Contract Law

How are Contracts Destroyed - Incapacity

Generally involving Mental capacity or minors. Drugs or alcohol don't apply.

How do Contracts come to an End

(a) Discharge by Performance (b) Discharge by Breach (c) Discharge by Frustration (d) Damages (e) Other Remedies (f) Law of Restitution (g) Deposit and Part Payments (h) Extension of Remedies

How are Contracts Destroyed

(a) Incapacity (b) Misrepresentation (c) Mistake (d) Illegality (e) Duress or Undue Influence

How are Contracts formed

(a) Invitation to Treat: "An expression of willingness to negotiate" (b) Offers (i) Unilateral Contracts, (ii) Invitations to treat, (iii) Revocation of offers (c) Acceptance (d) Consideration (e) Intention to Create Legal Relations (f) Certainty & Completeness (g) Form

Who can Enforce Contracts

(a) Rules of Privity (b) Contracts (Rights of Third Parties) Act 1999 (c) Exceptions to the Doctrine of Privity

Whats the Content of a Contract

(a) Terms & Representations (b) Parole Evidence Rule (c) Conditions / Warranties / Innominate Terms (d) Exclusion Clauses (e) UCTA 1977

How are Contracts Destroyed - Mistake

(a) Unilateral Mistake - one person to the contract is mistaken. (b) Mutual Mistake - both parties are mistaken about the same material fact within the contract. (c) Common Mistake - both parties hold the same mistaken belief of the facts.

Definition of Parole Evidence Rule

A rule of contractual construction which prevents extrinsic evidence being used to vary the terms of a written contract.

Consideration - Definition of consideration - *Currie v Misa (1874-75)* Sale of bills relating to purchase of company

Consideration is something of value promised by both parties during the formation of a contract.

The Offer - *Bilateral Offer*

A bilateral contract comes into existence when someone like Adam promises to do something for Josh, if Josh promises to do something for a certain amount of money or something of quantifiable value to Adam in return. Basically, the concept of a promise in exchange for another promise is what will make these kinds of contracts enforceable at law.

Privity of Contract - Remedies for Third Parties: The Exceptions - *Shanklin Pier v Detel Products Ltd [1951]* The Plaintiffs were owners of a pier in Shanklin on the Isle of Wight. They entered into a contract with contractors to have the pier repaired and painted. Under the contract the plaintiff had the express right to alter the contract. The Defendant company director approached the Plaintiffs with a new painting product for the pier. After much persuasion, the Plaintiffs amended their contract with the Contractors to allow for the paint in the renovation. After several months, the paint flaked off and did not last. The Plaintiffs brought a claim for damages. Issues Whether the Plaintiff was entitled to bring a claim against the Defendant company, who was not party to the contract to undertake renovations. Held The Defendant was found to be liable given he had provided an express warranty over the paint to the Plaintiffs, who in consideration of the warranty caused the contractor to buy the paint from the Defendant also and suffer the same damage, by reason of a breach of warranty. It was held that if the contract for the direct sale and purchase had been made between the Plaintiff and the Defendant (with no involvement of a contractor), then the same warranty for the paint would be intended to exist and be implied.

A collateral contract can be utilised to avoid the traditional rule of privity. [ ]

Privity of Contract - Remedies for Third Parties: The Exceptions - *New Zealand Shipping Co v Satterthwaite & Co (The Eurymedon) [1975]*

A collateral contract can provide the benefit of an exemption clause to a third party who was not originally a party in the contract. [ ]

The Offer - Tenders - *Blackpool and Flyde Aeroclub Ltd v Blackpool Borough Council [1990]* The defendants were a local authority that managed the local airport as its owners. They had granted the claimants, 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 claimant 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 claimant's tender missed the deadline and the defendant accepted a lower proposal. The claimants brought an action for damages against the defendant for negligence and for breaching their contract. Issue 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. Held 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 claimant's application made them liable.

A collateral warranty arises if a bid is properly submitted within time and not considered.

Acceptance/ Revocation - Acceptance can be by conduct - *Brogden v Metropolitan Railway Co. (1877)* The claimants were the suppliers of coal to the defendant railway company. They had been dealing for some years on an informal basis with no written contract. The parties agreed that it would be wise to have a formal contract written. The defendant drew up a draft contract and sent it to the claimant. The claimant made some minor amendments and filled in some blanks and sent it back to the defendant. The defendant then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose and it was questioned whether in fact the written agreement was valid. Held The written contract was valid despite no communication of the acceptance. The acceptance took place by performing the contract without any objection as to the terms.

A contract cannot be formed before the point at which the offer has been accepted. In the majority of cases, the acceptance is communicated to the offeror in some way. However, in some instances acceptance can be through performance of the contract.

The Offer - Counter-offers - *Hyde v Wrench (1840)* The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered £950 which the defendant refused. The claimant then sought to accept the original offer of £1,000. The defendant refused to sell to the claimant and the claimant brought an action for specific performance. Held There was no contract. Where a counter offer is made this destroys the original offer so that it is no longer open to the offeree to accept.

A counter-offer is not an acceptance of an offer. It is something that overrides the offer that was originally made.

Intention to Create Legal Relations - Social and Domestic Agreements - *Merritt v Merritt [1969]* A husband left his wife and went to live with another woman. There was £180 left owing on the house which was jointly owned by the couple. The husband signed an agreement whereby he would pay the wife £40 per month to enable her to meet the mortgage payments and if she paid all the charges in connection with the mortgage until it was paid off he would transfer his share of the house to her. When the mortgage was fully paid she brought an action for a declaration that the house belonged to her. Held The agreement was binding. The Court of Appeal distinguished the case of Balfour v Balfour on the grounds that the parties were separated. Where spouses have separated it is generally considered that they do intend to be bound by their agreements. The written agreement signed was further evidence of an intention to be bound.

A married couple in the process of separating or divorcing can be considered to possess the intention to create legal relations. [ ]

Consideration - Past Consideration - *Roscorla v Thomas (1842)* An agreement for the purchase of a horse had been completed between buyer and seller. Following the completion of the contract, the seller made a warranty that the horse was "free from vice". Upon delivery, it was discovered by the buyer that the horse was vicious in behaviour. The buyer consequently sued. The Court found for the defendant because his promise was unsupported by consideration. The consideration for the soundness warranty had already been made through the original contract of sale, and so new consideration would have had to be provided in order for the warranty to have legal effect. This decision demonstrates the rule in English contract law that consideration contracted for in the past does not amount to good consideration for a present agreement.

A promise which is offered after the close of a contract or performance will not be enforced by the courts, as it constitutes 'past consideration'.

Definition of Conditions & Warranties

A term of a contract maybe classified as a "condition" or "warranty". They can take the form of "Pre-Conditions" or "Conditions Subsequent" A warranty is a collateral term to the main purpose of the contract. The distinction between the two are - a breach of condition normally entitles the innocent party to terminate the contract and claim damages. - a breach of warranty entitles the innocent party to only claim damages.

