Common Law - Cases

Walford v. Miles (1992)

Illustration of the fact that there’s no general principle of precontractual liability

Here : even an express agreement to negotiate in good faith is unenforceable by the court.

Lord Ackner : it’s unenforceable “because it lacks the necessary certainty”.
And because good faith in negotiations goes against the idea that each party is “entitled to pursue his (or her) own interests, so long as he avoids making misrepresentations”
It has to be possible to “threaten to withdraw from further negotiations or to withdraw in fact” to seek their reopening to our advantage.

Smith v. Hughes (1871)

Facts: a trainer and a farmer created a contract for the sale of oats. The defendant argued that the contract was for the sale of old oats, whereas he received the latest crop. The plaintiff says he didn't say anything about old or new, and refuses to take the oats back.

Ruling: here, the general opinion is that basically if the defendant did not induce the mistake, it's not his problem. A new trial was ordered by the appellate court because the jury answered two questions, where the second one essentially misstate the law, and as such we don’t know why they ruled as they did.

Illustration of the objective test of agreement

Blackburn J : “if the parties are not ad idem, there is no contract”
Mentions Freeman v. Cooke (1848) : “he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by other party”

Regarding mistake

If the unilateral mistake is not about the terms of the contract, or the other party’s identity, but only about the facts surrounding the transaction, or the qualities of the subject-matter of the contract, or the attributes of the other party, the mistake is irrelevant

Regarding obligations of disclosure

Discussion about them and shows the reluctance of courts to admit such duties

Freeman v. Cooke (1848)

Rule of law regarding the objective test of agreement

If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.

→ an objective third party must believe there was an agreement from the conduct of one party (A) and that the other contracting party (B) must have actually believed there was an agreement and therefore entered the contract with A.

Hannah Blumenthal (1983)

Illustration of the objective test of agreement

Here, it was alleged that the parties’ silence and inactivity showed they had agreed to abandon an arbitration

Lord Diplock : “what is necessary is that the intention of each as it has been communicated to and understood by the other (even though that which has been communicated does not represent the actual state of mind of the communicator) should coincide”
→ meaning of the phrase “ad idem”

Lord Brightman : “must show that the buyers so conducted themselves as to entitle the sellers to assume, and that the sellers did assume, that the contract was agreed to be abandoned sub silentio”

Butler Machine Tools v. Ex-Cell-O Corporation (1977)

Contestation of the “offer and acceptance” analysis

Lord Denning : found the “offer and acceptance” analysis too rigid and out of date.

Facts : quotation sent by the sellers of a custom made machine, with their conditions and a price variation clause. Another document is sent by the buyers with their terms, without a price variation clause.

Ruling : the second document must be considered a counter offer killing off the first one

Gibson v. Manchester CC (1979)

Judges opinion regarding the “offer and acceptance” analysis

Facts: someone applied to a program to buy back his house, program which then was withdrawn. The claimant argues that he answered to an offer to sell (which effectively said it wasn’t an offer of mortgage, but lacked the mention that it wasn’t an offer to sell)

Ruling: there was no contract according to the analysis of offer and acceptance

Lord Denning : found the analysis too rigid and out of date.

Lord Diplock (and the rest of the House of Lords) : disagree and state that normally there can be no contract if the communications cannot be analysed into offer and acceptance.

Pharmaceutical Society v. Boots

Regarding invitation to treat

Case about the authority on supermarkets.

Facts: a statute stated that some medication can only be bought under the supervision of a registered pharmacist, and here the shelves weren’t supervised, but the checkout was.

Ruling : the price on the shelf is an invitation to treat, and the contract is concluded when you go to the check out to pay.

Byrne v. van Tienhoven

Regarding the withdrawal of an offer

The offer remains in force until the offeree is actually told it was withdrawn

Brownlie v. Four Seasons Holdings Inc [2017]

Regarding the time and place of the formation of the contract

In an obiter, Lord Sumption criticised the rigidity of the rule that the formation of the contract is at the time and the place that the acceptance takes effect

Holwell Securities Ltd v. Hughes

About the postal rule

Facts: Someone is trying to buy a property, but there is an option (pre contractual relationship): they have the right to buy a property provided they do it a certain way. Here, they tried to contact the offerer’s lawyer, and to send a letter.

Ruling: The postal rule does not apply as the terms of the contracts specified that the option had to be noticed in writing to the vendor : this did not include the postal service. We can understand this demand as the demand of a physical notice.

Brinkibon v. Stahag Stahl

Regarding the place where a contract is concluded

Facts: an acceptance was sent by telex from London to Vienna.

