Authorities Flashcards

Question 1

Q

Invitation to Treat

Answer

A

Falls short of the definition of an offer. A statement of preliminary stages: for example, to enter into negotiations

Question 2

Q

Offer

Answer

A

The definite promise to be bound by specific terms

Question 3

Q

Acceptance

Answer

A

An unqualified expression of assent to the terms of an offer

Question 4

Q

Agreement and Intention > Steps

Answer

A

Is there a contract?
Show whether there is intention to create legal relations
If there is intention to create legal relations states that the issue concerns agreement (repeat for each scenario in the question)
Conclude

Question 5

Q

Consideration

Answer

A

“price for a promise”, and justify using the facts why this is satisfied

Question 6

Q

Agreement and Intention > Step 1

Answer

A

Which party is alleging a contract?
State the three elements of a contract:
a. Agreement (offer and acceptance);
b. Intention to create legal relations; and,
c. Consideration
Show briefly that consideration is satisfied

Question 7

Q

Agreement and Intention > Step 2: Show whether there is intention to create legal relations

Answer

A

Assessment of parties’ intention in making an offer is objective
Commercial agreements
a. Presumption that there was intention to create legal relations
b. This is rebuttable, if there is specific wording to that effect
Non-Commercial/family agreements
a. Presumption that there was no intention to create legal relations
b. This is rebuttable

Question 8

Q

Agreement and Intention > 2. Intention > Smith v Hughes

Answer

A

Assessment of parties’ intention in making an offer is objective

Question 9

Q

Agreement and Intention > 2. Intention > 1. Assessment of parties’ intention in making an offer is objective

Answer

A

Smith v Hughes

Question 10

Q

Agreement and Intention > 2. Intention > Edwards v Skyways

Answer

A

Commercial agreements

a. Presumption that there was intention to create legal relations

Question 11

Q

Agreement and Intention > 2. Intention >

Presumption with commercial agreements that there was intention to create legal relations

Answer

A

Edwards v Skyways

Question 12

Q

Agreement and Intention > 2. Intention > Rose and Frank Co v Crompton Bros

Answer

A

Commercial agreements

b. This is rebuttable, if there is specific wording to that effect

Question 13

Q

Agreement and Intention > 2. Intention > The presumption of commercial agreements is rebuttable, if there is specific wording to that effect

Answer

A

Rose and Frank Co v Crompton Bros

Question 14

Q

Agreement and Intention > 2. Intention > Balfour v Balfour

Answer

A

Non-Commercial/family agreements

a. Presumption that there was no intention to create legal relations

Question 15

Q

Agreement and Intention > 2. Intention > Presumption with Non-Commercial/ family agreements that there was no intention to create legal relations

Answer

A

Balfour v Balfour

Question 16

Q

Agreement and Intention > 2. Intention > Merritt v Merritt

Answer

A

Non-Commercial/family agreements

b. This is rebuttable

Question 17

Q

Agreement and Intention > 2. Intention > Presumption with Non-Commercial/ family agreements is rebuttable

Answer

A

Merritt v Merritt

Question 18

Q

Agreement and Intention > Step 3: If there is intention to create legal relations states that the issue concerns agreement (repeat for each scenario in the question)

Answer

A

State: there is agreement if there is valid offer and acceptance
Is there an offer?
Is there acceptance

Question 19

Q

Agreement and Intention > 3. Issues concerning agreement > Valid offer and Acceptance > Scammel v Ouston

Answer

A

There must be CERTAINTY in offer and acceptance, or court may not uphold contract

Question 20

Q

Agreement and Intention > 3. Issues concerning agreement > Valid offer and Acceptance > There must be CERTAINTY in offer and acceptance, or court may not uphold contract

Answer

A

Scammel v Ouston

Question 21

Q

Agreement and Intention > 3. Issues concerning agreement > Valid offer and Acceptance > Hillas v Arcas

Answer

A

For example, ‘timber of fair specification’ was too vague

Question 22

Q

Agreement and Intention > 3. Issues concerning agreement > Valid offer and Acceptance > For example, ‘timber of fair specification’ was too vague

Answer

A

Hillas v Arcas

Question 23

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Steps

Answer

A

a) Define offer
b) Distinguish it from an INVITATION TO TREAT
c) Rules for auctions

Question 24

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Treital, The Law of Contract. Confirmed in: Allied Marine Transport v Vale do Rio Doce Navegacao SA (The Leonidas)

Answer

A

a) Define ‘offer’ – ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person whom it is addressed.

Question 25

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > a) Define ‘offer’ – ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person whom it is addressed.

Answer

A

Treital, The Law of Contract. Confirmed in: Allied Marine Transport v Vale do Rio Doce Navegacao SA (The Leonidas)

Question 26

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > b) Distinguish it from an INVITATION TO TREAT

Answer

A

An offer is different to an invitation to treat, which is made without intention to be bound by specific terms,

Question 27

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Pharmaceutical Society of Great Britain v Boots Cash Chemists

Answer

A

Example of an invitation to treat: Self Service display in a shop

Question 28

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Example of an invitation to treat: Self Service display in a shop

Answer

A

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Question 29

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Fisher v Bell

Answer

A

Example of an invitation to treat: Goods on display

Question 30

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Example of an invitation to treat: Goods on display

Answer

A

Fisher v Bell

Question 31

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Spencer v Harding;
Blackpool & Fyde Aero Club ltd. v Blackpool Borough Council

Answer

A

• Tenders,
o unless it is a unilateral contract, in which case it will be am offer (Harvela Investments Ltd v Royal Trust Company of Canada Ltd)

Question 32

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Example of an invitation to treat: Tenders

Answer

A

Spencer v Harding;

Blackpool & Fyde Aero Club ltd. v Blackpool Borough Council

Question 33

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Example of an invitation to treat: Tenders, unless unilateral contract, in which case it will be an offer.

Answer

A

Harvela Investments Ltd v Royal Trust Company of Canada Ltd

Question 34

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Harvela Investments Ltd v Royal Trust Company of Canada Ltd

Answer

A

Example of an invitation to treat: Tenders, unless unilateral contract, in which case it will be an offer.

Question 35

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Partridge v Crittenden

Answer

A

Advertisements were an invitation to treat

Question 36

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Advertisements were an invitation to treat

Answer

A

Partridge v Crittenden

Question 37

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Williams v Cawardine

Answer

A

Advertisements are invitations to treat unless offering a reward

Question 38

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Advertisements are invitations to treat unless offering a reward

Answer

A

Williams v Cawardine

Question 39

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Carlil v Carbollic Smoke Company

Answer

A

Advertisements are invitations to treat unless Unilateral contract, in which case acceptance need not be communicated

Question 40

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Is there an offer? > Advertisements are invitations to treat unless Unilateral contract, in which case acceptance need not be communicated

Answer

A

Carlil v Carbollic Smoke Company

Question 41

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Auction Rules > s.57 Sale of Goods Act

Answer

A

With reserve price. (Contract between the seller and the bidder once the auctioneer (as agent) completes the sale; i.e. with the fall of the hammer

Question 42

Q

Agreement and Intention > 3. Issues concerning agreement > 2. Auction Rules > With reserve price. (Contract between the seller and the bidder once the auctioneer (as agent) completes the sale; i.e. with the fall of the hammer

Answer

A

s.57 Sale of Goods Act

Question 43

Q

Agreement and Intention > 2. Issues concerning agreement > 3. Auction Rules > Barry v Davies

Answer

A

Without Reserve Price – unilateral contract between auctioneer and bidder that the auctioneer will accept the highest bid; if he doesn’t, the highest bidder can sue for damages

Question 44

Q

Agreement and Intention > 2. Issues concerning agreement > 3. Auction Rules > Without Reserve Price – unilateral contract between auctioneer and bidder that the auctioneer will accept the highest bid; if he doesn’t, the highest bidder can sue for damages

Answer

A

Barry v Davies

Question 45

Q

Agreement and Intention > 3. Is there acceptance? > Steps

Answer

A

a) Define acceptance: ‘an unconditional expression of assent to the terms of the offer
b) Acceptance must be communicated: GENERAL RULE – acceptance should be communicated and should be by offeree or authorised agent
c) Acceptance or counteroffer?
d) Battle of the forms
e) Postal Rule exemption
f) Has the offer been revoked before it was accepted?
g) Has the offer lapsed?

