CONTRACT LAW CASES - Complete Set-small

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Harvey v Facey [1893] UKPC 1

Offer

In order to amount to an offer it must

Harvey sent a Telegram to Facey which stated:

-"Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid;" Facey replied by

telegram:-"Lowest price for Bumper Hall Pen £900."

Carlill v Carbolic Smoke Ball co [1893] 1 QB 256

Offer

In order to amount to an offer it must be shown that

the offeror had the intention to be bound:

A Newspaper advert placed by the defendant

stated:-£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two

weeks according to the printed directions supplied with each ball... £1000 is deposited with the Alliance Bank, shewing our sincerity in the

matter."

Pharmaceutical Society of Great Britain v Boots

[1953] 1 QB 401

Goods on display in shops

Goods on display in shops are generally not offers

Boots introduced the then new self service system into their shops whereby customers would pick up goods from the shelf put them in their basket and then take them to the cash till to pay. The Pharmaceutical Society of Great Britain brought an action to determine the legality of the system with regard to

the sale of pharmaceutical products which were required by law to be sold in the presence of a pharmacist. The court thus needed to determine where the

contract came into existence.

Fisher v Bell [1961] 1 QB 394

Goods on display in shops

Goods on display in shops are

The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. The court applied the literal rule of

statutory interpretation.

Partridge v Crittenden (1968) 2 All

ER 421

Brogden v Metropolitan Railway

(1877) 2 App. Cas. 666

Acceptance can be through

The claimants were the suppliers of coal to the defendant railway company. They had been dealing for some years on an informal basis with no written contract. The parties agreed that it would be wise to have a formal contract written. The defendant drew up a draft contract and sent it to the claimant. The

claimant made some minor amendments and filled in some blanks and sent it back to the defendant. The defendant then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose and

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Butler Machine Tool v Ex-Cell-O

Corporation [1979] 1 WLR 401

Court of Appeal

Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of £75,535 along with a copy of their standard terms of sale. The terms included a price variation clause and a term that the seller's terms would

prevail over any terms submitted by a purchaser. The machine would be delivered in 10 months. Ex-Cell-O put in an order for the machine at the stated

price and sent a set of their terms which did not include the price variation clause. The order contained an acknowledgement slip which required a signature by Butler and was to be returned to Ex-Cell-O. This slip stated that

Adams v Lindsell (1818) 106 ER 250

The postal rule

Where it is agreed that the parties will use the post

as a means of communication the postal rule will

The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter was delayed in the post. On

receiving the letter the claimant posted a letter of acceptance the same day. However, due to the delay the defendant's had assumed the claimant was not

interested in the wool and sold it on to a third party. The claimant sued for breach of contract.

Held: Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord

Langdale MR)

The terms of the acceptance must exactly match the terms of the offer.

If the terms differ this will amount to a counter offer and no contract will exist:

The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered £950 which the defendant refused. The claimant then sought to accept the original offer of £1,000. The defendant refused to sell to the

claimant and the claimant brought an action for specific performance. Held:

There was no contract. Where a counter offer is made this destroys the

Scammell and Nephew v Ouston

[1941] AC 251 House of Lords

The agreement must be certain

The parties entered an agreement whereby Scammell were to supply a van for £286 on HP terms over 2 years and Ouston was to trade in his old van for £100. There was then some disagreement and Scammel refused to supply the

van. Held:

There was no certainty as to the terms of the agreement. Whilst there was

Sudbrook Trading Estate v Eggleton

[1983] AC AC 444 House of Lords

The agreement must be certain

A lease gave the tenant an option to purchase the freehold of the property at a price to be agreed by two surveyors one appointed by the tenant and one appointed by the landlord. The tenant sought to exercise the option but the landlord refused to appoint a surveyor. The landlord claimed that the clause

was too vague to be enforceable as it did not specify a price. Held:

Jones v Padavatton [1969] 1 WLR 328

Court of Appeal

Intention to create legal relations in

social and domestic agreements

A mother promised to pay her daughter $200 per month if she gave up her job in the US and went to London to study for the bar. The daughter was reluctant

to do so at first as she had a well paid job with the Indian embassy in Washington and was quite happy and settled, however, the mother persuaded

her that it would be in her interest to do so. The mother's idea was that the daughter could then join her in Trinidad as a lawyer. This initial agreement wasn't working out as the daughter believed the $200 was US dollars whereas

the mother meant Trinidad dollars which was about less than half what she

Balfour v Balfour [1919] 2 KB 571

Intention to create legal relations in

social and domestic agreements

In social and domestic agreements the

A husband worked overseas and agreed to send maintenance payments to his wife. At the time of the agreement the couple were happily married. The relationship later soured and the husband stopped making the payments. The

wife sought to enforce the agreement. Held:

The agreement was a purely social and domestic agreement and therefore it

Errington v Errington Woods [1952] 1 KB 290 Court

of Appeal

In social and domestic agreements the law raises a

presumption that the parties do not intend to create

legal relations:

A father-in-law purchased a house for his son and daughter-in-law to live in. The house was put in the father's name alone. He paid the deposit as a

wedding gift and promised the couple that if they paid the mortgage instalments, the father would transfer the house to them. The father then became ill and died. The mother inherited the house. After the father's death the son went to live with his mother but the wife refused to live with the mother and continued to pay the mortgage instalments. The mother brought an action

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Merritt v Merritt [1970] 1 WLR 1211 Court of Appeal

In social and domestic agreements the law raises a

presumption that the parties do not intend to create

legal relations:

This presumption may be rebutted by evidence to

A husband left his wife and went to live with another woman. There was £180 left owing on the house which was jointly owned by the couple. The husband signed an agreement whereby he would pay the wife £40 per month to enable

her to meet the mortgage payments and if she paid all the charges in connection with the mortgage until it was paid off he would transfer his share of the house to her. When the mortgage was fully paid she brought an action

for a declaration that the house belonged to her.

