Contract - Privity of contract, part payment of debt, promissory estoppel, remedies, misrepresentation, mistake, duress & undue influence and discharge

Question 1

PRIVITY OF CONTRACT

1) General rule

2) Exceptions

3) Collateral Contract

4) Assign

5) Contract rights of third parties

Answer 1

1) - only parties to a contract can sue or be sued under that contract and they must have provided consideration

Key case Dunlop v Selfridge
- tyres dunlop - dew & co - selfridge. Selfridge did not keep agreement with dew & co. Dunlop sued Selfridge
- Held Dunlop not party to contract with selfridge, no consideration provided

2) Exceptions
Agency
- principal authorises agent to act on their behalf with a a third party - customer
- so long as acts within authority given- principal bound by contract agent enters into
- THERE is no contractual relationship with the agent
- agents can have authority which is:
* express - written down
* implied - acts done in the business or trade
* apparent - no actual authority - principal died, fired them or exceeded authority - but third party has reasonable grounds to believe the agent has the authority and enters into the contract on that basis. Contact valid between principal and customer - NOT the agent

3) Collateral contract
- can be formed between party and a third party outside the contract IF third party has given a promise on which party relied when entered into contract with other party, and for which third party received some sort of benefit
eg 3rd party recommends painter to party 1 as gets commission. Party 1 & 2 enter into contract as a result of recommendation, paint fails - P1 can’t sue P2 but can sue 3rd party - because collateral contract formed - promise provided to P1 and received commission

4) Assign
- a party can assign their contract to another and they can therefore sue, even though not originally party to contract

5) Contracts (rights of third party Act 1999)
- 3rd party can enforce terms of contract not party to
- BUT can be expressly excluded in a contract so won’t operate
- 2 circs where can arise
* contract expressly provides 3rd party can enforce, or
* contract=
-confer benefit on third party
- parties intended the term to be enforceable by the third party- presumed if in contract - presumption can be rebutted if it is expressly excluded

-CAN only be done if third party can be expressly identified in the contract - absolutely clear - name, class or description
- so if clearly named = obvious
- BUT if group of people and third party part of that then - applies, but where not clear will be trickier

Question 2

Part Payment of a debt and promissory Estoppel

1) What is it?

2) What is the rule

3) What is promissory estoppel and what does it do?

Answer 2

1) - promise to accept part payment of debt DOES not discharge other party from paying full amount

2) What is the rule?
- paying less is not good consideration
- can’t pay less and expect full debt to be discharged
- This is case EVEN IF creditor states debtor is released from deb t
- if debtor wants to pay less and creditor accepts, debtor MUST give some consideration for it to be accepted
- new and valid consideration can be anything that involves a NEW ELEMENT - eg paying different time, place.
- to be valid new consideration other side must accept part payment
- key case Pinnel - part payment but in advance and therefore seen as new element and valid consideration

3) Promissory Estoppel
- operates as exception to rule that part payment of debt is not a good one
- equitable doctrine at CTS discretion
- party seeking to use must come with CLEAN HANDS not anything dodgy, as equitable person relying on it must be good and act honourably
- RULE
- where one person acts in a certain way, relies on the promise of another party, and they then go back on their promise
- Estoppel, prevents estopps party from going back on the promise
- designed to prevent unconscionable conduct - stopping promise when going back is unfair
Requirements =
1) Pre existing contractual relationship
2) clear unequivocal communications that the B accepted the offer from A and did so
3) Must be objectively intended that A intended to rely upon the statement or promise
4) A relied on the communication/understanding then changed their position. A need not have suffered any detriment.
5) B now seeks to rely on the original communication or understanding and its inequitable to do so
6) will be inequitable if it would cause A to suffer detriment having changed their position in reliance on the promise

KEY CASE - High Trees - reduced rent during war, then after war asked for payment back dated. Promissory estoppel operated - there was no valid consideration BUT a promise had been given and they had now changed their position, promise that was relied on - estoppel relied upon

When PE comes to an end
- In HIgh trees PE came to an end when war ended, because circumstances that gave rise to the estoppel have stopped
- PE can therefore come to an end at a reasonable time after the circumstances which gave rise to PE came to an end
- reasonable notice must be given that the promise will now be ending. This prevents estoppel being applied for as now it will come to an end

Question 3

REMEDIES

1) Damages

Answer 3

1) Damages
- financial remedy
- compensate so injured party back in position would have been if contract properly performed
- 3 ways to obtain
1) Liquidated damage clause
- parties insert a clause saying how will pay if contract breached
- this clause can be struck out as a penalty by the courts - called PENALTY RULE
Test for penalty rule - Cavendish Square Holdings
1) Must have liquidated damages clause, which is triggered by breach of contract
2) There is NO justification for the liquidated damages clause.
- to be justified it must protect legitimate interests of party ie must cover loss suffered and protect commercial interests of the innocent party eg deter party from breaching a term that would damage innocent parties commercial interests
3) clause is excessive and unconscionable.
- Amount payable disproportionate to the commercial interests of innocent party
- must be very high degree of disproportionality
- greater the bargaining power between parties lees likely court will deem the clause a penalty.
- need to identify what the legitimate interests of the innocent party.
- this is what the primary commercial purpose of the contract is for the innocent party,
- Does the liquidated damages clause protect that? It will do if it deters the party from breaching a term of the contract that is important to the contracts purpose or provides compensation to the innocent party, which allows it to fulfil or protect its ability to perform its side of the bargain.
- as well as being subject to the penalty assessment , liquidated damages clauses in consumer contracts are also subject to the obligation of fairness under CRA 2015
- liquidated damages clause is not subject to any limitations such as causation, remoteness or mitigation

3) Unliquidated damages - No liquidated damages clause or liquidated damages clause has been struck out