Law For Business Flashcards
what is the law of binding precedent
have to refer to the decisions of other judges for there decisions
what are the four things a legally binding contract must have
1) an offer
2) an acceptance offer
3)exchange of something of value (consideration)
4) intention to create legal relationship
what type of contracts must be written?
- contracts to sell land
- contracts to obtain credit
- contracts of marine insurance
what is an offer?
clear statement of the term of which the offeror is prepared to make an agreement with another party (offeree)
offers can be bilateral and unilateral
what is a bilateral offer
bilateral is the exchange of two promises
eg
David agrees to buy a specific car for an agreed price from tom, tom then agrees to deliver the car in that position eg if its a new car tom will deliver a new car
what is a unilateral offer
unilateral is a promise, eg pay a sum in return of completion
Unilateral offers can be made to the whole world, if this is the case, there may be several acceptances of the offer.
Bilateral offers are commonly made to one other person
E.g. Betty may promise to pay £100 to anyone who returns her cat that is missing.
in order for a contract to be legally binding it must include
1) terms of an offer must be clearly stated
2) offeror must intend to be legally bound
3) intention to be legally bound must be communicated to offeree
what case was highlighted for being too vague and therefore was not legally binding
Guthing v lynn
The case of Guthing v Lynn (1831) is an example of a vague term. The buyer of a horse made a promise to give the seller an extra £5 if the horse was ‘lucky for me’. It was held that the phrase was ‘lucky for me’ was too vague to be enforceable.
what is the case study hills v acros about
Hillas v Arcos (1932) –
vague terms - previous dealings – contract for the sale of wood
contained an option permitting the buyer to buy more wood next year. There were no other terms. It was held this was a valid offer as the terms could be clarified by looking at the previous dealings between the parties as well as from the custom and practice of the timber trade.
what is a statutory implied term
This is a term contained in a statute/Act of Parliament.
E.g., an offer to sell goods that are displayed without a price is valid as s8 Sale of Goods Act 1979 infers that a reasonable price will be paid.
what does an abbreviation clause do and explain Foley v Classique Coaches
An arbitration clause will refer any disputes, in this case relating to vagueness, to be determined by an arbitrator.
Foley v Classique Coaches – vague terms - mechanism (arbitration) in place to agree price of petrol., the contract was still enforceable despite this core term not being agreed.
what is an invitation to treat
Products in catalogues, menus and items displayed in shops are known as ‘invitations to treat’, not offers for sale. There are inviting potential customers to make an offer to buy the product.
what are the 3 cases that arrised from invitations to treat and explain them
Partridge v critten
Fisher v bell
Pharmaceutical society v boots
1) Partridge v Crittenden (1968)
The defendant placed an advert in a magazine offering wild birds for sale. It was an offence to sell these birds under the Wild Birds Act 1954. The defendant was found not guilty as the advert was not an offer, it was merely encouraging others to make an offer to him (which he could reject or accept). The advert was an invitation to treat.
2) Fisher v Bell (1960)
The defendant, having placed a flick knife for sale in his shop window, was accused of ‘offering for sale an offensive weapon’. It was held he was not guilty as he had not made an offer. The placing of a flick knife in a window was an invitation to treat, not an offer. The customer makes the offer when he attempts to buy the product and the shop owner can accept or reject this offer.
3) Pharmaceutical Society (GB) v Boots Cash Chemists (1953)
Boots were prosecuted for selling drugs without the supervision of a registered pharmacist. It was held they were not guilty as the medicines on display were just invitations to treat. The offer was made when the customer presented the goods at the till, at which a pharmacist was present, and the pharmacist could, at that point, refuse the customer’s offer if need be
what happens in the negotiation stage of a contract
when finalising a contract, the parties will spend time negotiating to iron out all the details. Problems occur when one party takes one of these negotiation statements as an offer and tries to accept it.
A court will have to decide if the statement is an offer or just part of the negotiations.
what 2 cases arrised due to the negotiation stage
Harvey v facey
Gibson v Manchester council
Harvey v Facey (1893):
Claimant inquired about the lowest price for Bumper Hall Pen.
Defendant replied with £900, but no contract formed.
Court held it was a statement of information, not an offer.
Gibson v Manchester City Council (1979):
Council tenant sought to buy his council house.
