Contract Law Flashcards - Core Concepts and Doctrines
Offer and Acceptance
Formation Prerequisites: A valid offer and an acceptance are absolute prerequisites to forming a legally binding contract.
Unilateral Contracts:
Defined as a contract where one party assumes a legal obligation while the other party may or may not. The offeror is specified from the outset, but the offeree may not be specified initially (Carlill v Carbolic Smoke Ball Company [1893]).
Standard examples include contracts made to the world at large.
Bilateral Contracts:
Defined as a contract where both parties assume legal obligations, and both the offeror and the offeree are explicitly specified.
Definition of an Offer:
Defined in Storer v Manchester City Council [1974] as inviting another person to enter into a binding contract.
An offer is any statement that is certain, leaving no room for further discussions or negotiations.
Invitation to Treat (ITT):
Defined in Gibson v Manchester City Council [1979] as inviting an offer from another party, or statements inviting the recipient to commence negotiations.
In Harvey v Facey (1893), a party telegraphed the lowest price he would accept for his property if he were to sell it in response to a query. Indicating the lowest price alone did not constitute an assurance that he would sell at that price; hence, it was an ITT.
General Rules on Invitations to Treat:
Display of Goods: All displays of goods are treated as ITTs.
Fisher v Bell [1961]: Displaying flick knives in a shop window was held to be an ITT, not a literal offer to sell; therefore, the shopkeeper was not liable under criminal law prohibiting the offer for sale of flick knives.
Pharmaceutical Society v Boots [1953]: The contract for the sale of medicines on display was formed at the cash counter rather than at the display shelves, as shelf displays are ITTs.
Advertisements: The general rule dictates that all advertisements are ITTs. However, advertisements containing terms promoting goodwill—such as reward offers—are construed as unilateral offers.
Partridge v Crittenden [1968]: An advertisement to sell endangered species was construed as an ITT; the advertiser was not liable for offering to sell.
Carlill v Carbolic Smoke Ball Company [1893]: The advertisement promised a reward to anyone who contracted influenza after consuming the medicine according to instructions. The inclusion of this reward term converted the advert into an offer.
Tenders: Advertisements requesting tenders are ITTs; the submitted tenders constitute offers, and the offeror retains the legal right to select any offer (Harvela Investments Ltd v Royal Trust Co of Canada Ltd [1985]). However, if the advertisement contains a goodwill term (e.g., stating the offeror will accept the highest or lowest bid), it is construed as an offer that binds the party (Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990]).
Auctions: Advertisements for an auction are ITTs. However, if the advert stipulates that the auction will be "with or without reserve price," this specific term is construed as an offer (Barry v Davies [2000]).
Lapse of Offer:
Expiry of a specified time limit stipulated in the offer.
Expiry of a reasonable length of time where no time limit is specified. Reasonableness is evaluated objectively based on the commodity in question (Ramsgate Victoria Hotel v Montefiore [1866] – involving an offer for stocks and shares).
Death of the offeror or the offeree.
Rejection of the offer by the offeree.
Issuance of a counter offer by the offeree, which completely nullifies the original offer and acts as a fresh offer (Hyde v Wrench [1840]).
A mere request for further information does not constitute a counter offer; the original offer remains valid (Stevenson v McLean).
Withdrawal of an Offer:
Bilateral Contracts: An offer can be withdrawn at any time prior to acceptance, provided the withdrawal is communicated to the offeree (Payne v Cave [1789]; reaffirmed in Byrne v van Tienhoven [1880]). Communication of withdrawal can come from a reliable third party (Dickinson v Dodds [1876] – where a friend of the offeror informed the offeree that the offeror had sold the house to a third party).
Objective Test: The existence of offer and acceptance is determined objectively (Centrovincial Estates v Merchant Investors Assurance Co [1983]).
Unilateral Contracts: English courts have no direct binding judicial pronouncements setting withdrawal rules for unilateral contracts. For unilateral offers to the world at large via advertisements, withdrawal does not require individual communication and is effective if made through the exact same medium as the original offer (Shuey v USA). For other unilateral contracts, the standard communication rules governing bilateral contracts apply.
Acceptance in Bilateral Contracts:
General rule: Acceptance must be communicated, and the burden of communication rests on the offeree (Entores v Miles Far East Corp).
A communication falling short of an acceptance (e.g., merely expressing gratitude for instructions) does not constitute acceptance (Arcadis Consulting v AMEC (BSC) [2016]).
