T2 Essentials of contract Flashcards
contract law definition
an agreement given rise to obligations which are enforced or recognised by law
exceptions:
> bills of exchange- = written instruction from one person to pay a specified sum of money to another. –> Bills of Exchange Act 1882 – “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.”
> Contracts for the sale or disposal of land/property
> Agreements regulated by the Consumer Credit Act 1974 –> Consumer Credit Agreements: aconsumercreditagreementisanagreementunderwhichcreditisextendedtoanindividual.Thoseagreementsthatareregulatedagreementscoverextensionsofcredituptoa
statutorylimit.Theseincludecreditsales,hire-purchase,securedandunsecuredloans
signing a contract
generally you are bound by the terms once signed
case example: L’Estrange v Graucob (1934) –
‘any express or implied condition, statement or warranty, statutory or otherwise not stated herein is hereby excluded’
Facts
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.
Issue
Whether the clause excluding all terms not stated in the contract should be deemed effective and binding.
Held
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.q
contract formation
essentials of contract:
> agreement of offer and acceptance
> intention to be legally bound
> certainty of terms
> the passing of consideration
offers v invitation to treat
OFFER : –
proposal of a set of terms with the intention for it to be legally binding upon acceptance with whomever the offer was proposed.
- must be clear and certain
INVITATION TO TREAT: is not an offer
Invitation to others to make offers
Invitations to negotiate
offers v invitation to treat case examples
Pharmaceutical Society of GB v Boots Cash Chemist (Southern) Ltd [1953]:
Facts in PSGB v Boots
The defendant ran a self-service shop in which non-prescription drugs and medicines, many of which were listed in the Poisons List provided in the Pharmacy and Poisons Act 1933, were sold. These items were displayed in open shelves from which they could be selected by the customer, placed in a shopping basket, and taken to the till where they would be paid for. The till was operated by a registered pharmacist. However, the claimant brought proceedings against the defendant for breach of section 18(1) of the Pharmacy and Poisons Act 1933, which requires the supervision of a registered pharmacist for the sale of any item in the Poisons List.
Issue in PSGB v Boots
The question was whether the contract of sale was concluded when the customer selected the product from the shelves (in which case the defendant was in breach of the Act due to the lack of supervision at this point) or when the items were paid for (in which case there was no breach due to the presence of the pharmacist at the till).
Held in PSGB v Boots
The Court of Appeal held that the defendant was not in breach of the Act, as the contract was completed on payment under the supervision of the pharmacist. The display of the goods on the shelves were not an offer which was accepted when the customer selected the item; rather, the proper construction was that the customer made an offer to the cashier upon arriving at the till, which was accepted when payment was taken. This analysis was supported by the fact that the customer would have been free to return any of the items to the shelves before a payment had been made.
Partridge v Crittenden [1968]:
Facts in Partridge v Crittenden
The defendant advertised for sale a number of Bramblefinch cocks and hens, stating that the price was to be 25 shillings for each. Under the Protection of Birds Act 1954, it was unlawful to offer for sale any wild live bird. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) brought a prosecution against the defendant under the Act. At his trial, the defendant was found guilty of the offence by the magistrates; he appealed this conviction.
Issue in Partridge v Crittenden
The issue on appeal was whether the advertisement was properly construed as an offer of sale (in which case the defendant was guilty) or an invitation to treat (in which case he had committed no offence). A further issue was whether it was appropriate to adopt a different interpretation of the phrase ‘offer for sale’ in the context of criminal law than was accepted in the context of contract law.
Held in Partridge v Crittenden
The court held that the advertisement was not an offer but an invitation to treat, and as such the defendant was not guilty.
The court also rejected the suggestion that the court should adopt a stricter interpretation of the phrase ‘offer for sale’ in the criminal context compared to the contractual context, reasoning that to do so would usurp the legislative function. The legislature had chosen the phrase ‘offer for sale’ based on its existing understanding, and to alter this understanding under the pretext of ‘interpretation’ was not the proper role of the court
acceptance of an offer
must be to all terms of the offer- any failure to accept all terms of the offer amounts to rejection; any counter offer is a rejection
case example: Felthouse v Bindley (1862)
Claimant offered to buy a horse from his nephew, John, who was selling up all his farm stock. Claimant said that he would assume John’s acceptance unless told otherwise. Intending to accept, John instructed the auctioneer to withdraw the horse from the sale, but by mistake the auctioneer sold it. The claimant sued the auctioneer in Tort.
