Contract Formation
Contract Formation
11/9
Offer + Acceptance = Agreement
Agreement + Consideration = Legally Enforceable Agreement
History - Carlill v Carbolic Smoke Ball Co 1893
Facts:
Russian Flu, got into London…1890s
Frederick Augustus Roe, an inventor specializing in making new medicines, wanted to prevent influenza: by a vaccine.
Context: Vaccines were launched to the public quickly.
His product was called the carbolic smoke ball
Got his product into the papers (eg. London Times News Paper)
Advertised that the smoke ball 3x day prevented lots of illness including the influenza
If you somehow still got any sicknesses listed then he’d pay you £100
He had £1000 in the alliance bank
Product didn’t state you had to take the product in the companies premises
Issue:
Lousia Elizabeth Carlill caught the flu despite using the product (but thankfully recovered) and wanted the 100 pound. Was she entitled to the £100?
Ruling: Tried to argue that they can’t contract with the whole world, but court siad that they only contracted with people who used the product and have adverse results. Company had launched money in the bank. A reasonable person looking at the ad would think that the ad was a serious offer. The product is serious as they have money in the bank - disrupts argument that it was a joke.
Carlill successfully sued and got the 100 pound.
Module Outline
Textbook: Contract Law by McDermott^2
End of Semester two hour closed book exam
Contract Formation
Look at what the party actually said, not what they intended.
Elements of a Contract
Offer, no offer means there can’t be acceptance, no agreement, etc.
“a clear and unambiguous statement of the terms upon which the offeror is willing to contract should the offeree decide to accept.”
Ads, items on display, generally mean that they aren’t offers, but invitations to treat.
Legal definition of an offer is different than it’s everyday form (invitations to treat)
Fisher v. Bell 1961
Facts: The flick knife was on display, and was thought of as an offering for sale.
Issue: Was the item in the window considered an offer for sale?
Ruling: Item in shop window wasn’t an offer, merely an invitation to treat. The customer who brings it to cash register is making the offer to buy. Shop owner is the one accepts or declines offer.
Partridge v Crittenden 1968
Facts: Bramble finches 25 shillings each for sale. Wild birds were illegal to sell.
Issue: Does that advertisement legally constitute an offer?
Ruling: Advertisement is merely an invitation to treat. Limited stock means that this could not be an offer as he cannot sell more birds than he has.
Pharmaceutical Society of Great Britain v. Boots Cash Chemists 1953
Facts: Section 17 of Pharmacy and Posions Act: if you were to offer these medicines for sale, you had to have a qualified pharmacist supervising the sale.
Issue: Sale without supervision of pharmacist within Boots store.
Items on the shelf are a invitation to treat, customer is the offerer as they want to make the purchase, and pharmacist could accept or decline the offer.
Invitation to treat is NOT legally an offer to sell.
Excrement Circumstances in application of offerings
Sometimes the court may rule contrary to the precedence
Lefkowitz v. Great Mineeapolis Surplus Store 1957
Facts: First advertisement says that at 9am Saturday morning 3 fur coats worth $100 would be sold for $1. Next week, 9am saturday morning 2 mink coats worth $90 would be sold for $1. A man shows up and is told that the sale is only for women.
Issue: Is this advertisement an invitation to treat?
Ruling: This particular advertisement constitutes an offer. “…where the offer is clear, definite and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.”
The condition that the sale was only available for women needed to be explicitly stated in the advertisement (the offer).
Bilateral Contracts
A promise from one party is exchanged from a promise from the other party.
Unilateral Contracts
A promise from one party is exchanged from an act from the other party, being that the party can be anyone as the offer is made to the world at large.
Eg. A lost dog - you can choose to look for the dog or not, but if you choose to capture and return it you are entitled to the reward.
18/9
Pepsi Cola v. Leonard 1996
In attempts to overtake Coca-Cola as the largest soda brand, Pepsi runs a promotion called “Drink Pepsi, get Stuff” where people can exchange merchandise with Pepsi points gotten by buying Pepsi products. A fighter jet was put into an ad. John Lennoard, a student, and Tod Hofman tried to get the fighter jet. Legal to own fighter jet if guns were removed.
You could buy pepsi points for 10 cents each. Now the business plan was 700,000 not 3-4 million dollars. This was a unilateral offer which Lenoard accepted.
An illegal contract is unenforceable (eg hiring a hitman)
Issue: Did the ad constitute the offer?
Ruling: The ad was an invitation to treat. A reasonable person would think that the fighter jet part of the ad was meant to be taken as a joke.
Pepsi initiated the case and got it to be held in New York
Offer termination
Revocation: withdrawal of the offer before it is accepted.