Acceptance can occur by conduct (Brogden v Metropolitan Railway – delivering coal without returning signed agreement; Reveille Independent LLC v Anotech International (UK) Ltd [2016] – draft agreement specified it was binding only when signed, but subsequent conduct established valid acceptance despite lack of signature).
Acceptance cannot be imposed by silence where a contract is forced upon an unwilling party (Felthouse v Bindley – uncle stating that if he heard no more from nephew, he would consider the horse his). Exceptionally, silence constitutes valid acceptance if both parties explicitly agree to it without forcing a contract on an unwilling party (Rust v Abbey Life [1979]).
Exceptions to the Communication Rule:
Terms of the Offer: If the offer explicitly dispenses with the requirement of communicated acceptance, silence amounts to acceptance (Rust v Abbey Life [1979] obiter dicta).
Conduct of the Offeror: If the offeror fails to receive communication of acceptance due to their own fault, the offer is accepted without receipt, provided the offeree attempted valid communication according to the offer's terms (Brimnes case – fax received during normal business hours on unmanned receptors creates acceptance if the offeror negligently fails to check it within a reasonable time). However, if the offeree posts a letter of acceptance to an incorrect address, acceptance is invalid (Korbetis).
Postal Rule: Acceptance sent via post is valid at the moment of posting rather than upon receipt, treating the postal service as the agent of the offeror (Adams v Lindsell [1818]). This rule applies even if the posted letter is lost in the post through no fault of the offeror (Household Fire and Carriage Accident Insurance Co Ltd v Grant [1879]).
Exceptions to the Postal Rule:
Non-instantaneous modes only: The postal rule does not apply to instantaneous modes of communication such as telex, fax, or email (JSC Zestafoni Nikoladze Ferroalloy Plant v Romly Holdings [2004]). It was noted obiter that the postal rule does not apply to email exchanges (Thomas v BPE Solicitors [2010]).
Prescribed method of acceptance: If the offer specifies a mandatory method of acceptance, the postal rule is excluded (Holwell Securities v Hughes [1974] – requirement of "notice in writing" excluded the postal rule).
Unreasonable mode: The postal rule does not apply if using the post is unreasonable under the specific facts of the case (Henthorn v Fraser [1892]).
Acceptance in Unilateral Contracts:
Acceptance occurs strictly by conduct upon full and complete performance of the stipulated act (Daulia v Four Millbank Nominees [1978]).
Once part performance has commenced, the offeror generally cannot revoke the unilateral offer (Errington v Errington [1952]).
Rare exception: Unilateral offers can be withdrawn after part performance has commenced if the consideration stipulated in the offer is very large while the reward offered is very small (Luxor (Eastbourne) Ltd v Cooper [1941]).
General Rules on Knowledge and Revocation of Acceptance:
Ignorance of Offer: An offer must be communicated to be effective; an offeree cannot accept an offer without knowledge of it, and forgetting an offer at the time of acceptance is legally equivalent to having no knowledge (R v Clarke [1927] Australian precedent).
Withdrawal of Acceptance: Acceptance can be revoked if the communication of withdrawal reaches the offeror prior to or simultaneously with the communication of acceptance (Dunmore v Alexander Australian precedent).
Consideration
Definition and Concept:
Defined in Currie v Misa as a benefit accruing to one party or a detriment suffered by the other party.
Consideration serves as the badge of enforceability in contract law, rooted in the concept of reciprocity (give and take).
It requires a legal benefit to the promisor or a legal detriment to the promisee; either is sufficient, though both are frequently present.
General Rules of Consideration:
Sufficiency vs. Adequacy: Consideration must be sufficient, but it need not be adequate.
Thomas v Thomas (1842): Rent set at \n\pounds 1\n per year for a house constituted valid consideration; courts do not require consideration to match market value.
Chappell v Nestlé (1960): Used chocolate wrappers constituted valid consideration because they carried some value and provided an indirect commercial benefit by incentivizing chocolate purchases.
Economic Value: Consideration must possess economic value. Goods and services carry economic value, whereas promises grounded purely in feelings or emotions do not.
White v Bluett (1853): A son's promise to stop complaining to his father in exchange for debt forgiveness was not valid consideration, as it lacked economic value.
Past Consideration: If an act is executed prior to the giving of a promise, it constitutes past consideration and is invalid.
Roscorla v Thomas: A promise that a horse was sound, made after the sale contract had already been executed, was unenforceable past consideration.
Re McArdle (1951): Home refurbishment work completed before other family members promised to contribute to the cost constituted invalid past consideration.
