cases second half

Question 1

Sources of Obligations

Answer 1

Tort, Benevolent Intervention, Unjustified Enrichment, Contract

Question 2

Carbolic Smoke Ball Company Case

Answer 2

Company said in an add that if they took the carbolic smoke ball three times a day for two weeks and still got sick, they would get compensated at the bank. Woman did it, still got sick and claimed she was entitled to the offered compensation.

Question:
Does the advertisement constitute a legal offer that becomes a legally binding contract by agreement? (or is negotiation necessary?)

Answer:
Yes

Why:
It was sufficiently specific. It had certain conditions that had to be achieved and wasn’t addressed to the whole world. Instead, only to a specific number of people that fulfilled the conditions laid out in the ad. The woman accepted the offer and therefore made it a legally binding contract.
Distinction between offer that only needs acceptance and an offer that needs negotiation.
In this case it was sufficient enough to be simply accepted

Question 3

Exploding Lemonade Bottle

Answer 3

Woman wants to buy a bottle of lemonade. Lemonade was not put in refrigerator. While buying the bottle it exploded on her, leaving her injured. Woman wanted to sue manufacturer and supermarket.

Question:
Was there a contract between the supermarket and the woman? Was there offer and acceptance?

Answer:
Yes, supermarket is liable for breach of contract, manufacturer not.

Why??
- Contract starts from the moment the item is put in basked (offer=products in the shelf, acceptance=putting it in your basket)
- Since she was injured by the item, her claim against the store regards contract law
- Manufacturer doesn’t have anything to do with it because the lemonade wasn’t defect in itself, it was kept wrongly

Question 4

Paal Wilson v. Partenreederei (Hannah Blumenthal Case)

Answer 4

There was a sales contract with an arbitration clause. Meaning that legal disputes with regard to the contract must be carried out by arbitration. The proceedings started but neither of the parties did anything for a long time. (no progress) After about 8 years the buyer proposed to set a fixed date for the hearing, but instead the seller declared that there had been a contract of abandonment. (contract was no longer valid)

Question:
Does the fact that arbitration proceedings stalled (in a contract with an arbitration clause) constitute behaviour that would imply consent to a contract of abandonment?

Answer:
NO, not making any advances in the arbitration process does not constitute the offer/acceptance with the intention to enter into a legally binding contract of abandonment.

WHY?
For contracts of abandonment the same criteria applies as for the formation of other contracts:
There has to be an offer that can reasonably be recognized as such and the acceptance that can also be reasonably recognized as such + INTENTION
Not given in this case.

Question 5

Bank Guarantee

Answer 5

Bank guaranteed that they would pay for the debts of the customer of a steel company. (If customer wouldn’t meet obligation to company, bank would pay). They wrote this in a letter to the company. Company wants to enforce the guarantee, but bank claims they didn’t have subjective intent.

Question:
Did the bank’s letter fulfill the criteria of intent for a binding contract? Is there a contract between bank and company?

Answer:
YES, because it’s not about subjective intent, it’s about what can be reasonably understood/interpreted as intent. The bank has the right to either make the contract void for ‘mistaken intention’ and pay compensation or uphold the promises.

Question 6

Shared business trip

Answer 6

Two people are in a car in italy and get into a car accident. The injured person wants to sue the other person because they agreed to divide the price of the gas for the trip (which was a contract in his opinion) and the accident was a breach of the alleged contract.

Question:
Does the informal agreement to share gas expenses constitute a contract?

Answer:
No, not sufficient

Question 7

betting syndicate

Answer 7

5 people form a betting syndicate and agree to buy a lottery ticket each week. One week one of them doesn’t because of work issues. Due to this they lose the bet and now the others want to sue the person that missed one week.

Question:
Was the arrangement of the betting syndicate a binding contract and is the person liable to the rest of the group for breach of contract?