Simpkins v Pays [1955] 1 WLR 975 Queen's Bench

Division

In social and domestic agreements the law raises a

presumption that the parties do not intend to create

legal relations:

A Grandmother, granddaughter and a lodger entered into a weekly competition run by the Sunday Empire News. The coupon was sent in the Grandmothers name each week and all three made forecasts and they took it in turns to pay. They had agreed that if any of them won they would share the winnings between them. The grandmother received £250 in prize money and refused to share it with the other two. The lodger brought the action to claim

one third of the prize money. Esso Petroleum v Customs & Excise [1976] 1 WLR 1 House of Lords

Intention to create legal relations in commercial agreements

Where an agreement is made in a commercial context, the law raises a presumption that the parties do intend to create legal relations by the

agreement:

Esso ran a promotion whereby any person purchasing four gallons of petrol would get a free coin from their World Cup Coins Collection. The question for

the court was whether these coins were 'produced in quantity for general resale' if so they would be subject to tax and Esso would be liable to pay £200,000. Esso argued that the coins were simply a free gift and the promotion was not intended to have legal effect and also that there was no

resale.

Edwards v Skyways [1964] 1 WLR 349 Court of

Appeal

Intention to create legal relations in commercial

agreements

The claimant was an airline pilot working for the defendant. He was to be made redundant. The defendants said that if he withdrew his contributions to

the company pension fund, they would pay him the equivalent of company contributions in an ex gratia payment. The claimant agreed to this and withdrew his contributions. The company then ran into further financial difficulty and went back on their promise relating to the ex gratia payment.

Held: Rose & Frank Co v Crompton Bros [1925] AC 445 House of Lords

Intention to create legal relations in commercial agreements Where an agreement is made in a commercial context, the law raises a

presumption that the parties do intend to create legal relations by the agreement:Again this presumption can be rebutted by evidence to the

contrary:

Binding in honour only clauses:

The claimants and defendants entered an agreement for the supply of some carbonised tissue paper. Under the agreement the claimants were to be the defendant's sole agents in the US until March 1920. The contract contained an

honourable pledge clause which stated the agreement was not a formal or legal agreement and shall not be subject to the jurisdiction of the courts in neither England nor the US. The defendants terminated the agreement early

and the claimants brought an action for breach.

Ferrera v Littlewoods Pools [1998] EWCA Civ 618

Court of Appeal

Intention to create legal relations in commercial

agreements

Where an agreement is made in a commercial

The facts were almost identical to those of Jones v Vernon Pools whereby the claimant filled in a winning entry and sent it off to Littlewoods Pools. Littlewoods disputed ever receiving the entry and denied the fact that they would be legally obliged to pay out even if they had received the entry due to the binding in honour only clause and based on the Court of Appeal precedent set in Jones v Vernon Pools. The claimant, a litigant in person, argued that the

decision in Jones v Vernons was outdated and should be overruled.

Kleinwort Benson (KB) v Malaysia Mining

Corporation BHD (MMC BHD) [1989] 1 WLR 379

Court of Appeal

Intention to create legal relations in commercial

agreements

Malaysia Mining Corporation Metals Ltd (MMC Metals) was a wholly owned subsidiary of the defendant, MMC BHD. MMC Metals approached the claimant KB Bank for a loan. MMC Metals was a relatively newly formed

company lacking in the size and resources of MMC BHD. The bank approached MMC BHD asking if they would act as guarantor for the loan. MMC refused to act as guarantor but stated they it was their company policy to ensure that their subsidiaries are always in a position to meet their debts. In

reliance of this letter of comfort the bank advanced money to MMC Metals.

Coward v MIB [1963] 1 QB 359 Court of Appeal

The distinction between social and domestic

agreements and commercial agreements can be

fine.

Compare the case:

Coward was killed whilst riding pillion on a motorcycle driven by a friend and work colleague on the way to work. The collision was due to the negligence of

the friend. Coward's widow sought to claim damages from the Motor Insurance Bureau since the rider's insurance did not cover pillion passengers. The Motor Insurance Bureau would only be obliged to pay if insurance for the pillion was compulsory. Insurance was only compulsory for pillions if they were

carried for hire or reward. Coward paid the friend a small weekly sum to take him to and from work each day. The widow therefore argued that this was a

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Albert v MIB [1971] 3WLR 291 House of Lords

The distinction between social and domestic

agreements and commercial agreements can be

fine.

Compare the case:

A docker was killed in a road collision on his way to work. He was a passenger in a car owned and driven by a work colleague. The driver gave lifts to the deceased and other dockers in return for payment. He had given lifts to different dockers over a period of eight years. A claim was made against the Motor Insurance Bureau (MIB) as the driver had no insurance

cover for passengers. The MIB was only obliged to pay if there existed a contract between the docker and the driver.