Exceptions to Past Consideration (Pao On v Lau Yiu Long (1979)):
The original act was performed at the promisor's express request (Lampleigh v Braithwaite (1615)).
Both parties understood that the service was to be paid for via money or another benefit (Re Casey's Patents (1892)).
The promise would have been legally enforceable had it been made prior to the performance of the act.
Existing Duties:
Existing Legal Duty: Performing an existing legal duty does not constitute valid consideration unless the promisee performs something beyond their statutory duty.
Ward v Byham (1956): A mother promised to keep her child "happy" in exchange for weekly maintenance of \n\pounds 1\n. Ensuring child happiness exceeded her bare legal duty to maintain the child, constituting valid consideration.
Glasbrook Bros Ltd v Glamorgan CC (1925): Police provided extra guard duties at a mine during a strike upon request. Providing protection beyond what police deemed necessary constituted valid consideration.
Existing Contractual Duty to Promisor: Performing an existing contractual duty owed to the promisor is not consideration unless the promisee does something considerably extra (Stilk v Myrick; affirmed in Hartley v Ponsonby).
Practical Benefit Exception: A promise to pay extra for an existing contractual duty is binding if it confers a practical benefit on the promisor and is free from economic duress (Williams v Roffey Bros).
Economic duress involves using superior economic power to force agreement. Coercion must be distinguished from acceptable commercial pressure (DSDN Subsea Ltd v Petroleum Geo-Services ASA [2000] per Dyson J; Adam Opel GmbH, Renault S.A. v Mitras Automotive (UK) Limited).
Existing Duty to Pay Debt:
Pinnel's Case / Foakes v Beer: Part payment of a debt cannot discharge the full debt unless additional consideration is provided via:
Adding an object alongside part payment;
Paying prior to the due date;
Providing explicit convenience.
Re Selectmove: The practical benefit doctrine does not apply to part payment of monetary debts.
MWB Business Exchange Ltd v Rock Advertising Ltd [2016]: An oral agreement to accept late debt payments was binding because it conferred practical benefits on the property owner (retaining occupancy and obtaining immediate partial arrears).
Part payment provided by a third party and accepted by the promisor operates as a complete discharge of the debt (Harichand Case).
Existing Duty to a Third Party: Promising to perform, or performing, an existing contractual duty owed to a third party constitutes valid consideration, as it exposes the promisee to legal actions from two distinct parties (The Eurymedon (1975)).
Promissory Estoppel:
Enforces a promise unsupported by consideration. Originating in Hughes v Metropolitan Railway and refined in Central London Property Trust Ltd v High Trees House Ltd by Lord Denning.
Mandatory Conditions:
An express, clear promise;
Reliance on that promise by the promisee;
An existing legal relationship;
Inequitable for the promisor to resile from the promise;
Used strictly as a shield, not a sword (a defense, not an independent cause of action);
Suspensory effect (suspends rights rather than extinguishing them permanently).
Combe v Combe: Promissory estoppel failed because a wife attempted to use it as a sword to enforce maintenance payments.
Baird Textile Holdings Ltd v Marks & Spencer Plc: Claim failed because promissory estoppel cannot create an independent cause of action.
Intention to Create Legal Relations
General Rule: Parties must intend for legal consequences to attach to their agreement, making it enforceable via external adjudicators such as courts or arbitrators.
Domestic and Social Context:
Rebuttable presumption that parties do not intend to create legal relations.
Balfour v Balfour [1919]: An agreement between spouses for monthly maintenance during separation was unenforceable due to lack of legal intention.
Jones v Padavatton [1969]: A mother's offer to pay maintenance (\n200\n) and purchase a house for her daughter to read for the bar was a family arrangement lacking legal intention.
Coward v MIB [1963]: An agreement to share petrol costs for lifts to work lacked contractual intention.
Rebuttal of Presumption in Domestic Context:
Merritt v Merritt [1970]: A written, signed agreement made between spouses who were separating/divorcing was legally binding.
Darke v Strout [2003]: Formal correspondence setting out child maintenance post-breakdown displayed legal intention.
Soulsbury v Soulsbury [2007]: An agreement between former spouses to forgo maintenance in exchange for a bequest in a will demonstrated legal intention.
Simpkins v Pays [1955]: A joint competition entry between three co-habitees exhibited contractual intention.
Wilson v Burnett [2007]: An informal agreement between friends to split bingo winnings lacked legal intention.