Questions: Where has the contract been concluded? Is the telex considered as instantaneous communication? Does the postal rule apply?

Ruling: it is considered instantaneous communication, therefore the postal rule doesn’t apply. The contract was made where and when the acceptance was received, which was in Vienna.

→ if the postal rule had applied, it would’ve been concluded when and where the acceptance is put into the charge of the post office

Thomas v. Thomas (1842)

About the fact that consideration must be economically valued

Here : agreement to transfer a cottage with a rent of £1 a year, to let the other have somewhere to live.
→ the agreement has consideration solely because of the £1

Williams v. Roffey Brothers

Regarding consideration in a variation of an existing contract

Facts: contractor employed to work on 27 flats that found himself in financial difficulties, so the owners offered to pay an additional £10,300 to have the work done on time but they didn’t pay this in the end

Ruling: When the promise is to pay extra money for the other to perform his obligations, consideration is found in the practical benefit obtained from the promise

→ Between commercial parties, in case of a variation of an existing contract, as long as one party obtained a practical benefit as a result of the other party’s promise, then that may be sufficient to consider it to be consideration

Pao On v. Lau Yiu Long (1980)

Rule regarding past consideration

The act must have been done at the promisor’s request, the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit, and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance.

→ The act must be done at the same time as the other’s promise, past consideration does not count

Pinnel’s Case (1602)

Rule regarding what counts as consideration

“payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole”

→ when the promise is giving up (part of) a debt, no consideration unless the debtor promises something different or additional in return

Foakes v. Beer (1884)

Rule regarding what counts as consideration

Confirms Pinnel’s Case (1602)

Re Selectmove (1995)

Rule regarding what counts as consideration

Confirms Pinnel’s Case (1602)

Collier v. Wright (2007)

Rule regarding what counts as consideration

Confirms Pinnel’s Case (1602)

Regarding promissory estoppel (English law)

The doctrine of promissory estoppel might be used to give effect to a promise to accept payment of part of a debt in discharge of the whole debt

MWB Business Exchange Centres Ltd v. Rock Advertising Ltd (2017)

Regarding what counts as consideration

Facts: in the case of a rental contract, one party could not pay so the parties worked up a revised payment plan ; however, the company still tried to evict the tenant.

Ruling: The judges ruled that this agreement was enforceable, but the case was heard by the supreme court on a different question.

→ Limitation of Pinnel’s case: when the promise is to accept payment of a debt by instalments, consideration is found in the practical benefit obtained from the promise.

Regarding promissory estoppel (English law)

Said (carefully) that the doctrine of promissory estoppel might be used to give effect to a promise to accept payment of part of a debt in discharge of the whole debt

Central London Property Trust Ltd v. High Trees House

First case using the principle of promissory estoppel (English law)

Facts: during WWII, tenants and landlors of a property agreed on a lower rent. After the war, a new property manager found out about the original rent and demanded its payment.

Ruling: The doctrine of promissory estoppel might be used to give effect to a promise to accept payment of part of a debt in discharge of the whole debt. However, this doctrine is only a defence because they relied on the promise, so the tenants will have to to pay the full rent going forward.

Combe v. Combe

Regarding promissory estoppel (English law)

Facts: divorce of a couple, the husband had agreed to support his wife but didn’t actually do it, so she demanded payment

Ruling: Promissory estoppel is a narrow principle which does not undermine the basic doctrine of consideration, so it was not extended that far

Ajayi v. Briscoe (1964)

Regarding promissory estoppel (English law)

Lord Hodson : promissory estoppel is “when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party.
This equity is, however, subject to the qualification (a) that the other party has altered his position, (b) that the promisor can resile from his promise on giving reasonable notice (…), (c) the promise only becomes final and irrevocable if the promisee cannot resume his position”.

→ subjected to the fact that (a) the other relies on it, (b) possible to withdraw the promise with reasonable notice, (c) will be final if impossible to resume original position

Hoffman v. Red Owl Stores (1965) Sup Ct Wisconsin

Illustration of promissory estoppel (U.S. law)

→ illustrates how a promise can be enforceable because the promisee has relied on it (as well as because there has been consideration)

Promise : A tells B that for $18,000 it would build and stock a grocery store which B and his wife would run

B relies on it : He bought an option to purchase the site of the proposed store

A is held liable under promissory estoppel : A increased the price which made the agreement fail, but he was held to compensate because of promissory estoppel

Waltons Stores v. Maher

Regarding promissory estoppel (Australian law)

Allowed promissory estoppel to be used to make promises enforceable in contexts where the doctrine would not apply in English law

Tweddle v. Atkinson (1861)

Origin of the doctrine of privity in the modern law

Facts: Before a wedding, the fathers of the groom and of the bride decided to give money to the groom, which was recorded in a contract. The groom had the right to sue either party for the money : one died and his executor did not pay, and the other father also died. The groom sued, but the question was whether or not he could recover the money and sue despite not being in the contract.