Question 46

Q

Agreement and Intention > 3. Is there acceptance? > Define Acceptance

Answer

A

an unconditional expression of assent to the terms of the offer

Question 47

Q

Agreement and Intention > 3. Is there acceptance? > Acceptance General Rule

Answer

A

a) Acceptance must be communicated: GENERAL RULE – acceptance should be communicated and should be by:
o Offeree (Entores); or
o Authorised Agent (Powell v Lee)

Question 48

Q

Agreement and Intention > 3. Is there acceptance? > acceptance should be communicated and should be by offeree

Answer

A

Entores v Miles Far East Corp Ltd;

Question 49

Q

Agreement and Intention > 3. Is there acceptance? > acceptance should be communicated and should be by [offeree or] authorised agent

Answer

A

Powell v Lee

Question 50

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > Carlil v Carbollic Smoke Ball Co

Answer

A

There is a unilateral contract

Question 51

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > There is a unilateral contract

Answer

A

Carlil v Carbollic Smoke Ball Co

Question 52

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > Felthouse v Bindley

Answer

A

The contract states that silence constitutes acceptance – silence CANNOT constitute acceptance

Question 53

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > The contract states that silence constitutes acceptance – silence CANNOT constitute acceptance

Answer

A

Felthouse v Bindley

Question 54

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > Re Selectmove

Answer

A

Silence cannot constitute acceptance UNLESS there is no reason for offeree not to bind themselves

Question 55

Q

Agreement and Intention > 3. Is there acceptance? > Exceptions > Silence cannot constitute acceptance UNLESS there is no reason for offeree not to bind themselves

Answer

A

Re Selectmove

Question 56

Q

Agreement and Intention > 3. Acceptance or Counteroffer? > Hyde v Wrench

Answer

A

GENERAL RULE: a counteroffer, i.e. a new provision entered, is implied rejection

Question 57

Q

Agreement and Intention > 3. Acceptance or Counteroffer? > GENERAL RULE: a counteroffer, i.e. a new provision entered, is implied rejection

Answer

A

Hyde v Wrench

Question 58

Q

Agreement and Intention > 3. Acceptance or Counteroffer? > Stevenson Jacques & Co v McLean

Answer

A

QUALIFICATION: questions about an offer are not deemed as rejecting it, and may still be acceptance if it falls within definition
o If the offeree responds to the offer by making an enquiry, this will not be acceptance, but neither will it be a counteroffer. It will be a request for further information, which does not destroy the original offer.

Question 59

Q

Agreement and Intention > 3. Acceptance or Counteroffer? > QUALIFICATION: questions about an offer are not deemed as rejecting it, and may still be acceptance if it falls within definition
o If the offeree responds to the offer by making an enquiry, this will not be acceptance, but neither will it be a counteroffer. It will be a request for further information, which does not destroy the original offer.

Answer

A

Stevenson Jacques & Co v McLean

Question 60

Q

Agreement and Intention > 3. Acceptance? > Battle of the forms > Brogden v Metropolitan Railway Co.

Answer

A

Following an exchange of incompatible terms by the parties, performance of the contract (e.g. delivery of the product) might be taken to be acceptance of the ‘last shot’.

Question 61

Q

Agreement and Intention > 3. Acceptance? > Battle of the forms > Following an exchange of incompatible terms by the parties, performance of the contract (e.g. delivery of the product) might be taken to be acceptance of the ‘last shot’.

Answer

A

Brogden v Metropolitan Railway Co.

Question 62

Q

Agreement and Intention > 3. Acceptance? > Battle of the forms > Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation

Answer

A

Not a true battle of forms, but an exchange of incompatible
• Offer
o Claimant makes an offer to the defendant
o Offer contains clause that claimant’s terms prevail over the defendants
• Counteroffer
o Defendant sent ‘acceptance’ to the claimant
o ‘Acceptance’ amended one of the claimant’s terms
• Acceptance
o Claimant signed and returned the defendant’s ‘acceptance’ to the defendant
o ‘Acceptance’ provided the defendant’s terms prevail
The claimant argued that the defendant accepted the original offer and tried to rely on the original terms. However, the court found that the defendant’s acceptance amounted to a counteroffer that was accepted by the claimant. Therefore, the defendant’s terms prevailed.

Question 63

Q

Agreement and Intention > 3. Acceptance? > Postal Rule Exemption > Adams v Lindsell

Answer

A

A Letter of acceptance will become binding when posted if:
o It was reasonable to use post as a method of communication
o It was properly posted
o The offeror did not exclude the postal rule impliedly/expressly

Question 64

Q

Agreement and Intention > 3. Acceptance? > Postal Rule Exemption >
A Letter of acceptance will become binding when posted if:
o It was reasonable to use post as a method of communication
o It was properly posted
o The offeror did not exclude the postal rule impliedly/expressly

Answer

A

Adams v Lindsell

Answer 65

A

If all the above are satisfied, the letter need not actually arrive for acceptance to be valid

Answer 66

A

Household Fire and Carriage Accident Insurance v Grant

Answer 67

A

N.B. There is no authority on whether an acceptance can be retracted once posted

Answer 68

A

Countess of Dunmore v Alexander

Answer 69

A

1: When can the offer be revoked?
2: How must the offer be revoked?

Answer 70

A

GENERAL RULE: an offer can be revoked at anytime, even if the offeror has agreed to leave it open.

Answer 71

A

Routledge v Grant

Answer 72

A

Exception to the revocation rule (an offer can be revoked at anytime)
• The offeror cannot revoke the offer if the offeree has given consideration for the offeror keeping the offer open

Answer 73

A

Mountford v Scott

Answer 74

A

Exception to the revocation rule (an offer can be revoked at anytime)
• If it is a unilateral contract, revocation is not possible once the act of acceptance has begun

Answer 75

A

Errington v Errington & Woods

Answer 76

A

Revocation must be communicated

Answer 77

A

Revocation must be communicated:

• By offeror; [or by reliable third party]

Answer 78

A

Byrne v Van Tiernhoven

Answer 79

A

Revocation must be communicated:
[• By offeror; or]
• By reliable third party

Answer 80

A

Dickinson v Dodds

Answer 81

A

• By offeror (Byrne v Van Tiernhoven)
or
• By reliable third party (Dickinson v Dodds)

Answer 82

A

If the revocation was received, but not read, and it could reasonably be assumed that staff should be at work it will be deemed to have been communicated effectively

Answer 83

A

The Brimnes

Answer 84

A

If the offer was made to the public at large, revocation can be made through the same channel as the offer provided it has the same prominence.

Answer 85

A

Shuey v United Stated (N.B. US Law)

Answer 86

A

An example of the postal rule of acceptance vs. the revocation rule in action:
Where the revocation of an offer posted at 12 noon did not reach the offeree until 5pm. However, since the offeree posted the acceptance at 3:50pm there was a binding contract from that time. This revocation must have been communicated in order for it to be effective.

Answer 87

A

Henthorn v Fraser

Answer 88

A

Offer will Lapse if there is an express condition; or in all other cases, the offer will lapse after a reasonable time period – what is reasonable depends on the facts.

Answer 89

A

Is there a contract?
Define consideration
Identify the consideration and problems (if any). Explain rules, exceptions and cases. Apply to facts.
Has there been any variation of terms? Is the variation agreed, and good consideration offered, or is there a problem? Explain rules/exceptions/cases/apply to the facts.
Conclude

Answer 90

A

Which party is alleging the contract?
State the 3 elements of a contract
i. Agreement (offer and acceptance)
ii. Intention to create legal relations; and,
iii. Consideration
Show briefly that agreement and intention to create legal relations are satisfied; the issue concerns consideration

Answer 91

A

The price you pay for another’s promise

Answer 92

A

Consideration is, in short, reciprocity. For example, the defendant promises something to the claimant. The promise is not reciprocal unless the claimant has given or promised something in exchange for the defendants promise. That ‘something’ is consideration, and without it a contract is unenforceable.

Answer 93

A

Consideration need not be adequate, but must be sufficient
Consideration must have some economic value
Is forbearance, i.e. not doing something, good consideration?

Answer 94

A

Consideration need not be adequate, but must be sufficient

Answer 95

A

Chappell & Co. Ltd v Nestle Co Ltd

Answer 96

A

Consideration must have some economic value

Answer 97

A

Thomas v Thomas

Answer 98

A

Is forbearance, i.e. not doing something, good consideration?
• GENERAL RULE: no, due to public policy issues (floodgate argument)

Answer 99

A

White v Bluett

Answer 100

A

Is forbearance, i.e. not doing something, good consideration?
• POSSIBLE EXCEPTION: If it involves giving up ones legal rights

Answer 101

A

Hamer v Sidway (N.B. US Law)

Answer 102

A

Is past consideration good consideration?
Is A’s performance of his existing contractual duties good consideration in exchange for a promise from B to pay more?
Is A’s performance of his existing contractual duties to a third party good consideration?
Is the performance of ones public/legal duties good consideration?
Is the part payment of undisputed debts good consideration for a promise by the creditor to forgo the balance? (promissory estoppel)

Answer 103

A

GENERAL RULE: No

Answer 104

A

Roscorla v Thomas

Answer 105

A

GENERAL RULE: No
EXCEPTION: yes, if all three of the following conditions are satisfied:
a. The act was carried out at the promisor’s request (Lampleigh v Brathwait)
b. The parties understood from the beginning that the act was to be rewarded in some way (Re Casey’s Patents, Stewart v Casey); and
c. All other requirements of a contract exist

Answer 106

A

Lampleigh v Brathwait

Answer 107

A

Exception: a. The act was carried out at the promisor’s request

Answer 108

A

Exception: b. The parties understood from the beginning that the act was to be rewarded in some way;

Answer 109

A

Re Casey’s Patents, Stewart v Casey

Answer 110

A

GENERAL RULE: No

Answer 111

A

Stilk v Myrick

Answer 112

A

EXCEPTION 1: Yes, if A exceeds his duties in some way, or confers extra benefit on B. However, this is a question of fact and degree; and public policy.