Commercial Context:
Rebuttable presumption that parties intend to create legal relations (Athena Brands v Superdrug Stores [2019] – email exchanges committing to minimum cosmetics purchases were binding).
Rebuttal of Presumption in Commercial Context:
"Mere puff": Statements not intended to be taken seriously (Weeks v Tybald – promising \n\pounds 100\n to anyone who married his daughter).
Honour clauses: Express clauses declaring the agreement non-binding in law (Rose and Frank Company v JR Crompton and Brothers Ltd [1925]).
Capacity
General Rule: Every natural person possesses capacity to contract, except minors and individuals suffering from mental disability or severe intoxication.
Minors (Under \n18\n Years of Age):
Contracts entered into by minors are generally voidable at the minor's option (can be repudiated before reaching \n18\n or within a reasonable time thereafter under the Minors' Contracts Act 1987).
Two Categories of Binding Minor Contracts:
Contracts for Necessaries:
Defined by s.3(3) of the Sale of Goods Act 1979 as goods suitable to the condition in life of the minor and to their actual requirements at the time of sale and delivery (Peters v Fleming [1840]).
Minor is liable to pay a reasonable price, not the contract price.
Hands v Slaney [1800]: A servant's uniform was a necessary for a minor from a wealthy background.
Nash v Inman [1908]: Purchase of fancy waistcoats was not necessary as the minor already possessed adequate clothing.
Chapple v Cooper [1844]: Funeral services contracted by a minor widow for her deceased husband were necessaries.
Contracts for Services:
Employment, apprenticeship, training, or professional engagement contracts are binding if they are beneficial to the minor overall.
Doyle v White City Stadium [1935]: A professional boxing contract was binding because it was beneficial overall.
DeFrancesco v Barnum [1890]: A \n14\n-year-old's dance apprenticeship contract banning external employment and marriage without guaranteed pay was overall detrimental and non-binding.
Proform Sports Management Ltd v Proactive Sports Management Ltd [2006]: A player representation contract for \n15\n-year-old Wayne Rooney was voidable; it was not a contract for necessaries, education, or apprenticeship.
Chaplin v Leslie Frewin [1966]: A contract authorizing the publication of a minor's memoirs was overall beneficial and binding.
Restitutionary Remedies:
Section 3 of the Minors' Contracts Act 1987 permits courts to order restitution of property.
Leslie v Sheill [1914]: If a minor fraudulently misrepresents their age to obtain property, equitable restitution applies only if the property remains traceable in the minor's possession.
Terms of a Contract
Definition: Duties and obligations assumed by contracting parties.
Express Terms vs. Representations:
Distinguishing factors applied by courts to determine if an oral statement is a term or representation:
Importance of the statement to the parties (Bannerman v White);
Specialist knowledge or expertise of the declarant (Dick Bentley v Harold Smith vs Oscar Chess v Williams);
Direct assumption of responsibility for the statement's accuracy (Schawel v Reade);
Overall intention of the parties (Heilbut v Buckleton).
Parol Evidence Rule:
Prevents the admission of extrinsic evidence to add to, vary, or contradict a fully integrated written agreement (Jacobs v Batavia).
Exceptions:
To show the document was not intended to express the entire agreement (Allen v Pink);
To prove implied terms (Gillespie Bros);
To prove invalidity due to mistake, misrepresentation, or fraud;
To show the contract has not come into existence or has ceased operating (Pym v Campbell);
To clarify the legal capacity of a signatory (principal vs. agent).
Implied Terms:
Trade Usage: Practices prevailing in an industry are implied into agreements.
Nature of Relationship: Implied based on necessity in specific relationships (Johnston – duty not to overwork staff in employment contracts).
Officious Bystander / Business Efficacy: Implying terms obvious to an bystander to make the contract workable (Moorcock – duty to check safety of riverbed). Unusable where extensive written contracts exist (Marks and Spencer).
Statute: Implied automatically by legislation (e.g., Sale of Goods Act for B2B; Consumer Rights Act 2015 for B2C).
Classification of Terms:
Conditions: Essential terms going to the root of the contract. Defined by statute, parties, or judicial interpretation. Breach permits contract termination and damages without proving loss (Re Moure; Acros – minor specification discrepancies in timber justified termination under statutory description conditions).
Warranties: Trivial terms. Breach permits damages only; no right of termination.
Innominate Terms: Developed in Hong Kong Fir. Terms capable of being breached with varying severity. If a breach deprives the innocent party of substantially the whole benefit, it is treated as a condition; otherwise, as a warranty.
