Contract Law

Question 1

Offer

Answer 1

Expression by one party of their assent to certain terms, provided that the other party will assent to the same terms
Creates power of acceptance in offeree
Must be objective, have inclusive terms, and be an expression of intention

Question 2

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Answer 2

About: offers

Court held that display of goods at Boots was an invitation for customers, not an offer

Question 3

Storer v Manchester City Council

Answer 3

About: offers and intention
Court held that even if the date on a house purchase contract was left empty, it is still binding because by all outward appearances it is a contract

Question 4

Types of contracts (2)

Answer 4

Bilateral = mutual promises made in exchange for each other, can exist prior to either party's performance
Unilateral = promise made by only one of the parties, is the only party under an enforceable legal duty, is an agreement to pay in exchange for performance if the offeree chooses to act

Question 5

Carlill v Carbolic Smoke Ball

Answer 5

About: offer, unilateral contract
Defendant argued that ad was too vague, too general (offer was to ‘everyone’), and there was no notification of acceptance of contract to be a valid contract
Court held that the ad was an enforceable unilateral contract and it is permissible to make an offer to ‘everyone’, performance of requested act can constitute acceptance

Question 6

Requirements of an offer acceptance (4)

Answer 6

Clear and unconditional
Made in response to the offer (not cross or counter)
Communicated to offeror in compliance with offer terms
Made with knowledge of the offer (motive is irrelevant)

Question 7

Larkin v Gardiner

Answer 7

About: acceptance

Offeree has power to revoke acceptance anytime prior to offeror being made aware of the acceptance

Question 8

Eliason v Henshaw

Answer 8

About: acceptance
Plaintiff successfully argued that since defendant’s acceptance of offer to buy flour didn’t comply with offer terms (must be sent to specific location), there was no acceptance of offer

Question 9

Manchester Council v Commercial & General Investments Ltd

Answer 9

About: acceptance
If offeror stipulates terms of acceptance in the offer, offer will become contract as soon as offeree does stipulated act regardless of if acceptance is communicated to offeror
Courts will generally find any means of acceptance that is no less advantageous to offeror to create the contract unless only 1 form has been made clear by offeror

Question 10

Livingstone v Evans

Answer 10

About: counter offer
Judge held that defendant’s reply that they would not reduce the offer price was a renewal of original offer, not creation of counter offer
Plaintiff’s acceptance of original offer was valid

Question 11

Felthouse v Bindley

Answer 11

About: silence to an offer
Uncle and nephew, horse sale
Condition in an offer that offeree’s inaction will constitute acceptance is generally not valid

Question 12

Consumer protection laws

Answer 12

Address consumer rights wrt unsolicited G/S
No supplier shall demand payment from a consumer wrt to unsolicited G/S despite use/receipt
Request for G/S shall not be inferred based on payment, inactivity or passage of time
If consumer is receiving G/S on an ongoing basis and there is a material change, the G/S shall be considered unsolicited unless the consumer has consented to the material change
A consumer may demand a refund for payment of unsolicited G/S up to 1 year after payment

Question 13

Scammell and Nephew Ltd v Ouston

Answer 13

About: certainty of acceptance
If terms are not sufficiently certain, there will be no contract
However, courts try to give proper effect to any clauses the parties reasonably understood and intended
Court held that words of agreement were so obscure that it was still a negotiation, not a contract between the parties

Question 14

Termination of offer

Answer 14

Offer is usually terminated after time limit for acceptance has passed, after a reasonable amount of time if there is no specific limit, or upon revocation
Offer is mere nudum pactum which can be revoked anytime prior to acceptance

Question 15

Dickinson v Dodds

Answer 15

About: termination of offer
Knowledge that indicates revocation to the reasonable person invalidates the power of acceptance in the offeree
Promise to hold offer open for certain time is unenforceable unless there is consideration for the offer

Question 16

Consideration

Answer 16

Is right/benefit to one party, or some loss/responsibility to the other party
If there is no consideration, there is no contract
Courts are concerned about existence of consideration, not its adequacy
Detriment and promise must be related, and must be requested by promisor
Must not be illusory