Answer 113

A

Hartley v Ponsonby

Answer 114

A

EXCEPTION 2: Yes, provided that all the following criteria, the (‘Glidewell Principles’) are satisfied:

a. There is a contract for goods/services in return for payment;
b. B doubts whether A will complete his obligations
c. B promises additional payment if A completes his obligation on time
d. As a result of giving this promise, B obtains a practical benefit or obviates a disbenefit; and
e. B’s promise to pay extra is not given as a result of economic duress or fraud on the part of A (in which case the variation will be set aside)

Answer 115

A

Williams v Roffey Bros

Answer 116

A

YES: a promise to do something can amount to consideration even if the promisor is already bound to perform this obligation

Answer 117

A

Scotson v Pegg

Answer 118

A

GENERAL RULE: No

Answer 119

A

Collins v Godfrey

Answer 120

A

EXCEPTION – yes, if:

• Not contrary to public policy

Answer 121

A

Williams v Williams

Answer 122

A

EXCEPTION – yes, if:

• Public duty is exceeded

Answer 123

A

Glasbrook Bros Ltd v Glamorgan County Council

Answer 124

A

GENERAL RULE: No

Answer 125

A

Foakes v Beer

Answer 126

A

EXCEPTION 1: part payment is good consideration if the debtor:
• Gives something different; or
• Pays early

Answer 127

A

Pinnel’s Case

Answer 128

A

EXCEPTION 2: Promissory Estoppel

Answer 129

A

High Trees House Ltd

Answer 130

A

Define promissory estoppel
When will promissory estoppel apply?
Effect of promissory estoppel

Answer 131

A

Where a promisor has, by words or conduct, made a promise to the other party (the promisee) to forgo the legal right. Once the promisee has acted on this promise he will have a good defence to any claim brought by the promisor which is inconsistent with the promise.

Answer 132

A

Promissory Estoppel will apply if all the following conditions are fulfilled:
P.R.I.D.E
Promise
Reliance
Inequitable
Defence
Effect

Answer 133

A

PROMISE: there must be a promise to waive a legal right, which must be intended to be acted upon by the other party.

Answer 134

A

Hughes v Metropolitan Railway Company

Answer 135

A

RELIANCE: The promisee must act upon the promise, but he need not have acted to his detriment, only have altered his behaviour.

Answer 136

A

Emanual Ajayi v RT Briscoe (Nigeria) Ltd

Answer 137

A

INEQUITABLE: It must be inequitable/unjust for the promisor to go back on his promise and insist full legal rights.

Answer 138

A

D&C Builders v Rees

Answer 139

A

DEFENCE: promissory estoppel will not give rise to a cause of action – it is a shield not a sword.

Answer 140

A

Combe v Combe

Answer 141

A

EFFECT: The effect is to extinguish or suspend legal rights

Answer 142

A

Usually operates to suspend promisor’s legal rights. In such cases the promisor may resume these rights by giving the promisee reasonable notice.

Answer 143

A

Tool Metal Manufacturing Co v Tungsten Electric Co Ltd

Answer 144

A

In cases where the promisee cannot resume his original position, promissory estoppel may operate to permanently extinguish the promisor’s legal rights

Answer 145

A

Emanual Ajayi v RT Briscoe (Nigeria) Ltd

Answer 146

A

Effects in one-off debts is uncertain. May possibly operate to waive payment

Answer 147

A

D&C Builders v Rees

Answer 148

A

N.B. The rule in Williams and Roffey cannot be extended to cases involving the part-payment of undisputed debts (Re Selectmove). This was challenged by the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising, where the creditor was said to have obtained a practical benefit beyond simply accommodating the debtor and not having to enforce the debt (the commercial benefit of its tenant remaining in occupation of the premises). However, this interpretation was not upheld when the case was appealed in the Supreme Court (as Rock Advertising v MWB), and the Court declined to tackle the issue. It was not relevant to the outcome in that case, and any decision would be likely to involve re-examination of the decision in Foakes v Beer. As Lord Simpson stated, “It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.” This is an area of law that may well evolve with coming cases.

Answer 149

A

N.B. The rule in Williams and Roffey cannot be extended to cases involving the part-payment of undisputed debts (Re Selectmove). This was challenged by the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising, where the creditor was said to have obtained a practical benefit beyond simply accommodating the debtor and not having to enforce the debt (the commercial benefit of its tenant remaining in occupation of the premises). However, this interpretation was not upheld when the case was appealed in the Supreme Court (as Rock Advertising v MWB), and the Court declined to tackle the issue. It was not relevant to the outcome in that case, and any decision would be likely to involve re-examination of the decision in Foakes v Beer. As Lord Simpson stated, “It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.” This is an area of law that may well evolve with coming cases.

Answer 150

A

Step One: Define
Step Two: Apply
Step Three: Effect

Answer 151

A

Agency is the relationship that arises where one person (agent) acts on behalf of another (principal), and has the power to effect the principal’s legal position with regard to a third party.

Answer 152

A

Agency is created in one of two ways:
1. Actual Authority – legal relationship between principal and agent created by express appointment, i.e. consensual agreement to which they alone are the parties; or,
2. Apparent Authority – legal relationship between the principal and the third party created when:
• A representation (words or conduct) is made by the principal to the third party that the agent had authority;
• The representation is relied upon by the third party, believing that the agent had authority; and
• In reliance of the representation, the third party altered their position e.g. by entering the contract.

Answer 153

A

Freeman and Lockyer v Buckhurst Park Properties

Answer 154

A

Where the agent has authority, whether actual or apparent, there is a valid contract between the principal and third party. The agent, ‘drops out’.
Where the agent has no authority, the principal cannot sue or be sued by the third party. However, the third party may sue the agent in:
• The tort of deceit, if the agent knew he had no authority; or
• Breach of an implied warranty of authority

Answer 155

A

If the agent exceeds his authority, then there is no authority

Answer 156

A

Step 1: Who are the parties in the contract?
Step 2: Identify the possible causes of action, i.e. have any express or implied terms been breached?
Step 3: is the exemption clause INCORPORATED into the contract?
Step 4: Does the clause cover the breach and damage alleged (‘construction’)?
Step 5: Consider the Unfair Contract Terms Act 1977
Step 6: The REASONABLENESS TEST (N.B. A lot of emphasis should be put on this section)
Step 7: Consider the Consumer Rights Act 2015 ??
Step 8: Claims against third parties
Step 9: Conclusion and Remedies

Answer 157

A

Express terms: terms specifically agreed by the parties, either orally or in writing
Implied terms- terms may be implied by the courts:
> Based on local customs or trade
> Based on a previous course of dealings between the parties
> Based on presumed intention of the parties; and/or
• Consider the business efficacy test; and
• The officious bystander test
Due to the type of contract

Answer 158

A

Implied terms- terms may be implied by the courts:

1. Based on local customs or trade

Answer 159

A

Hutton v Warren

Answer 160

A

Implied terms- terms may be implied by the courts:

2. Based on a previous course of dealings between the parties

Answer 161

A

Spurling (J) Ltd v Bradshaw

Answer 162

A

• Consider the business efficacy test

Answer 163

A

The Moorcock

Answer 164

A

The officious bystander test

Answer 165

A

Shirlaw v Southern FoundariesLtd

Answer 166

A

Liverpool City Council v Irwin and Another

Answer 167

A

Due to the type of the contract

Answer 168

A

Terms may also be implied by the Sale of Goods Act 1979 (SGA), the Supply of Goods and Services Act 1982 (SGSA), and the Consumer Right Act 2015 (CRA)

Answer 169

A

In the absence of an express term, a reasonable price should be paid

Answer 170

A

Where there is a contract for the sale of goods by description, the goods must correspond with the description
Buyer must reasonably rely on the description
May still apply where the goods have been inspected

Answer 171

A

• Buyer must reasonably rely on the description (s.13 SGA)

Answer 172

A

Harlington and Leinster Enterprises Ltd

Answer 173

A

• May still apply where the goods have been inspected (s.13 SGA)

Answer 174

A

Beale v Taylor

Answer 175

A

The goods are of satisfactory quality (14(2))
The goods are reasonably fit for the purpose that the buyer expressly or by implication makes known to the seller (14(3))
Seller must be in the course of business to a commercial buyer

Answer 176

A

Same as s.13 SGA but applies to the services/goods in service contracts:
• Where there is a contract for the sale of goods by description, the goods must correspond with the description

Answer 177

A

Same as s.14 SGA but applies to the services/goods in service contracts:

The goods are of satisfactory quality (14(2))
The goods are reasonably fit for the purpose that the buyer expressly or by implication makes known to the seller (14(3))
Seller must be in the course of business to a commercial buyer

Answer 178

A

Where the supplier of a service is acting in the course of business, the supplier will carry out the service with reasonable care and skill

Answer 179

A

s.13 SGSA

Answer 180

A

In the absence of an express term, the service will be carried out within a reasonable time.
Will not apply if contract includes time for carrying out service
Only applies if contract is silent on point

Answer 181

A

s.14 SGSA

Answer 182

A

Same as s.8 SGA but applies to the services/goods in service contracts

Answer 183

A

The Goods are of satisfactory quality

Answer 184

A

The goods are fit for purpose

Answer 185

A

The goods are as described

Answer 186

A

Service/work will be carried out with reasonable care and skill

Answer 187

A

Reasonable price will be paid for service/work

Applies only where no price has otherwise been fixed

Answer 188

A

Service/work will be performed in reasonable time

Applies only where no time has been set

Answer 189

A

The exemption clause can be incorporated into the contract in one of three ways:

Signature;
Notice; or
Course of Dealings

Answer 190

A

The clause will be incorporated by signature if:
• The clause is legible and signed by the claimant; and
• The document is a contractual document

Answer 191

A

L’Estrange v Graucob Ltd

Answer 192

A

However if the clause is misrepresented, it will be invalid.