Schuler v Wickman: A term requiring weekly visits over \n5\n years was relabeled as an innominate term due to the unreasonableness of treating minor breaches as total repudiation.
Reardon Smith: Mislabeling an oil tanker's construction shipyard as 'Osina' instead of 'Osaka' was held to be a minor breach of an innominate term, acting as a warranty.
Bunge Corp: Courts will label terms as innominate only when impossible to classify upfront as conditions or warranties. Time-of-the-essence terms are strictly conditions (Lombard).
Common Law and Statutory Controls on Unfair Terms
Common Law Incorporation Controls:
By Signature: Signed documents incorporate all terms regardless of whether read (L'Estrange v Graucob; Peekay Intermark Ltd).
Exceptions: Oral misrepresentation of a term's meaning overrides signature (Curtis v Chemical Cleaning & Dyeing Co); Defence of Non est factum applies if no negligence occurred and the document's purpose was fundamentally different from believed (Gallie v Lee).
By Reasonable Notice: Unsigned terms require reasonable notice prior to or at contract formation (Parker v South Eastern Railway; Thompson; Thornton v Shoe Lane Parking; Olley v Marlborough Court Hotel). Terms must appear on a contractual document (Chapelton v Barry – exclusion on a deckchair receipt was invalid as a receipt is mere proof of payment). Onerous clauses require prominent notice ("red hand rule" in J Spurling Ltd v Bradshaw).
By Course of Dealings: Terms from prior dealings are incorporated if dealings were consistent and frequent (Henry Kendall v Williams – \n100\n transactions over \n3\n years; contrast Hollier v Rambler Motors – \n4\n transactions over \n5\n years was insufficient).
Common Law Interpretation Rules:
Contra Proferentem Rule: Ambiguous terms are interpreted against the party relying on them (Houghton v Trafalgar Insurance; Andrew v Singer).
Excluding Negligence: The Morton Test from Canada Steamship required explicit reference to negligence or broad wording. Modern application evaluates clause construction and party intent (HIH Casualty and General Insurance v Chase Manhattan Bank; Photo Production v Securicor). Broad wording fails if overly wide (Shell Case; White v John Warwick). Limitation clauses face less strict scrutiny than exclusion clauses (Ailsa Craig Fishing v Malvern).
Unfair Contract Terms Act 1977 (UCTA):
Applies strictly to B2B contracts made in the course of business.
s.2(1): Clauses excluding liability for death or personal injury resulting from negligence are completely VOID.
s.2(2): Clauses excluding liability for other negligent loss or damage are subject to the test of reasonableness.
s.3: Exclusion of liability for contractual breach on standard business terms must pass the test of reasonableness.
s.6: Exclusion of statutory implied terms under Sale of Goods Act must pass the test of reasonableness.
s.9: Exclusion of liability for misrepresentation must pass the test of reasonableness.
s.11 & Schedule 2: Defines reasonableness at contract formation, considering resources, insurance, bargaining power, inducements, and custom goods (Granville Oil and Chemicals v Davis Turner).
Case Law Applications: Photo Production v Securicor (valid exclusion); Thompson v T Lohan (void under s.2(1)); Watford Electronics (reluctance to disturb freely negotiated terms between experienced business entities); George Mitchell v Finney Lock Seeds (unreasonable seed liability limitation); Phillips v Hyland (unreasonable short-term plant driver exclusion clause).
Consumer Rights Act 2015 (CRA 2015):
Governs Business-to-Consumer (B2C) contracts between a Trader (s.2(1), s.2(7), s.61(1)) and a Consumer (s.2(3)).
s.62(4) Fairness Test: A term is unfair if, contrary to good faith, it causes a significant imbalance in rights and obligations to the consumer's detriment. Assessed at contract conclusion (s.62(5)).
Good Faith Requirement:
Procedural Aspect: Absence of unfair surprise (Aziz v Caixa [2013]; West v Ian Finlay & Associates [2014]; OFT v Ashbourne Management Services Ltd [2011] – gym minimum commitments held unfair; Bryen & Langley Ltd v Boston [2005]).
Substantive Aspect: Significant imbalance in rights (Director General of Fair Trading v First National Bank plc [2001]).
Grey List: Schedule 2 Part 1 contains a non-exhaustive list of presumptively unfair terms.
s.67: Unfair terms are non-binding; the remainder of the contract continues if practicable.