Privity of Contract - Remedies for Third Parties: The Exceptions - *Donoghue v Stevenson [1932]* Mrs Donoghue went to a cafe with a friend. The friend brought her a bottle of ginger beer and an ice cream. The ginger beer came in an opaque bottle so that the contents could not be seen. Mrs Donoghue poured half the contents of the bottle over her ice cream and also drank some from the bottle. After eating part of the ice cream, she then poured the remaining contents of the bottle over the ice cream and a decomposed snail emerged from the bottle. Mrs Donoghue suffered personal injury as a result. She commenced a claim against the manufacturer of the ginger beer. Held Her claim was successful. This case established the modern law of negligence and established the neighbour test.

A third party may also be able to pursue a concurrent action in tort. [ ]

Privity of Contract - Right to Claim Damages - *Beswick v Beswick [1968]* PB was in poor health and agreed with the defendant, his nephew, that he would transfer the trade and good will of his coal business to him on the basis that the nephew employed him as a consultant for the rest of his life and paid him for this. The nephew also agreed to pay PBs wife after PB died for the rest of her life. She was not a party to the agreement. Upon the death of PB, the nephew paid PB's wife once but then not again. PBs widow brought an action as administrator of PB's estate and also in her personal capacity claiming for specific performance. Issue As an administrator to PB's estate, could claim for an order of specific performance for PB's nephew to honour his agreement. It was also important to see how the court weighed this claim alongside her claim on a personal level, which that she could claim as a party to the contract between her late husband and nephew. Held The court granted the widow an order of specific performance for the payment owed by PB's nephew as an administrator to her husband's estate.

A third party may circumvent the doctrine of privity and sue for their own benefit, provided they are the executor of the original party's estate. [ ]

Privity of Contract - Remedies for Third Parties: The Exceptions - *Scruttons v Midland Silicones [1962]* A drum filled with chemicals was shipped from the United States to the United Kingdom, as agreed by a bill of lading which included a clause which referenced the United States Carriage of Goods by Sea Act 1936. This clause limited the liability of the carrier to $500 for any damage that was caused to the goods. The carrier engaged stevedores to deal with the unloading of the cargo on arrival and unfortunately, while lowering the chemical drum onto a lorry, they negligently dropped the drum, causing almost $600 worth of damage. The respondents sued for the loss but the stevedores counter-claimed that their liability should be limited as per the clause stated in the contract. Issue The overriding issue for the court to consider, in this case, was whether the clause in the contract, which was inserted by the United States Carriage of Goods by Sea Act 1936, could be relied upon by the stevedores who had damaged the bottle. It was particularly important for the court to consider whether the stevedores were party to the contract between the buyer and seller. Held The court held that the clause could not be relied upon by the plaintiffs as the United States Carriage of Goods by Sea Act 1936 did not apply to stevedores. Moreover, the stevedores were not a party to the contract, by either express or implied terms, between the parties.

A third party subcontractor may benefit from a limited liability clause, provided they satisfy the necessary conditions. [ ]

Consideration - Exceptions to the past consideration rule - *Lampleigh v Braithwaite (1615)* The defendant had killed a man and was due to be hung for murder. He asked the claimant to do everything in his power to obtain a pardon from the King. The claimant went to great efforts and managed to get the pardon requested. The defendant then promised to pay him £100 for his efforts but never paid up. Held Whilst the promise to make payment came after the performance and was thus past consideration, the consideration was proceeded by a request from the defendant which meant the consideration was valid. The defendant was obliged to pay the claimant £100.

If past consideration is offered for an action that was done at requested by the promiser, it can be binding.

Acceptance/ Revocation - The Postal Rule - *Adams v Lindsell (1818)* The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter was delayed in the post. On receiving the letter the claimant posted a letter of acceptance the same day. However, due to the delay the defendant's had assumed the claimant was not interested in the wool and sold it on to a third party. The claimant sued for breach of contract. Held There was a valid contract which came in to existence the moment the letter of acceptance was placed in the post box. This case established the postal rule.

Acceptance is usually effective and the contract fulfilled when the offeror receives it. However, specific rules have been invented to deal with acceptance by post. As a letter has to spend time in the postal system, there is a period of uncertainty for one party or the other for obvious reasons such as the letter not arriving. As the offeror can always protect them by requiring another kind of acceptance, this postal rule aims to protect the accepting party.

Acceptance/ Revocation - Revocation of a Unilateral Offer - *Daulia v Four Millbank Nominees [1978]* The claimant wished to purchase some property from the defendant. The terms had been agreed but no written contract had been completed. The defendant promised the claimant that if he arranged for a bankers draft for the deposit to be delivered to the defendant before 10.00 am on the 22nd December he would complete the written contract. The claimant duly complied with the request but the defendant refused to complete. The claimant brought an action stating that unilateral contract existed and the defendant was thus bound by that contract to complete the written contract for the sale of the property. Held: A unilateral contract did exist.

An offer may be withdrawn at any time up until acceptance.

The Offer - Opening Negotiations or Statements About Price - *Gibson v Manchester City Council [1979]* The defendant City Council had adopted a policy of selling council houses to its tenants. The council wrote 'The [council] may be prepared to sell you the house at the purchase price...'. This letter also stated that it did not amount to a 'firm offer' of a mortgage, and invited the claimant to make a formal application using an enclosed form. The claimant returned the completed form to the defendant. Following local elections, control of the Council passed and the new Council policy was that council houses would not be sold. The defendant refused to sell to the claimant, who brought an action against them in breach of contract. This action was successful at first instance and the Court of Appeal, upon which the defendant appealed to the House of Lords. Issue The issue on appeal was whether the defendant's letter was properly construed as an offer or as an invitation to treat. Held The House of Lords held that there was no concluded contract and the defendant was not legally bound to sell the property, as the council's letter did not state the price and was not an offer but an invitation to treat.

An agreement can only exist when a clear offer is made that is then mirrored by a clear statement of acceptance.

Definition of Innominate Term

An intermediate terms which cannot be defined as a condition or warranty. This was first defined in "Hong Kong Fir v Kawasaki"

The Offer - Tenders - *Spencer v Harding (1870)* The defendants advertised a sale by tender of stock. The advertisement specified where the goods could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No reserve was stated. The claimant submitted the highest tender but the defendant refused to sell to him. Held Unless the advertisement specifies that the highest tender would be accepted there was no obligation to sell to the person submitting the highest tender. The advert amounted to an invitation to treat, the tender was an offer, the defendant could choose whether to accept the offer or not.

An invitation to tender is usually classed as an invitation to treat. As a result, the person making the invitation to tender is not obliged to accept any of the offers (in the form of responses) to the tender.

Acceptance/ Revocation - Revocation of offer - *Routledge v Grant (1828)* 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. Issue 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. Held 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.

An offer can be withdrawn at any time before it has been accepted. Anything said or done to accept the offer after it has been withdrawn has absolutely no effect whatsoever.