In contract law consideration is

concerned with the bargain of the

contract. A contract is based on an

exchange of promises. Each party to a

Consideration must be something of value in the eyes of the law - (Thomas v Thomas) (1842) 2 QB 851. This excludes promises of love and affection,

gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by

deed.

Whilst the common law strictly adheres to the requirement of consideration (although in some instances the courts seem to go to some lengths to invent

consideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros

Rules of consideration

There are various rules governing the law of consideration: 1. The consideration must not be past.

2. The consideration must be sufficient but need not be adequate.

3. The consideration must move from the promisee.

Re McArdle (1951) Ch 669 Court

of Appeal

Consideration must not be past:

Majorie McArdle carried out certain improvements and repairs on a bungalow. The bungalow formed part of the estate of her husband's father who had died living the property to his wife for life and then on trust for Majorie's husband

and his four siblings. After the work had been carried out the brothers and sisters signed a document stating in consideration of you carrying out the repairs we agree that the executors pay you £480 from the proceeds of sale.

However, the payment was never made.

Lampleigh v Braithwaite [1615] EWHC

KB J17

Consideration must not be past:

Past consideration may be valid

The defendant had killed a man and was due to be hung for murder. He asked the claimant to do everything in his power to obtain a pardon from the King. The claimant went to great efforts and managed to get the pardon requested.

The defendant then promised to pay him £100 for his efforts but never paid up.

Held:

Chappel v Nestle [1960] AC 87 House of Lords

Consideration must be sufficient but need not be

adequate:

There is no requirement that the consideration must

be market value, providing something of value is

Nestle ran a sales promotion whereby if persons sent in 3 chocolate bar wrappers and a postal order for 1 shilling 6d they would be sent a record. Chappel owned the copyright in one of the records offered and disputed the

right of Nestle to offer the records and sought an injunction to prevent the sales of the records which normally retailed at 6 shillings 8d. Under s.8 of the

Copyright Act 1956 retailers were protected from breach of copyright if they gave notice to the copyright holders of the ordinary retail selling price and paid

them 6.25% of this. Nestle gave notice stating the ordinary selling price was

Tweddle v Atkinson [1861] EWHC QB

J57 Queen's Bench Division

Consideration must move from the

promisee

A couple were getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son

also died so was unable to sue on the agreement. The groom made a claim against the executor of the will.

Held:

Collins v Godefrey (1831) 1 B & Ad

950 King's Bench Division

An existing public duty will not amount

to valid consideration

The claimant, Collins, had been subpoenaed to attend court as a witness in separate court case involving the defendant, Godefrey. Godefrey had sued his

attorney for malpractice and Collins was required by the court to attend as an expert witness. In fact Collins never gave evidence but was required to be on

standby for six days in case he was called. After the trial Collins gave Godefrey an invoice to cover his time spent at court and demanded payment by the next day. Without giving him the full day to pay, Collins commenced an

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Glasbrook Bros v Glamorgan County Council [1925]

AC 270 House of Lords

An existing public duty will not amount to valid

consideration

The defendant owners of a colliery asked the police to provide protection during a miner's strike. The police provided the protection as requested and provided the man power as directed by the defendants although they disputed

the level of protection required to keep the peace. At the end of the strike the police submitted an invoice to cover the extra costs of providing the protection.

The defendants refused to pay arguing that the police were under an existing public duty to provide protection and keep the peace.

Ward v Byham [1956] 1 WLR 496

Court of Appeal

An existing public duty will not amount

to valid consideration

An unmarried couple had a child together and lived together for five years. The father then turned the mother out of the house and sent the child to live with a neighbour and the father paid the neighbour £1 per week. The mother then got a job as a live in house keeper and wished to have the daughter live with her. The father agreed to allow the daughter live with the mother and

agreed to pay her £1 per week provided she ensured the child was well looked after and happy. The father made payments but then when the mother

remarried he stopped making payments. The mother brought an action to

Stilk v Myrick [1809] EWHC KB J58

King's Bench Division

An existing contractual duty will not

amount to valid consideration

The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain

never made the extra payment promised. Held:

Hartley v Ponsonby [1857] 7 EB 872

An existing contractual duty will not

amount to valid consideration

If a party has an existing contractual

Half of a ship's crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked the ship and completed

the voyage. The captain then refused to pay up. Held:

The crew were entitled to the extra payment promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage

Williams v Roffey Bros [1990] 2 WLR

1153

An existing contractual duty will not

amount to valid consideration

The defendants were building contractors who entered an agreement with Shepherds Bush Housing Association to refurbish a block of 27 flats. This contract was subject to a liquidated damages clause if they did not complete

the contract on time. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing

the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was

Scotson v Pegg [1861] EWHC Exch J2

An existing contractual duty will not amount to valid

consideration

If a party has an existing contractual duty to do an

act, this act can not be used as consideration for a

A purchaser of some coal paid the defendant to carry and to unload the coal. The claimant was the supplier of the coal who had also paid the defendant to carry and unload the coal. The claimant brought an action to recover the money paid arguing the defendant was already under an existing duty to carry

and unload the coal and thus provided no consideration. Held:

Pinnel's Case 1602 5 Rep, 117 Court of Common Pleas Part payment of a Debt

Part payment of a debt is not valid consideration for a promise to release the debt in full:

Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made:

a). before the due date b). with a chattel

Pinnel's Case 1602 5 Rep, 117 Court of Common Pleas

The claimant was owed £8 10 shillings. The defendant paid £5 2 shillings and 2p. The claimant sued for the amount outstanding.