Core terms (price and subject matter) are exempt from fairness review only if transparent and prominent (OFT v Foxtons Ltd [2009]).
ss.9, 10, 11: Terms excluding statutory rights regarding satisfactory quality, fitness for purpose, and description are VOID.
Misrepresentation
Definition: An unambiguous false statement of fact made by one party that induces the other to enter into a binding contract.
Element 1: False Statement of Fact:
Statements made by professionals in their line of business (Esso Petroleum v Mardon).
Statements made by parties in material possession of true facts (Smith v Land & House Property Corp).
Statements of opinion do not constitute misrepresentation (Bisset v Wilkinson).
Statements of mere puff or ambiguous sales talk are non-actionable (Dimmock v Hallett).
Statements of future intention that are not carried out constitute misrepresentation if the declarant lacked intent at the time of making the statement (Edgington v Fitzmaurice).
Conduct can constitute a false representation (Spice Girls Case).
Silence: General rule is caveat emptor (silence is not misrepresentation) (Keates v Cadogan; Smith v Hughes).
Exceptions: Contracts uberrimae fidei (utmost good faith, e.g., insurance/land contracts) (Lambert Case); baseline statement rendered false prior to contract execution due to changed circumstances (With v O'Flanagan; Spice Girls Case).
Element 2: Inducement:
The false statement must be a real and substantial factor inducing entry into the contract (Edgington v Fitzmaurice; Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010]).
Material misrepresentations automatically presume inducement (Museprime v Adhill [1990]); minor misrepresentations require explicit proof of inducement (Dadourian Group International Inc v Simms [2009]).
Inducement is disproved if the defendant demonstrates the claimant would have entered the contract regardless (The Lucy [1983]).
An unexercised opportunity to verify the facts does not defeat inducement (Redgrave v Hurd; Hayward v Zurich Insurance Co plc [2016]).
Statements originating solely from a third party cannot induce the contract (Attwood v Small).
Categories of Misrepresentation:
Fraudulent Misrepresentation: Statement made knowingly, without belief in its truth, or recklessly (Derry v Peek [1889]; Smith New Court Securities). High burden of proof resting on claimant.
Negligent Misrepresentation at Common Law: Requires showing a special relationship, voluntary assumption of responsibility, and reliance (Hedley Byrne v Heller).
Negligent Misrepresentation under Statute: Misrepresentation Act 1967, s.2(1). Reverses the burden of proof, making the representor liable unless they prove reasonable grounds to believe the statement was true. Standard of proof is exceptionally high (Howard Marine v Ogden; Foster Case).
Innocent Misrepresentation: Statement made with honest and reasonable belief in its truth, falling outside the prior categories.
Remedies for Misrepresentation:
Damages:
Fraudulent and Statutory s.2(1) misrepresentations use the tort of deceit measure: recovery of all direct losses flowing from the statement, unconstrained by reasonable foreseeability (Whittington v Seale-Hayne; East v Maurer; Doyle v Olby; Royscott v Rogerson – the "fiction of fraud"). Damages can be awarded in lieu of rescission under s.2(2) (Salt Case).
Innocent misrepresentation uses the contractual measure: damages limited strictly to reasonably foreseeable losses.
Rescission:
Sets aside contract and restores parties to their pre-contract positions.
Bars to Rescission:
Affirmation of contract post-discovery (Long v Lloyd);
Excessive lapse of time (Leaf v International Galleries);
Impossibility of restitutio in integrum (Clarke v Dickson);
Acquisition of rights by an innocent third party (Caldwell Case).
Mistake
General Effect: Operative mistake renders a contract void ab initio (void from the beginning).
Categories of Mistake:
Cross-Purpose Mistake: Parties are at cross-purposes. Void only if an objective bystander cannot determine agreement (Raffles v Wichelhaus – two ships named Peerless).
Common Mistake: Both parties share the same fundamental mistake, destroying consensus:
Mistake as to Existence of Subject Matter (Res Extincta): Policy written on a dead person (Scott v Coulson); Sale of Goods Act 1979 s.6 (Couturier v Hastie). Distinction drawn between guaranteeing subject matter existence versus taking a chance on existence (McRae; Great Peace Shipping).
Mistake as to Ownership (Res Sua): Contract to buy property already legally owned by the purchaser is void (Cooper v Phibbs).
Mistake as to Possibility of Performance:
Physical Impossibility (Sheikh Brothers);
Legal Impossibility (Cooper v Phibbs);
Commercial Impossibility (Griffith).