Privity of Contract - Rights of Third Parties Act 1999 - *Nisshin Shipping Co Ltd v Cleaves and Co [2003/4]* Cleaves negotiated nine time charters on behalf of Nisshin. The contract between Cleaves and Nisshin stated that Cleaves was to receive a commission as a broker and contained an arbitration clause which was wide enough to entitle a claim by the charterers against the owners for failing to pay the promised commission. After Nisshan refused to pay the commission to Cleaves, the matter went to arbitration. Nisshin claimed that Cleaves had repudiated the contract by having an interest with one of Nisshan's competitors, taking this as a termination of contract and cancellation of any entitled commission. Issues Whether the commission clauses conferred a benefit on the part of the brokers and whether the parties intended the commission clause to be enforceable by the brokers under s 1 of the Contracts (Rights of Third Parties) Act 1999 (the Act). Held Nisshin's application was dismissed. The commission clauses were for the purposes of conferring a benefit on Cleaves, namely an entitlement to a commission as a broker.

As maintained in the Rights of Third Parties Act 1999, a third party can enforce a term of a contract if the contract intended to provide an enforceable benefit to the third party. [ ]

The Offer - Opening Negotiations or Statements About Price - *Grainger v Cough [1896]* The defendant wine merchant circulated a catalogue which contained a price list for its products. The claimant ordered a number of bottles of wine from the catalogue and, when the defendant refused to deliver these at the stated price, alleged that a contract had been formed. The issue was whether the price list constituted an offer to sell wine at a certain price (in which case the contract was fully formed and the claimant had a valid claim), or an invitation to treat (in which case no contract had been formed).

Because merchants have limited supply, the advertisement for their goods is considered an invitation to treat.

Definition of consideration

Consideration is required in all contracts except where deed used. Pre-requisite that both parties offer consideration before a contract can be thought of as binding. No consideration, no Contract. Only with its presence will an agreement be deemed legally enforceable. Parties could rely on Quantum Merit, Quasi-Contract or Promissory Estoppel if the latter was the case.

Consideration - Consideration must be sufficient - *Thomas v Thomas [1842]* Before he died, Mr Thomas said he wished for his wife to have the house they lived in for the rest of her life. However, this was not written into his will. After he died, his executors, 'in consideration of such promise', agreed with Mrs Thomas that she would pay a peppercorn rent of £1 per year in return for being allowed to live in the house. They later tied to dispossess her. Issues A valid contract must be supported by consideration. That is, the promisee must promise to do something in return for the promise of the other party. Held The executors statement did not create a contract as it only expressed their motive for entering into the agreement. However, the £1 rent was recognized as good consideration.

Consideration must be present, but need not be adequate. The courts will not measure consideration for adequacy.

Consideration - Past Consideration - *Re McArdle [1951]* Majorie McArdle carried out certain improvements and repairs on a bungalow. The bungalow formed part of the estate of her husband's father who had died leaving the property to his wife for life and then on trust for Majorie's husband and his four siblings. After the work had been carried out the brothers and sisters signed a document stating in consideration of you carrying out the repairs we agree that the executors pay you £480 from the proceeds of sale. However, the payment was never made. Held The promise to make payment came after the consideration had been performed therefore the promise to make payment was not binding. Past consideration is not valid.

Consideration offered after a voluntary act is performed is 'past consideration' and not considered valid.

The Offer - Opening Negotiations or Statements About Price - *Chartbrook v Persimmon Homes*

Created "Red Ink" rule where there are no limits to verbal rearrangement to give commercial sense when constructing a contract in its bargaining context; re-affirmed that pre-contract negotiations were inadmissible in construing a contract.

Acceptance/ Revocation - The offeror can ask for a specific method of acceptance - *Tinn v Hoffman (1873)* Contract - Offer - Acceptance - Post - Cross Offer - Counter Offer - Contract Formation The defendant, Mr Hoffman wrote to the complainant, Mr Tinn with an offer to sell him 800 tons of iron for the price of 69s per ton. He requested a reply to this offer by post. On the same day, without knowing of this offer, Mr Tin also wrote to Mr Hoffman. He offered to buy the iron on similar terms. This case concerned the validity of these two cross offers. Issues The issue in this case was whether there was a valid contract between Mr Tinn and Mr Hoffman for the sale of the iron. There was also the issue if acceptance had to be by post for it to be valid, as this was specified in the offer. Held It was held in this case that there was no contract between Mr Tinn and Mr Hoffman for the iron. The cross offers were made simultaneously and without knowledge of one another; this was not a contract that would bind the parties for the iron. There is a difference between a cross offer and a counter offer. In order to form a valid contract, there must be communication that consists of an offer and acceptance.

Despite the fact that an offeror cannot enforce the offeree's silence as acceptance of their offer, they can be specific in advance about the method they want to use for acceptance to be communicated.

Consideration - Contractual duty to a third party - *Scotson v Pegg (1861)* A purchaser of some coal paid the defendant to carry and to unload the coal. The claimant was the supplier of the coal who had also paid the defendant to carry and unload the coal. The claimant brought an action to recover the money paid arguing the defendant was already under an existing duty to carry and unload the coal and thus provided no consideration. Held An existing contractual duty owed to a 3rd party to the contract can amount to valid consideration for a new promise. Consequently the claimant could not recover the sums paid and the defendant was entitled to get paid twice for doing the same thing.

Despite the fact that performing an existing duty is not valid consideration, performing a duty that is under a contract that a third party is owed can be seen to be valid consideration.

Consideration - Contractual duty to a third party -

Despite the fact that performing an existing duty is not valid consideration, performing a duty that is under a contract that a third party is owed can be seen to be valid.

Duress - Economic Duress - *Universe Tankships Inc. v International Transport Workers' Federation (The Universe Sentinel) [1983]* The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port. They made several demands in relation to pay and conditions and also demanded the ship owners pay a large sum of money to the Seafarers International Welfare Fund. The ship owners agreed in order that the ship could leave port and then sought to recover the sum paid to the welfare fund. Held The money had been extracted under economic duress and could be recovered. The House of Lords held that earlier case law had been wrong to look at coercion of the will so as to vitiate consent. During an analogy with the defence in criminal law where it is recognised that a defendant acting under duress has the intention to commit the offence but is excused from the crime because they had no choice but to submit. Accordingly two elements of duress were identified: 1. Compulsion of the will - absence of choice 2. Illegitimacy of the pressure

Economic Duress exists when there is compulsion of the will to the point where the party under duress is without any practical alternative, outside of complying with the threat. [Ship workers blacked the ship and demanded sums of money. They were paid, but later sued and ordered to pay back as agreement was under duress]

Duress - Economic Duress - *D&C Builders v Rees [1966]* Mr Rees instructed the claimant to do some building work at his home to the value of £746. Mr Rees paid £250 on account and the claimant reduced the bill by £14 and there was a sum owing of £482. The claimant wrote to the defendant several times pressing for payment but was unsuccessful there had been no complaints as to the workmanship at this time. The claimant at the time was in dire financial need and the business was verging on bankruptcy a fact that Mrs Rees was aware of. The defendant telephoned the home and Mrs Rees answered she made complaints about the work and said she would give them £300 in satisfaction of the whole debt. The defendant refused and said he would take the £300 and give her a year to clear the balance. He called at the house to collect the money but Mrs Rees remained firm that she would only pay £300 and demanded that the defendant wrote on the receipt 'in completion of the account' otherwise she would pay him nothing. The defendant needed the money immediately so reluctantly agreed to write this on the receipt but stated he fully intended to pursue the balance as the money paid did not cover the costs he had incurred. He subsequently brought an action to recover the balance. The defendant sought to rely on estoppel relying on the written receipt as demonstrating a promise to accept the lesser sum. Held The claimants were successful. Mrs Rees could not rely on estoppel as there was no true agreement to accept less and because Mrs Rees had taken advantage of the builder's position and mislead them as to her financial position.