Dickinson v Dodds 1876
Facts: Sale of a property offered for sale for 800 pounds. Offer open until 9am friday 9th of june. Offeree is told on thursday that the property has been sold. Thursday evening the offeree wants to buy the property, and gets declined. Sues arguing that the offer was still open and they handed in their acceptance. How could they know that the third party info that the house was sold was correct?
Walker v Glass 1979 (from tutorial)
Rejection: Reject an offer and the offer terminates.
Hyde v Wrench 1840
Facts: Selling price of 1,000 pounds for the property. Offered 950 pounds, which was declined. Then said okay I’ll pay the 1000 pounds, which was then declined. Sued for breach of contract.
IssueL Was that breach of contract?
Ruling: No, as they lowballed and then got declined, and then offered the original price then was declined, it is not a breach of contract if you get declined.
Lapse of time: Offer isn’t open indefinitely, timing depends. The offeror can indicate the time the offer is open, sometimes timeframe isn’t indicated but is for a reasonable amount of time.
Death of the oferror.
Acceptance of an offer
Acceptance is defined as “a final and unequivocal expression of agreement to the terms of an offer.
Includes intention and communication to accept offer
Parkgrange v Shandon 1991
Facts: Offer to sell a property, vendor signs contract to sell the property for tax advice, didn’t show the contract to the otherside.When plaintiff finds it through discovery,
No valid acceptance
Counteroffer extinguishes counter offer- acceptance is
Lynch v Governors of Sait Vincent’s Hospital 1987
Facts: Doctors work contract expired, but hospital wants to keep him and extend his hours, but don’t have payments. The hospital gives him a contract but has a blank space for serviec requirements. febuary contract is given, in september, they send a second contract with the filled in hours which is 21 hours. But he can’t find the new contract, so fills in old contract with hours but the hospital wanted to decline due to lack of funding.
Issue: Was filling in the service hours considered a counter offer?
Ruling: Doctor was accepting valid offer, and the contract of employment was binding on the hospital.
Notes 25/9
Silence does not constitute acceptance
Inertia selling - unsolicited goods are given to you. (think tourist scams)
Felthouse v. Bindley (1862) 11 CB (NS) 869
Facts: An uncle wanted to buy a horse from his nephew and was confused about the price of a horse. The price was confused between 30 pounds and 30 guineas (a shilling and a pound). The uncle said split the difference, 15 pounds and 15 shillings and that if there was no reply, then he assumed the horse was his.
Issue: Is it a legally enforceable contract?
Ruling: Silence isn’t an acceptance.
Russell & Baird v. Hoban [1922] 2 IR 159 - another case regarding this (silence is not acceptance)
Facts: The plaintiff sent a sale note offering to supply certain material with a condition that if the sale note were kept for 3 days beyond the date of the note, it would be held to have been accepted by the defendant.
Ruling: Ronan J stated that “no man can impose such conditions upon another. The document is conclusive evidence against the parties who sent it, that it was an offer which required acceptance.”
Exceptions to the silence is not an acceptance
The Postal Rule: where an offer can be accepted by post, then that acceptance is valid the moment the letter of acceptance is posted.
But the offeror won’t know of the acceptance until they receive the letter. They won’t know of the acceptance for days.
Only applies to acceptance and not revocation
Kelly v. Cruise Catering [1994] 2 ILRM 394
Facts: A waiter worked on board a ship and was injured. Kelly wishes to sue in Ireland. But to bring the case in Ireland, there needs to be a connection between the contract and the jurisdiction. His employer is Norwegian, his contract was signed and posted in Oslo to Dublin. The employee signed and agreed in Dublin, and sent it back to Oslo.
Ruling: The court ruled by saying that because he accepted the offer in Dublin. Under the Postal Rule, the offer is accepted as soon as the letter is posted. “It was possible, for example, that the acceptance might be lost in the post and in such cases it might be unjust to hold a party to a contract where he had never received the acceptance. That is no doubt correct but it is not a relevant consideration in the present case…” and therefore Kelly could sue in the Irish courts.
Byrne v. Van Tienhoven (1880) 5 CPD 344
On 1 October the defendants wrote from Cardiff offering to sell tinplates to the Plaintiff in New York.
On 8 October the defendant posted a second letter withdrawing or revoking their earlier offer. Postal Rule does not apply.
On 11 October the offer reached the plaintiff who accepted immediately by telegram and letter. Valid acceptance.
The subsequent letter of withdrawal reached the plaintiff on the 20th October.
The Court said that a contract existed from 11 October.
Legal blind spot! Offeror sets out conditions of acceptance (?)
Holwell Securities v. Hughes [1974] 1 WLR 155
The defendant offered the plaintiff a 6 month option to buy a certain property exercisable “by notice in writing to” the defendant.
The plaintiff posted an acceptance but it was lost and never delivered to the defendant. The plaintiff claimed that a contract existed anyway.