Council replied, ‘may be prepared to sell,’ invited application.
Tenant applied, but rejected due to policy change.
Court ruled council’s letter an invitation to treat, not an offer.
Tenant made the offer through the application; no acceptance, no contract.
if someone does something unaware of the reward are they still entitled to the reward?
The offeree must know of the offer and its terms to be able to accept it.
Consider the situation of a person who returns a lost pet and is unaware of a reward.
An offer can be accepted in many ways e.g., word of mouth, in writing or by gesture (e.g., when you take goods to the cashier in a shop).
unilateral contract can include the whole world
which case is An example of an offer to the whole world can be seen
Carlill v Carbolic Smoke Ball Co (1893):
- Smoke ball advertised to prevent influenza.
- Company offered £100 to users who, after correct use, caught influenza.
- Money placed in a local bank to show sincerity.
- Mrs. Carlill bought, used it, and caught influenza.
- Company claimed the ad was a puff, but court held it as an offer.
Placing money in the bank indicated an intention to make an offer.
Established that offers can be made to the entire world, and advertisements can be considered offers.
what are the 4 ways a contract can be terminated
Hyde v wrench
Ramsgate hotel v mintefore
Dickinson v Dodds
Death:
If the offeror dies, the offer typically becomes invalid.
Rejection & Counter Offers:
Rejection ceases the offer’s existence.
A counter-offer is both a rejection and a new offer (Hyde v Wrench, 1840).
Example: Defendant offered farm for £1,000; claimant countered with £950, destroying the original offer.
Lapse of Time:
Offer valid for a specified time; if not, it lapses after a reasonable time.
Ramsgate Hotel v Montefiore (1866) - Shares application lapsed due to extended delay; emphasizes timely response.
Revocation:
Offers can be withdrawn before acceptance.
Effective if the offeree knows of the withdrawal (Dickinson v Dodds, 1876).
Example: Dodds offered property to Dickinson, sold it to a third party, and Dickinson, unaware of the sale, tried to accept. Offer had been revoked, and acceptance was not possible.
how do you terminate a unilateral offer and a bilateral offer
unilateral
the offeror must take reasonable steps to state the offer is no longer open. E.g., an advert placed in the same way as the original offer to this effect would satisfy this.
bilateral
if someone has begun, but not completed the act required, e.g., return of a lost pet, then the offer cannot be revoked for that person as it would not be fair.
The offeree, by accepting the offer, agrees to be bound by all the terms of the offer.
Therefore, the acceptance must be:
- A “mirror image” of the offer
- Unconditional
- Communicated to the offeror
Acceptance may be by express words, either oral or written, or may be implied from conduct. The courts will only infer acceptance through conduct if it appears reasonable to conclude that the actions of the offeree showed an intention to accept the offer.
We will look at each of these in turn to ensure you understand what they cover.
what is meant by the mirror image of an offer
Neale v Merritt
The offeree must accept the offer giveneactly.
Neale v Merrett – mirror image rule - lump sum sale, accepted by £80 and rest in instalments. This was ineffective as the offeree had not accepted the original (lump sum) offer.
what is unconditional acceptance
Is there is a condition attached to the acceptance it is not binding as it is not mirroring the offer.
In other words, the offeree must agree to the exact terms set out in the offer made by the offeror
what are the three methods of communication with an offer?
- Communication is only effective if made by an authorised person
(A) Conduct
(B) Verbal Communication
(C) The Postal Rule
what is conduct and the case relating to it
Brogan v metropolitan railway
Brogden v Metropolitan Railway – acceptance by conduct - contract being negotiated and an order placed, seen as acceptance of the terms.
It was held that the contract sent by Brogden had been accepted by conduct. The contract sent by Brogden was a counter-offer which was accepted by the company when they placed an order.
what is the impact of verbal communciation
Acceptance is only valid when the offeror knows of the acceptance. This is straightforward when parties are face to face but more problematic when they are not.
Acceptance by telephone is held to be effective only on being heard by the offeror i.e., only effective when received. Problems may arise if an oral contract is being made over the telephone when there could be interference on the line, and the offeree is unaware that the offeror has not heard his acceptance.
what is the postal ruleand what adam v lindsell
Postal Rule:
Acceptance of an offer is valid when it is posted.
