Cotract Law Flashcards
What does Frustration deal with ?
Deals with whether radically changed circumstances can relieve parties of there Contractual obligations
Problem that frustration poses ?
Sanctity of contract ie still bound even if bad bargain vs events that make performance very different from what was expected
Arnold v Britain 2016 case facts and judgment
Times of high inflation
Term said service charge could be increased 10% each year
Term was still binding even when inflation slumped
Krell v Henry 1903 case facts and judgment
D agreed to hire c flat for 2 days not including overnight stay
Was to see the coronation of king Edward pass
Agreed sum of £75 with £25 paid in advance
Balance due on first day
Coronation cancelled and c sued for balance
Vaughan Williams at court of appeal said if particular state of thing needed to create foundation of contract and it is removed then frustrated
D not liable for balance but cannot reclaim 50 either as before frustrating event
Herne bay steamboat v Hutton 1903 case facts and judgment
D contracted to hire Cs steamboat cynthia for 2 days
D intended to sell tickets for trips to see naval review marking edwards coronation and to tour fleet at Spithead
D paid 50 in advance and 200 was due when boat left herne bay
Naval review cancelled when coronation cancelled
D no longer wanted ship
C claimed balance and d counter claimed return of 50
Same judges in krell however c could claim because distinguished from krell
Naval review not foundation could stilll see spit head
Davis v fareham udc 1956 case facts and judgment
C contracted to build 78 houses
C suffered delays because of shortage of skilled labour
Work tool 22 months instead of 8
C incurred costs and claimed frustration by shortage of skilled labour
Sought additional money on basis of quantum Meruit claim
Contract was frustrated and no room for quantum meruit mad matter of payment was dealt with in contract
Did not approve implied term in Taylor
The 3 board categories for frustration
1) where performance of some part of contract is literally impossible eg because of destruction of subject matter like music hall in Taylor but unlikely where only impractical or more costly like in David
2) where performance is possible and practical but the commercial purpose has been completely removed ie krell v Henry - these are rare
3) where performance is illegal ie fibrosa case
The sea angel case 2007 facts and judgment
Chartered the sea angel
Sea angel was held at ports as part of dispute over oil spill ; compensation
C claimed for extended period through off hire clause in contract
D said contract was frustrated because inability to leave port
Held contract not frustrated as performance not radically different
Ship being held at port was forseeable risk and off hire clause indicated d had carried this risk
Lots to take into account , multi factorial approach
Taylor v Caldwell 1863
C agreed to hire from D a music hall
Hall destroyed by fire
C claimed d was in breach and claimed preparation costs for events
Held implied term in contract that the foundation of contract was continued existence of music hall and that parties would be excused if ceased to exist
Consequences of frustration
1) brings contract to end automatically ie no party has option to continue which is different to breach of contract as innocent party could continue if want to
2) whole contract discharged - not just part of
3) contract cannot be temporarily frustrated - bank of New York Mellon v cine uk ltd 2021 - covid case
Frustrated contracts act 1943
All sums paid before frustrating event can be recovered ie 25 in krell but court may decide that some can be retained to cover expenses
All sums due but unpaid at time of event cease to be payable
Effectively act allows court to reach in and adjust the position as seems just in the circumstances
Davis v Fareham 1956
C contracted to build 78 houses
C suffered delays because of shortage of skilled labour
Work took 22 months instead of 8
Incurred large costs therefore claimed contract frustrated by shortage of labour and sought additional money on basis of quantum meriut claim
Contract was not frustrated and no room for quantum meruit as the matter of payment was dealt with in contract
Did not approve implied term basis in Taylor
Limits on frustration
If contract provides how event will be handled then that will take effect and contract will not be frustrated - Canary Wharf v European Medicines Agency 2019
Force majeur clause which says that certain terms of contract seize to bind under certain circumstances like strikes etc
Parties negligence
Self induced
Have the courts solved the dilemma ?
Radically different test in Davis used to limit frustration to cases that are truly exceptional
In large majority of cases the contract will be treated as allocating the risk and will be enforced - Canary Wharf
Controversy remains about how line should be drawn - there is no simple tile that can be applied in the grey area - whether it depends on a multifactorial approach, or construction of the contract, the decision seems to depend on a very detailed assessment of the evidence
Paradine v Jane 1646
Before doctrine of frustration
Still liable for rent even though expelled from land .
Change in circumstances did not matter
Canary Wharf v European Medicines Agency 2019
25 year lease of premises granted to European Medicines Agency
Agency needed to move headquarters to Amsterdam
Agency claimed lease frustrated on illegality and common purpose like in krell v Henry
First ground rejected as not illegal to remain in London
Applied radically different test in Davis and multi factorial approach in sea angel
Held not like krell and contract provided what should happen
What is an actionable misrepresentation
A pre contractual false statement of material fact , made either orally, in writing or by conduct , that induces a party to enter into a contract with the party making the representation
Misrep is a vitiating factor
Set aside
Remedy of recision is for misrep
What is difference between recision and termination
Recision - putting parties into position they were before contract was formed
Termination - releases parties from any further obligations ; does not provide for undoing of obligations already performed
Derry v peek 1889 - fraud is proved …
1) when it is shown that false representation has been made knowingly or
2) without belief in its truth or
3) recklessly , careless whether it be true or not
Does Derry v peak include negligent misrepresentation
What are the types of misrep ?