Answer 193

A

Curtis v Chemical Cleaning and Dyeing Co.

Answer 194

A

In the absence of misrepresentation (Curtis v Chemical Cleaning and Dyeing Co.) if signed, the principal is bound by the terms of the contract (L’Estrange)

Answer 195

A

The document containing the clause must be contractual in nature

Answer 196

A

Chapelton v Barry Urban District Council

Answer 197

A

There must be either:
• Actual notice, i.e. the innocent party must know of the clause; or
• Constructive notice, i.e. the party relying on the clause must have taken ‘reasonable steps’ to bring it to the other’s notice.
The person relying on the exemption clause must show that reasonable steps were taken to bring them to the attention of the other party.

Answer 198

A

Parker v South Eastern Railway

Answer 199

A

Factors that determine whether steps were reasonable include:
• Position;
• Prominence; and
• Type of Clause

Answer 200

A

Parker v South Eastern Railway

Answer 201

A

Onerous clauses must be explicitly drawn to the attention of the other party (red hand pointing to it in red ink)

Answer 202

A

Thornton v Shoe Lane Parking Ltd

Answer 203

A

Onerous clause printed on the foot of a delivery note does not amount to reasonable steps to bring to the other’s attention

Answer 204

A

Interfoto

Answer 205

A

The reasonable steps to incorporate the term must occur before the contract is finalised

Answer 206

A

Olley v Marlborough Court Ltd

Answer 207

A

A course of dealings can provide notice, after a contract is finalised.

However, the course of dealings must be consistent in both frequency and terms

Answer 208

A

Spurling (J) Ltd v Bradshaw

Answer 209

A

Three to Four times per month over three years amounted to course of dealings

Answer 210

A

Kendall (Henry) and Sons v Lillico and Sons Ltd

Answer 211

A

Three to Four times in 5 years did not amount to a course of dealings

Answer 212

A

Hollier v Rambler Motors

Answer 213

A

If the signing of the contract is not consistent, i.e. sometimes a signature is included, sometimes it isn’t, the course of dealings is not sufficiently consistent.

Answer 214

A

McCutcheon v MacBrayne

Answer 215

A

Contra proferentem rule
Exemption clause for negligence
Very serious breaches

Answer 216

A

Contra proferentem rule – if the clause is unclear, the courts will interpret it against the party relying on it

Answer 217

A

Houghton v Trafalgar Insurance

Answer 218

A

Exemption clause for negligence
Clause must clearly relate to negligence. This can be either because the clause:
• Expressly exempts liability for negligence; or
• Contain words that are wide enough to exclude liability for negligence, provided that, should the wording cover liability other than negligence, the court doesn’t restrict liability to that other liability.

Answer 219

A

Canada Steamship Lines v The King

Answer 220

A

Very serious breaches – If the exemption is clearly worded, very serious breaches can be covered

Answer 221

A

Photo productions Ltd v Securicor Transport Ltd

Answer 222

A

If the clause applies under common law, you must consider the Unfair Contract Terms Act 1977.

Answer 223

A

Does not apply to exemption clauses if trader –> consumer contract, as these are governed by CRA. If such a contract, move to Step 7.

Answer 224

A

Things done in the course of business, not otherwise

Answer 225

A

s.1(3) UCTA

Answer 226

A

Breach of the SGA

Answer 227

A

s.6 (s.6(1)(a)) UCTA

Answer 228

A

Breach of the SGSA

Answer 229

A

Negligence and negligent breach of contract

Answer 230

A

Breaches of express terms

Answer 231

A

If UCTA applies it either:
• Renders the exemption clause void; or
• Subjects it to the REASONABLENESS TEST

Answer 232

A

Subject to reasonableness

Answer 233

A

Subject to reasonableness (if dealing on standard terms of business)

Answer 234

A

Subject to reasonableness

Answer 235

A

Subject to reasonableness

Answer 236

A

The reasonableness test – it must have been fair and reasonable to include the exemption clause having regard to circumstances that:
• Were known;
• Ought to reasonably have been known; or
• Were within the contemplation of other parties when the contract was made.

Answer 237

A

s.11 UCTA

Answer 238

A

Relative Strength of bargaining position of the parties
Was there an inducement (for example, did the customer have an opportunity to enter a similar contract with someone else, but without the exemption clause?)
Incorporated? Did the customer know/reasonably should have known about the clause?
Was it reasonable to expect that compliance with the clause would have been practicable?

Answer 239

A

The resources that the defendant could expect to be available to him for the purpose of meeting the liability

Answer 240

A

s.11(4) UCTA

Answer 241

A

It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does

Answer 242

A

s.11(5) UCTA

Answer 243

A

In the case of advice:
• Where the parties of equal bargaining power?
• Would it be reasonably practicable to obtain the advice from an alternative source?
• How difficult is the task?
• What are the practical consequences?

Answer 244

A

Smith v Eric Bush

Answer 245

A

For limitation clauses:
• Experienced commercial bodies free to make their own bargain?
• Was there awareness of limitation clause at time of contract?
• Is the type of clause common for the industry in question?
• Does the defendant have ample resources to the liability?
• Given the defendants insurance, is the amount in the limitation clause reasonable? (E.g. where insurance cover is £1m, why limit liability to £10k?)

Answer 246

A

St Albans City and District Council v International Comupters Ltd

Answer 247

A

Standard Industry terms are generally reasonable

Answer 248

A

Schenkers Ltd v Overland Shoes Ltd

Answer 249

A

When deciding whether a clause is reasonable, the clause must be considered as a whole

Answer 250

A

Stewart Gill Ltd v Horatio Myer & Co Ltd

Answer 251

A

If a term has separate parts, their reasonableness should be considered separately

Answer 252

A

Watford Electronics v Sanderson CFL Ltd

Answer 253

A

A clause that excludes liability for misrepresentation, could be read to include exclusion for fraudulent misrepresentation.

Answer 254

A

Thomas Witter v TBP Industries

Answer 255

A

A clause that was so wide that it could potentially exclude liability for death/injury (which is prohibited by UCTA) was void, even though, the actual possibility of death/injury was very small

Answer 256

A

Phillips v Hyland

Answer 257

A

‘the court should not be too ready to focus on remote possibilities,’ when deciding whether a clause fails

Answer 258

A

Skipskredittforeningen v Emperor Navigation

Answer 259

A

In this 2018 case, the Court of Appeal did not strike out the whole of a clause that excluded loss caused to, “property, goods, persons or the like, directly or indirectly resulting from our negligence.” The Court emphasised the fact that the parties were of equal bargaining power and that the party agreeing to the exemption clause was best placed to obtain the relevant insurance.

Answer 260

A

Goodlife Foods v Hall Fire Protection Ltd

Answer 261

A

GENERAL RULE: An exemption clause cannot protect a third party as the privity of the contract rule provides that only a party to a contract can rely on the clause.

Answer 262

A

Alder v Dickinson

Answer 263

A

Contracts (Rights of Third Parties) Act 1999

2. Negligence

Answer 264

A

Contracts (Rights of Third Parties) Act 1999 – a third party can acquire rights if:
• The contract expressly provides that he may acquire a benefit

Answer 265

A

s.1(1)(a)

Answer 266

A

Contracts (Rights of Third Parties) Act 1999 – a third party can acquire rights if:

• The term purports to confer a benefit on him

Answer 267

A

s.1(1)(b)

Answer 268

A

The third party does not have to be specifically named if he falls within an identified class for example employee

Answer 269

A

a third party may claim in the tort of negligence if they can establish duty, breach and causation

Answer 270

A

Can the innocent party recover for the loss/damage they have suffered?
if yes consider the remedies
where the term is a condition, the buyer can terminate or affirm the contract and Sue for damages.

Answer 271

A

are conditions. all other terms are innominate

Answer 272

A

ss.3-4 SGSA, s.14 SGA, ss.9-11 CRA

Answer 273

A

The buyer:
• Is not obliged to perform further contractual duty;
• Can recover the money paid;
• Must return goods; and
• Can sue for damages for any further loss

Answer 274

A

The buyer can:
• keep the goods and
• sue for damages for any loss suffered

Answer 275

A

Under the SGA, the right to terminate is lost if:
• The breach is so slight that it would be unreasonable for him to reject goods or is contrary to the requirement of good faith (s.15) and
• buyer has accepted goods (11(4))
o i.e. retained goods beyond a reasonable time (s.35)

Answer 276

A

Under the SGA, the right to terminate is lost if:
• The breach is so slight that it would be unreasonable for him to reject goods or is contrary to the requirement of good faith and

Answer 277

A

Under the SGA, the right to terminate is lost if:

• buyer has accepted goods

Answer 278

A

s.11(4) SGA

Answer 279

A

Under the SGA, the right to terminate is lost if:
[the buyer has accepted the goods]
o i.e. retained goods beyond a reasonable time

Answer 280

A

Under the CRA consumer cannot repudiate (treat contract as at an end) for breaching sections 9-11 by exercising their right to reject the goods this overrides common law right to terminate for breach of these terms

Answer 281

A

Step One: What’s the problem?
Step Two: How was the contract discharged? Consider (1)doctrine of breach (2)doctrine of complete performance (3)discharge by agreement
Step Three: If there has been a breach of contract; are remedies available?
Step Four: Conclusion. What can the innocent party claim?