Economic duress can come about when parties enter into a contract and then one party decides to take advantage of the other's bad situation and then force the terms of the contract to be renegotiated to be more favourable to himself. [Mrs R held the builder to ransom due to their financial situation, later sued R and recovered variance as it was found to be agreed under duress]

Promissory Estoppel and Waivers - How can Promissory Estoppel be used? - *D&C Builders v Rees [1966]*

EstoppeI can only be used if it is not inequitable for the promisor to go back on their promise. [ ]

Acceptance/ Revocation - Revocation of a Unilateral Offer - *Luxor v Cooper [1941]* Luxor v Cooper assessed the agents right to remuneration where they have conducted work on behalf of the principal and there is either no formal contract or the contract is silent as to the level of remuneration to be paid. It asks whether there is an implied term that the agent who has undertaken work under the agreement should be remunerated for that work. It also assesses the level of remuneration that should be paid for work completed under an agreement where the main contract is not proceeded with. The Court concluded that there was no agreement of agency as the agent had not been asked to find the purchaser for the cinema albeit that he was promised a reward if he did.

Even if a term is not written down and stated in the contract, but is something so obvious and essential to the running of the contract that it was simply overlooked, then it goes "without saying" that it was intended. Basically, it is something so obvious to the running of an agreement that an impartial man on the street would simply look at the situation and say: "oh, of course". [Officious By-stander - Implied terms by Necessity only]

Intention to Create Legal Relations - Commercial Agreements: Exceptions - *Rose and Frank v JR Crompton [1923]* The claimants and defendants entered an agreement for the supply of some carbonised tissue paper. The contract contained an honourable pledge clause which stated the agreement was not a formal or legal agreement and shall not be subject to the jurisdiction of the courts in neither England nor the US. The defendants terminated the agreement early and the claimants brought an action for breach. Held The honourable pledge clause rebutted the presumption which normally exists in commercial agreements that the parties intend to be legally bound by their agreements. The agreement therefore had no legal affect and was not enforceable by the courts.

Even in business transactions, the inclusion of a honourable pledge clause' can render an agreement legally unenforceable, as both parties have agreed to consider the document informal and not legally binding. [ ]

Consideration - Consideration for the variation of contractual terms - *Foakes v Beer (1884)* Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and agreed she would not seek enforcement of the payment provided he kept up the instalments. No mention was made in this agreement of interest although judgment debts generally incurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the interest. Held Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of a debt and under the rule in Pinnel's case this was not good consideration for a promise not to enforce the full amount due.

GeneralIy, the party that is in debt is already contractually obliged to repay the larger sum of money and does not provide consideration by agreeing to pay a smaller sum and nothing more.

Privity of Contract - Definition - *Tweddle v Atkinson (1861)* A couple were getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died so was unable to sue on the agreement. The groom made a claim against the executor of the will. Held The claim failed: The groom was not party to the agreement and the consideration did not move from him. Therefore he was not entitled to enforce the contract.

Generally, if you are not party to a contract between other parties, you cannot bring a claim. [ ]

The Offer - Invitation to treat - *Fisher v Bell [1961]* The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. The court applied the literal rule of statutory interpretation.

Goods displayed in the front of a shop in the window are not regarded as an offer to sell.

The Offer - Invitation to treat - *Pharm Society of C.B. v Boots Cash Chemist [1953]* 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. The claimant brought proceedings against the defendant for breach of the Act, which requires the supervision of a registered pharmacist for the sale of any item in the Poisons List. Issue 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 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.

Goods displayed on the shelf do NOT amount to an offer to sell, but are instead an invitation to treat. In the last section, we established that a transaction allows both parties the ability to change their minds. A shop owner is able to refrain from selling alcohol to a customer whom he does not like (for example, someone who is not of the legal age to drink). The same can also be said about a customer that takes items from the shelves of a supermarket. The items can be returned if they change their mind before going to the till to pay.

Intention to Create Legal Relations - Commercial Agreements - *J Evans & Son v Andrea Merzario [1976]*

lf two parties are in the process of conducting business with each other, the courts are almost certainly going to consider an agreement as possessing the intention to create legal relations.

The Offer - Auctions - Formation of a Contract *Barry v Davies (2000)* Facts Two brand new engine analyser machines owned by Customs and Exise were put up for auction by the defendant auctioneer. They were listed without a reserve price, but the auctioneer refused to accept two lower than anticipated bids and withdrew the machines from auction. The claimant brought proceedings against the defendant, contending that in an auction without a reserve price the auctioneer was bound to deliver the goods to the highest bidder. Issue The issue was whether the holding of an auction without a reserve price amounted to a contractually binding offer to sell the property to the highest bidder. Held The Court held that the holding of an auction for sale without reserve is an offer by the auctioneer to sell to the highest bidder. The claimant was awarded damages reflecting the difference between the value of the machines and the price he had bid.

If there is an auction without reserve, the auctioneer must sell to the highest bidder.

Definition of Contra Proferentem *Bramhall & Ogden v Sheffield CC* The parties entered into a JCT Standard Form Contract 1963 edition for the erection of 123 dwellings. The Appendix provided for liquidated and ascertainable damages "at the rate of £20 per week for each uncompleted dwelling". Pursuant to arbitration proceedings it was decided that Sheffield was entitled to retain £26,150 as liquidated and ascertainable damages. By an application for leave to appeal under s.1 of the Arbitration Act 1979, Bramall & Ogden claimed that clause 16(e) JCT operated to reduce the amount of liquidated damages for partial possession of works. Granting leave to appeal and remitting the award to the Arbitrator, the court held that the contract did not provide for sectional completion; Sheffield was not entitled to recover liquidation.

Interpretation against the draftsman. Places the losses on the party who in the best position to avoid the harm.

The Offer - Auctions - *Harris v Nickerson (1873)* The defendant was an auctioneer who had advertised that certain office furniture would be sold by him by auction. The claimant was a commission broker in London, who attended the sale on the final day (on which it had been advertised that the office furniture, which he had commission to purchase, would be sold). However, on that day, all the lots of furniture were withdrawn by the defendant. The claimant sought to recover his expenses and the time which he had wasted in attending the auction from the defendant, arguing that the withdrawal of the lots was a breach of contract which had been formed by the offer made by the defendant in the advertisement, and accepted by the claimant in attending the auction. Issue The issue was whether the advertisement placed by the defendant was a legally binding offer of sale, which had been accepted by the claimant's attendance at the auction, forming a completed contract. Held The court held, dismissing the claimant's case, that the advertisement was merely a declaration to inform potential purchasers that the sale was taking place. It was not an offer to contract with anyone who might act upon it by attending the auction, nor was it a warranty that all the articles advertised would be put or sale.