Held: claimant’s action failed because he was unable to prove that he was the horses owner. Since John had not communicated his intention to accept, there was no contract under which ownership of the horse could pass, so when the sale took place, the horse still belonged to John. The auctioneer had not disposed of the claimant’s property.
rules about acceptance
> Must be to all of the terms of the offer
In the manner specified in the offer (if applicable)
Express or by conduct
Via a third party or agent
Post or electronic means:
Adams v Lindsell [1818]:
2nd Sept defendant’s sent a letter of an offer to sell wool to the claimant and stated any acceptance must be made by return of post. The letter was delayed because it was wrongly addressed and did not arrive until the 5th September. The claimants posted their acceptance immediately and it finally arrived on 9th September. On 8th September the defendant, believing that the claimant was not interested sold the wool to a third party. Claimant sued for breach of contract.
Held: Claim would succeed. The claimant had complied with the terms of the offer by posting their acceptance immediately. Once a letter of acceptance is posted, a contract comes into existence immediately.
Entores v Miles Far East Corp [1955]
The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from the defendants in Holland. The defendant sent back a telex from Holland to the London office accepting that offer. The question for the court was at what point the contract came into existence. If the acceptance was effective from the time the telex was sent the contract was made in Holland and Dutch law would apply. If the acceptance took place when the telex was received in London then the contract would be governed by English law.
Held: To amount to an effective acceptance the acceptance needed to be communicated to the offeree. Therefore the contract was made in England.
certainty of terms
terms of agreement must be clear and unambiguous.
the courts will not rewrite the contract which lacks sufficient certainty
case example:
Loftus v Roberts (1902) 18 TLR 532
Miss Kitty sued a theatre director over the contract. The terms said, ‘I engage you to play the part at a west end salary to be mutually arranged between us.’ Even though there had been offer and acceptance, it did not mean she had a contract. The words ‘to be arranged between us’ showed there was room for further negotiation, meaning there was no valid contract. It was uncertain and incomplete.
consideration
“A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
case example:
Currie v Misa (1875)
Facts of Currie v Misa
Lizardi & Co. sold a number of bills of exchange to Mr. Misa, drawn from a banking firm owned by Mr. Currie, and were to be paid on the next day. However, Lizardi was in substantial debt to Mr. Currie’s bank and was being pressed for payment. A few days later, upon paying in the cheque, Mr. Mirsa learned of Lizardi’s stopped payments and outstanding debts, instructing his bankers not to honour the cheque. The question arose as to whether the cheque was payable, particularly as to whether the sale of an existing debt formed sufficient consideration for a negotiable security, so as to render the creditor to whom it was paid, Mr. Currie, a holder for the value of the cheque.
Issue in Currie v Misa
The question arose as to whether the existing debt constituted sufficient consideration for the security so as to constitute a legally-enforceable contract for the creditor.
Decision / Outcome of Currie v Misa
The Court held that consideration must “consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.” (p 162). Thus, there can be no legal contract unless there is consideration in the form of a benefit gained, or detriment suffered arrangement by the parties. On the facts, the Court held that the title of a creditor to a negotiable security on account of a pre-existing debt and transferred to him, bona fide, without any notice of infirmity of title by the debtor is indefeasible. The pre-existing debt did not in and of itself form a sufficient consideration for the negotiable security. Accordingly, there was an absence of any consideration or the making or payment of the cheque by Mr. Mirsa.
rules about consideration
> Past consideration is no consideration
Consideration must have value but need not be commensurate
Consideration must be performed in full
Must be in exchange for consideration promised by other party – not a gift
Consideration cannot be something that you are already contractually bound to do
Consideration must be legal
valid definition
legally binding contract that can be enforced because it has all the essential elements: agreement, consideration, legal intention and legal certainty
voidable definition
the contract exists, but can be avoided by the injured party
void definition
null, the contract never existed in law and is without legal obligations
Vitiating Factors – can render a contract either void or voidable
> Missing an Essential Element
Form – exceptionally some contracts must be in writing
Capacity – infants: not enforceable save exceptions mentally impaired persons, Diplomats
Legality – Immoral, Against Public Interest or Policy
Mistake – at to the subject matter, identity of one party
Duress and Undue Influence
Misrepresentation