→ The third party (here, the groom) cannot sue because he has not provided any consideration for the promise

Dunlop v. Selfridge (1915)

Privity

Facts : Selfridge, who sold tyres to the public, bought a stock of tyres from a company called Dew. The tyres were manufactured by Dunlop, and in the contract with Dew, Selfridge promised not to resell the tyres at a discount below Dunlop’s list price. Dew obtained this promise from Selfridge because Dunlop required them to do so as part of the arrangements under which they received their tyres to sell on. Dunlop sued Selfridge to enforce the promise.

Ruling : The House of Lords here affirms the decision stating that Dunlop cannot enforce the promise. One of the Lords states that one of the important principles of English law is privity, the fact that someone who is not a party to a contract cannot sue on it

→ Confirmed the doctrine of privity established in Tweddle v. Atkinson (1861) in reasoning that based the doctrine of consideration

White v. Jones (1995)

Regarding the avoiding of privity before 1999 with torts

Here : a solicitor who failed to exercise due care in favour of his client by failing to draw up a will for the client to sign before the client died, owed a duty to those members of the client’s family who would have benefited under the will had it been properly entered into

Beswick v. Beswick

Regarding specific performance

Facts : Peter Beswick transferred his coal delivery business to his nephew, John Beswick, and John Beswick undertook to make weekly payments to Peter Beswick for the rest of his life, and then £5 a week to Ruth Beswick, Peter Beswick’s wife, after his death. The payments were made to Peter Beswick; then he died, and John Beswick made only one payment to the widow. Ruth Beswick sued, making two separate claims: (i) as the administratrix of her deceased husband’s estate (i.e., enforcing his claim as contracting party) and (ii) as herself, the third party beneficiary of the contract between Peter and John. She plays two roleq, as a third party and as an administratrix.

Ruling : The House of Lord awards specific performance, but does not deem that she has her own avenue

→ Case in which specific performance was awarded, which may indirectly protect the rights of third parties without getting bothered with privity

Tamplin v. James

Facts: a man believed he was buying a property with two adjacent gardens at an auction, whereas he was only buying the property itself. He did not check this information.

Ruling: It is his fault : If a man will not take reasonable care to ascertain what he is buying, he must take the consequences

Regarding mistake

If the unilateral mistake is not about the terms of the contract, or the other party’s identity, but only about the facts surrounding the transaction, or the qualities of the subject-matter of the contract, or the attributes of the other party, the mistake is irrelevant

Bell v. Lever Brothers (1932)

Sets out the approach regarding common mistake

Facts: two employees within a company were let go, and the company gave them leverage packets. But both of them had committed breach of contracts that would have warranted them to leave anyway. The company did not know, and they hadn’t realised : it was a common mistake.

Ruling: This did not warrant the contract being voided (but highly divided). The fact that it could have obtained the same thing without payment did not mean that it was a sufficient mistake to render the termination contract void.

→ Common mistake can make a contract void under very narrow conditions: if the parties have not provided for such a mistake in the contract, and if this mistake prevents the purpose of the contract to be fulfilled

The Great Peace (2002)

Regarding the approach of common mistake

Facts: A ship entered a contract to help another ship in distress, believing from third party information to be close to it when they were actually 400 miles away (instead of 35)

Ruling: The contractual adventure can still be fulfilled so it still has to be fulfilled.

→ Rejected the widening of the narrow test (which wanted mistake to render a contract voidable instead of void) established in Bell v Lever Brothers

Car and Universal Finance Ltd v. Caldwell

Regarding the rescission of the contract for misrepresentation

Facts: A man made a fraudulent misrepresentation inducing a contract in buying a car, which the original owner discovered a few days after. He tried to get the car back by going to the police, unsuccessfully, and the man sold the car to another company (who knew about the fraud), which then sold it to another company and ten yet again to another. The question was to whom did the car belong.

Ruling: The original owner did everything they could to rescind the contract, even though they could no longer contact the other party. As such, the car was considered to be his.

→ The representee need not to go to court in order to achieve rescission

Dick Bentley v. Harold Smith

Facts: A man contracted to buy a car from another, who had told him he could check the history of the cars he sold. He told him that this particular car had done only 20,000 miles, which was wrong (and made the car worth significantly less). The question was to know whether or not the mileage was guaranteed within the terms of the contract.