Held:

The claimant was entitled to the full amount even if they agreed to accept less. Foakes v Beer (1883-84) LR 9 App Cas 605 House of Lords

Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made:

a). before the due date b). with a chattel c). to a different destination

This rule from Pinnel's case was affirmed by the House of Lords in:

Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and agreed she would not seek enforcement of the payment provided he kept up the instalments. No mention

was made in this agreement of interest although judgment debts generally incurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer

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Hirachand Punamchand v Temple

[1911] 2 KB 330 Court of Appeal

Part payment of a Debt

Where part payment is made by a

The claimants were money lenders in India. They lent money to the defendant Lieutenant Temple who was an army officer serving in India. The claimants

sought return of the money from the claimant but were unable to get any response so they contacted his father. Some correspondence went between

the claimant and the father's solicitors. The claimants asked how much the father would be prepared to pay to settle the son's accounts. An amount was agreed which was a substantial, amount although not the full amount due. The claimant promised to send the promissory note relating to the son's debt to the

Promissory estoppel

Promissory estoppel is an equitable doctrine which in some instances can stop a person going back on a promise which is not supported by consideration. Promissory estoppel was developed by an obiter statement by Denning J (as he then was) in Central London Property Trust Ltd v High Trees

Ltd [1947] KB 130 (Case summary). Denning J based the doctrine on the decision in Hughes v Metropolitan Railway (1876-77) L.R. 2 App. Cas. 439 (Case summary). The House of Lords affirmed the existence of promissory estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR

Central London Property Trust v High

Trees House [1947] KB 130 High

Court

Promissory estoppel was developed

High Trees leased a block of flats from CLP at a ground rent of £2,500. It was a new block of flats at the time the lease was taken out in 1937. The defendant had difficulty in getting tenants for all the flats and the ground rent left High Trees with no profit. In 1940 many of the flats were still unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any change to this situation in the near future. CLP agreed to reduce the rent to £1,250 during the war years. The agreement was put in writing and High Trees paid the reduced rent from 1941. When the war was over the flats

Hughes v Metropolitan Railway

(1876-77) LR 2 App Cas 439 House of

Lords

Denning J based the doctrine of

A landlord gave a tenant 6 months notice to carry out repairs failure to do so would result in forfeiture of the lease. The landlord and tenant then entered into negotiations for the tenant to purchase the freehold of the property. It was

thought by both parties that a conveyance of the property would take place. The tenant had not carried out the repairs as they believed they would be purchasing the freehold and the repairs required by the landlord were not essential to his use of the property. At the last minute negotiations broke down

and the Landlord gave the tenant notice to quit for failure to carry out the

Tool Metal Manufacturing v Tungsten

[1955] 1 WLR 761 House of Lords

The House of Lords affirmed the

existence of promissory estoppel in

Tungsten had been infringing a patent right held by TMM. When TMM heard of this they waived all infringements in return for Tungsten paying 10% Royalty and also 30% 'compensation' if sales exceeded 50KG in any month. These sums were excessive but Tungsten agreed to pay them otherwise they would be faced with a claim for infringing the copyright. Tungsten struggled to make payments. They got into arrears during the war times and an agreement was reached to waive the 'compensation' payments during the war years.

Combe v Combe [1951] 2 KB 215

Court of Appeal

Requirements of promissory estoppel:

A husband promised to make maintenance payments to his estranged wife but failed to do so. The wife brought an action to enforce the promise invoking

promissory estoppel. Held:

Her action failed. There was no pre-existing agreement which was later modified by a promise. The wife sought to use promissory estoppel as sword

Woodhouse A.C. Israel Cocoa Ltd. v.

Nigerian Product Marketing Co. Ltd.

[1972] AC 741

Requirements of promissory estoppel:

A contract for the sale of some coffee beans was agreed to be payable in pound sterling. The sellers mistakenly sent an invoice stating price was payable in Kenyan Shillings. At the time the value of pound sterling and Kenyan shillings was equal. The buyers accepted the delivery and invoice with

out objection. Subsequently the value of the pound fell quite dramatically in relation to Kenyan shillings. The buyers then sought to revert to pound sterling

as stated in the contract.

Alan v El Nasr [1972] 2 WLR 800

Requirements of promissory

estoppel:

By contract, the sellers agreed to sell 250 tons of coffee beans at 262 Kenyan shillings per cwt to El Nasr payable on credit. At the time of the contract the value of Kenyan shillings and pound sterling were of equal value. Whilst the contract stipulated the price payable in Kenyan shillings, the credit account

referred payment in pound sterling. There were a number of other discrepancies between the credit agreement and contract such as date of

shipping and the quantity to be shipped. These other discrepancies were rectified in a revised agreement however, the new agreement still referred to

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D & C Builders v Rees [1966] 2 WLR

28 Court of Appeal

Requirements of promissory estoppel:

It must be inequitable to allow the

Mr Rees instructed the claimant to do some building work at his home to the value of £746. Mr Rees paid £250 on account and the claimant reduced the bill by £14 and there was a sum owing of £482. The claimant wrote to the defendant several times pressing for payment but was unsuccessful there had

been no complaints as to the workmanship at this time. The claimant at the time was in dire financial need and the business was verging on bankruptcy a

fact that Mrs Rees was aware of. The defendant telephoned the home and Mrs Rees answered she made complaints about the work and said she would Esso Petroleum v Mardon [1976] QB 801 Court of Appeal

Statements made during the course of negotiations can be classified as either:

1. An express term - if not fulfilled the innocent party may bring an action for breach of contract.

2. A representation - if not fulfilled the innocent party may bring an action for misrepresentation.

3. As part of a collateral contract - the innocent party may sue on the collateral

Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of a new Petrol station. Esso's experts had estimated that the petrol station would sell 200,000 gallons of petrol. This estimate was based on figures which were prepared prior to planning application. The planning permission changed the

prominence of the petrol station which would have an adverse affect on the sales rate. Esso made no amendments to the estimate. The rent under the tenancy was also based on the erroneous estimate. Consequently it became

impossible for Mr Mardon to run the petrol station profitably. In fact, despite Oscar Chess Ltd v Williams [1957] 1 WLR 370 Court of Appeal

In deciding whether a statement amounts to a term or representation the courts look at four factors:

1.The parole evidence rule

Where the contract has been put into writing only the terms included in the written document are terms any verbal statements will be representations.

2.Relative expertise of the parties Relative expertise:

Mrs Williams purchased a second hand Morris car on the basis that it was a 1948 model. The registration document stated it was first registered in 1948. The following year her son used the car as a trade in for a brand new Hillman Minx which he was purchasing from Oscar Chess. The son stated the car was

a 1948 model and on that basis the Oscar Chess offered £290 off the purchase price of the Hillman. Without this discount Williams would not have

been able to go through with the purchase. 8 months later Oscar Chess ltd found out that the car was in fact a 1939 model and worth much less than

Dick Bentley Productions v Harold Smith Motors

[1965] 1 WLR 623 Court of Appeal

Contractual term or representation

Relative expertise:

If the representor has the greater knowledge, it is

Dick Bentley knew the defendant, who was a car trader specialising in the prestige market, for some time. He had asked him to look out for a well vetted

Bentley car. The defendant obtained a Bentley and recommended it to the claimant. He told him that the car had been owned by a German Baron and

had been fitted with a replacement engine and gearbox and had only done 20,000 miles since the replacement. Mr Bentley Purchased the car but it developed faults. The defendant had done some work under the warranty but then more faults developed. It transpired that the car had done nearer 100,000

Bannerman v White (1861) 10

CBNS 844

Contractual term or representation

The claimant agreed by contract to purchase some hops to be used for making beer. He asked the seller if the hops had been treated with sulphur and told him if they had he wouldn't buy them as he would not be able to use them for making beer if they had. The seller assured him that the hops had not

been treated with sulphur. In fact they had been treated with sulphur. Held:

Routledge v Mackay [1954] 1 WLR

615 Court of Appeal

Contractual term or representation

Timing

The claimant acquired a Douglas BSA motorcycle and sidecar by exchanging another motorcycle and paying £30. The registration documents stated that it

was a 1942 model and this is what the defendant stated the year of the motorcycle to be when the claimant cam to look at it. The motorcycle was in

fact a 1936 model but had been modified and re-registered by a previous owner. The purchaser went away to think about it and then returned a few days later a written agreement was produced to the effect of the exchange which ended with the words "It is understood that when the £30 is paid over

Poussard v Spiers (1876) 1 QBD 410

Conditions

A condition is a major term of the

contract which goes to the root of the

Madame Poussard entered a contract to perform as an opera singer for three months. She became ill five days before the opening night and was not able to

perform the first four nights. Spiers then replaced her with another opera singer.

Held:

Madame Poussard was in breach of condition and Spiers were entitled to end

Bettini v Gye (1876) QBD 183

Warranties

Warranties are minor terms of a

contract which are not central to the

Bettini agreed by contract to perform as an opera singer for a three month period. He became ill and missed 6 days of rehearsals. The employer sacked

him and replaced him with another opera singer. Held:

Bettini was in breach of warranty and therefore the employer was not entitled to end the contract. Missing the rehearsals did not go to the root of the

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Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 Court of Appeal

Innominate terms

The innominate term approach was established in the case of Hong Kong Fir Shipping. Rather than classifying the terms themselves as conditions or warranties, the innominate term approach looks to the effect of the breach and

questions whether the innocent party to the breach was deprived of substantially the whole benefit of the contract. Only where the innocent party

A ship was chartered to the defendants for a 2 year period. The agreement included a term that the ship would be seaworthy throughout the period of hire. The problems developed with the engine of the ship and the engine crew

were incompetent. Consequently the ship was out of service for a 5 week period and then a further 15 week period. The defendants treated this as a breach of condition and ended the contract. The claimants brought an action for wrongful repudiation arguing the term relating to seaworthiness was not a

condition of the contract.

Schuler v Wickman Tools [1974] AC

235 House of Lords

Even where the parties have

themselves classified the term as a

Schuler were manufacturers of certain tools and Wickman were a sales company granted the sole right to sell certain tools manufactured by Schuler.