Fraudulent
Innocent
Negligent
Controls preventing recision
Affirmation - long v lloyd 1958 - dynamo gone agreed pay half … broke again … held had affirmed first time
Lapse of time - leaf v international galleries 1950
Third party rights prevent restitution - crystal place v Dowie 2007
Crystal place v dowie - third party rights case
Palace entered into agreement with dowie - compromise agreement
Place said only entered into because of misrep of dowie that wanted to move up north because of family reasons and didn’t have contact with other London clubs ie Charlton
Later joined Charlton and then coventry
Also meant palce had waived rights to millions
Revision prevented because Coventry had contract of employment so recision not possible
Fraudulent misrep and damages
Damages for fraudulent misrep assessed under tort of deceit
Foreseeability not considered so all losses flowing from misrep awarded
Negligent misrep damages treated the same unless
Can prove reasonably grounds to believe misrep was true up untill contract made
Is contributory negligence a defence
Yes
Does section 2(1) of misrep act 1967 create a new category of negligent misrep ?
Some academics and judges refer to as negligent misrep claims
Negligent misrep also used for development of tort of negligence in regard to negligent misstatements brought about by hedley Byrne v heller and partners 1963
Hedley Byrne v heller and partners 1963 tort of negligence extended to
Include economic loss caused by negligent misstatements
Section 2()2
Damages cannot be awarded if recision not possible salt v strastone
Misrepresentations do not include
Trade puffs - ie Nike air trainers make u fly
Statements of opinion - bisset v Wilkinson - seller believed land could rear 2000 sheep but couldn’t
Esso petroleum v Mardon 1976
Esso had specialist knowledge and failed to take care with statement
False statement as to the law pankhania v Hackney London bourogh council 2002
Party bought property at auction
Auction catalogue said ncp could be given 3 months notice
But had statutory protection
Misrep
Actionable misrep through conduct ie silence and implied representation
General rule that silence will not amount to actionable misrep fletcher v krell 1873
Sykes v Taylor rose 2004 - no legal obligation to reveal material facts
House was site of murder
Spice girls b Aprilla 2002 - implied rep that all of girls would be on tour so misrep
Exception to silence rule
Change of circumstances
With v oflanagan 1936 - continuing misrep not corrected
Half truths - nothing ham patent brick Co v butler 1886
Inducement to enter into contract
BV Nederlandse industrie 2019
Fraudulent misrep - evidential presumption of fact that the representee was induced. Only need to show they had been materially influenced by representation, with it being actively in there mind
Innocent/ negligent misrep - needs to show but for reason for entering
Representation but not inducement
JEB fasteners v marks bloom 1983 - negligently created accounts not reason for claimants buying company
Representation not believed but still inducement established
Hayward v Zurich insurance Co 2016
Employee suffered injury at work … insurer did not believe extent of injury
Tip off from neighbour that extent of injury fraudulent
Held irelavent whether misrep believed or not - just whether they were influenced by it
Discovering truth
Redgrave v Hurd 1881
Attwood v small 1838
Good faith in English law compared to USA
English law not embraced doctrine of good faith
USA has
USA - good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing
Every contract under the uniform commercial code requires obligation of good faith in us
Use of good faith in consumer rights act 2015 is derived from EU derivative 1993
Meaning of good faith here not further defined
Good faith here is not contextual
Does not refer to expectations in the market just imposes a standard
2 kinds of good faith
Good faith in formation - making contract
Good faith in performance - carrying out the contract
Walford v miles 1992 HL
- good faith in formation -
D owned photo processing business and in discussion with c about sale for 2 mill
D agreed not to negotiate with third party if c obtained bank letter confirming funds
C provide letter
D then withdrew and sold to third party
C argued lock out agreement that put parties under good faith
Accepted by dissenting judgment
But majority said would go against freedom to contract
Limited types of contract of utmost good faith - insurance , partnership , trusteeship untill ….
Yam seng v international trade 2013
Yam seng case
Yam seng contracted with d to distribute Man U fragrances in Middle East
Mainly duty free shops
Breaches alleged- undercut yam seng by offering same products to domestic market so duty free was pointless
Provided false info that yam sent was likely to rely on in marketing
But not obvious breaches of express terms
Implied term of good faith held
Relational contract
Bristol ground school ltd 2014
C authorised manuals for pilots ; entered joint venture with contract with d under which d converted manuals to digital form with d receiving royalties
Relationship worsened and c accessed d database secretly and downloaded files
Judge applied yam seng - relational contract with implied term to act in Good faith
Bates v post office 2019
500 former post masters
Following intro of new accounting software 1999 , many found unexplained shortfalls in their accounts
C said shortfalls due to software malfunction
Now settled
But
Postmasters were independent contractors not employees
Was a relational contract so would of had good faith involved
Carter and Courtney 2016 article
Response to good faith in yam seng
Rejects good faith implied term because unorthodox
Good faith not needed ; result could have been achieved by using ordinary approach to termination
A good faith implied term would be of uncertain scope and undermine certainty in the law
Campbell 2014
Response to yam seng
Welcomes legates formulation as based on implied term - some commercial contracts need for efficiency
Welcomes recognition of category of relational contracts
Good faith elements already in English law just not under that name
Disagreement over yam seng is over
Whether there should be explicit reference to good faith in limited circumstances
Yam seng is contextual meaning of good faith and has no teeth when confronted with express term contrary
Good faith and issue of uncertainty
Times travel 2021
Law does not recognise general principle of good faith ; would create uncertainty in commercial relations
Arnold v Britain 2016
Majority - no mention of good faith
Dissent judgment - giving term literal meaning would be grotesque outcome
Stephen waddams argument
Common law should adopt principle that courts could override terms when grossly unfair or unreasonable
Relational contracts ie
Long term distributor ship agreements where mutual trust and and confidence is necessary