Ruling: here, a reasonable bystander would assume that it was indeed warranty, so it was.

Illustration of the possibility to sue for damages because of misrepresentation

If the representor promised in the contract, either expressly or impliedly, that the statement he was making was true, then the representee can sue for damages for the loss caused by the breach of contract

Regarding the interpretation of a contract (series of communications)

A party who makes representations during the negotiations may be held to have been (objectively) intending to include a promise in the contract that his representation is true

→ we interpret the communications objectively

Prenn v. Simmonds (1971)

Regarding express terms of a contract when in a single document

Lord Wilberforce : “a contract must not be interpreted in isolation from “the matrix of facts” in which it was set: it is necessary to “inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view.”

Investors Compensation Scheme Ltd v. West Bromwich Building Society (1998)

Regarding express terms of a contract when in a single document

Goes beyond Prenn v Simmonds by being more opened to the contextual interpretation of contracts and other documents :

Lord Hoffmann: (1) interpretation is what the document conveys to a reasonable person with the background knowledge;

(2) the “matrix of facts”/background includes anything affecting the wording of the document;

(3) the background excludes pre-contractual negotiations and subjective intents;

(4) there must be a distinction between the sheer meaning of words and the meaning of the document (must be contextualised with the background);

(5) Linguistic mistakes aren’t easily accepted, judges don’t have to attribute an intention that plainly could not have been had by the parties

Chartbrook Ltd v. Persimmon Homes Ltd (2009)

Regarding pre-contractual negotiations when interpreting the written contract (single document)

→ Pre-contractual negotiations cannot normally be used to interpret the contract

Lord Hoffmann compares how Continental legal systems accept them more easily, but it’s not the case of the English system

Arnold v. Britton (Supreme Court, 2015)

Regarding the interpretation of commercial contracts (single document)

When the document of the commercial contrat is clear and unambiguous, it will be given effect

(otherwise, courts will take into account the interpretation consistent with business common sense when the language leaves open alternative possible interpretations)

Wood v. Capita Insurance Services Ltd (Supreme Court, 2017)

Regarding the interpretation of commercial contracts (single document)

To find the objective meaning attributed to the parties’ agreement, we take into account the text and the context of the document, which includes : nature, formality, quality of drafting…

→ it is not a single, simple test

The Moorcock

Regarding implied terms of a contract

Facts: Contract between a jetty owner and a boat owner. The river bed was not suitable for the ship, which got damaged. Here, the question was: was there an implied term of warranty ?

Ruling: here, it was found by one of the judges that there had to be implied warranty, because it was the only way to get the contract to work for one judge. Another added that the jetty owner had knowledge, but the boat owner had not. While the jetty owner did not have responsibility to make the riverbed safe, it was deemed an implied term that they had to warn about it in order for the contract to work

→ Illustrates one way for a term to be implied by the parties: because it’s necessary to make the contract work and is consistent with all the other terms

L’Estrange v F Graucob Ltd (1934)

Regarding exclusionary clauses

Facts: A cafe owner bought a slot machine, which did not work. The contract had a small print stating that “any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded.”. The owner did not want to pay, but the sellers demanded payment due to this clause excluding liability.

Ruling: While the trial court attempted to protect the buyer, the appellate court judged that the clause should be considered valid, as it was present on the document - the fact that the cafe owner did not read it is “immaterial”. One of the judges mentions regretting reaching that decision, and that it is a harsh one.

Liverpool CC v. Irwin (1977)

Regarding implied terms of a contract

Illustrates one way for a term to be implied: because in certain contracts, a party will normally be held to have intended to include a particular term (whether expressly or not)

Attorney-General of Belize v. Belize Telecom Ltd (2009)

Regarding implied terms of a contract

Adopts another way to interpret implied terms (rather than the 3 traditional questions): what would the instrument, read as a whole against the relevant background, reasonably be understood to mean?

But the UKSC did not follow this and reaffirmed the traditional tests in 2015, emphasising that the implied term must be necessary

Yam Seng Pte Ltd v. International Trade Corp Ltd (2013)

Regarding good faith in the performance of a contract

Leggatt J held there was a duty of good faith in performance implied on the facts of the case (with a context including duties of hoesty and standards of commercial dealing and “fidelity to the bargain”)

But it’s controversial : an implied obligation of good faith is not commonly accepted in English law

Davis Contractors Ltd v. Fareham Urban District Council (1956)

Sets out the modern test of termination for frustration

Lord Radcliffe : “frustration occurs whenever the law recognises that, without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract”

Krell v. Henry

Regarding termination for frustration

Facts: A man rented a room to be able to see the Coronation of the King, but it was postponed. He asked to get his deposit back.