Mistake as to Quality: Extremely narrow threshold. Valid only if the mistake makes the subject matter radically or essentially different from what it was believed to be (Bell v Lever Bros; Associated Japanese Bank; Great Peace Shipping; contrast Leaf v International Galleries – sale of fake painting was not void as the subject matter remained a painting).
Mistake as to Law: A shared mistake regarding legal provisions can render a contract void (Kleinwort Benson Ltd v Lincoln City Council [1999]).
Unilateral Mistake:
Mistake as to Terms: One party is mistaken regarding contractual terms, and the non-mistaken party knew or reasonably ought to have known of the mistake (Smith v Hughes; Hartog v Colin and Shields [1939] – pricing offered per pound instead of per piece rendered contract void).
Mistake as to Identity:
Inter Absentes (Written/Distance Dealings): Title does not pass to a fraudster using an alias of an existing business; contract is void for mistake (Cundy v Lindsay; Shogun Finance v Hudson). Identity must be material to the contract (Dennant v Skinner [1948]; King's Norton Metal – where no identifiable entity existed, title passed).
Inter Praesentes (Face-to-Face Dealings): Law presumes contract is formed with the physical person present; title passes to the fraudster, making contract voidable rather than void (Lewis v Averay; Phillips v Brooks; contrast Ingram v Little).
Mistake in Equity:
Lord Denning created equitable mistake in Solle v Butcher and Grist v Bailey to render contracts voidable on equitable terms.
Fully overruled by the Court of Appeal in Great Peace Shipping and confirmed as overruled by the Supreme Court in Pitt v Holt.
Frustration
Doctrine Development: Historically, contractual duties were absolute (Paradine v Jane). Doctrine relaxed in Taylor v Caldwell. A contract is discharged for frustration if an unforeseen post-formation event occurs without fault of either party, rendering performance impossible, illegal, or radically different (National Carriers Ltd; CTI Group Inc). Courts apply a multifactorial approach (The Sea Angel [2007]).
Recognized Frustrating Events:
Destruction of subject matter (Taylor v Caldwell – hall burned down; Asfar – cargo contamination);
Personal incapacity in personal contracts (Condor v The Barron Knights);
Non-occurrence of a foundational event (Krell v Henry; contrast Herne Bay Steamboat Co v Hutton – where main purpose was not destroyed);
Supervening illegality or war (Fibrosa; Metropolitan Water Board; The Evia / Firelvet AG);
Government interventions (Gamerco SA – stadium closure; Amalgamated Investment and Property Co – listing building as heritage site);
Novel unforeseen delays (Jackson v Union Marine Insurance).
Barriers to Frustration:
Performance merely becoming more difficult or expensive (Davis Contractors Ltd – \n70\n houses taking \n20\n months instead of \n8\n months; Tsakiroglou / Noblee);
Foreseen events or express Force Majeure clauses covering the event (Jackson; Gold Group);
Self-induced frustration (Maritime National Fish).
Remedies for Frustration:
Common Law: Automatic termination. Payments returned only upon total failure of consideration (Chandler v Webster; Fibrosa; Hirji Mulji; The Super Servant Two).
Statutory Framework (Law Reform (Frustrated Contracts) Act 1943):
s.1(2): All money paid prior to frustration is recoverable; money payable ceases to be payable. Courts retain discretion to allow retention of expenses incurred (Gamerco SA).
s.1(3): Compensation recoverable for valuable non-monetary benefits conferred prior to the frustrating event (BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979]).
Anticipatory Breach
Definition: Occurs when a party demonstrates a clear, absolute refusal (express or implied by conduct) to perform contractual obligations before performance becomes due (Universal Cargo Carriers Corp v Citati (1957)).
Rights of Innocent Party:
Entitled to immediately terminate the contract and sue for damages without waiting for the due date of performance (Hochster v De la Tour (1853)).
Refusal evaluated under an objective test: whether a reasonable man would conclude the party did not intend to fulfill their contractual obligations.
Election and Affirmation:
Innocent party can elect to terminate or affirm the contract and proceed with performance (White and Carter (Councils) Ltd v McGregor (1962)).
Limits on Right to Affirm:
Performance requires cooperation of the breaching party (Hounslow LBC v Twickenham Garden Developments Ltd (1971));
Innocent party lacks a legitimate interest in performance, rendering affirmation "wholly unreasonable" or "perverse" (The Odenfield (1978); The Alaskan Trader (1984); The Aquafaith (2012)).