Items can be withdrawn before the auction takes place.

Definition of Acceptance

Must be communicated, not by silence. Unliateral contract can be one to many relationships. Acceptance can be inferred by conduct.

Promissory Estoppel and Waivers - How can Promissory Estoppel be used? - *Combe v Combe [1951]* A husband promised to make maintenance payments to his estranged wife but failed to do so. The wife brought an action to enforce the promise invoking promissory estoppel. Held Her action failed. There was no pre-existing agreement which was later modified by a promise. The wife sought to use promissory estoppel as sword and not a shield.

Promissory estoppel can only be used as a defence, not as something that can be construed as a detriment to the other party - as "a shield, not a sword" [ ]

The Offer - Opening Negotiations or Statements About Price - *Harvey v Facey [1893]* Harvey sent a Telegram to Facey which stated: "Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid;" Facey replied by telegram: "Lowest price for Bumper Hall Pen £900." Harvey then replied: "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession." Held: The Privy Council held that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer.

Not everything said in the course of negotiations can amount to a firm offer. For example, "If I sell my law notes to you, would you be interested?" Does this amount to an offer? This is a difficult question of fact to determine, and we need to look at what is said and what words are used.

Consideration - Contractual duty to a third party - *New Zealand Shipping v Satterthwaite and Co (The Eurymedon) [1975]* A contract for the carriage of a machine by ship to New Zealand provided that the owners of the goods could not sue the carriers or stevedores unless any claim was brought within one year of the action giving rise to the cause of action. The stevedores were independent contractors who were engaged to load and unload the ship by the ship owner. A stevedore damaged the machine whilst unloading it. The owner of the machine brought an action against the stevedore after the limitation period specified in the contract. The stevedore sought to rely upon the clause in order to escape liability. The owner of the machine argued that the stevedores could not rely on the clause as they were not privy to the contract and had not provided them with any consideration. Held The stevedores had provided consideration in the form of services of unloading the machine. Relying on the case of Scotson v Pegg, there is nothing to prevent consideration owed to a 3rd party being valid consideration for a new promise to another party. Therefore the stevedores had protection from the limitation clause. The claimant's action was unsuccessful.

Offering a promise to a third party that is already undertaking an action can be valid consideration if the promisee receives a benefit from the promise.

Definition of Revocation

Offers can be revoked before acceptance, must be communicated to the offeror. If the offer is to the entire world, then revocation of such offer must be done in the same way.

Acceptance/ Revocation - Lapse of time - *Ramsgate Victoria Hotel v Montefiore (1866)* The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract. Held The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessful.

Offers will expire at the end of the time stated for the lapse (if it's actually said) or after a reasonable time passes. What is defined as 'reasonable' is a question of fact in the circumstances of each case.

Privity of Contract - Definition - *Dunlop Pneumatic Tyre co Ltd v Selfridge & co Ltd [1915]* Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires below a recommended retail price (RRP). As part of the agreement, Dunlop also required their dealers to gain the same agreement with their retailers, who in this instance was Selfridge. The agreement held that if tires were sold below the RRP, they would be required to pay £5 per tire in damages to Dunlop. This was agreed between the dealer and Selfridges, which effectively made Dunlop a third-party to that agreement. Sometime after this, Selfridge sold the tires below the agreed price and Dunlop sued for damages and an injunction to prevent them from continuing this activity. At the initial trial, the decision was given to Dunlop. This was appealed by Selfridge and the decision was reversed. Dunlop appealed. Issue Selfridge argued that Dunlop could not enforce the contract as Dunlop was not part of the agreement between the dealer and Selfridges. On this basis, the question for the court was whether Dunlop had the right to access damages without a contractual relationship. Held The court held in a unanimous decision that *Dunlop could not claim for damages in the circumstances*. The court found that firstly, only a party to a contract can claim upon it. Secondly, Dunlop had not given any consideration to Selfridge and therefore there could be no binding contract between the parties. Lastly, Dunlop was not listed as an agent within the contract and could therefore not be included as a valid third-party who had rights to claim on the contract.

OnIy parties that are associated with a contract are able to gain rights and liabilities under that particular contract. Thus, if someone is not a party to a contract, they cannot bring action with it. Conversely, it follows that if someone cannot bring action with the contract, they cannot be sued by one of the parties to the contract either. [ ]

The Offer - Request for Information - *Stevenson Jacques v McLean (1879 - 80)* The defendant, Mclean, offered to sell iron to the complainant, Stevenson Jaques & Co. They stated the price and the offer would remain open until Monday. The complainant sent a telegram to the defendant, asking whether he would accept payment over a two-month period, or what his longest limit would be for payment. McLean did not respond to this telegram. The defendant sold the iron to another party, but did not inform the complainant of this action. On Monday morning, the complaint sent a telegram to accept the offer, unware it had been sold. Issues The complainant sued the defendant for non-delivery of the iron and that this was a breach of contract. The issue in the case was whether there was binding contract between the parties and if the telegram sent by the complainant was an inquiry for information or a counter offer. Held The court heard the complainant was only inquiring for more information about whether the terms of the offer could be changed; there was no specific wording to indicate that it was a counter offer or rejection. This was in contrast to Hyde v Wrench.

One way to escape the above counter offer rule is to argue there was no counter offer made by merely a request for further information.

Consideration - Legal Rules

Part payment is not good consideration. Consideration must move from promisee, but not necessarily to promisor. Consideration must be sufficient but need not be adequate. Consideration cannot be illusionary. Consideration must not be passed. Performance of existing duties is not good consideration.

Consideration - Exceptions to the past consideration rule - *Re Casey's Patents [1892]* The defendant, Casey, managed some patents owned by the plaintiffs. The plaintiffs later signed a document that read: 'In consideration of your services... we hereby agree to give you one-third share of the patents'. This payment was in return for work Casey had already done. When Casey registered this document on the patent register in order to claim his 1/3 interest in the patents, the plaintiffs applied to have the document expunged from the register. Issues The plaintiffs stated that the document was not a deed and therefore was required to be supported by consideration before it became a valid agreement. The issue was whether what Casey had already done was past consideration, in which case it would not be good consideration, and the agreement to give him an interest in the patents would be void. Held The Court of Appeal held that Casey must have assumed his work was to be paid for in some way. The work done was not just a matter of goodwill but something a manager would have expected to have been paid for. The promise to pay was, therefore, just a crystallization of this reasonable expectation. Therefore, Casey's past work was good consideration and the agreement was enforceable.

Past consideration offered in a business context could be enforceable in court.

