Key Cases - Establishing ratio/obiter (unit1-4) Flashcards
Explain MWB Business Exchange Centres Ltd v Rock Advertising Ltd and its significance
Rock accumulated licence fee arrears. Rock’s director, Mr Idehen, proposed a revised schedule of payments to Ms Evans, a credit controller employed by MWB. Under his proposal, certain payments would be deferred and the accumulated arrears would be spread over the remainder of the licence term. This revised schedule was worth slightly less to MWB than the original terms, because of the interest cost of deferral.
A dispute arose as to whether Ms Evans had accepted Mr Idehen’s proposal orally. MWB subsequently locked Rock out of the premises, terminated the licence and sued for the arrears.
Judgement:
The Supreme Court disagreed with the Court of Appeal and gave effect to the no oral modification clause, rendering the subsequent oral modification ineffective, yet by reference to the same basic notion of freedom of contract and party autonomy.
The Supreme Court unanimously allowed the appeal. Lord Sumption gave the lead judgement, with which Lady Hale, Lord Wilson and Lord Lloyd-Jones agree and Lord Briggs delivered a concurring judgement. Lord Sumption stated, ‘Nearly all contracts bind the parties to some course of action, and to that extent restrict their autonomy.
Ratio:
The judgement reinforces the validity and enforceability of NOM clauses in contracts and highlights the importance of adhering to the formal requirements for variations as stipulated by the parties in their agreement.
Explain the Felthouse v Bindley [1862] and its significance
The complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else.
Key Issues in Felthouse v Bindley
Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show that the horse was his property, in order to prove there was a valid contract. Mr Bindley argued there was no valid contract for the horse, since the nephew had not communicated his acceptance of the complainant’s offer. The issue in this case was whether silence or a failure to reject an offer amount to acceptance
Analysis/Judgement:
It was held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.
Ratio:
The nephew’s failure to respond to the complainant did not amount to an acceptance of his offer. Therefore silence does not qualify acceptance with verbal contractual agreements.
Explain Vitol SA v Norelf Ltd, The Santa Clare [1996] and its significance
The defendant buyers – Vitol (V), entered into a contract with the plaintiff sellers – Norelf (N) to purchase a cargo of propane at a price of $400 per tone. The cargo was to be shipped from Houston in the US and delivered between 1 and 7 March 1991. On 8 March, the buyers sent a telex to the sellers that they had been advised that the vessel would not complete loading until 9 March and accordingly, the cargo would not be delivered on time. In light of the breach of this condition, V wanted to reject the cargo and repudiate the contrac
The vessel completed loading and neither party took any steps to perform the contract.
Key issues:
(1) Can an aggrieved party accept repudiation of a contract merely by failing to perform its part of the contract?
(2) Is this a question of law or a question of fact?
Judgement/Ratio:
Analysis/Judgement:
The appeal was allowed and the cross-appeal was dismissed.
(1) Whether an aggrieved party can accept repudiation of a contract merely by failing to perform its part of the contract is a question of law under s. 1(2) Arbitration Act 1979.
(2) When the contract was repudiated by the buyers, the sellers had a choice of either accepting the repudiation or affirming the contract.
(2) The sellers’ failure to perform the contract could not constitute acceptance of the buyers’ anticipatory repudiation of the contract as the failure did not evince a clear and unequivocal choice not to affirm the contract.
Explain Carlill v Carbolic Smoke Ball Company (1893) and its significance
The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a newspaper for their products, stating that any person who purchased and used their product but still contracted influenza despite properly following the instructions would be entitled to a £100 reward. The advert further stated that the company had demonstrated its sincerity by placing £1000 in a bank account to act as the reward. The claimant, Mrs Carlill, thus purchased some smoke balls and, despite proper use, contracted influenza and attempted to claim the £100 reward from the defendants.
The key question was whether the advert in question constituted an offer or an invitation to treat.
- No Binding Contract: The company argued that the advertisement was not a contract but a mere sales puff and that no binding contract could be formed with the general public.
- Vagueness of Terms: The defense contended that the terms of the offer were too vague, particularly with no time limit set for when the influenza had to be contracted, making the offer unenforceable.