Adams v Lindsell (1818): postal rule - sale of wool and delay in communication did not prevent contract being in place.
can the postal rule be avoided
Yes
Parties can avoid the postal rule by insisting on a different means of communication or stating that letters are effective on receipt (not posting). The courts can also imply such an intention.
can the offeror waive the communication rule
whatis felthouse v bidley
Offeror cannot waive the communication rule
Felthouse v Bindley (1862):
– Felthouse v Bindley – withdrawal of horse from an auction never communicated failed; the horse still belonged to the seller as there was no communicated acceptance.
is communication required in a unilateral contract
Unilateral Contracts:
In a unilateral contract, the offeror implies that notification of acceptance is not required.
what is consideration
- consideration in a contract is the promise of performance, rather than performance itself. This means that a contract has legal effect from the moment it is agreed, and that it can be enforced even if that party is not yet due to pay or perform.
Imagine you have two parties – A + B. They enter a contract for A to sell goods to B.
A’s consideration will be the goods or the promise of the goods
B’s consideration will be the money or the promise of money
what are the case studies linking to consideration
currie v misa
dunlop v selfriges
In Currie v Misa (1875) it was held that a valuable consideration, may consists in some benefit to one party,and responsibility given, by the other.
In Dunlop v Selfridge, consideration was defined in terms of the price by which one party bought the other party’s act or promise.
what is Executory Consideration
a promise made in return for a promise – where both promises are still to be performed
John promises to deliver a car to Bert.
Bert promises to pay £10,000 on car delivery.
Breach of Contract:
If John fails to deliver the car, it’s a breach of contract.
what are the two types of consideration
Consideration is classified as one of two types:
executory: when the promise has not been performed
executed: when the promise has been performed within the meaning of the contract
what is Executed Consideration
where the promisor asks for something in exchange for his promise and the promisee provides consideration by giving the promisor what he has requested.
Example:
Offer for a reward for return of a dog.Whoever finds and returns the dog executes their consideration.
what are the 4 rules of consideration?
1) Consideration must not be past
2) It must have value
3) It must be negotiated and agreed upon by both parties;
3) It must be something that the law regards as having value;
explain rule 1 Consideration must not be past
Timing of Promise and Act:
If a promise follows an already completed act, it’s considered past consideration and usually not enforceable.
Enforceability Condition:
To be enforceable, the promise to pay must precede the act, establishing a clear agreement before the action is taken.
what is the leading case to rule 1 (consideration must not be passed)
-balvour v balvour
Balfour v Balfour (1919):
An agreement between family members during an ongoing relationship is typically not legally binding.
Daughter-in-law made improvements following which all children signed an agreement to reimburse her upon Mrs. Balfour’s death.
On Mrs. Balfour’s death, children refused reimbursement.
Court held the agreement unenforceable as the improvements were completed before the reimbursement agreement, making it past consideration.
If the work had been done in response to a promise of reimbursement, it would have been legally enforceable.
rule 1 (past consideration) may not apply in two situations and explain the casestudy linking to it (Stewart v Casey )
- If an act is completed in response to a specific request, it may be enforceable.
- Payment Normally Expected it strengthens enforceability.
Stewart v Casey
Employer asked an employee to work on an invention.
After completion, the employee was promised a share of profits.
Court held the employee entitled to a share due to the specific request and the employer/employee relationship implying payment.
The promise to pay £5,000, however, was not enforceable as it came after the completion of the action.
what is Rule 2 (Consideration must move from the promiseee)
Only those who have contributed consideration can sue on the contract.
A party that is not part of the contract cannot enforce any rights as they have not provided any consideration.
E.g. If Andrew promises Ben £1,000 if Ben gives his car to Chris, then Chris cannot usually enforce Ben’s promise because Chris is not a party to the contract. Here, the parties to the contract are Andrew and Ben.
what is Rule 3: (Consideration must be sufficient but need not be adequate)
This means that any consideration must be of material value, but it does not have to be the value of any product or service. other words, provided that the consideration has some value in the eyes of the law, however small that value might be, it can constitute consideration.
A contract to sell an iPhone for £1 would be valid in respect of adequacy of consideration even though the value of an iPhone is much greater than £1. i.e., it is important that the consideration is of material value, but it does not have to be the value of the product.
what are the case studies relating to rule 3
Thomas v Thomas (1842)
Hartley v Ponsonby (1857):
Thomas v Thomas (1842):
Owner promised the widow of the previous owner the right to occupy the house for life in exchange for £1 per year.Later, the owner tried to reclaim the house from the widow.