Question 17

Hamer v Sidway

Answer 17

About: consideration
Court held that nephew suffered legal detriment as he gave up liberty to drink/smoke/swear under his uncle’s promise, therefore there is consideration

Question 18

Tobias v Dick and Eaton co

Answer 18

About: consideration
Judge ruled that agreement for Tobias to be able to sell Dick’s goods was one sided, Tobias hadn’t promised anything in return and thus there was no consideration for the contract to be binding on Dick

Question 19

Wood v Lady Duff Gordon

Answer 19

About: consideration
Court held that plaintiff’s promise to use reasonable effort to earn profits could be implied from contents of contract to sell defendant’s fashion line, therefore there is consideration and the employment agreement is a contract

Question 20

Past consideration

Answer 20

If a promise is made in return for an act that has already been performed, the promise is not motive for the act anymore and thus does not support the promise
If the act is performed at the request of the promisor and in circumstances that suggest benefit would be conferred, then the promise may be enforceable and consideration may not be past

Question 21

Gilbert Steel Ltd v University Construction Ltd

Answer 21

About: pre existing duty
Court determined that defendant’s oral promise to pay higher price to plaintiff wasn’t enforceable because plaintiff had pre existing duty to offer defendant the lower price, and plaintiff didn’t provide new consideration for higher price

Question 22

Balfour v Balfour

Answer 22

About: intention to create legal relations
Between husband and wife
Judge acknowledged that many agreements with consideration still don’t result in legal contracts because parties didn’t intend there to be legal consequences when making the agreement

Question 23

Rose and Frank Company v JR Crompton and Brothers

Answer 23

About: intention to create legal relations
Court held that contract clause that the agreement was not to be legally enforced was valid
Although it is assumed in business that parties intend to create legal relations, compelling evidence such as this clause can override this

Question 24

Estoppel

Answer 24

Is an equitable remedy which may apply to enforce a promise that is otherwise not enforceable as a contract
Usually applied when there is no consideration

Question 25

Promissory estoppel

Answer 25

Applies when one party has promised that they will not enforce their contractual rights, but then goes back on this
Rights limiting
Stops party from enforcing their rights when it would be unjust to allow them to do so
Promise not to enforce can be explicit or reasonably inferred
Promisee must show that they reasonably relied on the promise to their detriment, without detriment there can be no inequity

Question 26

Hughes v Metropolitan Railway

- Hughes ‘rule’ (3)

Answer 26

About: promissory estoppel
Court held that plaintiff H was estopped from enforcing his lease rights because he entered into negotiations that implied this to the defendant
Parties will be estopped from enforcing rights when
- parties have entered into a contract
- one party is led to believe the other will not enforce their legal rights
- the supposedly enforcing party will be estopped when it would be inequitable for them to enforce their rights

Question 27

Proprietary estoppel

Answer 27

Can enforce a promise that creates new legal rights
Applies when one party has led another to believe that they will enjoy some right and it would be unjust to allow the promisor to go back on their word

Question 28

Crabb v Arun District Council

Answer 28

About: proprietary estoppel
Court held that defendant was required to grant plaintiff the right of way as they had led him to believe they would allow him access through a second gate on their property (didn’t object when gate was built)

Question 29

Cowper Smith v Morgan

- when proprietary estoppel arises (5)

Answer 29

About: proprietary estoppel
SSC held that since both defendant and plaintiff (litigating over rights to family home) understood for a long time that they would inherit an interest in the house, it was sufficiently certain that plaintiff could rely on defendant’s promise to give him her interest even if at time of promise defendant owned no interest yet
Proprietary estoppel arises when
- A representation is made to a person which leads that person to believe they will enjoy some right over property
- The person reasonably relied on that belief by doing/not doing something
- The person suffers a detriment and it would be inequitable to allow the person responsible for the representation to go back on their word
- Representation/assurance may be express or implied, and may require recognition of new rights
- Can apply even if promisor didn’t have interest in property at time of promise, relevant question is whether promisee’s reliance was reasonable

Question 30

Breach of contract

Answer 30

Occurs when one or more parties fail to perform their contractual obligations

Question 31

Types of remedies to breach of contract (2)

Answer 31

Specific = decree ordering specific performance from defendant, or injunction against them
Monetary = damages, aim at compensating plaintiff and putting them in as good a position as they would have been if contract had been fulfilled (expectation damages, not reliance damages)

