variation of contracts

what are the methods of variation

·       Agreement in another contract to vary the contract

·       Novation- replacing old contract with a new one

·       Can be done by deed, otherwise requires consideration

·       Promissory estoppel and absent duress, unless affirmed

what is promissory estoppel

· a legal doctrine that allows enforcement of a promise even without a formal contract when someone reasonably relies on it to their detriment.

designed to prevent unfairness when a promisor tries to renege on a clear promise that the promisee has relied upon to their detriment It serves as a shield, not a sword

1. A clear and unequivocal promise which the promisor knew or intended the other would rely on;

2. A change in position by the promisee in reliance on the promise;

3. That it would be inequitable for the promisor to rely on the promise

describe the case of 1877 Hughes v Metropolitan Railway

A lessor gave a repair notice against his lessee on the 22nd of October. It was due to expire on the 22nd of April the next year. The lessor wrote back suggesting that they would like to buy the property. The parties then began negotiations, which ended in December without any sale. The lessor sought to evict the lessee on the 22nd of April, as they had failed to enact the repairs. The lessee argued that they should have equitable relief against the eviction.

The Court held in favour of the lessee. The negotiations suspended the repair notice for their duration. The lessor had therefore tried to evict the lessee before the notice expired, which equity would protect against.

describe the case of 1946 Central London Property Trust v High Trees House

In 1937, Central London Property Trust Ltd (CLPT) leased a block of flats in London to High Trees House Ltd (HTH) at £2,500 per year for 99 years. Due to the impact of World War II, there was a drastic under-occupancy of the flats in 1940. CLPT agreed to reduce the rent to £1,250. This halved rent was paid until the end of 1945. By then, London had largely recovered from the war and the flats were again fully occupied. CLPT then claimed for the full rent for the last 2 quarters of 1945.

The court held that CLPT could not go back on its promise to accept reduced rent for the period when the flats were not fully occupied.

it was also held that once conditions went back to normal, the original agreement could be enforced and therefore the claim for full rent for the last quarters of 1945 was successful.

describe the case of Collier v P&M J Wright

The applicant and his partners took out a commercial loan for his company with a credit company. After a county court judgment against his company, the applicant and the partners agreed to pay the company’s debts at a rate of £600 a month. Later, the parties agreed that the applicant could reduce his payments to £200 and that he would only be liable for 1/3rd of the debt. He started paying £200 a month, and continued to do so for five years. Eventually, he had paid off his third of the debt.

However, his partners became bankrupt. The credit company made a statutory demand for the full amount of the outstanding debt from the applicant. The applicant argued that the credit company could not go back on their promise to only hold him liable for 1/3rd of the debt.

However, his partners became bankrupt. The credit company made a statutory demand for the full amount of the outstanding debt from the applicant. The applicant argued that the credit company could not go back on their promise to only hold him liable for 1/3rd of the debt

The Court of Appeal held in favour of the applicant. The credit company’s promise was to accept less in satisfaction of a full debt.

what is duress of a person

threaten you personally

what is duress of goods

threaten your possessions

what is economic duress

economic costs

describe the case of The Universe Sentinel

arose in 1978 when the ship Universe Sentinel was blacked by the ITF at Milford Haven. The ITF demanded that the shipowners improve pay and conditions for the crew and pay $80,000, which included a contribution to the Seafarers International Welfare Fund, to allow the ship to leave port. The shipowners complied under severe commercial pressure, fearing further delays and financial losses

The House of Lords held that the payment was indeed extracted under economic duress, which rendered the consent of the shipowners revocable. The court ruled that the ITF's actions constituted illegitimate pressure, and thus the shipowners were entitled to recover the payment. The ruling clarified that economic duress could invalidate consent in contractual agreements, emphasizing that consent obtained through illegitimate pressure is not binding

what is duress

pressure

what happens when a contract is deemed voidable

·       it allows the innocent party who face duress to pull out of contract (recission) or carry on with the contract (affirming contract)

how can duress be evaluated

·       Duress can be evaluated either by how bad the pressure is OR how it effects the freedom of choice of the party (autonomy)

what is a void contract

·       Void contracts are contracts that never existed. Voidable contracts are contracts which are damaged, and it is up to one party to either pull out or carry on with it.