- Lack of Acceptance: The company suggested that there was no acceptance of the offer because the plaintiff did not give notice of acceptance before using the smoke ball.
The Court of Appeal found for the claimant, determining that the advert amounted to the offer for a unilateral contract by the defendants. In completing the conditions stipulated by the advert, Mrs Carlill provided acceptance. The Court further found that: the advert’s own claim to sincerity negated the company’s assertion of lacking intent; an offer could indeed be made to the world; wording need only be reasonably clear to imply terms rather than entirely clear; and consideration was identifiable in the use of the balls.
It’s a key case in establishing that unilateral contracts, offered to the public at large can be accepted by anyone who performs the stipulation contained within it (i.e. with rewards etc) and that with these types of offers acceptance of an offer should normally be notified, but the language and nature of the transaction may show that notice of acceptance is not required apart from notice of performance
Key Rule:
We don’t have a definitive domestic precedent (other than a persuasive argument from the US) and there have been a few cases over the years which contradict each other.
However, it is generally accepted that an offer of a unilateral contract will become binding once the offeree accepts and provides consideration for the offer by fulfilling the condition stated in the offer. In other words, once they do what the offer tells them to (i.e. locate and return a lost dog for example), the unilateral contract will be binding. Until this point, the offer is revocable and they must communicate their revocation in the same manner in which they communicated the offer.
Explain Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council (1990) and its significance
The defendants were a local authority that managed the local airport as its owners. They had granted the plaintiffs, who were a flight club, a concession to operate casual flights out of the airport. The concession came up for renewal and the tender invitation was released to the plaintiff and six other companies. The tender had a clause stating that tenders would not be considered if they missed the time and date deadline stipulated. The town’s clerk failed to empty the letterbox on time and as such, the plaintiff’s tender missed the deadline and the defendant accepted a lower proposal.
The plaintiffs brought an action for damages against the defendant for negligence and for breaching their contract. At an initial hearing, the judge held that the request for tenders by the defendant required them to consider all the tenders received and on this basis, they were liable to the plaintiff. The defendants appealed this decision.
Key issues:
The issue for the court was whether the invitation to submit a bid for tender could be considered to establish the intent to create a contract between the parties. It is important to note that contracts were not to be readily implied by the courts which made this deliberation particularly important.
Judgement/ratio:
The court dismissed the defendant’s appeal. They found that the invitation to submit a tender was usually no more than an offer to receive bids but in this circumstance, examining the behaviour of the parties created clear intention to create a contract and therefore the failure to consider the plaintiff’s application made them liable.
Invitations for tenders are normally invitations to treat, not offers. Therefore, defendants are not obliged to accept any particular tender.
However, invitations for tenders may give rise to a collateral contract which requires the defendant to properly consider all tenders submitted in accordance with the invitation. This turns on whether a reasonable observer would think it obvious that the defendant could not accept a tender before they had considered all valid submissions.
Explain Entores v Miles Far East Corp [1955] and its significance
The complainants, Entores, were a company that was based in London. They had sent an offer to purchase 100 tons of copper cathodes to the defendants, Miles Far East Corp. Their company was based in Amsterdam and this offer was communicated by Telex, a form of instantaneous communication.
The Dutch company sent an acceptance of this offer by Telex to the complainants. When the contract was not fulfilled, the complainants tried to sue the defendants for damages.
In order to decide whether the action for damages should arise in English or Dutch law, the court had to decide the moment of acceptance of the contract. If it was when the contract acceptance was sent, damages would be dealt with under Dutch law. If acceptance was when it was received, then it would be under English law.
Analysis/Judgement:
The court held that the contract and damages were to be decided by English law. It was stated that the postal rule did not apply for instantaneous communications. Since Telex was a form of instant messaging, the normal postal rule of acceptance would not apply and instead, acceptance would be when the message by Telex was received.
Thus, the contract was created in London. This general principle on acceptance was held to apply to all forms of instantaneous communication methods. Acceptance via these forms of communication had to be clear before any contract is created.