As a result, the letter which was not received was insufficient to form a contract with Lawton LJ observing that “the rule does not apply if, having regard to all the circumstances, including the nature of the subject matter under consideration, the negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising an option had in fact communicated the acceptance or exercise to the other.”
Can a contract be accepted without knowledge of said contract?
R v. Clarke [1927] 40 CLR 277
Facts: The offer of a reward for information leading to the arrest and conviction of a person for the murders of two police officers. The plaintiff was arrested and charged with the murder of one of the police officers. While in custody, he gave information that led to a conviction for one of the murders and later attempted to claim the reward.
Issue: Could he accept an offer he knew nothing about?
Ruling: Court said no.
Consideration
Price paid for the promise?
Rule One: Consideration Must Move from the Promisee
Theres no consideration in a gift - therefore no contract.
Consideration must move from promisee. Person looking to enforce the promise must have provided consideration for it.
If the beneficiary of the contract is a thord party they are unable to enforce is as they haven’t provided consideration.
Rule two: Consideration must not be past
Roscorla v. Thomas (1842) 3 QB 234
Facts: Regarding a sale of a horse for 30 pounds and contract is concluded. The vendor indicated that the horse was healthy, when in fact the horse was no healthy. The plaintiff sued for breach of warranty.
Ruling: The Court said that the warranty was unenforceable, as it was not supported by consideration. The warranty was subsequent to the act (the purchase of the horse) and was independent of it. Thus, there was no consideration given in exchange for the warranty. The consideration happened after the sale and therefore the breach of contract did not happen.
Re McArdle [1951] Ch 669
Facts: Property owned by multiple family members. Work is done on the property, and after the work was done, the relatives are happy and say they want to pay, but then don’t. The lady wanted to sue because they didn’t pay. Her consideration was doing the renovations. The consideration was before the promise. Past consideration is no consideration.
Rule 3: Consideration Need Not be Adequate
The consideration (usually money) doesn’t need to reflect market value of item being sold.
Haigh v. Brooks (1839) 10 Ad. & E 309
The defendant requested, and received, a worthless piece of paper in return for a promise to pay £10,000. The piece of paper was held to constitute good consideration.
ICS Building Society v. Grant [2010] IEHC 17,
“[p]eople can enter into bad bargains. The law never enquires into the adequacy of any consideration for a contract. One can sell a motor manufacturing company for billion Euros or for ten Euros.
Rule 4: Consideration must be Sufficient
Consideration must have some value, namely, economic
value, even if that value cannot precisely be quantified
White v. Bluett (1853) 23 LJ Ex. 36
Facts: A father promised to discharge his son from debt due if the son promised not to bore his father with his complaints about the father’s distribution of his property among his children.
Ruling: This was not supported by consideration because refraining from making complaints is of no economic value.
O’Neill v. Murphy [1936] NI 16.
Facts: a builder executed work for his neighbouring parish in return for prayers being said for him and his family. He had written a letter to one Father Murphy in which he said he would consider himself well paid for the work if he arranged for prayers to be said for him and his family.
Issue: Do prayers constitute consideration?
Ruling: Prayers don’t have economic value.
Pando v. Fernandez (1984) 127 Misc 2d 224
Facts: A religious young man claims that one day a woman gave him money and asked him to buy a lottery ticket for her. He claims she said that if he said prayers to Saint Eligia to cause her numbers to win, then she would share any jackpot with him. The ticket was the jackpot $2.8 million. He wants half the jackpot, and he provided consideration: he said the prayers to the Saint.
Issue: Is prayers sufficient consideration?
Ruling: No. The prayers were not sufficient consideration. “Theology is to be protected against the law, as law is protected against theology.”
2/10
Topic 3 continmous (page 8)
Chappell v. Nestle [1960] AC 87
Facts: If you sent a sum of money + 3 chocolate bar wrappers, Nestle would send you a record. Royalties owed.
Ruling: House of Lords said chocolate wrappers had economic value and part of the consideration: you bought numerous chocolate bars and customers deliberately sent the wrappers. The wrapper symbolizes the sale.
Invented or illusory consideration is not sufficient (is no consideration)
A transaction without consideration??
Revenue Commissioners v. Moroney [1972] IR 372
Facts: Sale of a pub, sold from father to son for 16,000 pounds. Revenue commissioners said the money would never be paid. That the family knew that fact. If you are gifted an item, there is gift tax. But if you buy an item then no gift tax. Illusory consideration.
Ruling: Illusory consideration is not consideration.
A forbearance or a compromise may be good consideration
Hamer v. Sidway (1891) 124 NY 538
Facts: A man is enrolling in university. The man had a concerned uncle. Uncle thought campus life would distract him. Uncle says “if you refrain from drinking, smoking, swearing, gambling until 21, he will give the boy $5,000). Boy follows up on that, graduates, goes to the uncle, Uncle says he’ll pay it in the future…. Uncle died.