Answer 282

A

Identify the type of contract: SGA / SGSA / CRA
Identify the term in dispute. The term will be a condition, warranty or an innominate term:
Identified the monies paid/owed

Answer 283

A

Term going to the root of the contract

Answer 284

A

Less Important Term

Answer 285

A

An Innominate term is ‘neither condition nor warranty.’

Answer 286

A

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

Answer 287

A

Generally, if the effect of a breach of the term deprives the innocent party of the whole benefit of the contract, the term is a condition; if not it is a warranty.

Answer 288

A

To determine whether the term is a condition, warranty or innominate term, the court will take into account:
• Circumstances surrounding the making of a contract
• The contract as a whole; and
• Whether the parties described the term as a condition or warranty (N.B. This can be rebutted)

Answer 289

A

Schuler v Wickman

Answer 290

A

A contract can be discharged by :

1. Doctrine of Breach
2. Doctrine of Complete Performance
3. Discharge by agreement
4. Frustration

Answer 291

A

Can terminate future performances and sue for damages

Answer 292

A

Can sue for damages for loss suffered

Answer 293

A

If the breach deprives the innocent party of substantially the whole benefit of contract, the innocent party can:
• Terminate the contract and sue for damages (Hong Kong Fir Shipping Co); or
• Affirm the contract and sue for damages
… Unless Parliament (e.g. SGA and CRA) or the parties have made their intention to do otherwise, clear.

Answer 294

A

[innominate terms]
If the breach deprives the innocent party of substantially the whole benefit of contract, the innocent party can:
• Terminate the contract and sue for damages

Answer 295

A

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

Answer 296

A

GENERAL RULE: a party only has to perform their obligations when the other party has performed their part of the contract. Performance must be precise and exact.

Answer 297

A

Cutter v Powell

Answer 298

A

Wrongful prevention of performance by the other party
Voluntary acceptance of partial performance by the other party
Substantial performance
Divisible obligations: parties have agreed payments for a distinct part or stage of the work.

Answer 299

A

o Can recover damages including lost profit (Robinson v Harman)
o Quantum Meruit i.e. a reasonable amount for the work done (Planché v Colburn)
o Quantum Valebrant i.e. a reasonable sum for goods supplied

Answer 300

A

Can recover damages including lost profit

Answer 301

A

Robinson v Harman

Answer 302

A

Quantum Meruit i.e. a reasonable amount for the work done

Answer 303

A

Planché v Colburn

Answer 304

A

Sumpter v Hedges

Answer 305

A

• Voluntary acceptance of partial performance by the other party
o The defendant must have the option to take or not take the work done
o Can claim Quantum Meruit i.e. a reasonable amount for the work done (Planché v Colburn)

Answer 306

A

• Substantial performance
o Work is finished but defective
o Consider the nature and extent of the defects
(Hoenig v Isaacs and Bolton v Mahadeva)

Answer 307

A

Where the defects are slight, contract will be substantially performed (remedy will be cost of cure); consider the cost of cure in relation to the overall cost.

Answer 308

A

Hoenig v Isaacs – cost of cure was 1/14 of total contract price

Answer 309

A

Where defects are extensive, contract will not be substantially performed

Answer 310

A

Bolton v Mahadeva – cost of cure was 1/3 of total contract price

Answer 311

A

The parties to a contract may agree to release one another from outstanding obligations, thus ending the contract. To be binding, the three elements of a contract must be present: intention to create legal relations, agreement and consideration.

Answer 312

A

1. Damages
•	Remoteness
•	Mitigation
•	Contributory Negligence
•	Time Assessment for damages
•	Specified damages/penalty clauses
2. Restitution
3. Restitutionary Damages
4. Action for an agreed sum
5. Equitable Remedies (Specific Performance and Injunction)

Answer 313

A

BROAD ETHOS = compensatory: the goal is to compensate the claimant, not punish the defendant; the claimant must have sustained loss, or the claimant may have to pay the defendant’s costs

Answer 314

A

Obagi v Stanborough (Developments) Ltd

Answer 315

A

a) EXPECTATION LOSS: aim is to put the claimant in the position he would have been in had the contract been properly performed

Answer 316

A

Robinson v Harman

Answer 317

A

The following are taken into account when quantifying the damage:
• Difference in value (goods)
• Cost of cure (services)
• Loss of Amenity
• Loss of Opportunity
• Loss of Pleasure: usually cannot claim for loss of pleasure.
o However, if the contracts purpose was the claimants enjoyment; you can claim for loss of enjoyment
o N.B. The claimant’s enjoyment need not be the sole purpose of the contract, just important

Answer 318

A

• Loss of Amenity: pool was only nine inches too shallow. The difference in market value was £0, whereas the cost of cure was £21,000.00. Damages of £2,500.00 were awarded for loss of amenity

Answer 319

A

Ruxley Electronics and Construction v Forsyth

Answer 320

A

Loss of Opportunity

Answer 321

A

Chaplin v Hicks

Answer 322

A

Loss of Pleasure: usually cannot claim for loss of pleasure

Answer 323

A

Addis v Gramophone Co Ltd

Answer 324

A

However, if the contracts purpose was the claimants enjoyment; you can claim for loss of enjoyment

Answer 325

A

Jarvis v Swans Tours

Answer 326

A

N.B. The claimant’s enjoyment need not be the sole purpose of the contract, just important

Answer 327

A

Farley v Skinner

Answer 328

A

RELIANCE LOSS: aim is to put the claimant in the position he would have been in had the contract never been entered into

Answer 329

A

Anglia Television v Reed

Answer 330

A

Loss must be within the reasonable contemplation of the parties.
This will be the case where:
• It arises from the ordinary course of things; or
• The special circumstances causing the loss are known to the parties at the time the contract is made

Answer 331

A

Hadley v Baxendale
Loss must be within the reasonable contemplation of the parties.
This will be the case where:
• It arises from the ordinary course of things; or
• The special circumstances causing the loss are known to the parties at the time the contract is made

Answer 332

A

Normal profits are foreseeable, but profits from a special contract are not

Answer 333

A

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd

Answer 334

A

If a particular TYPE of loss is within parties’ reasonable contemplation then the culpable party is liable for the FULL SCALE of that loss, no matter if it is higher than contemplated

Answer 335

A

Parsons (Livestock) Ltd v Uttley Ingham Ltd

Answer 336

A

Normal profit is a different type of loss to high profits resulting from an specially lucrative contract

Answer 337

A

Brown v KMR services

Answer 338

A

In the complex financial cases where loss is difficult to quantify, you can look at the commercial context, not simply reasonable contemplation.

Answer 339

A

Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)

Answer 340

A

In this case, it was said by the Court of Appeal that there might be unusual cases, like The Achilleas, in which particular circumstances and context make it necessary to consider whether or not a party had assumed responsibility for losses of that particular kind.

Answer 341

A

John Grimes Partnership Ltd v Gubbins

Answer 342

A

Claimant must take reasonable steps to mitigate his loss

Answer 343

A

British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railway Company of East London

Answer 344

A

The claimants damages can be reduces according with the Act

Answer 345

A

Law Reform (Contributory Negligence) Act 1945

Answer 346

A

Damages are assessed by reference to the time of breach, but the key principle is that damages must cover the loss suffered so that the normal rule should not be applied if this key principle is offended.

Answer 347

A

Golden Strait Corporation v Nippon Yusen Kubishiki Kaisha (The Golden Victory)

Answer 348

A

Clauses that state an amount payable in the event of a breach will either be a specified damages clause or a penalty clause

Answer 349

A

Is the authority for the current test for a penalty clause, which is defined as a clause which creates 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. In short, a penalty clause is one that attempts to put exorbitant or unconscionable economic pressure on a party to perform the contract.

Answer 350

A

Cavendish Square Holding BV v Makdessi

Answer 351

A

Cavendish Square Holding BV v Makdessi
Is the authority for the current test for a penalty clause, which is defined as a clause which creates 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. In short, a penalty clause is one that attempts to put exorbitant or unconscionable economic pressure on a party to perform the contract

Answer 352

A

A party’s legitimate interest in enforcing such a clause may go beyond the merely financial. In that case, the presumption is that where the parties are commercial entities of fairly equal bargaining power, they must be taken to have been the best judges of what they were prepared to agreed to.
Where the legitimate interest of a party in enforcing the clause is merely financial (i.e. just compensation for breach), the guidelines from Dunlop Pnemaumatic Tyre Co, can be used to decide if the clause is penal.

Answer 353

A

Guidelines for deciding whether a clause is specified damages or penalty
• Is the sum extravagant/unconscionable? –> penalty
• If breach is not paying a sum of money, or if the sum in the clause exceeds the amount that ought to be paid –> penalty
• If a single sum is due on the happening of one of multiple events, varying in severity, there is a presumption of penalty
• Clause CAN be specified damages clause even if it is difficult/impossible to pre-estimate the cause of the breach.

Answer 354

A

Dunlop Pnemaumatic Tyre Co v New Garage & Motor Co Ltd

Is the sum extravagant/unconscionable? –> penalty
If breach is not paying a sum of money, or if the sum in the clause exceeds the amount that ought to be paid –> penalty
If a single sum is due on the happening of one of multiple events, varying in severity, there is a presumption of penalty
Clause CAN be specified damages clause even if it is difficult/impossible to pre-estimate the cause of the breach.