Answer:
NO

Question 8

How to get rid of a contract

Answer 8

1. No consensus = no contract (Raffle v Wichelhaus)
2. Grounds of invalidity/Avoidance = contract is void
   - Fraud
   - Mistake (Shark meat case)
   - Coercion or threats (The former shop director case, The threatened wife case)
   - Unfair exploitation/distress (The Rolf steamship case, Atlantic Baron case)
3. Right of withdrawal = restitution
4. Termination = restitution
   - Non-performance
   - Change of circumstances

Question 9

Raffle v. Wichelhaus (‘Peerless’ ship case)

Answer 9

Raffle sold cotton to Wichelhaus. However, the cotton should have been transported with a different ship than the one it was transported with and so Wichelhaus refused to accept the cotton.

Question of whether there was even a contract concluded in the first place, i.e. whether there was consensus.

Judgement:
They did not have proper consensus. If there is no agreement to the same terms, then there cannot be any contract.

Question 10

Shark Meat Case

Answer 10

Seller concludes a contract of sale for 214 barrels of “Haakjoeringskoed” which both parties of the contract assumed to be whale meat. However, the Norwegian word actually means shark meat and so when the buyer received shark meat instead of whale meat, he demanded the difference in price to be paid back to him because whale meat is more expensive than shark meat.

Question of whether a contract can be declared invalid on the ground of a mistake.

Judgement:
The contract is valid in the sense and with the meaning that both of the parties agreed to it. Both parties agreed on the sale of whale meat but used the wrong word to describe it - the intention of the two parties and what they meant prevails.

Therefore the buyer can get the difference in price back, because the binding contract was about whale meat, despite the fact that it said shark meat.

Question 11

The Former shop director case

Answer 11

A former shop director entered into a contract where she agreed to pay the debt to the owners for the supply of goods she had ordered in her capacity as a shop director. The owners made it clear in a letter that if she did not settle the debts, they would bring criminal proceedings against her.

Question whether the plaintiff can avoid the contract on grounds of threat

Judgement:
The contract cannot be avoided, because the threat is not sufficiently serious.

Argumentation:
- The person did not display the kind of behaviour that would be expected from a threatened person:
= she possessed enough experience in her work and was old enough to resist such intimidation
= she showed that she was not scared or intimidated by the letter by the fact that she waited three months to reply and also put precise conditions on the acceptance of her reply (owner had 48h to accept).

Question 12

The threatened wife case

Answer 12

A bank asked for a guarantee to be given to it by the wife of one of the bank’s clients who undersigned a contract with said bank. The wife of the man acted as a guarantor. However, when the husband failed to comply with the terms of the contract, the bank brought an action against the defendant under the guarantee. She claimed that she had agreed to the guarantee under a threat. She claimed the bank director had threatened her that criminal proceedings for fictitious bills would be brought against her husband if the didn’t agree to the guarantee.

Judgement:
A threat can also be a lawful means. However, in assessing whether a threat was lawful or not, it is necessary to consider all the circumstances of the case.

Unlawfulness of Threat Test:
1. Legitimate interest in achieving the result thought?
- All circumstances have to be considered
a) Does the threatener have a legal right to the objective of his threats?
b) If no legal right, threats may be justified where considerations of public policy indicate that the debtor should fulfill his obligation
2. Is the threat a reasonable means of achieving that result?
- From the POV of a reasonable person
- Threats to third party may be reasonable if they participated in the criminal act that caused the damage or profited from it in some way
3. Intention of the threat
- Is the creditor aware that his threat is contrary to morality?

Question 13

The Steamship Rolf Case

Answer 13

Steamship Rolf got stuck on the sands in the mouth of a river. The captain of another ship offered to get the Rolf out in exchange for 18,000 Francs, even though such an operation would normally only cost 4,000. Agreeing to the contract is the only way to avoid completely losing the 360,000 Francs worth Rolf and so the owner agreed.

Question as to whether or not the contract can be avoided on the grounds of unfair exploitation by one party of another party’s state of necessity.