A term of the contract between the parties was described in the contract as being a condition and provided that Wickman would send a sales person to each named company once a week to solicit sales. This imposed an obligation

to make 1,400 visits in total. Wickman failed to make some of the visits and Schuler terminated the contract for breach of condition.

Lombard North Central v Butterworth

[1987] QB 527

Even where the parties have

themselves classified the term as a

The defendant leased a computer from the claimant. The claimant was to pay £584 by 20 instalments every 3 months. A term of the lease agreement provided that punctual payment was required and breach of this term would entitle the lessor to terminate the agreement. The defendant got into arrears with the instalments and the claimant took possession of the computer and sold it on for £175. The claimant sued the defendant claiming arrears and all

future payments amounting to £6,869 in total.

The Mihalis Angelos [1970] 3 WLR

601 The need for certainty in

The owners of the ship, The Mihalis Angelos, chartered the ship to the defendant to use for the carriage of some cargo. A clause in the agreement stated the ship was expected ready to load on 1st July. In fact the owners had no grounds for believing the ship would be ready to load on that date as it was in Hong Kong at the time and would not be ready until at least the 14th of July and in fact it was not ready at that date. The defendant cancelled the contract on 17th of July. The cargo that they expected to be carrying had not arrived

due to the bombing of a railway in Vietnam. The ship owners brought an

Bunge Corporation v Tradax

[1981] 1 WLR 711 House of Lords

The need for certainty in

A contract for the sale 5,000 tons of soya beans required the buyers to give the sellers 15 days notice of readiness of loading. This term was stated as a condition. The buyers gave a shorter notice period and the sellers treated this

as terminating the contract and claimed damages. The price of soya beans had dropped by over $60 per ton. The initial hearing was decide by arbitration

where it was held that the sellers were entitled to end the contract and awarded $317.500 representing the decrease in value of the soya beans. The

buyers appealed to the High court who reversed this decision applying the Hutton v Warren [1836] EWHC Exch J61

Terms implied by common law

The courts are reluctant to imply terms in to a contract at common law. It is the parties' role to agree the terms of their particular agreement. It is generally not

considered to be the role of the courts to rewrite a contract for the parties. Freedom of contract prevails. There are limited circumstances where the

courts will imply a term into a contract at common law: Terms implied through custom

The claimant was a farmer who had a tenancy on the defendant's fields. The claimant had planted corn and Barley on the fields and worked the fields to ensure the crops would grow. Before the field was due to be harvested the tenancy was terminated. The claimant then submitted a bill to the defendant for the work and cost of seed spent on the field as was customary in farming tenancies. The defendant refused to pay stating there was nothing in the

tenancy agreement stating that such compensation was payable. The Moorcock (1889) 14 PD 64

Terms implied by common law

courts will imply a term into a contract at common law: Terms implied in fact

The business efficacy test:

This asks whether the term was necessary to give the contract business efficacy ie would the contract make business sense without it? - The courts

will only imply a term where it is necessary to do so.

The claimant moored his ship at the defendant's wharf on the river Thames. The river Thames is a tidal river and at times when the tide went out the ship Shirlaw v Southern Foundries [1939] 2 KB 206 Court of Appeal

Terms implied in fact

Terms implied as fact are based on the imputed intention of the parties. Two tests have developed:

The officious bystander test:

Had an officious bystander been present at the time the contract was made and had suggested that such a term should be included, it must be obvious

that both parties would have agreed to it.

The officious bystander test:

Had an officious bystander been present at the time the contract was made and had suggested that such a term should be included, it must be obvious

that both parties would have agreed to it.

The claimant had been employed as a managing director of Southern Foundries the office of employment was to last for 10 years. Federated

(10)

Liverpool City Council v Irwin [1977] AC 239 House of Lords Terms implied by common law

courts will imply a term into a contract at common law: Terms implied in law

Liverpool city council owned a block of flats in which the defendant was a tenant. The common parts of the flats, the lifts, stair cases, rubbish chutes etc, had fallen into disrepair. A rent strike was implemented by many of the tenants

including the defendant. The council sought to evict the defendant for non payment of rent and she counter claimed for breach of an obligation to repair.

However, the tenancy agreement did not mention any obligation to repair. In fact the tenancy agreement only imposed obligations on the tenant with no mention of the obligations of the landlord. The defendant asked the court to

Wilson v Best Travel [1993] 1 All ER

353 Terms implied in law

In addition to being a contract of a

The claimant was injured when he fell through some glass patio doors whilst on holiday in Greece. The glass conformed to Greek safety standards but did

not conform to British safety standards. The claimant brought an action against the travel agent asking for a term to be implied as a matter of law, that

all accommodation offered by the defendant should conform to British safety standards.

Held: Rowland v Divall [1923] 2 KB 500

S. 12 implied terms as to title

S. 12 applies to all contracts for sale of goods so it will cover private sales in addition to where goods have been purchased from a shop or other business.

S.12(1) implies a term that the seller has the right to sell the goods. This covers situations where the seller is selling stolen goods (whether the actual

thief or a subsequent sale in the chain). This term is a condition in all sales. A buyer who treats the contract as repudiated is entitled to return of the full

The claimant, a car dealer, bought a car from the defendant for £334. He painted the car and put it in his showroom and sold it to a customer for £400. Two months later the car was impounded by the police as it had been stolen. It was then returned to the original owner. Both the claimant and defendant were unaware that the car had been stolen. The claimant returned the £400 to

the customer and brought a claim against the defendant under the Sale of Goods Act.