Consideration - Consideration for the variation of contractual terms - *Re Selectmove Ltd [1995]* Selectmove Ltd owed the IR substantial sums in outstanding tax and national insurance. The managing director met the IR and said he would pay future tax as it fell due and the arrears at £1000 a month. IR said he would have to check and would contact the managing director if it was unacceptable. Selectmove Ltd heard nothing until a £25,650 notice came in and a threat of a wind-up petition. Select subsequently claimed that the IR had said he could repay less. The High Court held that even if that were found to be true, Select had not bound the IR, and there was no consideration for the varied agreement anyway.

Paying back a debt in smaller installments, to avoid a company's liquidation and total repayment, does not offer a 'practical benefit' to the borrower.

Consideration - Promisee already under a contractual duty - *Hartley v Ponsonby (1857)* Half of a ship's crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked the ship and completed the voyage. The captain then refused to pay up. Held The crew were entitled to the extra payment promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage had become too dangerous frustrating the original contract and leaving the crew free to negotiate a new contract.

Performing a contracted duty in a capacity beyond normal means, or in potential danger, can be seen as valid consideration for a promise.

Consideration - Promisee already under a contractual duty - *Stilk v Myrick (1809)* The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised. Held The claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore he had not provided any consideration for the promise for extra money. Consequently he was entitled to nothing.

Performing a contracted duty is not seen as good consideration for a new promise.

How are Contracts Destroyed - Duress

Person performs an act as a result of violence, threat, or other pressure against the person. Duress can be: - Physical: to the person or to goods (ie not releasing goods until payment) - Economic: wrongful or improper threat; no reasonable alternative (but to accept the other parties terms); The threat actually induces the making of the contract; the other party caused financial distress.

Duress - Duress to the person - *Barton v Armstrong [1976]* Armstrong was the chairman and held the largest sharing holding in Landmark Corporation Ltd a public company. Barton was the managing director and also had a substantial shareholding in. There were two other directors Bovil and Cottrel. There had been a long history of ill will between the parties and a struggle over who should have controlling power with Armstrong being the most aggressive. The other directors in the company were also unhappy with Armstrong and wanted him to be removed for abusing certain privileges and they disagreed with the way he ran the company believing him to be putting the company at risk of insolvency. However, Armstrong refused to resign. The three managed to take control of subsidiary companies and removed all credit facilities from Landmark Corp. When Armstrong discovered the credit had been removed he made a number of death threats to Barton to pressure him into signing an agreement which contained various elements including the purchase by Barton of Armstrong's shares in the company at a substantial over value. Barton agreed to this partly due to the threats but also due to the fact that it would mean that Armstrong would no longer have controlling interest and he believed he would be able to turn the company around without Armstrong's dealings. However, the company became insolvent shortly after and Barton sought to have the contract set aside. Held The contract could be set aside. Where there is duress to the person there was no obligation to show that he would not have entered the agreement but for the threat, it simply being sufficient that the death threats were a cause.

Pressure has to be proven by the party that claims to be put under duress, but it does not need to be the only reason. [Court held that a person who agrees to a contract under physical duress may avoid the contract, even if the duress wasn't the main factor in agreeing to the bargain]

Promissory Estoppel and Waivers - Waivers - *Hickman v Haynes (1874-75)*

PrincipIe Waivers allow parties to agree to not enforce their rights that are included in a contract. [ ]

Promissory Estoppel and Waivers - When does promissory estoppel exist? - *Emmanuel Ayodeji Ajayi v R.T. Briscoe (Nigeria) Ltd. [1964]*

Principle Promissory estoppel appears when the promisee relies on the promise. [ ]

Promissory Estoppel and Waivers - Promissory Estoppel - *Central London Property v High Trees House [1947]* High Trees leased a block of flats from CLP at a ground rent of £2,500. It was a new block of flats at the time the lease was taken out in 1937. The defendant had difficulty in getting tenants for all the flats and the ground rent left High Trees with no profit. In 1940 many of the flats were still unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any change to this situation in the near future. CLP agreed to reduce the rent to £1,250 during the war years. The agreement was put in writing and High Trees paid the reduced rent from 1941. When the war was over the flats became fully occupied and the claimant sought to return to the originally agreed rent. Held The rent would be returned to the originally agreed price for the future only. CLP could not claim back the arrears accrued during the war years.

Promissory estoppel can operate as an equitable exception to the general rule that part payment of a debt without fresh consideration does not discharge the debt obligation. [ ]

Privity of Contract - Remedies for Third Parties: The Exceptions - *Tulk v Moxhay (1848)* The claimant, Tulk, owned several properties in Leicester Square, London, and sold one such property to another, making the purchaser promise to not build on the property so as to help keep Leicester Square 'uncovered with buildings' and creating an equitable covenant. The purchaser subsequently sold the land and it underwent multiple transactions, and was eventually purchased by the defendant, Moxhay. Whilst Moxhay was aware of the covenant attached to the land at the time of the transaction, he claimed it was unenforceable as he had not been a party to the original transaction in which the covenant had been made. Issue Whether an equitable covenant limiting the use of a property could 'run with the land' and bind a future owner of the property. Held The High Court, found for Tulk, and passed an injunction to prevent Moxhay from building on the land.

Restrictive covenants in land cases can be applicable to future owners; in this case, the covenant applies to the land - not the owner. [ ]

Promissory Estoppel and Waivers - Waivers - *Charles Rickards Ltd v Oppenheim [1950]*

Terms of a contract, even very critical or important ones, can be amended by waiver. [ ]

Terms of contract - Express terms of the contract - *J Evans & Son v Andrea Merzario [1976]*

Statements made during the course of negotiations are either representations or terms. [ ]

Consideration - Consideration must be sufficient - *Chappell and Co v Nestle [1960]* Nestle ran a sales promotion whereby if persons sent in 3 chocolate bar wrappers and a postal order for 1 shilling they would be sent a record. Chappel owned the copyright in one of the records offered and disputed the right of Nestle to offer the records and sought an injunction to prevent the sales of the records which normally retailed at 6 shillings. If the wrappers were a mere token or condition of sale rather than constituting consideration, then the notice would be valid and Nestle could sell the records. Held The wrappers did form part of the consideration as the object was to increase sales and therefore provided value. Chappel were granted the injunction and Nestle could not sell the records as they had not complied with the notice requirements.

The actual value of the exchanged consideration does not matter, it must only have a value in essence.

The Offer - Auctions - *S.57(2) of the Sale of Goods Act 1979* (2)A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.

The calling out for bids by an auctioneer amounts to an invitation to treat. Anyone who makes a bid is therefore making offer. The auctioneer has the discretion to accept or reject these offers.

The Law of Obligations

The law considering contract, tort and equity.

Duress - Economic Duress - *DSND Subsea Ltd v Petroleum Services ASA [2000]* DSND entered into a memorandum of understanding varying the terms of the agreement with PGS, after DSND was found to have a made a misrepresentation in their original agreement. PGS then cancelled the agreement, claiming that DSND had breached the terms of the agreement by making false representations and forcing PSG to sign under duress. DSND argued that PSG had not validly terminated the contract, as there was no duress and that there had been no misrepresentation, although DSND had agreed to a variation. PGS claimed they had validly terminated the agreement after DSND had breached the terms of their main agreement by misrepresentation. Issues The issue was whether the representation made by DSND led PGS to sign the agreement and whether that amounted to duress. Held The appeal by PGS was dismissed. The court found that the misrepresentation had not led PGS to sign the agreement in the first instance and that there had been no evidence that any duress had occurred.