Judgement:
Yes, because there owner of the Rolf was in a state of necessity, he had no other choice than to agree and was therefore forced to = not consented freely
What to look at when trying to determine whether the price that was demanded constituted an exploitation:
- Value of the vessel that was saved
- Whether it involved a risk for the rescuing party
- How long it took for the rescuing party
- Whether the rescuing party suffered damages

Question 14

The Atlantic Baron Case

Answer 14

The owner of a ship (the Atlantic Baron) concluded a contract for its building with the shipbuilder. After the first payment, however, the value of the dollar dropped and the shipbuilder asked a 10% increase on the accorded price, threatening not to deliver the ship. The owner decided to pay the 10% extra ‘without prejudice of their own rights’ (contractual formula to claim the money back successively). They stayed silent and brought no action for 8 months, then claimed back the money stating that the contract had been made under duress.

Judgement:
The party was under economic duress, but they were inactive for too long to avoid the contract.

A threat to break a contract may amount to ‘economic duress’. The owners of the ship feared to lose another profitable contract that they were negotiating.

Question 15

Surrogate motherhood case

Answer 15

Example of a contract infringing on non-mercantile values

A couple has problems with conceiving a child so they want to have a baby through a surrogate. However, in France, the parental rights lie with the biological parents (in this case the surrogate mother) and surrogacy is banned. So the couple and the surrogate agree that the surrogate gives up her parental rights/abandons the child and the couple adopts it (to find a way around the ban of surrogacy).

Question as to whether or not there was a legally binding contract? Or whether it violates fundamental principles

Judgement:
There was no legal contract because it violates the fundamental principles of bodily integrity and also amounts to an abuse of the institution of adoption.

Question 16

Schroeder Music Publishing v Macaulay

Answer 16

A songwriter entered into a contract which gave the full copyright for the whole musical world for all of his music. The musician has no rights on his own music and does not receive any payment unless his songs are published. However, only the publisher has the right to decide whether they get published or not.

Question as to whether the contract is against fundamental principles and therefore void.

Judgement:
The contract is so disproportionate and oppressive to the songwriter that it violates fundamental principles. It is against the public policy of promoting trade = everyone has the right to earn a livelihood and reap the benefits of their abilities.
Since the publisher had full power over which songs get published; the contract stated no obligation to promote the artist; the full copyright for the whole world was given for a long period of time; the songwriter received no payment unless his songs were published; he had no chance to regain the copyright over his work, the contract was not justified.

Question 17

St John Shipping Corp v Joseph Rank Ltd.

Answer 17

The defendants chartered the plaintiffs ship through a carriage of goods contract.
However, the ship was overloaded an contradicted the Merchant Shipping Act.

Question as to whether the contract is in breach of a mandatory rule and therefore void

Judgement:
There are 2 grounds for for unenforceability:
1. When the objective of the contract is to commit an illegal act (not the case here)
2. When a contract is expressly or impliedly prohibited by statute
- Does the statute mean to prohibit contracts?
- If yes, does the contract at hand belong to the class which the statute intends to prohibit?

It did not contradict the mandatory rule because the overloading was a consequence of the contract. The statute does not intend to prohibit the creation of such contracts as in this case.

Question 18

Davis Contractors Ltd. v Fareham UDC

Answer 18

A building contract foresaw that houses would be built in 8 months for 95,000$. The company took 22 months and 110,000$ to build those houses. The building company was paid the original price that was foreseen in the contract and wanted compensation because they claimed the contract had been frustrated since adequate supplies of labour and materials were not available.

Question as to whether there was a frustration of contract

Judgement:
No, it’s not frustration because the performance was still possible to carry out and possible losses have to be accepted. It does not automatically constitute a frustration if a contract becomes more difficult to perform. It was not manifestly unjust to hold the debtor accountable to their obligations.

Question 19

The EDF Strike Case

Answer 19

There was a contract between the plaintiff and an electricity supplier. However, the supply of electricity was interrupted and damages were suffered by the plaintiffs due to strikes by the staff of the company.

Question as to whether the strike qualifies as an excusable impediment for non-performance.

Judgement:
Yes, the strike was a case of force majeure and therefore the defendant is not liable for the non-performance.