Answer 355

A

Commercial Considerations are also important, e.g. balancing the bargaining power between parties.

Answer 356

A

Azimut-Benetti SpA (Benetti Division) v Healey

Answer 357

A

Certainty is important

Answer 358

A

Phillips Hong Kong Ltd

Answer 359

A

BROAD ETHOS: The goal is to prevent the unjust enrichment of one party

Answer 360

A

• Recovery of paid money due to ‘total failure of consideration’ i.e. not done any part of consideration; or what was performed was completely useless
• Compensation for work done/goods supplied
o The contract has been broken – a claim for a reasonable sum for work done/goods supplied as an alternative claim for damages/quantum meruit/quantum valebrant
o The contract was never formed – the supplier may be able to claim in restitution for a reasonable sum for work done/goods supplied (British Steel Corp. v Cleveland Bridge and Engineering Co Ltd)

Answer 361

A

o The contract was never formed – the supplier may be able to claim in restitution for a reasonable sum for work done/goods supplied

Answer 362

A

British Steel Corp. v Cleveland Bridge and Engineering Co Ltd

Answer 363

A

Restitutionary damages may be awarded where the defendant’s breach is deliberate and for their own reward, the claimant can’t show any loss and the claimant has legitimate interest to restrict the defendant’s behaviour

Answer 364

A

Wrotham Park Estate Co Ltd v Parkside Homes, clarified by Experience Hendrix LLC v PX Enterprises Inc

Answer 365

A

The law is a bit murky on whether it is compensatory or Restitutionary; it is viewed as a new and distinct means of determining damages

Answer 366

A

Court awarded full account of profits from a published book (but very exceptional factual circumstances)

Answer 367

A

Attorney General v Blake

Answer 368

A

Court awarded Claimant only 5% of profits made by the defendant; majority of judges said that the damages were not compensatory (i.e. they were focussed on the defendant’s gain, rather than the claimant’s loss)

Answer 369

A

Wrotham Park Estate Co Ltd v Parkside Homes Ltd

Answer 370

A

Tone was Restitutionary

Answer 371

A

Experience Hendrix LLC v PX Enterprises Inc

Answer 372

A

Tone was Compensatory

Answer 373

A

WWF v WWF

Answer 374

A

The claimant can start an action for an agreed sum if:
• The contract provides for one party to pay a definite sum to the other; and
• The Duty to pay has arised
This is a simple debt action; remoteness and mitigation rules do not apply.

Answer 375

A

This is an order by the court which requires a party to perform his contractual obligations. Failure to comply will result in Contempt of Court.
A discretionary remedy

Answer 376

A

Specific performance will not be provided where the court will have to supervise, for service contracts, or for contract where relationship of trust is paramount

Answer 377

A

Ruxley Electronics and Construction v Forsyth

Answer 378

A

A prohibitory or mandatory order
Injunction will not be granted if the effect would be to compel the defendant to act in a way he could not be ordered to by an order for specific performance
Negative promises (e.g. not to work for another company) can be enforced (Warner Brothers Pictures Incorporated v Nelson)
The court will not enforce a promise in a contract if the injunction would result in the party remaining idle and detrimentally impacting their career (Page 1 records v Britton)

Answer 379

A

Negative promises (e.g. not to work for another company) can be enforced

Answer 380

A

Warner Brothers Pictures Incorporated v Nelson

Answer 381

A

The court will not enforce a promise in a contract if the injunction would result in the party remaining idle and detrimentally impacting their career

Answer 382

A

Page 1 records v Britton

Answer 383

A

Step One: Identify Contracting Parties
Step Two: State General/original rule
Step Three: Identify the party who, in order to avoid a charge of breach of contract, might try and claim that the contract was frustrated.
Step Four: Is there frustration?
Step Five: What is the effect if the contract is frustrated?
Step Six: What is the effect if the contract has NOT been frustrated

Answer 384

A

If a party has assumed an absolute obligation, even If circumstances make performance of this obligation impossible, he is liable for breach of contract

Answer 385

A

Paradine v Jane

Answer 386

A

DEFINE Frustration and apply to the facts. A contract is frustrated when:

a) Supervening event; which
b) Is unforeseen
c) Is outside the control of the parties (The Super Servant 2); and
d) Renders the contract impossible to perform (Davis Contractors Ltd v Fareham UDC)

Answer 387

A

c) Is outside the control of the parties

Answer 388

A

Maritime Fish Ltd v Ocean Trawlers and The Super Servant 2

Answer 389

A

d) Renders the contract impossible to perform

Answer 390

A

Davis Contractors Ltd v Fareham UDC

Answer 391

A

Essential person unavailable

Answer 392

A

Condor v Barron Knights

Answer 393

A

Essential thing unavailable (e.g. venue)

Answer 394

A

Taylor v Caldwell

Answer 395

A

Fundamental event does not occur

Answer 396

A

Krell v Henry

Answer 397

A

Government Intervention

Answer 398

A

Metropolitan Water Board v Dick Kerr and Company

Answer 399

A

Illegality of the contract

Answer 400

A

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Answer 401

A

Delay – consider the length and time obligation in performance.
How long was the delay? Was there a time limit for obligations to be performed? The delay will only frustrate the contract if ti has become radically different.

Answer 402

A

Metropolitan Water Board v Dick Kerr and Company

Answer 403

A

Event was foreseen or should have been foreseen

Answer 404

A

Davis Contractors Ltd v Fareham UDC

Answer 405

A

Prices go up

Answer 406

A

Tsakiroglou & Co Ltd v Noblee Thorl

Answer 407

A

Contract becomes more expensive/difficult to perform

Answer 408

A

Davis Contractors Ltd v Fareham UDC

Answer 409

A

Essential person is unavailable for an insignificant period

Answer 410

A

If event is not directly related to objective of contract (N.B. Contrast with Krell v Henry)

Answer 411

A

Herne Bay Steamboat Co v Hutton

Answer 412

A

If event is in any way self-induced – any element of choice will prevent frustration

Answer 413

A

The Super Servant Two

Answer 414

A

Delay and Leases of Land – not being able to use property for two out of ten years was held not to be a frustrating event

Answer 415

A

National Carriers Ltd v Panalpina (Northern) Ltd

Answer 416

A

If there is frustration, mention presence or not of a force majeure clause (a clause that releases parties from contractual obligations when circumstances beyond their control arise)

Answer 417

A

Contract is automatically discharged/terminated
Future Obligations cease
No parties are in breach

Answer 418

A

Contract is automatically discharged/terminated

Answer 419

A

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Answer 420

A

Future Obligations cease

Answer 421

A

Krell v Henry

Answer 422

A

Law Reform (Frustrated Contracts) Act 1943

Answer 423

A

• Money paid before the frustrating event is recoverable
• Money that was payable before the frustrating event need not be paid
• Expenses incurred by the payee are recoverable, but:
o This is subject to a price ceiling (the sum of money paid before the frustrating event and money payable before the frustrating event)
o The court has a broad discretion as to this amount, and its goal will be to avoid unjust enrichment. It will achieve this goal by adjusting the amount for the payee depending on whether the payer has also incurred any expenses.
(Gamerco SA v ICM/ Fair Warning (Agency) Ltd)

Answer 424

A

The court has a broad discretion as to this amount, and its goal will be to avoid unjust enrichment. It will achieve this goal by adjusting the amount for the payee depending on whether the payer has also incurred any expenses.

Answer 425

A

Gamerco SA v ICM/ Fair Warning (Agency) Ltd

Answer 426

A

• If there is any valuable benefit that survives the frustrating event, court may order a ‘just sum’ to paid with regard to all the circumstances.
• Valuable benefits must be ‘benefits accrued in, or for the purpose of the contract.’
• The size of this sum will be decided with regard to:
o The value of the benefit to its recipient at time of event (BP Exploration Co (Libya) Ltd v Hunt); and
o Any expenses awarded under s.1(2) LR(FC)A 1943
• Unpredictable element – hard to know what courts may do

Answer 427

A

The size of this sum will be decided with regard to:

o The value of the benefit to its recipient at time of event

Answer 428

A

BP Exploration Co (Libya) Ltd v Hunt

Answer 429

A

Discuss BREACH of contract and appropriate remedies (See previous WS for Remedies)

Type of Breach
Remoteness
Measure of Damages
Mitigation

Answer 430

A

If serious, a repudiatory breach, the innocent party can either discharge the contract and get damages, or affirm contract

Answer 431

A

Loss must be within the reasonable contemplation of the parties at the time the contract was entered into.
The loss must either:
a) Arise naturally from the breach itself; or
b) Could reasonably be supposed to have been in reasonable contemplation of parties at time of contract due to special circumstances known to them.