The central idea of duress is that someone does something 'or else' something bad will happen to them, but you must remember that it does not have to come as a direct threat to them. As long as a party can prove their free will was twisted, then duress can stand as a defence to enforcing a contract. There must be 'pressure' which (a) Leaves the victim with no practical choice (b) Is illegitimate, and (c) Is the 'significant cause' of the victim's agreement

Payment, Quantum Meruit, and Variations *McAlpine Humberoak v McDermott*

The court of Appeal held that substantial drawing changes and quantity change may not amount to a separate contract.

Intention to Create Legal Relations - Commercial Agreements: Ambiguous Phrasing - *Edwards v Skyways Ltd [1964]* The claimant was an airline pilot working for the defendant. He was to be made redundant. The defendants said that if he withdrew his contributions to the company pension fund, they would pay him the equivalent of company contributions in an ex gratia payment. The claimant agreed to this and withdrew his contributions. The company then ran into further financial difficulty and went back on their promise relating to the ex gratia payment. Held The agreement had been made in a business context which raised a strong presumption that the agreement is legally binding. The claimant could therefore enforce the agreement and was entitled to the money.

The courts are likely to find intention to create legal relations in circumstances where the phrasing in a commercial agreement seems vague or ambiguous. [ ]

Intention to Create Legal Relations - Commercial Agreements: Exceptions - *Weeks v Tybald [1604]*

The courts will not recognise intention to create legal relationships in a situation where an offer is obviously not serious or is exceptionally ambiguous or vague. [ ]

Promissory Estoppel and Waivers - How can Promissory Estoppel be used? - *Tool Metal Manufacturing Co. v Tungsten Electric Ltd (No.2) [1955]* Tungsten had been infringing a patent right held by TMM. When TMM heard of this they waived all infringements in return for Tungsten paying 10% Royalty and also 30% 'compensation' if sales exceeded 50KG in any month. These sums were excessive but Tungsten agreed to pay them otherwise they would be faced with a claim for infringing the copyright. Tungsten struggled to make payments. They got into arrears during the war times and an agreement was reached to waive the 'compensation' payments during the war years. Held TMM could not enforce the compensation payments during the war years but could enforce them on termination of the war. TMM were estopped from going back on their promise to waive the payments in equity.

The doctrine of promissory estoppel only ever suspends contractual rights it does not diminish them altogether. Remember, because the doctrine is one that exists in equity, it is only something that can be used at the court's discretion when a judge examines the facts of a case. [ ]

Payment, Quantum Meruit, and Variations *Blue Circle v Holland Dredging*

The employer may not use a variation mechanism under the contract if he instructs the different nature of works from the contract

The Offer - Invitation to treat - *Partridge v Crittenden [1968]* The defendant placed an advert in a classified section of a magazine offering some bramble finches for sale. The Protection of Birds Act 1954 made it an offence to offer such birds for sale. He was charged and convicted of the offence and appealed against his conviction. Held The defendant's conviction was quashed. The advert was an invitation to treat not an offer. The *literal rule* of statutory interpretation was applied.

The general rule is that advertisements are to be regarded an invitation to treat. In some instances, however, (i.e. reward type situations) they can amount to an offer; it depends on the words used and the specific circumstances.

Acceptance/ Revocation - The offeror can ask for a specific method of acceptance - *Manchester Diocesan Council v Commercial General Investments [1969]* The complainants, Manchester DC, called for tenders relating to property. The defendant, CGI, submitted a tender offer to buy the property from the complainants. It was stated that the acceptance of tender would be notified to the person by a posted document and to the address that was to be given in the tender. The complainants decided to accept the tender given by the defendants. They sent their acceptance of the tender. They sent the document to the defendant's solicitor and not the address given on the offer. The complainant sent another acceptance to the defendant's address detailed on the tender. Issues The defendants argued that the time they had received the correct acceptance document, the offer had lapsed. Held The court held that there was no prescribed or mandatory method for acceptance of a tender. If the offeror wanted to create a mandatory acceptance method, this would need to be made clearly and explicitly to the other parties. An equally effective method of acceptance would be enough to form a valid contract.

The method of acceptance arranged for a tender was not mandatory and if an offeror wants it to be mandatory, this needs to be made explicit.

Acceptance/ Revocation - Revocation of offer - *Byrne v van Tienhoven (1880)* The defendants wrote a letter. to the plaintiffs offering the sale of 1000 boxes of tin plates. The defendant was based in Cardiff and the plaintiff was based in New York, and letters took around 10-11 days to be delivered. The plaintiffs received this letter and accepted it on the same day by telegram, as well as by letter a couple of days later. In the meantime, the defendant sent a letter to the plaintiffs which withdrew their offer and this arrived with the plaintiff. The plaintiffs claimed for damages for the non-delivery of the tin plates. Issue The court was required to establish whether the withdrawal of the offer for the sale of goods was acceptable. Held The court held that the withdrawal of the offer was ineffective as a contract had been constructed between the parties when the plaintiffs accepted the offer.

The offeror can retract his offer at any point up until the point of acceptance.

Duress - Economic Duress - *Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989]* The Kafco imported basket ware and entered a contract with Atlas to sell and deliver baskets to Atlas retail stores. Atlas tried to negotiate a further term in the contract for a minimum order of £440 per trailer load. Several days later, an Atlas representative turned up to Kafco's premises with an empty trailer and told Kafco that if the trailer was not returned with £440 worth of goods as the new minimum, the trailer would be driven away unloaded. Kafco reasonably believed they would be unable to negotiate further terms of the contract and thereby sabotaging their opportunity to trade with Atlas, so they felt compelled to sign the agreement and meet the new terms of minimum stock trade. The agreement continued until Kafco sent them money on account and a letter stating they had signed the contract under duress. Atlas sued for the money on account. Issues Whether Kafco signed in duress, even though they had honored the contract. Held Judgment was awarded in favour of Kafco. Kafco were found to have signed the agreement under economic duress as they felt that in the circumstances they had no alternative but to sign the varied contract. Kafco had not approved the new terms of the agreement (as they had previously rejected the proposed variation) and further, there was no consideration for the new agreement as the variation placed Kafco in a less favourable position financially. Thus, their non-payment of the money of account resulted from the duress.