The promise to pay £1 per year and maintain the house constituted sufficient consideration.
Hartley v Ponsonby (1857):
The crew was significantly reduced, forcing the remaining members to take on additional duties beyond their contractual obligations.
In this case, the extra work was deemed good consideration, leading to a different outcome
Contrast with Stilk v Myrick:
what is Rule 4: Pinnel’s Case
Rule in Pinnel’s Case (1602):
A promise by a creditor to accept less than the full sum owed on the due date does not discharge the debtor from the legal obligation to pay the balance.
Example:
Lucy owes Tilly £50. On payment day, Lucy offers £25, and Tilly agrees.
Part payment alone is not good consideration; Lucy still owes £25 as she gained a benefit without giving anything in return.
what is an express terms
Express terms are those that are explicitly agreed upon and communicated between the parties, either verbally or in writing.
what is an implied term
Implied terms ( statute, custom , the courts ) (i.e., the common law).
- They are not expressly agreed on by the parties.
- these included by contracts
Courts imply terms into contracts to help protect parties from exploitation. E.g. terms are implied into employment contracts to protect employees from unsafe working environments, discrimination
what is a statute
Terms may be implied into certain types of contract.
An example can be found in the Consumer Rights Act 2015 which protects consumers against faulty goods.
what are the terms implied at common law
Courts imply terms into contracts to help protect parties from exploitation. E.g., terms are implied into employment contracts
what are terms of a contract
In a contract, some terms matter more. If there’s a breach the solution depends on how important the term is.
Terms can be:
Warranty: It’s in the contract from the start.
Implied: It’s not written but understood by both parties.
Innominate: It’s in between and its importance decides the remedy
what happens in the casestudy
hutton v warren
Hutton v Warren (1836) A landlord gave his tenant farmer notice to quit his tenancy. The landlord insisted the farmer continued to farm during the period of notice. As the tenant would leave before harvest, he requested an allowance for seed and labour. There was no mention of an allowance in the tenancy contract.
The court implied into the tenancy contract the trade custom relating to seed and labour. This stated that, when a tenant is given notice to quit, he is bound to work the land during his notice period, but trade custom permits him to claim a fair allowance for this work.
what is the term condition
-Fundamental terms are crucial for the contract’s existence and meaning.
-Parties can emphasize the importance of specific terms before contract conclusion.
Breach of Condition:
Breaching a condition releases the other party from performance.
what is the term warranty
Warranties in a contract are like secondary promises, not as important as the main terms.
If a warranty is broken (breached), the consequence is only damages. For example, if a hotel promised tea and coffee facilities but didn’t provide them (a warranty breach), it won’t end the contract but might lead to compensation, like a lower bill.
In simple terms, warranties are important but breaking them doesn’t cancel the contract. Instead, it means you can get compensation for any problems or letdowns.
what is the term innominate terms
- Terms that are not readily identifiable as conditions or warranties are labelled as innominate terms.
- If the consequences of the breach are serious and the contract ends it will be a condition. happens when injured party has been deprived of the benefit of the contract.
If the consequences of the breach are minor it will be classified as a warranty.
what is exclusion and limitation clause
An exclusion and limitation clause is a part of a contract that aims to restrict or exempt liability in case of contractual issues. For it to be effective, it must be clearly written, incorporated into the contract, and fair to both parties.
Courts and laws scrutinize these clauses to prevent misuse and ensure fairness.
what is incorporationand the 2 factors of it
the clause must be incorporated into the contract
For a clause to become part of the contract the party who will be subject to the clause must have reasonable notice of its inclusion. We are asking if the exclusion or limitation clause has been incorporated into the contract i.e., is it a term of the contract?
There are two factors to consider.
- Timing
- Sufficiency of notice
what is the timing and the case study relating to it
Olley v Marlborough Court Hotel (1949)
Must have notice either before or at the time they enter into the contract.