Issue: Is the promise enforceable (is there consideration)?
Ruling: Forbearance is good consideration.
Performance of an existing duty
Doing something you are already legally required to do does not constitute good consideration.
Collins v. Godefroy (1831) 1 B& D 950
A person is subpoenaed and told they will give the witness 6 guineas (a shilling and a pound) to show up and testify.
Ruling: Because they were legally required to testify, the money wasn’t owed.
Glasbrook v Glamorgan 1925
Facts: There was a miners strike at a mine, and the company wanted police there in fear the miners would damage the mine. Mine owner wanted a standing unit, to stand guard of the coal mine. Police wanted payment the owner agress. Mine owner doesn’t pay saying that it was the polices legal obligation.
Ruling:
Harris v. Sheffield United Football Club [1987] 2 AER 838,
Facts: FC didn’t want to pay for police.
Ruling: Courts said that they had to pay..
Topic 4
Intention to Create Legal Relations
When a contract is made with relatives or friends, the courts presume that the parties do not intend the argeement to be legally binding.
Husbands and Wives
Balfour v. Balfour [1919] 2 KB 571
Facts: Civil survant transferred. Wife couldn’t leave england for health purposes. Husband promised monthly allowance of 30 pounds.
Issue: Is there an intent to make a legal relationship?
Ruling: Court said no.
Other family relationships
Jones v Padavaton
Facts: Mom living in Trinidad, daughter in Washington. Mom says that if the daughter gives up life in Washington and returned to England to study for the bar in Lodon then she give her an allowance. Initially the mother financially supports her, and the mom says she will buy a house. The daughter started failing in school AND EVICTS THE DAUGHTER. Daughter sues for break of contract.
Issue: Is there a legally enforceable agreement?
Ruling: Court said that when entering the agreement, they got along and didn’t intend to make a legally binding contract. One dissent: There was a contract!
Haggar v De Placido 1972
Facts: Plaintiff was injured in a road traffic accident and agreed to apy his mother and brother a weekly amount (12 guineas) as compensation for their nursing series to him. The agree was recorded formally in writing.
Issue: Was this legally enforceable?
Ruling: Prima Facie,
Coleman v. Mullen [2011] IEHC 179
Facts: A neighbor of an elderly childless widow. The neighbor starts assisting the widow with stuff like errands, cooking, etc., 20 hrs/wk multiple weeks. The widow dies, and the plaintiff wants compensation from the widow's estate. Quantum-meruit: A claim that you’ve done work and believe you are to be paid, and want quantum-meruited payment. They don’t pay, she sues.
Ruling: Lower court: 25K euros. High Court overturns that on the basis that there was no intention to create a legal relationship.
Commercial Agreements
With commercial agreements, the parties are usually presumed to intend to create legal relations: they operate at arm’s length from each other and act purely in their own interest, so there are no complications such as can exist when close relatives make agreements with each other
Blue v. Ashley [2017]
Facts: Mike Ashley is founder of sports direct and owned New Castle United at some point. He holds a business meeting about getting new brokers for sports direct in a bar. Lots of drinks are consumed. Jeffery Blue says that Ashley said to him that if he could get the shares of sports direct over 8 pounds, he would give him a bonus of 15 million. Worked on behalf of the company of the company and provided consideration. Mr Blue is paid a bonus of 1M. Blue sues for the remaining 14M.
Issue: Did the parties intend, when engaging in pubchat, to create a legal relationship?
Ruling: The claim failed, no intention.
Simpkins v. Pays [1955]
Facts: Grandmother, granddaughter, and a lodger share a home and bet on a newspaper competition for money. Won 750
Issue: Was there a syndicate in being with risks and profits intended to be shared?
Ruling: It was found that there was such a syndicate, no matter how “loose”, and the court awarded the plaintiff £250.
Walsh v. Walsh (No.1) [2017]
Facts: 3.4M jackpot, multiple people signed the ticket. The defendant(the wife/mother), the husband (now deceased), two sons (one who becomes the plaintiff), and a relative. The defendant picks up the prize. The son sues his mother.
Ruling:
Express exclusion of enforacbility
It may seem obvious, but where the parties have decided to expressly exclude enforceability of their agreement, the courts will recognise that decision.
Rose & Frank v Crompton 1925
Facts: Defandants gave right to plaintiff to sell tissues in US and Canada. Honourable Pledge Clause:
Letters of Comfort
A document which typically arises in commercial context, that is generally not legally enforceable.
A “letter of comfort” is a term given to some assurance provided by a parent company in relation to a subsidiary company, or by some government body or state agency in relation to a related body.
Kleinwort Benson v. Malaysia Mining Corp Bhd [1989]
Facts: A bank makes a loan to a subsidiary company. Gets a letter of comfort. Loan not repaid, company liquidates(??). Bank sues MMC.