Answer 432

A

Compensatory: the goal is to compensate the claimant, not punish the defendant

Answer 433

A

a) Start with EXPECTATION LOSS: The aim is to put the claimant in the position he would have been in, had the contract been properly formed

Answer 434

A

Robinson v Harman

Answer 435

A

b) If this cannot be calculated, move onto RELIANCE LOSS: the aim is to put the claimant in the position he would have been in had the contract not been entered into

Answer 436

A

Anglia Television v Reed

Answer 437

A

The claimant must take reasonable steps to keep loss at a minimum

Answer 438

A

British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railway Company of East London

Answer 439

A

Step One: Is there a valid contract?
Step Two: Explain whether the statement in question is a term, representation, or a mere sales puff
Step Three: If statement is a TERM, consider remedies for breach of contract
Step Four: If statement is a REPRESENTATION, consider the definition of Misrepresentation
Step Five: Apply each part of the definition to the facts to ascertain whether there has been a misrepresentation
Step Six: Remedies for Misrepresentation
Step Seven: Consider whether the defendant may have a DEFENCE (available for non-fraudulent mis-representation only)

Answer 440

A

Are the three elements of a contract present? (Agreement, intention to create legal relations, consideration)
[If YES, continue to step two]

Answer 441

A

Cannot claim for misrepresentation. Claim in TORT instead for NEGLIGENT MISSTATEMENT

Answer 442

A

(a) Unlike misrepresentation, don’t need a contractual relationship to sue
(b) A statement of OPINION may be a negligent misstatement, as well as one of fact.

Answer 443

A

(a) Misrepresentation claims under the Act are better for claimants as they reverse the burden of proof (the defendant has to prove that there was not a negligent misrepresentation).

Answer 444

A

S2(1) Misrepresentations Act 1967

Answer 445

A

(b) Remoteness rules that apply to damages are better because no remoteness.

Answer 446

A

Due to Royscott Trust Ltd v Rogerson

Answer 447

A

If so, apply Hedley Byrne & Co v Heller etc. i.e. a special relationship must exist.

Answer 448

A

A part of the contract which if untrue, provides a remedy for breach

Answer 449

A

A statement made by one party to the contract which may have induced the other party to enter into the contract, but does not form part of it

Answer 450

A

An obviously extravagant claim providing no right of action (e.g. Red Bull doesn’t actually give you wings)

Answer 451

A

What were the parties’ intentions at the time of the statement? If these are not clear, consider the objective test.
Objective test: would a reasonable man consider the parties’ intentions to be that the statement is a term or a representation

Answer 452

A

The party making the statement has greater skill/knowledge than the recipient.

Answer 453

A

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd

Answer 454

A

The statement is of vital importance to the contract and the recipient made this known

Answer 455

A

Bannerman v White

Answer 456

A

Where the maker of the statement tells the recipient not to bother verifying it.

Answer 457

A

Schawel v Reade

Answer 458

A

Where the party makes a statement about something out of his control

Answer 459

A

Birch v Paramount Estates Ltd

Answer 460

A

The recipient of the statement has greater skill or knowledge

Answer 461

A

Oscar Chess Ltd v Williams

Answer 462

A

There was a long-time lapse between the statement and the contract

Answer 463

A

Routledge v McKay

Answer 464

A

The maker of the statement asks the recipient to verify it

Answer 465

A

Excay v Godfrey

Answer 466

A

The statement is ORAL, and not repeated in the WRITTEN contract.

Answer 467

A

Routledge v McKay

Answer 468

A

[The statement is ORAL, and not repeated in the WRITTEN contract. (Routledge v McKay)]

o However, this is not a definite rule. Where oral statement is not followed up in writing, contract could be deemed part written, part oral, so could be a term.

Answer 469

A

Birch v Paramount Estates Ltd

Answer 470

A

Damages to be assessed on EXPECTATION OF LOSS basis, i.e. aim is to put the claimant in the position he would have been in had the contract been properly formed.

Answer 471

A

Robinson v Harman

Answer 472

A

Scope of damages are those which are natural or contemplated, i.e.

Answer 473

A

Hadley v Baxendale

Answer 474

A

Those which fairly and reasonably should be considered as arising naturally from breach of contract

Answer 475

A

Those which may reasonably be supposed to have been in the contemplation of both parties at the time the contract was made.

Answer 476

A

There is a possible breach of the implied term that goods should match their description. The remedies for which are damages, the option to reject goods etc. (may be additional remedies available to consumers)

Answer 477

A

s.13 SGA; s.3 SGSA; s.11 CRA 2015

Answer 478

A

A false statement of fact made by one contracting party to another before the contract was made and which was one of the factors that induced the other party to enter into the contract.

Answer 479

A

False statement of Fact
Made at the time of/before the contract
Induces the representee to enter the contract

Answer 480

A

The statement must be one of fact, not opinion.

Answer 481

A

Bisset v Wilkinson

Answer 482

A

Unless it is an ‘implied false statement of fact’, that is:
o The opinion is not genuine; or
o There are no reasonable grounds for the maker to believe it is true [case]

Answer 483

A

Smith v Land and House Property Corp

Answer 484

A

A Misrepresentation can be made by CONDUCT

Answer 485

A

Spice Girls v Aprilia World Service BV

Answer 486

A

A statement of INTENTION will only be a misrepresentation when that intention was never really held

Answer 487

A

Edgington v Fitzmaurice

Answer 488

A

SILENCE does not constitute misrepresentation.

Answer 489

A

Hamilton and Others v Allied Domecq plc

Answer 490

A

• SILENCE does not constitute misrepresentation.
Exceptions:
o Failing to disclose a change in circumstances that would render a previously true statement, false. (With v O’Flanagan)
o Telling of a half-truth (only telling half the story) (Curtis v Chemical Cleaning & Dyeing Co)
o Where there is an obligation to disclose facts (e.g. under a fiduciary relationship, or under contracts of the utmost good faith e.g. insurance contracts)

Answer 491

A

o Failing to disclose a change in circumstances that would render a previously true statement, false.

Answer 492

A

With v O’Flanagan

Answer 493

A

o Telling of a half-truth (only telling half the story)

Answer 494

A

Curtis v Chemical Cleaning & Dyeing Co

Answer 495

A

• There must be RELIANCE on the representation/statement

Answer 496

A

Attwood v Small

Answer 497

A

• Provided the stamen encourages entry into the contract, it need not have been the only inducement

Answer 498

A

Edgington v Fitzmaurice

Answer 499

A

• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim.

Answer 500

A

Redgrave v Hurd

Answer 501

A

[• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim. (Redgrave v Hurd)]
Unless:
o The true position was set out in the final contract and the claimant is experienced in the area.

Answer 502

A

Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd

Answer 503

A

[• A representee’s failure to verify the truth of a statement made to them will not prevent a misrepresentation claim. (Redgrave v Hurd)]
Unless:
o Distinguish from the Curtis Case where contract included true terms but claimant was a consumer

Answer 504

A

Curtis v Chemical Cleaning & Dyeing Co

Answer 505

A

It makes a contract voidable; innocent party may affirm or rescind the contract

Answer 506

A

Rescission
Damages in lieu of rescission
Damages

Answer 507

A

Rescission is an optional remedy, available for all forms of misrepresentation. The effect of rescission is that each party returns money/property to each other, and both are released from any future obligations. The innocent party must notify the other of the intention to rescind.

Answer 508

A

(a reasonable attempt may suffice)

Answer 509

A

Car and Universal Finance Co Ltd v Caldwell

Answer 510

A

a) An innocent purchaser acquires an interest in the property before the contract is rescinded (e.g. purchase of goods);
b) The innocent party affirms the contract;
c) There has been undue delay [case] from the point at which the misrepresentation should have been discovered (but when misrepresentation is fraudulent, from the point at which the misrepresentation was actually discovered) (Leaf v International Galleries); or
d) It is impossible substantially to restore goods/property to the other (Crystal Palace FC (2000) Ltd v Iain Dowie)

Answer 511

A

c) There has been undue delay [case] from the point at which the misrepresentation should have been discovered (but when misrepresentation is fraudulent, from the point at which the misrepresentation was actually discovered);

Answer 512

A

Leaf v International Galleries

Answer 513

A

d) It is impossible substantially to restore goods/property to the other

Answer 514

A

Crystal Palace FC (2000) Ltd v Iain Dowie

Answer 515

A

• N.B. However, the restoration need not be exact

Answer 516

A

Erlanger v New Sombrero Phosphate Co.

Answer 517

A

On rescission, the innocent party may also claim an indemnity for expenses incurred from the contract. However, claims for indemnity are very restricted and only cover the precise terms of the contract

Answer 518

A

Whittington v Seale-Hayne

Answer 519

A

(a) Under s2(2) Misrepresentation Act 1967: the court may award damages IN LIEU OF RESCISSION
(b) This remedy is at the discretion of the court
(c) Will most likely be awarded where false statement was made about a minor matter and where it would be unjust to allow the other party to rescind.
(d) Will not be available if rescission itself has been barred.

Answer 520

A

May be claimed in addition to either affirming or rescinding the contract

(a) if the misrepresentation is FRAUDULENT, sue in the tort of deceit
(b) If the misrepresentation is NON-FRAUDULENT

Answer 521

A

To prove fraudulent misrepresentation, the claimant must prove that they statement was made knowingly, or without belief in its truth, or recklessly. (Difficult to prove.) (Derry v Peek)
Damages assessed on tort principles (put person back in the position they would have been before contract entered into)
Usual remoteness/foreseeability rules do not apply. The means you can recover damages for all direct consequences, including for example, profits that would have been made had another contract been entered into. (East v Maurer)

Answer 522

A

• To prove fraudulent misrepresentation, the claimant must prove that they statement was made knowingly, or without belief in its truth, or recklessly. (Difficult to prove.)

Answer 523

A

Derry v Peek

Answer 524

A

• Usual remoteness/foreseeability rules do not apply. The means you can recover damages for all direct consequences, including for example, profits that would have been made had another contract been entered into.