Ineffective notice can be seen in the case of
Olley v Marlborough Court Hotel (1949)
A notice on the back of stated the hotel would not be liable for theft of property from guests. Mrs Olley suffered when her clothes and jewellery were stolen from her room. It was held the clause excluding liability was ineffective as Mrs Olley only had notice of the clause after the contract had been made – which was at the reception desk. Had she seen the clause before she entered into the contract, e.g., if it was on a notice on the reception desk, it would have been incorporated.
what Are the 2 case study linking to timing
Thornton v Shoe Lane Parking (1971):
Chapelton v Barry UDC (1940):
In Thornton v Shoe Lane Parking (1971), a car park notice disclaimed liability for customer injuries, but the court ruled the clause wasn’t part of the contract. The contract was formed at the ticket machine, and the clause wasn’t visible at that time.
In Chapelton v Barry UDC (1940), a notice instructed payment to the attendant for a deckchair, and the ticket received had an exclusion clause. The court deemed the ticket a receipt, not a contractual document, as the offer was the notice and acceptance was taking the deckchair. The exclusion clause wasn’t incorporated since the ticket was received after the contract was made.
Incorporation criteria require clauses to be visible before or at the contract’s formation, either in a written sign at the business place or in a contractual document.
what is sufficiency of noticeand case study relating to it
Interfoto Picture Library v Stiletto Productions (1988):
A clause is generally not binding unless the offeror takes reasonable steps to bring it to the customer’s attention.
Reasonable steps are required for any clause to be effective.
Interfoto Picture Library v Stiletto Productions (1988):
Contract for photographic transparencies included a penalty clause for late return.
Claimants were 14 days late returning 47 transparencies.
Court held that reasonable steps were not taken /Consequently, the term was not part of the contract.
What happens if a party signs a document without reading it?and the case study relating tp this
L’Estrange v Graucob (1934
A party is deemed to have notice of any terms in that contract, regardless of whether they have read the contract or not. It is up to the party signing the contract to read it.
L’Estrange v Graucob (1934)
The claimant signed an agreement for a cigarette machine for her café.
She did not read the terms but was nonetheless bound by an exemption clause in the contract.
what is the contra proferentem rule.
if a contract is unclear, the interpretation that is less favorable to the party who created the document will be favored. This rule helps ensure that those who create contracts are responsible for making their intentions and terms clear and unambiguous.
Contra = against
Proferentem = the party who offered it
what is needed for an exception clause to be valid
For an exemption clause to be valid, whether in a signed document or not, it must be written in a clear and unambiguous manner.
If there is any doubt about the meaning or extent of the clause, the court will construe it against the party seeking to rely on it.
what is a Domestic and social agreements
This presumption assumes that family members and friends do not generally intend to create legally enforceable agreements.
They assume that these agreements are social and legal consequences are not anticipated in the event of a breach.
E.g. if you agree to meet your friends to go to the cinema at 7pm and they do not turn up, it is unlikely you will sue them for breach.
intention to create legal relations
Definition: Parties must intend to be legally obligated.
Challenges: Intent may not be explicitly stated, leading to disagreements.
Dispute Resolution: Courts decide if parties intended legal relations.
Assessment by Courts: Consider the commercial or social context.
Presumptions:
Domestic/Social Agreement: Presumed no legal intent.
Business Agreement: Presumed legal intent.
Rebuttal: Presumptions can be rebutted based on specific circumstances. Courts consider actions, conduct, and context to determine true intentions.
what are the 4 case studies linking to Domestic and social agreements
Wilson and Another v Burnett (2007):
Balfour v Balfour (1919):
Merritt v Merritt (1970):
Simpkins v Pays (1955):
Wilson and Another v Burnett (2007):
Agreement to share bingo winnings held not legally enforceable.
Although an agreement was made to share prizes over £10, it was considered a mere discussion or chat.
Lack of clear agreement and no intention to create legal relations.
Balfour v Balfour (1919):
Husband promised to pay wife money while working abroad.
Held to be an informal arrangement, not legally enforceable.
The presumption was that domestic agreements lack legal intent.
Merritt v Merritt (1970):
Money payment agreement between separated couple held enforceable.
Despite being married, the couple intended the agreement to have legal consequences.
Simpkins v Pays (1955):
Arrangement between friends to enter a competition held legally binding.
Each party contributed financially, indicating a joint enterprise.
The agreement was considered legally enforceable.
Presumption and Rebuttal:
The cases demonstrate the importance of circumstances in determining legal intent.