Question 32

Specific performance

Answer 32

Equitable remedy only given when damages are inadequate, traditionally granted for land contracts (Smelhago v Paramedevan: only applies when land is unique)

Question 33

Warner Bros v Nelson

- terms of negative covenant

Answer 33

About: specific performance
Court concluded that monetary damages weren’t an adequate remedy to Betty Davis refusing to fulfill acting contract because Davis’ talents were unique and damages would be difficult, enforced a negative covenant instead (positive covenants can’t be applied to contracts of personal service)
Courts will enforce negative covenant in personal service as long as it doesn’t amount to a positive covenant in disguise, and force the defendant to choose between remaining idle and performing the positive covenant

Question 34

Peevehouse v Garland Coal and Mining

Answer 34

About: measuring damages for breach of contract
Courts had to decide whether measurement was cost of performance ($29k) or diminution in value ($300)
While cost of performance is usually applied, courts used diminution of value here
Cost of performance was argued to be unfair, only a secondary provision of the contract, and not likely to be done by any reasonable person

Question 35

To determine the right measure of damages for breach of contract (2)

Answer 35

Does plaintiff have special interest in property other than as an economic vehicle?
Was this special interest communicated at contract formation or part of contract?
If yes, cost of performance may be more appropriate

Question 36

Groves v John Wunder

Answer 36

About: measuring damages for breach of contract
Court held that cost of performance was appropriate because any other measure would award defendant for intentional breach of contract
Dissent argued that diminution in value shouldn’t been used because damages should compensate plaintiff’s loss, not punish defendant for their breach

Question 37

Disgorgement damages

Answer 37

In exceptional circumstances, plaintiff may be awarded damages measured by defendant’s gain
Aim is to strip defendant of profit from improper use of plaintiff’s property
Common equitable remedy for breaches of fiduciary duty

Question 38

Attorney General v Blake

Answer 38

About: disgorgement damages

Court awarded how much Blake made from book deal to UK government

Question 39

Test for disgorgement damages (3)

Answer 39

Expectation damages or specific performance are inadequate
Relation between parties was one of trust
Plaintiff has legitimate interest in preventing defendant from profiting from breach

Question 40

Intangible losses

Answer 40

Traditionally, courts don’t reward damages for mental anguish/emotional suffering except if intangible benefits are purpose of contract

Question 41

Jarvis v Swan Tours Ltd

Answer 41

About: intangible losses
Court held that plaintiff was entitled to monetary damages for loss of enjoyment during vacation hosted by defendant since purpose of contract was for relaxation

Question 42

Punitive damages

Answer 42

Courts generally don’t try to punish defendant by awarding damages because they go against basic private law principle that damages are compensatory, are a windfall to plaintiff, and are penalties applied by civil court without protections of criminal law
Only when defendant’s conduct is harsh, vindictive, reprehensible and malicious

Question 43

Whiten v Pilot Insurance

Answer 43

About: punitive damages
SCC awarded $1 million punitive damages because defendant insurance company unjustifiable refused to pay appellant’s insurance claim

Question 44

Remoteness and consequential loss

Answer 44

Defendant is only liable for damages that could be reasonably considered to be naturally arising from the breach, and are reasonably known to both parties at time of contract
Special losses which are recoverable must be communicated to defendant by plaintiff

Question 45

Hadley v Baxendale

Answer 45

About: remoteness of losses
Court held that defendant wasn’t liable for lost profits from late machine part delivery because he didn’t know that late delivery would result in shut down of business

Question 46

Victoria Laundry Ltd v Newman Industries

Answer 46

About: remoteness of losses
Court awarded plaintiff damages for lost ordinary profit, but not lost profit from potential lucrative government contracts

Question 47

Mitigation of loss

Answer 47

Plaintiff must attempt to mitigate their loss, do everything a reasonable person would do
Plaintiff can claim any incidental expense used to reasonably mitigate the loss in damages
If plaintiff fails to mitigate, they aren’t entitled to damages resulting from failure to mitigate
If plaintiff has fair, real and substantial claim for specific performance, they don’t need to mitigate