The court assessed:
Whether the strike was internal or external (it was nation-wide, so external)
Whether it was foreseen (it was unforeseen)
Whether there was any solution possible to repair the situation, e.g. replace the workers (not possible because it was on a national level)
= no compensation for the plaintiff

Question 20

Bad Harvest Case

Answer 20

A farmer had a harvest contract with the creditor. However, there was a very bad drought. The creditor received 5% of the harvest. The creditor brought an action for performance claiming among other things, that the debtor could buy other seeds of the same quality and give them to him.

Question as to whether the drought qualifies as force majeure and excuses the non-performance.

Judgement:
The defendant cannot be required to do more than he can reasonably perform.
The contract regarded seeds that are cultivated and grown by the defendant, he can therefore not be obligated to buy other seeds and give them to the creditor.
Inability to perform a contract releases the defendant only when the performance has become completely impossible, due to circumstances of extraordinary severity and with no fault/good faith from the defendant.

Question 21

Houghton v Trafalgar Insurance

Answer 21

An insurance company included an exemption clause so that damages that occur when the car is carrying “a load in excess” are not covered by insurance. A car accident happened with 6 people in a car that was only designed for 5.

Question on how the word load should be interpreted

Judgement:
The insurance company should pay for the damages because the meaning of the word is to be interpreted against their interest.
According to the Contra Proferentem Rule, any clause considered to be ambiguous should be interpreted against the interests of the party that created, introduced, or requested that a clause be included.
This means in this case it is to be interpreted against the interest of the insurance company and in the interest of the plaintiff.

Question 22

Ship not loaded Case

Answer 22

Ship had to be ready to load in New York. The plaintiffs gave the charterers of the ship a final chance to perform their obligation. The charterers gave a vague offer to load the ship in Port Orleans instead. The ship was not there on the day of the deadline and the plaintiffs terminated the contract the next day and claimed damages.

Question as to whether the plaintiffs could terminate the contract for fundamental non-performance and claim damages without giving notice of default.

Judgement:
Yes, the plaintiffs can terminate and claim damages without giving notice of default because the breach was sufficiently serious.

To be sufficiently serious the breach must be so that the object of the contract is jeopardised and the injured party can no longer be expected to continue the contract.

Question 23

Hochster v. De La Tour

Answer 23

Defendant employed plaintiff as personal assistant for a trip around Europe. However, before the date of the performance of the contract, the defendant wrote the plaintiff that he will no longer need his service.

Question as to whether the contract can be assumed to be terminated by the plaintiff due to the anticipatory non-performance.

Judgement:
Yes, the contract can be deemed to be terminated.

Question 24

Hong Kong Fir Shipping v Kawasaki

Answer 24

A contract stated that a vessel had to be delivered to the charterers after 24 months and maintain its seaworthiness in the meantime. The vessel suffered numerous breakdowns and damages due to incompetence of the staff.

Question as to whether the contract can be terminated on the basis of fundamental non-performance.

Judgement:
No, because the seaworthiness clause was not a condition of the contract = not fundamental
The breach was also not serious enough for the party to terminate the contract = not fundamental
Question to ask is whether the breach denies the claimant of the main benefit of the contract - this was not the case.

Question 25

Machine for peeling of artichokes case

Answer 25

The railway company (the defendant) delayed the delivering of the peeling machine for artichokes. The plaintiffs claimed damages because the artichokes perished and they had to employ manual labour to peel the artichokes.

Question as to whether damages could be claimed by the defendant.

Judgement:
The defendant is liable for breach of contract but they do not have to pay any damages for the losses.
Damages only have to be paid when they were foreseeable to occur. They weren’t foreseeable in this case to the defendant does not have to pay.

Question 26

Bad tempered bear case

Answer 26

A visitor in a zoo fell against a barrier that was meant to keep the visitors at a safe distance from the bears. The barrier collapsed and the visitor was bitten by the bear.

Question as to whether the visitor contributed to the damages through negligence.

Judgement:
The zoo is liable for breach of contract and the visitor had no fault so the zoo has to pay the full damages.
The damages can only be reduced when there is proof that the victim contributed to the damages occurring (negligence). However, in this case there was no fault of the victim.