Explain The Brimes
(Tenax Steamship Co v Owners of the Motor Vessel Brimnes 1974) and its significance
The ship called Brimnes belonged to the defendants, Owners of the Motor Vessel Brimnes. They agreed to sell her to the complainant, which was on the condition that the ship would be time-chartered back to them. On several occasions, the hire payment was made later than agreed. In response, the complainant sent a message by Telex, which gave notice of withdrawal of the ship from service. This Telex message was sent during normal office hours. However, the defendant did not read it until the next day and had already made payment.
The claim was dismissed by the court, but this decision was appealed. The issue in the appeal concerned whether the notice of withdrawal of service was effective before the defendant’s payment of hire.
Analysis/Judgement:
It was held that the withdrawal was effective when it Telex message was received, not when the message was read. As it was sent during normal office hours, the staff neglected to pay attention to the Telex machine, as the staff member in charge of Telex did not leave the office until later on.
Thus, this case became authority for the reasoning that any withdrawal of an offer sent through a form of instantaneous communication, such as Telex, would be effective when it could have been read by the other party; not when it was actually read. In this case, the defendant should have read this Telex message, but through their own actions, this did not happen.
Ratio:
Communication of withdrawal of an offer by telex is effective when it could be read rather than when it is in fact read - as seen in The Brimnes (1975)
Explain Tweedle v Atkinson (1861) and
McCoubray v Thomson (1868)
Explain the significance of these cases in relation to the doctrine of privity and + consideration
In Tweedle v Atkinson (1861)
The son and daughter of the parties involved in this dispute were getting married. As such, the father of the groom and father of the bride entered into an agreement that they would both pay sums of money to the couple. Unfortunately, the father of the bride died before he paid the money to the couple and the father of the son died before he could sue on the agreement between the parties. As a result of this, the groom brought a claim against the executor of the will for the payment that was previously agreed between the fathers.
The primary issue for the court was whether or not the son could, as a third party to the agreement, enforce the contract between the fathers, which was ultimately for the benefit of him and his wife. It was argued that the intention of the agreement between the fathers was for the couple to derive a benefit from the payment of the money. Moreover, it was argued that preventing the son from being able to enforce the contract would effectively ignore the intention of the fathers.
Analysis/Judgement:
The groom’s claim was rejected by the court. It was held that the groom was not a part of the agreement between the fathers and he did not provide any consideration for the promise made by the father of the bride. Also, as a stranger to the contract, the son could not enforce it.
On this basis, the court found in favour for the executor of the will.
A third party cannot enforce the contract, albeit they have an interest in the contract, as the agreement is between the promisee and promisor
In McCoubray v Thomson (1868)
Landowner wished to transfer his property in equal shares to P and D. D wanted all of the land and P agreed to this provided he was paid a sum of money. The landowner agreed that he would transfer the land to D provided this payment was made. D later refused to pay, and P sued.
These two cases developed the doctrine of Privity:
Tweedle v Atkinson(1861;) McCoubray v Thomson(1868) developed the following principles:
Clark – ‘Prevents a contract from being enforceable against someone who is not a party to it.’
Friel – ‘Privity denies the right to a person who is not a party to a contract and therefore
cannot be said to have supplied consideration from enforcing the contact.
Explain Foakes v Beer (1883) and its significance
The respondent, Beer, loaned the appellant, Dr Foakes, £2090 19s. When he was unable to repay this loan she received a judgment in her favour to recover this amount. The pair then entered an agreement whereby ‘in consideration’ of an initial payment of £500 and ‘on condition’ of six-monthly payments of £250 until the whole amount was repaid, she would not enforce her judgment against him. Foakes made these regular payments until the entire amount was repaid. However, he had not paid any interest on the judgement debt, which Beer was entitled to under statute. This interest totalled £302 19s 6d.
Key issues:
The respondent’s case was that the promise not to enforce the judgement was not supported by good consideration because the appellant had only done what he was already contractually bound to do. The respondent relied on the rule in Pinnel’s Case (1602) 5 Co Rep 117 that part payment of a debt could not be satisfaction of the whole.
Analysis/Judgement:
The House of Lords held that the respondent’s promise not to enforce the judgment was not binding as Dr Foakes had not provided any consideration. Their Lordships approved the rule in Pinnel’s Case.
Ratio:
It is a leading case from the House of Lords on the legal concept of consideration. The doctrine that payment by the debtor of a less sum than the whole amount of the debt will not extinguish the debt, although the creditor expressly agree to receive it in full and give a receipt or writing to that effect, is well established by abundant authority.