Ruling: Didn’t create a legally enforceable contract. Even if the letter was legally enforceable, it was problematic. Tense! The letter of comfort should use language in future tense.
Banque Brussels Lambert SA v. Australian National Industries (1989)
Facts: Bank gives loan looking for guarantee, dont get it, then look for letter of comfort. They get the letter.
Issue: Is the letter of comfort legally enforceable?
Ruling: Austrian courts says yes. Excessively technical and unrealistic, in commercial agreements like a loan facility, they should be given commercial enforceability.
Week 6/ Topic 4 - Contractual Capacity
If one party does not have capacity to enter the contract then the contract isn’t enforceable.
Different circumstances in which a contract is not enforceable
Underage
Intellectual disability
Intoxicated
Imprisoned
Contracts Binding on Minors
Contracts for Necessities
Section 2 Sale of Goods Act 1893 - “goods suitable to the condition in life of such infant or minor … and to his actual requirements at the time of sale and delivery.”
Necessities include:
Food, water, healthcare, education, shelter, legal representation?, clothes etc.
Nash v Inman 1908
Facts: A student at Oxford who purchased waistcoats, and whether the contract was enforceable.
Ruling: While clothes is a necessity, it is not a necessity if the young man already had a sufficient amount of waist coats. But only the buyer knows how much of the purchasable item the person may have.
Test on whether the contract is enforceable:
Is this item capable of constituting a necessity?
Are the items a necessity for this particular person?
Skrine v Gordon
Facts: A young man who went to a ball, had some drinks, and on the way home from the ball he bought a horse. He attempts to evade contract later.
Issue: Is the contract enforceable?
Ruling: It is not a contract for necessities and therefore not enforceable. Amusements are not a necessity.
Beneficial Contracts for Services
Keays v Great Southern Railway 1941
Facts: A girl had a train ticket to bring her to school. Due to the train companies negligence she is injured. The railway company has an exclusion clause in the contract taking away liability for injuries suffered.
Ruling: If the contract contains unfair terms to a minor, the minor has the ability to reject the contract. The girl could sue.
Chaplin v Leslie Frewin
Facts: Charlie Chaplin’s son is 19, married, has a child on the way, and he’s on social welfare. Decides to write autobiography. Leslie Frewin is a publisher, and enters a contract with Chaplin, a ghostwriter (a journalist) makes the book. Later, Chaplin changes his mind while the publication is ready.
Issue: Is this a contract for services enforceable?
Ruling: It was a beneficial contract for services. Despite the terrible book, the book was beneficial to Chaplin for two reasons. Enabled him to earn money and support his family, and it enabled him to become a published author. A dissenting judgement (Lord Denning?) argued this was a contract for an autobiography yet nothing in the mans life worth recording. The purpose of the book was to publish scandalise information on others and invade privacy of his family. He concluded that the son would be better off going out and getting a real job.
Toronto Hockey Club v Tonnely
Facts: A promising canadian hockey player, when 17 entered a contrat with an amateur hockey club, contract said he would play with them for 3 years with minimal pay. There was an option to keep him for a fourth year at the hockey club. If he turns professional, for his first three years he would pay 20% of his salary back to the professional club. He can only accept the second contract once the first one expires. The contracts benefit the club as a whole.
Ruling: The contract is beneficial to the sport as a whole, but it wasn’t enough to be enforceable.
The test is if its beneficial to this particular person. It was not.
Doyle v White City Stadium Ltd & British Boxing Board of Control 1935
Facts: Jack Doyle a famous boxer, entered a contract. The fight was controlled under the BBBC (not BBC.). Jack Doyle agrees to take fight and get paid. He gets disqualified for punching below the belt and his payment is taken away. He challenged it (he was under 21 at the time)
Ruling: The contract was somewhat similar to employment contract. Court held that the rule did benefit the plaintiff, as it promoted fair fighting.
Voidable Contracts
A void contract is one that was never made. Voidable means it can be avoided but must take necessary steps to avoid it. The contract can continue to exist.
Voidable Categories are
Contracts relating to an interest in land
Marriage Settlements
The purcahse of, or subscription for, shares
Partnerships
Insurance Contracts
Infants Relief Act of 1874
O’Keeffe v Ryanair
Facts: A woman was traveling through Dublin airport when she was stopped by a stranger. Is asked if she was one millionth passengers if she could do promotional work for the airline for a prize. Newspapers photographed her with a giant check with free flights for life. This worked for a while. Later, she rang up Ryanair wanting to go to Glasgow, yet she was told the flight was full when it wasn’t. Ms. O’Keefe sued Ryanair. Ryanair attempted to argue that the prize was a gift, and gifts aren’t legally enforceable, and they also say there was no intention to create a legal relationship.