While there’s a presumption based on the setting (domestic or business), it can be rebutted by specific circumstances indicating the parties’ true intentions.
what is a business agreement and the case study linking to it
Rose & Frank Co v Crompton & Bros (1925):
A presumption exists that parties intend to form a legal agreement, requiring them to prove a lack of intention.
Rose & Frank Co v Crompton & Bros (1925):
Defendant appointed claimant as sole distributor of paper tissues. Agreement stated it was not legally binding and not subject to legal jurisdiction in courts.
Defendant ended the agreement without notice and refused orders.
Court held no legally enforceable contract between the parties.
what is capacity for a contract
Not everyone has the capacity to enter into a contract.
Parties that lack contractual capacity include those who are:
minors,
intoxicated
mental incapacity
corporations.
about capacity what is a minor and what is the two exemptions
A minor is a person under 18.
The law prevents minors entering into contracts for their own protection, i.e., it prevents them entering into unfavourable contracts which are not for their benefit.
There are two exceptions
- Necessaries
-Education
what are the 2 exceptions in a minors contractand case studies reataing
Nash v Inman (1908)
Doyle v White City Stadium (1935):
Necessities:
Contracts for necessities are binding on a minor, provided they do not contain detrimental terms.Detrimental terms could render the contract non-binding.
Nash v Inman (1908):
Minor Cambridge student supplied with clothes, including 11 fancy waistcoats.
Court held the clothes were suitable but not actually needed; contract not binding.
Education:
Contracts for education are generally binding if overall beneficial for the minor.
Doyle v White City Stadium (1935):
Agreement between a minor professional boxer and British Boxing Board of Control.
Clause stated the minor would lose payment if disqualified.
Court held the agreement binding as it encouraged clean fighting and protected inexperienced boxers.
what is intoxication
Anyone who make a contract whilst under the influence of alcohol or drugs are presumed to know what they are doing and are bound by it
However, if at the time of making a contract, a person is so intoxicated he does not know the nature of the transaction he is entering into, and the other party realises this, then the contract will be unenforceable, unless the contract is for necessary goods that have been sold and delivered.
what is a metal disorder
affairs of a person lacking mental capacity may be under the control of the court under the Mental Capacity Act 2005. In these cases, the court takes control of a person’s power to make contracts and any contracts purported to be made with the person personally are not valid.
A contract made with a person who is not under the control of the court but has some form of mental incapacity is valid, unless it can be shown that, at the time of making the contract, the mentally disordered person did not know the nature of the transaction and the other party knew or should have known of the mental incapacity.
what is cooperations
A corporation is a legal entity with its own legal personality.
Companies have constitutions, and capacity to act may be restricted by their constitution.
ultra vires- company or other body acting outside its powers is said to be acting ‘ultra vires’ (beyond the powers).
If a body acts ultra vires, then its actions may be invalid.
what is privity
Privity of contract is the common law principle that states only parties to a contract can sue on that contract. i.e., only those who have provided consideration (the offeree and offeror) may sue in the event of a dispute (i.e. something goes wrong, e.g., goods were promised and not delivered).
what is the case of tweedle v Atkinson
William Tweddle and Miss Guy were engaged. Both fathers agreed to give the couple a sum of money when the marriage took place, but Mr Guy died before making his payment.
It was held that William was not entitled to the money. He was a beneficiary of a promise, but he had not provided any consideration. There was no contract between William and Mr Guy and therefore no privity of contract.
exceptions of privy
-agency
- third party insurance
-trusts
- benefit of group
what Is agency
Agency: Where an agent acts on behalf of their Principal, the Principal is treated as though they had made the contract themselves. E.g. A creates a contract on behalf of B, then B is seen as a party to the contract.
what is third party insurance
Third-party insurance: If an insurance policy has been made for another’s benefit, they can claim even if they did not pay the premiums. For example, under the Road Traffic Act 1988 motorists are required to have insurance against damage and injury to other road users. In certain circumstances, an injured road user can claim compensation directly from the other party’s insurance company.
what is a trust
A trustee will hold, for example, property on behalf of another. A trust is where property is passed by one party to a second party (the trustee), stating that it is to be held by the trustee for the benefit of third parties (beneficiaries). If the trustee does not comply with conditions set out in the trust, then the beneficiary can apply to the court to enforce the terms of the trust.
what is a contract for the benefit of a group and casestudy releating to it
Jackson v Horizon Holidays (1975)
Where a contract is made in one person’s name, but the contract benefits a group
.only the person who made the contract is entitled to sue. However, that person will be able to sue for his own losses and those of the group.