Answer 525

A

East v Maurer

Answer 526

A

Sue for a non-fraudulent misrepresentation under s.2(1) MA 1967

Answer 527

A

The claimant need only show that there was a misrepresentation and that he suffered loss.
Damages are assessed according to tort principles in the same way as for fraudulent misrepresentation, i.e. usual remoteness rules do not apply. (Royscott Trust Ltd v Rogerson)
Effectively removes the need to make a claim of fraudulent misrepresentation and moves burden of proof onto the defendant with regard to his defence.

Answer 528

A

• Damages are assessed according to tort principles in the same way as for fraudulent misrepresentation, i.e. usual remoteness rules do not apply.

Answer 529

A

Royscott Trust Ltd v Rogerson

Answer 530

A

Under s2(1) of the MA 1967 Available for non-fraudulent misrepresentation under s2(1) of the MA 1967 only

Answer 531

A

Available for non-fraudulent misrepresentation under s2(1) of the MA 1967 only

Answer 532

A

The defendant must prove that he had reasonable grounds to believe, and did honestly believe up to the time that the contract was made, that the facts were true.
Very difficult to establish, as there are objective and subjective elements to the belief in the truth of the statement. (Howard Marine & Dredging v Ogden)
If the defence succeed, claimant will not be entitled to damages but may still rescind the contract provided rescission is not barred.

Answer 533

A

• Very difficult to establish, as there are objective and subjective elements to the belief in the truth of the statement.

Answer 534

A

Howard Marine & Dredging v Ogden

Answer 535

A

Step One: Identify (1) original contract; and (2) variation
Step Two: Is there consideration for the variation
Step Three: Consider economic duress (fifth factor in Williams v Roffey and Nicholls (Contractors) Ltd)
Step Four: Effect of Duress and Remedy
Step Five: Conclude

Answer 536

A

If there is consideration, the variation is valid and the ‘new’ contract is binding. If there is no consideration, the variation is void and the ‘new’ contract is not binding.

Answer 537

A

Consideration is the price you pay for another man’s promise

Answer 538

A

The basic rule is that ‘performance of existing contractual duties is not good consideration’

Answer 539

A

Stilk v Myrick

Answer 540

A

Exception 1: ‘if the defendant exceeds his duties in some way or extra benefit is conferred, there is consideration’

Answer 541

A

Hartley v Ponsonby

Answer 542

A

Exception 2:

a) There is a contract to do work/supply goods and services in return for payment;
b) B doubts whether A will complete his obligations;
c) B promises additional payment if A completes his obligations on time (it does not matter who introduces the promise)
d) As a result of giving his promise, B obtains a practical benefit or obviates a disbenefit; and
e) B’s promise was not given as a result of economic duress or fraud on the part of A.

Answer 543

A

Duress is some sort of violence, illegitimate threat or pressure. To amount to economic duress, the threat must be improper or illegitimate (i.e. a threat to breach a contract or to commit a tort – apply). The burden of proving duress is on the party who alleges in. The effect of duress is to make the contract (or variation) voidable (i.e. the contract is valid and binding unless and until it is rescinded by the innocent party.)

Answer 544

A

To establish duress, the innocent party must establish that there has been:

a) An illegitimate threat or pressure
b) Whether the threat or pressure left him with no practical choice; and
c) Whether the threat or pressure was a significant factor in inducing him to enter the contract or variation, although it need not be the only reason why the innocent party entered the contract (Barton v Armstrong)

Answer 545

A

Carillion Construction Ltd v Felix

Answer 546

A

Whether the threat or pressure was a significant factor in inducing him to enter the contract or variation, although it need not be the only reason why the innocent party entered the contract.

Answer 547

A

Barton v Armstrong

Answer 548

A

Duress may also be used as a defence if the other party tries to enforce a variation of the contract.

Answer 549

A

Altas Express v Kafco

Answer 550

A

The current position is if conditions 1-4 in Williams v Roffey Bros and Nicholls (Contractors) Ltd are satisfied, but number 5 is not, it means that there is consideration, but there is also economic duress. Hence the contract is voidable which means the claimant has a choice to rescind or affirm (Adam Opel GmbH (2) Renault SA v Mitras Automotive (UK) Ltd).

Answer 551

A

The claimant has a choice to rescind or affirm

Answer 552

A

Adam Opel GmbH (2) Renault SA v Mitras Automotive (UK) Ltd

Answer 553

A

a) Innocent party must inform the other party that it wants to rescind. If the other party cannot be found or refuses to return the money/property, they must inform the police or apply for a court order of rescission.
b) Once rescinded, no party has any future obligations. All money/property must be returned.
c) Rescission will not be possible if any of the bars to rescission exist:
i. Delay, e.g. the claimant left it 8 months before alleging duress (North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron))
ii. Affirmation, e.g. the claimant paid while not under any pressure
(North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron))
iii. An innocent party has acquired an interest in the property before the contract is voided; or
iv. Where it is impossible to substantially return goods/property, e.g. goods destroyed/used

Answer 554

A

i. Delay, e.g. the claimant left it 8 months before alleging duress
ii. Affirmation, e.g. the claimant paid while not under any pressure

Answer 555

A

(North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron))

Answer 556

A

There has been a variation; has there been consideration (Stilk, Hartley, Roffey); has there been economic duress (Carillion); do any bars to rescission apply (Atlantic Baron); should the claimant rescind (Opel)?

Answer 557

A

Step One: Was there undue influence? Examine the relationship between the surety and the debtor.
Step Two: Did the bank have NOTICE of the undue influence? Examine the position between the ‘abused’ party and the lender.
Step Three: Remedies

Answer 558

A

‘Abuse of a dominant position in a relationship that involves an inappropriate influence on the claimant’; or ‘where one party takes advantage of a relationship of trust and confidence.’

Answer 559

A

Do the facts suggest so? E.g. husband was heard shouting at wife when documents signed.
Difficult for the claimant to prove, as it’s often one person’s word against the other’s.
Example of a successful: old lady forced to enter contract by threat of court action (threat may well be legal). The old lady’s evidence was preferred to the nephew’s (Daniel v Drew)

Answer 560

A

There will be presumed undue influence if (i) there is a relationship of trust and confidence, AND (ii) the transaction calls for an explanation (Royal Bank of Scotland v Etridge).

Answer 561

A

• Definition: ‘A relationship of influence, where one party trusts the other, and the other conducts his business independently,’

Answer 562

A

• In law – certain categories of relationship are irrebuttably presumed to be of fiduciary nature (e.g. doctor/patient; solicitor/client; parent/minor child). However, Husband/Wife or cohabitees does not raise an irrebuttable presumption of a fiduciary relationship.

Answer 563

A

Barclay’s Bank v O’Brien

Answer 564

A

• On facts – Categories of fiduciary relationship are not closed. The court can find a fiduciary relationship on the facts of a particular case

Answer 565

A

Tate v Williamson; O’Sullivan v Management Agency Ltd

Answer 566

A

The transaction must be such that it is not readily explicable by the relationship between the parties
Example: we’re a very large risk (e.g. house repossession) is entirely upon one person and that person is not a partner in the business in question.

Answer 567

A

Royal Bank of Scotland v Etridge

Answer 568

A

If both (a) and (b) are present, the onus shifts to the defendant to rebut the presumption of undue influence by showing that the claimant exercised their own, free, informed mind in agreeing to sign.

Answer 569

A

If the lender has actual or constructive notice of the debtor’s impropriety, the lender will be tainted with it. Consequently, the contract will be voidable.

Answer 570

A

For example, a bank manager witnessed husband bullying wife to sign document.

Answer 571

A

A lender will have constructive notice if (i) It ought to have been put on inquiry of risk of undue influence by the debtor, and (ii) it did not take reasonable steps to ensure that the surety was aware of the implications of what she was signing.

Answer 572

A

• Banks are ‘put on inquiry’ (i.e. have constructive) whenever surety-debtor relationship is non-commercial (personal)

Answer 573

A

Royal Bank of Scotland v Etridge

Answer 574

A

• Held: Bank did not have constructive notice of Mr Pitt’s undue influence because the document looked like a straightforward mortgage. Lord Browne-Wilkinson distinguished a ‘joint advance’ from a situation where wife stands a surety for husband’s debts as in the latter wife does not stand to benefit whatsoever.

Answer 575

A

CIBC Mortgages plc v Pitt

Answer 576

A

• In Royal Bank of Scotland v Etridge, three ways of doing so were mentioned:
o Have a private meeting with surety (e.g. husband must not be present);
o Warn/inform surety of the risks; and
o Urge surety to take legal advice

Answer 577

A

• In extreme circumstances, where transactions are particularly disadvantageous to a surety, the creditor should ENSURE and INSIST that the Shorty receives independent legal advice and explain the full extent of the transaction to them.
[N.B. case did not involve a husband and wife scenario.]

Answer 578

A

Credit Lyonnais v Burch

Answer 579

A

If there has been undue influence, the contract is VOIDABLE
RESCISSION (Damages not available), unless there are bars:
a) Delay – STATE: ‘provided the surety takes action soon, delay will not be a bar
b) Affirmation;
c) Impossible to substantially return goods and services;
d) An innocent party (equity’s darling) acquired an interest in the property before it was voided
Effect of Rescission
a) Returns parties to pre-contractual position
b) The bank/creditor/lender will only be able to claim the money owed from the debtor as an unsecured creditor

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