Ruling: There was an offer, an acceptance by Ms. O’Keefe, and consideration. Variables: What is the value of free flights for life? How much will air travel cost in the future? How old will O’Keeffe live to? Ryanair settled: free flights for life, compensation for flights taken while she was suing them, and legal fees covered. She declined. Was she acting reasonably to decline the offer? Yes, it was reasonable of her to turn down the settlement because she didn’t want to deal with ryanair moving forward. 67.5k in total awarded. 60k for flights and 7.5 for emotional damages.
What is in a contract?
Terms explicit in a contract
Employment contract: Who you work for, wages, vacation days, sick days, etc.
Does that mean those terms are the only terms in the contract?
Implied Terms - 23/10
Terms implied by fact
To give effect to the presumed intentions of the parties
Tests:
Business Efficacy Test
The Moorcock 1889
Facts: The defendant allowed the plaintiff to unload his shop at his wharf. The ship settled on a ridge of rock and was damage, and sues for breach of contract.
Issue: Is there an implied term for the safety of using the jetty?
Ruling: Court ruled it was an implied term that the jetty would be such that it would endanger the vessel so far as reasonable care could provide.
Murphy Buckley & Keogh v Pye 1971
Facts: The defendants engaged with the plaintiffs in regards to the sale of a factory in Dundrum on a sole agency basis. They sold it to purchases not introduced by the plaintiffs. Plaintiffs were deprived of their commisssion and sued, claiming an implied term.
Ruling: Courts took the view that even though such a term would be commercially sensible, it wasn’t required. Aka, it was necessary to imply the term into the contract.
Dakota Packaging v Wyeth Medica
Facts: Contract to provide specialist packaging for their medicine. Plaintiffs can’t choose to stop overnight. If they want to take away their business they must give notice.
Ruling: High court judge ruled that this was an implied term in the contract. If defendants wanted to taken business elsewhere they must give 12 months notice. Wasn’t the intent of both parties!!! Supreme Court says their is no such implied term.
Kelly v Calliman 2012
Facts: Two people in a personal and business relationship. They split up. Contract requires that the plaintiff has to pay certain liabilities. Defendant will sell property and reimburse plaintiff 120k euros. Large economic collapse.. nobody wants to pay 1.8M for the property. implied term: she gets reimbursed even if property isn’t sold.
Ruling: Court agreed, she will get reimbursed. Court isn’t remaking agreement. Agreeing to intent of both parties at the time of the creation of the contract
Officious Bystander Test
Shirlaw v Southern Foundries (in establishing the test itself)
Test says: If there was a bystander hypothetically present while making the contract and suggests a term that can be very obvious or implied, the parties would say “oh, of course!”.
Kavanagh v Gilbert
Facts: Case concerning an auctioneer. The auctioneer had agreed to sell the plaintiff's farm. The auctioneer conducts the auction and accepts the highest bid, but he fails to draw up a memorandum of agreement.
General rule: A written agreement isn’t needed to make a contract enforceable.
Ruling: There is an implied obligation on the auctioneer to use care and skill in concluding a binding contract. (A memorandum after the sale!)
Exceptions to officious bystander test
Contracts that have to be in writing (contract for the sale of land).
If one of the parties would not have agree to the term.
If one of the parties is unaware of the term which is sought to be implied.
If implying the term would destroy the contract.
If implying the term would have far reaching and unwanted consequences
Carna Foods v Eagle Star Insurance
Facts: The insurance canceled its coverage to Carna Foods without reason. Carna Foods says that the defendants cannot do this; they need to give a reason for cancellation.
Under no circumstances would they have agreed to the term. (the implied term that they needed to announce their reason for cancellation.)
They wouldn’t have agreed because they thought the plaintiffs could commit arson, but that would then lead to an action for defamation.
Ruling: Court agreed, refusing to imply the term. The insurance company would have never agreed to the implied term, and it would have far-reaching and unwanted consequences.
MR v TR
Facts: A couple had a baby through a fertilitc clinc and had frozen eggs. They had one successful child together but had 3 remaining frozen emybros. After they seperated, the ex-wife wanted to use the frozen emybros to have more children. There was no terms stated between the couple regarding the term.
Ruling: Officious bystander test is applied but not positively, but it negative here, its obvious that they wouldn’t want children together if they were split up. Cannot be filled by an implied term. No shared intention. Far reaching and unwanted consequences.
Intent to make legal relations: people within a family don’t typically intend to create legal relations.
Did the protection of the unborn extend to the frozen embyro? No.
Move away from the business efficacy test and the officious bystander:
AG of Belize v Belize Telecom Ltd 2009
Facts: Different types of shareholders. Certain categories of shareholders can appoint directors. The shareholders who appointed the directors were bought out (no longer exists). A director can only be removed by certain shareholders who no longer exist.
Issue: Is there an implied term that the director resigns if the shareholder who appointed them ceases to exist?