what are the three parts of duress

·       Duress is assessed in three parts: the legitimacy of the pressure, the causative effect of the pressure, and whether there was “no reasonable alternative”.

what are the three elements to assess economic duress

·       Three elements need to be established for economic duress: an illegitimate threat; sufficient causation; and that the threatened party had no reasonable alternative to giving in to the threat.

what is lawful act duress

party is pressured into contract through lawful means, but the pressure is deemed illegitimate. (act itself is lawful)

what is presumed undue influence

·       Presumed undue influence- one party has preferred their own interests and failed in some duty they owed to safeguard the other party’s interest

when does constructive notice apply

·       Constructive notice applies when a party did not actually have notice of a particular event, but the courts deem such notice, usually because the party turned a blind eye or was negligent and ought to have had actual notice.

what does unconscionable mean

·       Unconscionable= the stronger party has offended the conscience of the court; the court disapproves of the party’s behaviour in exploiting the weakness of the vulnerable party

describe the case of Pinnel’s Case (1601)

The defendant, Cole, owed the plaintiff, Pinnel, the sum of £8 10s. Pinnel sued Cole for recovery of the debt. Cole had, at Pinnel’s request, paid £5 2s 6d one month before the debt was due to be paid and stated that they had an agreement that this part payment would discharge the entire debt.

Whether part payment of a debt can be good consideration.

it was found to be good consideration

describe the case of D & C Builders Ltd v. Rees [1966]

The builders sought payment from Rees for building work done and materials supplied in respect of alterations and repairs completed on Rees’ shop. Rees did not pay, but the work continued and a second bill was issued. Builders started to have financial difficulties so requested the funds again. Rees offered Builders a reduced lump sum in payment of the debt and stated that if it was not accepted, they would get nothing. A cheque was issued after Builders feared they would receive no payment at all and Rees provided a receipt stating the funds were in full payment of the account. Builders brought action for the balance and Rees filed a defence stating that the work was defective and that Builders had entered into a binding agreement.

The appeal by Rees was dismissed. Builders had been under duress to accept a reduced amount due to their financial position which Rees was aware of and took advantage of. An acceptance arising from a threat does not amount to a settlement.

describe the case of North Ocean Shipping Co v. Hyundai Construction Co, ‘The Atlantic Baron’ [1979]

Shipbuilders Hyundai Construction (HC) agreed to build a tanker for North Ocean Shipping (NOS) for a fixed price, which was to be paid in five instalments, in US dollars. HC opened a letter of credit as security repayment of instalments in the event of default. After the first instalment was paid, the US dollar’s value went down by 10%, so HC claimed a 10% increase in the building price in response. NOS rejected the claim and paid the following two instalments based on the original price. HC returned these payments. HC also rejected the idea of arbitration and gave an ultimatum to NOS – they either accept HC’s demand for a 10% price increase or HC will terminate their contract.

The Court found in favour of HC. HC’s increase of the letter of credit served as consideration for NOS’s increased payments under the original contract. While HC’s demand for a 10% price increase did amount to economic presure and made the original contract voidable, NOS’s payments without protest affirmed the contract. NOS’s claim based on economic duress thus had to fail.

describe the case of Atlas Express Ltd v. Kafco (Importers & Distributors) Ltd [1989]

The Kafco imported basket ware and entered a contract with Atlas to sell and deliver baskets to Atlas retail stores. Atlas tried to negotiate a further term in the contract for a minimum order of £440 per trailer load. Several days later, an Atlas representative turned up to Kafco’s premises with an empty trailer and told Kafco that if the trailer was not returned with £440 worth of goods as the new minimum, the trailer would be driven away unloaded. Kafco reasonably believed they would be unable to negotiate further terms of the contract and thereby sabotaging their opportunity to trade with Atlas, so they felt compelled to sign the agreement and meet the new terms of minimum stock trade. The agreement continued until Kafco sent them money on account and a letter stating they had signed the contract under duress. Atlas sued for the money on account.

Judgment was awarded in favour of Kafco. Kafco were found to have signed the agreement under economic duress as they felt that in the circumstances they had no alternative but to sign the varied contract.