Constructive dismissal Constructive dismissal is where the employer commits a breach of contract, thereby causing the employee to resign Western Excavating (ECC) Ltd v Sharp Advance Holiday Pay If the employer is not in breach of contract, the employee cannot claim for constructive dismissal

Wrongful dismissal Wrongful dismissal is a common law concept arising in specific circumstances. It gives the employee an action for breach of contract Justification of dismissal Willful disobedience of a lawful order Misconduct Dishonesty Incompetence or neglect Gross negligence Immorality Drunkenness Unfair dismissal Unfair dismissal is a statutory concept introduced by employment protection legislation. As a rule, every employee has the right not to be unfairly dismissed Potentially fair reasons for dismissal Capability and Qualifications Conduct Redundancy Legal prohibition Some other substantial reason

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International Sports Ltd v Thomson

Employee did not work for 25% of the time

The illnesses were unrelated and unverifiable so dismissal was fair

Remedies for Unfair dismissal Reinstatement Reinstatement is return to the same job without any break of continuity Re-engagement Re-engagement means that the employee is given new employment with the employer (or his successor or associate) on terms specified in the order. Compensation Basic Award Compensatory award (up to 66,200) Punitive additional award (up to 380 per week)

Redundancy A dismissal is treated as caused by redundancy if the only or main reason is that: The employer has ceased, or intends to cease, to carry on the business in which the employee has been employed The requirement of that business for employees to carry on the work done by the employee have ceased or diminished High Table Ltd v Horst and Others Waitresses Dismissal was for genuine redundancy as the place of work was of the new employer was at the client company premises

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