Explain Central London Property Trust v High Trees House (1947) and its significance relating to the doctrine of promissory estoppel in English law
In 1937, Central London Property Trust Ltd (CLPT) leased a block of flats in London to High Trees House Ltd (HTH) at £2,500 per year for 99 years. Due to the impact of World War II, there was a drastic under-occupancy of the flats in 1940. CLPT agreed to reduce the rent to £1,250. This halved rent was paid until the end of 1945.
CLPT then claimed for the full rent for the last 2 quarters of 1945.
Key issues:
The key question was whether the agreement by CLPT to accept a reduced rent was legally binding, and thus not allowing them to request the full rent once the flats were fully occupied again.
Analysis/Judgement:
The court held that CLPT could not go back on its promise to accept reduced rent for the period when the flats were not fully occupied. This was held as a clear case of CLPT making a promissory representation that they intended HTH to rely on and thus were estopped from reneging. However, it was also held that once conditions went back to normal, the original agreement could be enforced and therefore the claim for full rent for the last quarters of 1945 was successful.
The High Trees case thus strongly established the principle of promissory estoppel in English law, i.e., once a promise is made and relied upon, it cannot be reneged on without agreement (even if not supported by consideration) if this would be inequitable.
However, importantly, it was also stipulated by Lord Denning that the effect of such a promissory estoppel ‘is only suspensive’ — i.e., it only temporarily varied the rent payable — and does not permanently extinguish rights.
Ratio:
Established the doctrine of promissory estoppel in English law which prevents a party from backing out of a promise which the other party had relied on, even though the promise wasn’t supported by consideration.
Explain L’Estrange v Graucob (1934)
and its significance
The claimant, L’Estrange, contracted to purchase a slot machine for cigarettes from the defendant, Graucob, and the agreement included an express clause stating ‘This agreement contains all the terms and conditions under which I agree to purchase the machine specified above and any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded’. The machine proved to be faulty and the claimant thus brought an action against the defendant, alleging that the machine breached the Sale of Goods Act by not being of merchantable quality.
The defendant asserted that the statute was made irrelevant by the express clause, and that he was not in breach of the agreement they had made. The claimant responded she had been unaware of the clause as she had not properly read the agreement and it ought not apply.
Key issues:
Whether the clause excluding all terms not stated in the contract should be deemed effective and binding.
Analysis/Judgement:
The Court of Appeal found for the defendant, determining that the express provisions of the contract were binding and effectively excluded the relevance of statutory sales provisions. Furthermore, the fact that the claimant had not properly read the contract did not impact its validity, as in signing the contract she consented to be bound by its contents. Significantly this case emphasizes the Court’s respect for sanctity of contract.
Affirmed that the clauses of a written contract are binding on the signatories, even where a party is unaware of the contract’s full contents.
Ratio:
When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not (if the exemptions aren’t satisfied).
The rule in L’Estrange v Graucob reflects the classic freedom of contract position: if a sane adult signs a document then, provided he was not misled or forced to do so, he is deemed to agree to everything in it, even if he did not read it or agree to its contents in a meaningful sense. After all, he need not have signed it at all.
Explain Ramsgate victoria hotel Ltd v Mountfire (1865-1966) and its significance relating to the ‘lapse’ of an offer over time
Mountfire put in his offer to the complainant and paid a deposit to his bank account to buy them in June. This was for a certain price. He did not hear anything until six months later, when the offer was accepted and he received a letter of acceptance from the complainant.
By this time, the value of shares had dropped and the defendant was no longer interested. Mr Montefiore had not withdrawn his offer, but he did not go through with the sale. He was then informed that he had bee allotted shares in the hotel and mount fire subsequently refused to accept them due to the period of time that had passed.
Key issues:
The complainant brought an action for specific performance of the contract against the defendant. The issue was whether there was a contract between the parties after the acceptance of the original offer six months after it was made.
Analysis/Judgement:
The court held that the Ramsgate Victoria Hotel’s action for specific performance was unsuccessful. The offer that the defendant had made back in June was no longer valid to form a contract. A reasonable period of time had passed and the offer had lapsed.