Jackson v Horizon Holidays (1975)
Mr Jackson booked a holiday for his family. The holiday was poor he decided to sue. Mr Jackson could sue as the party to the contract, but damages were awarded to the whole family. i.e., only the person who made the contract is entitled to sue on it. However, that person will be able to sue for his own losses and those of the group.
what is the general rule of discharge by performance
the general rule is that complete performance is required.
If a party fails to complete their side of the bargain, then they may be in breach of contract. In the event of a breach, the other party may be entitled to, for example, withhold payment.
E.g., Fred agrees to sell his car to Bert in exchange for a cash price. When Fred has given the car to Bert and Bert has paid Fred, the contract is at an end as they have completed their obligations, in other words, they have performed the contract.
Unfortunately, sometimes things go wrong, e.g., Fred could give the car to Bert and Bert may refuse to pay the cash.
The rule on complete performance can create an unfair result eg cutler v powell
Cutter v Powell (1795) Cutter was a crew member on a ship with wages due on completion of a voyage. He died 19 days before the journey ended and his widow was refused the unpaid wages as he had not fully performed the contract.
Several exceptions have developed to help with the unfairness of the rule.
what is the 4 exemptions that were developed to help with the unfairness of a rule on performance
Our first exception - Divisible Contracts
Our second exception - Prevention of Performance
Our third exception - Acceptance of Part Performance
Our fourth exception - Substantial Performance
what is the first exemption divisible contracts
Ritchie v Atkinson (1808)
Some contracts are divisible into parts, and payment becomes due at various stages of performance. Contracts of employment are an example of divisible contracts
.
Ritchie v Atkinson (1808) goods would be shipped at a cost of £5 per tonne. Only part of the agreed cargo was shipped, and the owners claimed that, as the contract had not been fully performed, they were released from payment.
It was held that the contract was divisible. The contract could be divided into separate parts as the agreement was to pay per tonne. Therefore, payment was owed for each tonne of the cargo that had been carried.
what is the second exemption (prevention of performance by another party)
Planche v Colburn (1831)
A party will be in breach if they prevent the other party from fulfilling their contractual obligations.
Planche v Colburn (1831) The claimant was asked to write a book with payment due on completion. The claimant wrote half the book when the defendan asked him to stop. The claimant was entitled to part payment for partly performing his contract.
what is the third exception Acceptance of Part Performance
Sumpter v Hedges (1898):
In a non-divisible, entire contract, it may be possible to show that the other party voluntarily accepted partial performance.
The party accepting part performance pays for the completed portion of the contract (proportional payment).
Genuine Choice:The party accepting part performance must have a genuine choice over whether to accept or reject it.
Case Example - Sumpter v Hedges (1898):
Claimant contracted to build a barn for the defendant but abandoned the project
Court held the defendant did not have to pay for part performance as there was no genuine choice.
Defendant only had to pay for materials left behind and used to complete the building (as he had a choice in using the materials).
what is the fourth exception - Substantial Performance
This occurs where someone substantially performs their contract, i.e., they have done the bulk of what they have agreed to do, but some minor part remains undone. In this case the injured party had to pay what is due under the contract with a minor discount to cover the incomplete performance.
The court must decide if there has been substantial performance, and this will change with the facts of each case.
two cases linking to the rule of discharge by performance
Bolton v Mahadeva (1972):
Hoenig v Isaacs (1952)
Bolton v Mahadeva (1972):
Contract for the installation of heating system for £560.
The central heating was defective and required substantial repair costing £174.
Court held the cost to repair was too great a proportion of the original cost; contract not substantially performed.
Claimant could not recover payment for the work done.
Hoenig v Isaacs (1952):
Contract to decorate and furnish a flat.
Full performance lacked repairs to a bookcase and replacement of a wardrobe door. cost was £750.
Court held the contract was substantially performed, but a reduction of £55 was made for the incomplete work.
In Bolton v Mahadeva, the cost of repairs was deemed too significant, while in Hoenig v Isaacs, a deduction was made for the minor incomplete elements.