Ruling: Here, both parties regarded the coronation as the founding of their contract. As such, it was terminated for frustration, despite the fact that it was technically still possible for the man to rent the room.

→ Example of how English courts have admitted that a contract was frustrated when it was not physically impossible to perform the obligations, but the purpose of the contract was no longer possible

Photo Production Ltd v. Securicor Ltd (1980)

Regarding termination for breach of contract

Lord Diplock : “Every failure to perform a primary obligation is a breach of contract”. As long as the obligations aren’t fully performed, there can’t be termination for breach, unless :
(1) the “event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit“ (fundamental breach) or;
(2) a particular primary obligation agreed to be a “condition” isn’t performed, irrespectively of the gravity of the event resulting from the breach

Co-operative Insurance v. Argyll Stores

Regarding specific performance for breach of contract

Facts: A supermarket inside a mall closed down because it was losing money, which broke the agreement within the lease that the supermarket must be open during normal business hours. The supermarket knew this and agreed to pay damages, but the mall asked for specific performance.
(in practice, the lease was assigned to another store, which solved part of the issue, and the appeal was mainly about costs, but the judges deemed that it was an important issue to settle)

Ruling: Here, the court refused to award specific performance, stating that forcing the supermarket to continue business would be akin to having a sword of Damocles above his head, and likely to result in more cases and dispute anytime the supermarket closed down for any reason. This would mean that the courts would have to supervise all the time, and hold the risk of being held in contempt of court

→ Shows the courts’ usual attitude regarding specific performance : amongst other things, if it requires the constant superivsion of courts, specific performance won’t be allowed

Parke B, Robinson v. Harman (1848)

Regarding damages for breach of contract that cover the “expectation interest”

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed

Anglia Television v. Reed (1972)

Regarding damages for breach of contract that cover the “reliance interest”

Facts : a film company recovered against an actor who walked off the set the expenditure it had wasted in making the film so far. The film had to be abandoned

Damages for reliance interest because the courts couldn’t predict the profit the film would’ve made (couldn’t predict the expectation interest)

Ruxley Electronics & Construction Ltd v. Forsyth (1996)

Facts: a contractor built a swimming pool which was supposed to have a maximum depth of 7 feet six inches, but only had a maximum depth of 6 feets. This did not make the pool unsafe to dive in, but the only way to make the pool the “right” size would be to demolish it entirely and to build a new one for £21,560.

Ruling: here, the pool owner only got damages for the difference in value rather tha for expectations, as he did get a fully functional pool, albeit not the right size : giving him the full amount of money would be giving him a large benefice, which damages are not supposed to be.

Regarding the calculation of the claimant’s lost value when awarding damages for breach of contract

Where it is unreasonable to spend money (or so much money) curing the defect, or where the claimant does not intend to cure the defect even if “cost of cure” damages are awarded, it might be more appropriate to characterise the claimant’s loss as the difference in value between the works properly performed and the defective works.

Regarding damages for non-financial loss due to a breach of contract

There was an award of damages for “loss of amenity”, meaning the loss of enjoyment, here because of a wrong-sized pool

Farley v. Skinner (2001)

Regarding the award of damages for breach of contract in the case of non-financial losses

Facts : a surveyor was employed by a potential purchaser to investigate whether a property was seriously affected by aircraft noise, and failed in his duty of care. The purchaser had no financial loss (the price paid didn’t change).
The purchasers were awarded damages compensating the lack of peace and tranquility

→ Where a major or important object of the contract is to give pleasure, relaxation or peace of mind, damages can be awarded for that non-financial loss

Hadley v. Baxendale (1854)

Introduced a rule on limits on recovery with damages because of remoteness of damage

Alderson B : “such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from [the] breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of it”

→ Defendant’s liability only for losses in contemplation at the time of the contract (either objectively predictable or because it was drawn by the claimant to his attention before the conclusion of the contract)

Transfield Shipping Inc v. Mercator Shipping Inc, The Achilleas (2008)

Regarding the rule of remoteness of damage (limits on recovery with damages)

Asks a question on which the rule is based : ‘for what kind of loss would [the defendant] reasonably be taken to have accepted liability?’

→ Remoteness of damage is all about the scope of risk assumed by the parties

Cavendish Square Holding BV v. Makdessi (2015)

Regarding penalty clauses

Kept the rule that penalty clauses are unenforceable and redefined what is a penalty clause : “a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.”