Ruling: Lord Hofman devises his own test. The other two tests were dangerous…. (study this bc wtf..)
Marks and Specers plc v BNP Paribas Securities Services Trust co. 2016
Facts: Lord Hofmans beliefs did not change the law. Should not be considered to change the terms implied as a matter of fact. Just because a term is reasonable isn’t enough: it needs to be necessary.
Ruling:
Terms implied as a matter of law;
Law of the land implying the term(??). It might correspond with the intentions of the parties but it doesn’t matter if it happens to correspond with either party it is solely about the law.
Terms Implied by the Courts
Liverpool City Council v Iriwin 1977
Facts: The home was a council flat (provided by council). The tower-block in poor repair, lifts didn’t work, stair wells unlit, rubbish shoots blocked. The tenant withheld rent in protest. The council sought possession. The tenant countered with a claim for breach of contract of an implied term to maintain the premises to an adequate standard. Written lease when renting a flat, but nothing in lease deals with such issue.
Ruling: The house of lords took the view that there needed to be some maintenance of the premises, not on the tenets but on the city council.
Siney v Dublin Corporation 1980
Facts: Irish case with a council flat provided by Dublin corporation. The premises weren’t ventilated properly, creates mold which destroys the tenents property.
Issue: Is it a breach of implied terms?
Ruling: The flat is provided under the housing act, which aimed to provide accomidation to less well-off people. Health of the tenent and property is at risk. The council could avoid statuory obligations without implied term.
Mahmud & Malik v BCCI 1998
Facts: BCCI went bankrupt for fraud??? Plaintiffs are former employees of BCCI and when the company went into liquidation they lost their jobs. When employers saw BCCI on their CVs they lost interest. Stigma damages. In the court of appeal the employees lost (no cause of action).
The employees said there was an implied term that the bank was running honestly.
Ruling: Courts agreed with the implied term that the business isn’t run corruptly or dishonestly.
Terms implied under Statute
Sale of Goods Act 1893 and Irish Sale of Goods and Supply of Services Act 1980
Terms implied under the Constitution
Mescal
Issue: Is there a right to join a trade union when there is a constitutional right going the other way?
Ruling: Yes.
Tierney v An Post 2000
Facts: A postmaster was informed he might be fired; he appealed, and a hearing was held. Post hearing: they don’t think the employee is credible, and fire the plaintiff. Employee challenges this up to the Supreme Court.
Ruling: He is successful in the Supreme Court, he has a constitution right to fair trial. When there is a discplinary panel, there is an implied term that it is conducted fairly.
Terms implied by custom
Customs can be universally followed within trade. That custom can be implied into the contract.
Solicitor is a trade with lots of customs.
Deviling - unpaid apprenticeships. Minimum wage doesn’t apply.
Non-exaustive list of requirements must be fulfilled before a custom may be implied
The Custome must have acquired such notoriety that the parties msut be taken to havek nown of it and intended it should form part of the contrac.t
The custom must be certain
The custom must be reasonable, and the more unreasonable it is, the harder it will be to prove that it exists.
Until the courts take judicial notice of a custom, it must be proved by clear and convincing evidence
The custom must not be inconsistent with the express contract.
Shirley Engineering Ltd V Irish Telecommunications Investments plc 1999
Facts: Does a deposit of 10% have to be paid? The 10% deposit didn’t meet the test of customs.
Ruling: No such term was implied!
New topic! 20/11
Exclusion Clauses
In the contract, it says that if a adverse thing happens, the party won’t be liable.
Types
Total exclusion of liability
A limitation clause
Questions
Is the exclusion clause part of the contract? (incorperation)
Incorporation by signature
If you sign a document, you are bound by your signature.
That is the case even if you’ve read the document
Estrane v Graucob 1934
Facts: A cafe owner purchases a vending machine (slush puppy) from the defendents. Theres a sale agreement, in small print. The cafe owner signs the contract without reading it, and the machine is defective. Defendant that says that in the contract there is a clause there is an agreement that denies me liability if the machine is defective.
Issue: Is the clause valid?
Ruling: Court agrees, the clause is valid. Once the plaintiff signed it, depsite not reading it, it was binding. There is a caveat, that the contract was signed by consent.
Curtis v Chemical Cleaning 1951
Facts: A wedding dress is handed to a dry cleaners. She’s asked to sign a document, she asks why, is explained that the dry cleaners are exempting themselves from liabileity for any damage to beading/decor on the dress. During the cleaning process the dress is stained. Plaintiff sues, but defendants claim that the contract included exclusion clause.
Ruling: The signature was given out of a misrepresentation of the contract. Signature wasn’t binding.
Modern irish cases: Londis v Gorman’s supermarket ltd 2014
Hudson v Halloway 2022
Facts: Technological advancements go past ordinary understanding for e-signatures (??)