The court stated that what would be classed as reasonable time for an offer to lapse would depend on the subject matter. In this case, it was decided that six months was the reasonable time before automatic expiration of the offer for shares. Yet, for other property, this would be decided by the court in the individual cases.
Ratio:
An offer may lapse after a specified period or on the occurrence of a specified period of time. If none, after a reasonable time - Ramsgate victoria hotel Ltd v Mountfire (1865-1966)
Explain Routledge v Grant (1828) and its significance
The defendant contacted the claimant in writing, offering to purchase the lease of the claimant’s home. The offer stated that it would remain open to the claimant for a period of six weeks. However, during this period, before the claimant had accepted, the defendant changed his mind about the purchase and wrote to the claimant once again purporting to withdraw the offer. After receiving this second letter, still within six weeks from the first, the claimant accepted the defendant’s offer.
Key issues:
The issue was whether the defendant was contractually bound by his original letter to keep the offer open for six weeks, and by extension whether he was therefore bound by the claimant’s acceptance within that period.
Analysis/Judgement:
The court held that the original letter did not bind the defendant to keep the offer open for a full six weeks, and as such it had been validly withdrawn by the defendant, and the claimant’s purported acceptance was ineffective.
The underlying reason for this was that it is a fundamental principle of contract law that one party cannot be bound whilst the other is not. In the words of Best CJ:
“… If a party make an offer and fix a period within which it is to be accepted or rejected by the person to whom it is made, though the latter may at any time within the stipulated period accept the offer, still the former may also at any time before it is accepted retract it; for to be valid, the contract must be mutual: both or neither of the parties must be bound by it…” (p. 4)
Ratio:
Routledge v Grant (1828) - An offer may be revoked (withdrawn) by the offeree at any time before acceptance.
Explain Mountford v Scott (1975) and its significance
The defendant granted the claimant a six-month option to buy his house for £10,000. The claimant gave £1 as consideration. The defendant purported to withdraw the option before the six-month period expired. Despite this, the claimant later attempted to exercise the option. When the defendant refused to sell, the claimant sued for specific performance. The defendant responded that the claimant had not given adequate consideration, so the option was unenforceable. Had the claimant provided good consideration for the option?
Analysis/Judgement:
The Court of Appeal held in the claimant’s favour. Since the adequacy of consideration is not relevant to whether it is valid, £1 was good consideration for the option. The defendant’s attempt to withdraw the option was invalid, and so the claimant could still exercise it. The claimant was therefore entitled to specific performance of the agreement.
Ratio:
Consideration does not need to be adequate to be valid. An option is an offer which is irrevocable for the duration of its terms. If the other party exercises the option, this constitutes an acceptance of the offer. This gives rise to a binding contract of sale.
An offer can be revoked any time before acceptance ..
Unless something has been provided in return to keep the offer open - (Mountford v Scott 1975)
Explain Hyde v Wrench (1840) and its significance
The defendant, Mr Wrench, offered to sell the farm he owned to the complainant, Mr Hyde. He offered to sell the property for £1,200, but this was declined by Mr Hyde. The defendant decided to write to the complainant with another offer; this time to sell the farm to him for £1,000.
He made it clear that this would be his final offer regarding the property. In response, Mr Hyde offered £950 for the farm in his letter. This was refused by Mr Wrench and he confirmed this with the complainant. Mr Hyde then agreed to buy the farm for £1,000, which was the sum that had previously been offered. However, Mr Wrench refused to sell his farm.
Key issues:
The complainant brought an action for specific performance, claiming that as Mr Wrench refused to sell the farm, this was a breach of contract.
The issue in this case was whether there was a valid contract between the parties and if a counter offer was made in discussions, whether the original offer would still remain open.
Analysis/judgement
The court dismissed the claims and held that there was no binding contract for the farm between Mr Hyde and Mr Wrench. It was stated that when a counter offer is made, this supersedes and destroys the original offer. This original offer is no longer available or on the table.
In this case, when Mr Hyde offered £950, he cancelled the £1,000 offer and could not back track and accept.
Ratio:
Hyde v Wrench (1840) - Implied rejection via a counter offer to original offer