Niblett v Confectioners' Material [1921]

3 KB 387 Court of Appeal

In addition to applying to stolen goods

s.12(1) also applies where the seller

The claimant purchased 1,000 tins of condensed milk from the defendant. The tins were labelled 'Nissly'. Nestle told the claimant that if they attempted to sell these on, they would apply for an injunction to prevent the sale as the label

was very similar to Nestle's labels for their condensed milk. The claimants agreed not to sell them and brought an action against the sellers.

Held:

Microbeads v Vinhurst Road Markings

[1975] 1 WLR

S.12 (2)(b) implies a term that the

purchaser will enjoy quiet possession

The claimant purchased some road marking machines from the defendant. After the purchase a third party was granted a patent right in the machines. This meant the claimant could not use the machines unless they were granted

a licence to do so. There was no breach of s.12(1) as at the time of the sale the seller had the right to sell the goods. However, there was a breach of

s.12(2) in that the buyer could not enjoy quiet possession of the goods. Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564

S.13 sale by description

s.13(1) provides that where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the

description.

This section applies where the sale is solely by description. If the buyer sees the actual goods before the sale then s.13 can not be relied upon:

The claimant purchased a painting from the defendant for £6,000. The painting was described in an auction catalogue as being by German impressionist artist Gabrielle Munter. Both the buyers and the sellers were London art dealers. The sellers were not experts on German paintings whilst the buyers specialised in German paintings. The purchasers sent their experts

to inspect the painting before agreeing to purchase. After the sale the buyers discovered that the painting was a fake and worth less than £100. They brought an action based on s.13 Sale of Goods Act in that the painting was

Arcos v Ranaason [1933] AC 470

House of Lords

S.13 sale by description

s.13(1) provides that where there is a

A contract for the sale of a quantity of wooden staves for making barrels described the staves as being 1/2 an inch thick. Some of the staves delivered were not 1/2 an inch thick but very slightly out. There was nothing wrong with the quality of the wood and they could still be used for the intended purpose of

making barrels. The buyer rejected the goods as the price of wood had fallen and he could purchase them cheaper elsewhere.

Held:

Re Moore & Landauer [1921] 2 KB 519

Court of Appeal

S.13 sale by description

s.13(1) provides that where there is a

A contract for the sale of 3,100 tins of peaches described the tins as being packed in cases of 30. When they arrived the tins were packed in cases of 24

although the agreed overall number of tins was supplied. Held:

(11)

Stevenson v Rogers [1999] 1 All ER 613 Court of

Appeal

S. 14 Implied term as to quality

S.14 only applies where the seller sells goods in the

course of a business. It therefore does not apply to

The defendant was a fisherman. He sold his fishing boat to the claimant. The claimant brought an action against the defendant based on breach of S.14 of the Sale of Goods Act as the boat was not of satisfactory quality. S.14 only applies to the sale of goods sold in the course of a business. The defendant

argued that the sale of the boat was not in the course of his business. His business was catching fish and selling them, he was not in the business of

buying and selling fishing boats. Shine v General Guarantee Corp [1988] 1 All ER 911

Liability under s.14 is strict and not dependant of proof of fault on the part of the seller.

The relevant parts of s.14 are as follows:

(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory

quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet

The Acceptability Test – Applies to consumer transactions The acceptability test looks at whether a reasonable purchaser would have

accepted the goods at the same price had they known of the defect: The claimant purchased a second hand sports car from a car dealer. The car

gave him constant problems and he then discovered that the car had previously been in an accident and had been totally submerged in water. The

claimant brought an action under s.14(2). Aswan Engineering v Lupdine [1987] 1 All ER 135 Court of Appeal

Liability under s.14 is strict and not dependant of proof of fault on the part of the seller.

The relevant parts of s.14 are as follows:

(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory

quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet

The Usability Test – Applies to business to business transactions The usability test is less generous than the acceptability test. This test requires the court to consider if a reasonable purchaser could have used the

goods for purposes for which the goods were commonly supplied: The claimants purchased some liquid waterproofing from the defendant which

was contained in some heavy duty plastic pails. The pails were described as Bartlett v Sidney Marcus ltd [1965] 1 WLR 1013 Court of Appeal

S.14 (2C) provides certain limitations to the application of s.14(2) as follows: (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:

The claimant purchased a second hand Jaguar car from the defendant car dealer. The defendant told the claimant that the clutch was defective and that this was a minor repair costing around £2-3. He gave the claimant the choice of either taking the car as it was and knocking £25 off the stated price or he would repair it and charge the full price. The buyer chose to take it with the fault and get the discount. It then transpired that the fault would cost £84 to

repair. The buyer sought to bring a claim based on s.14. Olley v Marlborough Court [1949] 1 KB 532

Protection at common law

Protection at common law comes in two forms. Firstly, the courts will consider if the term has been incorporated into the contract. Secondly, the courts will

consider if the clause covers the loss in question. Incorporation of unfair terms

The general rule is that the term must be brought to the attention of the contracting party before or at the time the contract was made. If the term was

The claimant booked into a hotel. In the hotel room on the back of the door a notice sought to exclude liability of the hotel proprietors for any lost, stolen or

damaged property. The claimant had her fur coat stolen. Held:

The notice was ineffective. The contract had already been made by the time the claimant had seen the notice. It did not therefore form part of the contract. Thornton v Shoe Lane Parking [1971] 2 WLR 585 Court of Appeal

The claimant was injured in a car park partly due to the defendant's negligence. The claimant was given a ticket on entering the car park after putting money into a machine. The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car

park. One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the defendant brought it to the attention of the claimant before or at the time the contract was made. This question depended upon L'Estange v Graucob [1934] 2 KB 394 Court of Appeal

Protection at common law Protection at common law

consider if the clause covers the loss in question. 1. Incorporation of unfair terms

The general rule is that the term must be brought to the attention of the

The claimant purchased a cigarette vending machine for use in her cafe. She signed an order form which stated in small print 'Any express or implied, condition, statement of warranty, statutory or otherwise is expressly excluded'.

The vending machine did not work and the claimant sought to reject it under the Sale of Goods Act for not being of merchantable quality.

Held: Curtis v Chemical Cleaning [1951] 1 KB 805 Court of Appeal

The claimant took her wedding dress to the cleaners. She was asked to sign a form. She asked the assistant what she was signing and the assistant told her

that it excluded liability for any damage to the beads. The form in fact contained a clause excluding all liability for any damage howsoever caused.

The dress was returned badly stained. Held:

(12)

Thompson v London, Midland and Scotland Railway Co [1930] 1 KB 41 Court of Appeal

Reasonable notice of unfair terms

A party seeking to rely on an unfair term must demonstrate that they gave reasonable notice. ie they took reasonable steps to bring the term to the

The claimant was injured whilst stepping off a train. The railway company displayed prominent notices on the platforms excluding liability personal injury

and damage to property due to negligence. The tickets also stated they were subject to terms and conditions displayed on the platform. The claimant was illiterate and could not read the signs. She argued that the exclusion clause was not incorporated into the contract as the railway company had not brought

the clause to her attention at the time the contract was made. Interfoto Picture Library v Stilletto [1989] QB 433

Reasonable notice of unfair terms

A party seeking to rely on an unfair term must demonstrate that they gave reasonable notice. ie they took reasonable steps to bring the term to the

attention of a reasonable person:

The claimants ran a photo library the defendant was in advertising. The claimants advanced some transparencies to the defendant for his perusal and

he was to get back to them as to which photos he would like to use. The package of the photos contained a document stating that if any transparencies

were kept longer than 14 days a £5 +VAT holding fee would be charged per photo per day. The defendant had not read this document and then forgot about the transparencies and failed to return them for 6 weeks. The claimants

CONTRACT LAW CASES - Complete Set-small

Harvey v Facey [1893] UKPC 1

Offer

In order to amount to an offer it must

Carlill v Carbolic Smoke Ball co [1893] 1 QB 256

Offer

In order to amount to an offer it must be shown that

the offeror had the intention to be bound:

Pharmaceutical Society of Great Britain v Boots

[1953] 1 QB 401

Goods on display in shops

Goods on display in shops are generally not offers

Fisher v Bell [1961] 1 QB 394

Goods on display in shops

Goods on display in shops are

Partridge v Crittenden (1968) 2 All

ER 421

Advertisements

Spencer v Harding Law Rep. 5 C. P. 561

Contract by Tender

The request for tenders represents an invitation to

treat and each tender submitted amounts to an offer

unless the request specifies that it will accept the

Heathcote Ball v Barry [2000] EWCA Civ 235

Auctions

Where an auction takes place with reserve, each

bid is an offer which is then accepted by the

auctioneer. Where the auction takes place without

Thornton v Shoe Lane Parking [1971]

2 WLR 585 Court of Appeal

Machines

The machine represents the offer, the

Dickinson v Dodds (1876) 2 Ch D 463

3. Revocation

An offeror may revoke an offer at any

time before acceptance takes place:

Errington v Errington Woods [1952] 1 KB 290 Court

of Appeal

Revocation

An offeror may revoke an offer at any time before

acceptance takes place:

Dahlia v Four Millbank Nominees [1978] Ch 231

Court of Appeal

Revocation

An offeror may revoke an offer at any time before

acceptance takes place:

Hyde v Wrench (1840) 49 ER 132 Chancery

Division (Decided by Lord Langdale MR)

Counter offer

A counter offer is where an offeree responds to an

Felthouse v Bindley [1862] EWHC CP

J35 Court of Common Pleas

The general rule is that the offeror

must receive the acceptance before it

Brogden v Metropolitan Railway

(1877) 2 App. Cas. 666

Acceptance can be through

Butler Machine Tool v Ex-Cell-O

Corporation [1979] 1 WLR 401

Court of Appeal

Adams v Lindsell (1818) 106 ER 250

The postal rule

Where it is agreed that the parties will use the post

as a means of communication the postal rule will

Scammell and Nephew v Ouston

[1941] AC 251 House of Lords

The agreement must be certain

Sudbrook Trading Estate v Eggleton

[1983] AC AC 444 House of Lords

The agreement must be certain

Jones v Padavatton [1969] 1 WLR 328

Court of Appeal

Intention to create legal relations in

social and domestic agreements

Balfour v Balfour [1919] 2 KB 571

Intention to create legal relations in

social and domestic agreements

In social and domestic agreements the

Errington v Errington Woods [1952] 1 KB 290 Court

of Appeal