Risk of Affirmation: If affirmed, the contract remains alive and risks subsequent discharge via supervening frustration (Avery v Bowden (1855)).
Damages Calculation: Governed by the contractual measure limiting recovery to reasonably foreseeable losses (Hadley v Baxendale).
Chapter 2: Offer and Acceptance
Carlill v Carbolic Smoke Ball Co
Defendants advertised a reward for using their product and catching influenza. Court held this was a unilateral offer; acceptance occurred through performance, establishing a binding contract.
Errington v Errington
A father promised his children ownership after paying the mortgage. Widow tried to revoke this. Court held once performance begins, revocation is not allowed.
Lefkowitz v Great Minneapolis Surplus Store
Store advertised items on a first-come basis but refused sale. Court found it was a unilateral offer; acceptance occurred by performance.
Storer v Manchester City Council
Council's letter to sell a house was deemed an offer when signed by Storer. Court held a binding contract existed upon return of the signed agreement.
Gibson v Manchester City Council
Council's letter inviting an application was held as an invitation to treat, thus no contract was formed.
Partridge v Crittenden
Advertisement for sale was held as an invitation to treat, not a contractual offer, no offense occurred.
Fisher v Bell
Court found that shop window displays are invitations to treat; customers make the offers at the till.
Pharmaceutical Society v Boots
Goods displayed are ITTs; the offer is made at the cash register.
Harris v Nickerson
Auction advertisement was an ITT; no obligation to sell was created.
Barry v Davies
In specific circumstances at auctions where there is a no-reserve condition, a unilateral contract arises to honor the highest bid.
Ramsgate Victoria Hotel v Montefiore
Delay in acceptance of shares caused the offer to lapse due to unreasonable time.
Stevenson v McLean
An inquiry for delivery terms did not nullify the offer, which remained viable.
Hyde v Wrench
Original offer was terminated by counter-offer.
Chapter 3: Consideration and Promissory Estoppel
Currie v Misa
Defined consideration as a benefit to one party or a detriment to another, essential for enforceability.
Thomas v Thomas
A nominal rent was held sufficient consideration as adequacy isn't required as long as legal value exists.
Chappell & Co v Nestlé
Wrappers were sufficient consideration as part of a promotional deal despite little economic value.
Re McArdle
Past improvements made were not valid consideration because they predated any promise of payment.
Pao On v Lau Yiu Long
Conditions for recognizing past acts as valid consideration were established.
Collins v Godefroy
Attendance as a witness was not valid consideration since it was an existing legal duty.
Glasbrook Bros v Glamorgan CC
Extra police service beyond normal duty constituted valid consideration.
Williams v Roffey Bros
An agreement for extra payment to ensure timely project completion constituted valid consideration based on practical benefits.
Hughes v Metropolitan Railway
Promissory estoppel arose where a party led another to believe rights would not be enforced, establishing reliance on such expectation.
Chapter 4: Intention, Certainty and Completeness
Balfour v Balfour
Domestic agreements are presumed not to have legal intent.
Merritt v Merritt
Written agreements post-separation rebut the presumption of non-intent.
Jones v Padavatton
Family arrangements are often non-binding unless formal agreements indicate otherwise.
Edmonds v Lawson
Intention to create legal relations is typically strong in professional agreements.
Esso Petroleum v CCE
Commercial offers carry intention to create legal relations even in promotional contexts.
Chapter 5: Terms of the Contract
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd
Seller's false statement about the car was a term due to reliance and expertise.
Oscar Chess Ltd v Williams
Seller's misrepresentation was held as a mere representation due to lack of expertise.
Schawel v Reade
Assurances about a horse's condition were deemed terms, inducing reliance.
Jacobs v Batavia & General Plantations Trust Ltd
Rules on parol evidence established that written contracts are final unless misrepresented.
Liverpool City Council v Irwin
Implied duties are inherent in property relationships, showcasing legal expectations.
Chapter 6: Regulation of Terms of Contract (Unfair Terms)
L’Estrange v F Graucob Ltd
Signature binds parties regardless of knowledge; exceptions exist for misrepresentation.
Curtis v Chemical Cleaning & Dyeing Co
Misleading information invalidated an exclusion clause as it was not incorporated based on misrepresentation.
George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd
Imposed unreasonable limitations on liability indicate judicial reluctance to interfere with commercial agreements.
Director General of Fair Trading v First National Bank
Lack of good faith in pricing structures reflects substantial imbalance, reinforcing consumer protection provisions.