Incorporation by notice
Ollie v Marlborough Court 1949
Facts: A couple was booking into a hotel, the contract was concluded at reception desk of the hotel, everything signed at the reception desk. On the back of the door there is a sign that says that the management accepts no responsibility for the theft of guests property unless property is deposited with the hotel manager.
Couple discovers that the hotel room has been broken into and items are stolen, like the wifes fur coat. They sue. Hotel claims they have no liability.
Ruling: Court said that because the contract was concluded at the reception desk, they were entirely unaware of the exclusion clause. Clause was NOT incorporated in the contract.
Incorporation through a previous course of dealing
If you do business with person again and again, communications get informal.
What constitutes a previous course of dealing?
Spurling v Bradshaw
Facts: Barrels of orange juice are left in a warehouse and are damaged/destroyed.
Ruling: If theres a contract ever time, they it’s to be expected ever time(?)
Holier v Rambler Motors 1972
Facts: Car handed over to the garage ¾ times. At least two of those times, the car owner had signed a document, but didn’t read it. He accepted that in the contract, the garage owner excluded liability, with explicit detail about damage with fires that happen in the garage. The car is then damaged in a fire. No signature this time. Garage owner argues previous course of dealing. This particular agreement there was no written agreement.
Ruling: Previous dealings not sufficient to incorporate an exclusion clause in a contract.
Assuming the clause is part of the contract, does it cover the events that have actually occurred? (interpretation)
Is the clause affected by any legislation? (legislation)
The contra proferntent rule (against the proferror)
If theres any ambiguity or doubt it can be interpreted against you(?????). Where an exclusion clause is ambiguous, it will be interpreted against the party trying to rely on it.
Andrews v Singer 1934
Facts: Contract of sale of a new car. The car had hundreds of miles on the clock. Vendor relied on exclusion clause, which was widely worded, including all (implied terms), conditions, warranties, liabilities, etc. All they’ve excluded their liability for is implied terms. Delivery of a new car is an express term, not implied!!
Ruling: If a vendor wants to protect themselves from liability they must do so with much clearer language.
Case only applies when there is an actual ambiguitiy
Exempting liability for Fundamental breach (Doctrine of fundamental breach)
Karsales (Harrow) v Wallis 1956
Facts: Sale of second-hand car, is inspected by purchaser who then buys it. No conditional warranty that the car is road-ready. Tires removed and engine damaged. To deliver the car, the garage owner couldn’t ride it. The car delivered was extraordinarily unsatisfactory. The purchaser entered a contract clause that has no guarantee that the car is fit to drive. Very widely worlded exclusion clause.
Ruling: The exclusion clause is rendered ineffective. Can’t rely on the exclusion clause where there is a fundamental breach in the contract.
Photo productions v Securior Transport
Facts: Photo productions hires Securior to protect their factory during the nighttime and weekends. Securior will not be responsible under circumstances for any injurious act made by an employee. Wide exclusion clause. One night it gets chilly, an employee sets a fire to stay warm. The fire burnt the factory to the ground.
Issue: Is there a fundamental breach?
Ruling: It didn’t apply, because there was no such rule. Fundamental breach didn’t exist, no doctrine exists! Ample resources to deal with these cases without making shit up. Even if the exclusion clause is wide, so be it (just fuck them basically…)
Doctrine of Fundamental Breach in Ireland
Clayton Love v B & I Transport
Facts: Concerns a contract to transport frozen scampi from Dublin to Liverpool. Loaded at atmospheric (as opposed to subatmospheric) temperature: leads to the scampi unfreezing, going off. Defendants are likely to be sued.
Two exclusion clauses:
Issue: Could a party rely on an exclusion clause in Ireland where there had been a fundamental breach in contract?
Ruling: Court took the view that the doctrine of fundamental breach applies in Ireland.
However, in the UK, they’ve moved away from it. Supreme Court decisions are binding on lower courts in Ireland. Irish judges are reluctant but are obglied to apply it.
(After Clayton) ESL Consulting v Verzion
Facts: In essence, its to due with internet supply to a business. On a number of occasions the supply of the internet is wrongly suspended for a period of time.
Ruling: Judge deteremined that even if it was a breach of contract it wasn’t a fundamental breach of contract.
(After Clayton) Judge says: Strong arguments to reconsider the doctrine of fundamental breach. Do what they’ve done in England and abandon it.
Is the exclusion clause affected by any legislation?
Sale of Goods Act 1980 (sections in slides)
Any exclusion on the issue of title is void. If you sell goods you don’t actually own, any attempt to exclude your liability of title(ownership) the issue is void.
Void if the buyer is a consumer, if a business, then different?
Consumer Rights Act of 2022
Provides that you cannot have an exclusion clause against a consumer. Consumer means a person entering a contract in a personal capacity (not a business).