There is a 'dividing line between economic duress and so called 'hard and fair bargaining'. The line will always be difficult to draw; because of this, it is a question of fact whether a party has been forced into unduly accepting unfavorable terms or just entering as a result of normal contractual negotiations. [Kafco supplier baskets to Woolworths, they engaged Atlas who underestimated costs to deliver, subsequently held K to ransom for increased fees which was considered duress]

Acceptance/ Revocation - The Battle of the Forms - *Butler Machine Tool co. Ltd v Ex cell O Corporation ltd [1979]* Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of £75,535 along with a copy of their standard terms of sale. The terms included a price variation clause and a term that the seller's terms would prevail over any terms submitted by a purchaser. The machine would be delivered in 10 months. Ex-Cell-O put in an order for the machine at the stated price and sent a set of their terms which did not include the price variation clause. The order contained an acknowledgement slip which required a signature by Butler and was to be returned to Ex-Cell-O. This slip stated that the contract would be subject to the terms stated overleaf. Butler duly signed the slip and returned it. The machines were then delivered and Butler sought to enforce the price variation clause and demanded an extra £2,893. Ex-Cell-O refused to pay. Held The offer to sell the machine on terms provided by Butler was destroyed by the counter offer made by Ex-Cell-O.

This rule relates to where two companies are fighting over what terms and conditions should prevail. The general rule is the last shot rule (coined by Denning J), or the person who has the last shot or last word, will prevail.

Acceptance/ Revocation - Silence is not acceptance - *Felthouse v Bindley (1863)* A nephew discussed buying a horse from his uncle. He offered to purchase the horse and said if I don't hear from you by the weekend I will consider him mine. The horse was then sold by mistake at auction. The auctioneer had been asked not to sell the horse but had forgotten. The uncle commenced proceedings against the auctioneer for conversion. The action depended upon whether a valid contract existed between the nephew and the uncle. Held: There was no contract. You cannot have silence as acceptance.

To accept an offer, the offeree needs to clearly convey their acceptance to the offeror. There is acceptance from the moment there is communication. In situations where the offeree was simply intending to accept, but did not communicate their intention to the offeror, no contract can be seen to exist. So, in short, just thinking it is not good enough to amount to intention. Furthermore, the offeror might not mention that he will allow silence to be acceptance of an offer.

Intention to Create Legal Relations - Social and Domestic Agreements - *Balfour v Balfour [1919]* A husband worked overseas and agreed to send maintenance payments to his wife. At the time of the agreement the couple were happily married. The relationship later soured and the husband stopped making the payments. The wife sought to enforce the agreement. Held The agreement was a purely social and domestic agreement and therefore it was presumed that the parties did not intend to be legally bound.

UnIess indicated, it is assumed that a married couple that makes an agreement does not intend to create legal relations. [ ]

The Offer - Unilateral Offer *Carlille v Carbolic Smoke Ball co. [1892]* A Newspaper advert placed by the defendant stated £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball... £1000 is deposited with the Alliance Bank, shewing our sincerity in the matter." Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought to claim the stated £100 reward. The defendant raised the following arguments to demonstrate the advertisement was a mere *invitation to treat* rather than an offer. Held The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer.

Unilateral contracts arise where A promises to do something in return for an ACT to be performed by B. For example: I will pay you CIO if you were to take some notes for me at a law lecture I could not attend on a certain day this week. They can be best seen, then, as 'If you do this' types of contract. A summary of the general principle, then, is that in unilateral contracts, performing the act that another requests publicly amounts to both the acceptance and the consideration to mandate the offeror to provide the reward. This is a type of contract where commencing performance is the requisite acceptance.

Duress - Duress to the person - *Williams v Bayley [1866]* Mr Bayley's son forged his father's signature on promissory notes and gave them to Mr Williams. Mr Williams threatened Mr Bayley that he would bring criminal prosecution against his son unless he granted an equitable mortgage to get back the notes. House of Lords upheld the cancellation of the agreement, on account of undue influence. The agreement was cancelled on the ground that he was influenced by threat.

When a contract is established by undue pressure, it can be cancelled out altogether.

Acceptance/ Revocation - Revocation of offer - *Errington v Errington and Woods [1952]* A father-in-law purchased a house for his son and daughter-in-law to live in. The house was put in the father's name alone. He paid the deposit as a wedding gift and promised the couple that if they paid the mortgage instalments, the father would transfer the house to them. The father then became ill and died. The mother inherited the house. After the father's death the son went to live with his mother but the wife refused to live with the mother and continued to pay the mortgage instalments. The mother brought an action to remove the wife from the house. Held The wife was entitled to remain in the house. The father had made the couple a unilateral offer. The wife was in course of performing the acceptance of the offer by continuing to meet the mortgage payments. Under normal contract principles an offer may be revoked at any time before acceptance takes place, however, with unilateral contracts acceptance takes place only on full performance.

When someone has begun to carry out the terms of a unilateral offer and keeps on doing so, the unilateral offer cannot be retracted.

Acceptance/ Revocation - Revocation of offer - *Shuey v US 92 US 73 (1875)* Facts: The United States used newspapers to publicize a reward for the arrest of an accomplice in the murder of President Lincoln. The offer was later revoked in the same manner. Shuey, unaware of the revocation, gave information that led to the arrest of the accomplice. She was given a smaller reward. Issue How may a general offer that is made to unknown persons via the mass media be revoked? Held An offer of a reward made by means of a published proclamation can be revoked in the manner in which it was made or through similar publicity. There is no legal duty to satisfy' an acceptor who does not know of the revocation.

Where a unilateral offer is made (if published in the Gazette) must be revoked in the same way. [Reward offered for capture of accomplice involved in Lincolns murder; Reward removed before S realised]

Privity of Contract - Right to Claim Damages - *Jackson v Horizon Holidays Ltd [1975]* Mr Jackson booked a 28 day holiday in Ceylon for himself and his family through Horizon Holidays. The hotel turned out to be unsatisfactory for various reasons relating to cleanliness and provision of services. The trial judge made an award for the disappointment suffered by Mr Jackson, but stated he could not take into account the disappointment suffered by his wife and children since they were not party to the contract. Mr Jackson appealed. Held Mr Jackson was able to recover for the disappointment suffered by his wife and children.

lf a contracting party purchases something on behalf of others, they may also be compensated for their loss, in addition to their own. [ ]

Intention to Create Legal Relations - Commercial Agreements: Exceptions - *Confetti Records v Warner Music UK Ltd [2003]*

lf an agreement incorporates the phrase 'subject to contract,' it may indicate that there is no intention to create legal relations; however, this may differ if the parties choose to act upon the agreement as a contract. [ ]

Intention to Create Legal Relations - Commercial Agreements: Exceptions - *Jones v Vernon's Pools [1938]* Littlewoods disputed ever receiving the entry and denied the fact that they would be legally obliged to pay out even if they had received the entry due to the binding in honour only clause and based on the Court of Appeal precedent set in Jones v Vernon Pools. The claimant, a litigant in person, argued that the decision in Jones v Vernons was outdated and should be overruled. Held Littlewoods were not bound to pay out. The court was bound by the decision in Jones v Vernon Pools the existence of the binding in honour only clause demonstrated an intention that the parties did not intend to be legally bound.

lf an agreement specifies that it is 'binding in honour only,' then it is not legally enforceable because there is no demonstrated intention to create legal relations. [ ]

Consideration - Promisee already under a contractual duty *Williams v Roffey Bros and Nicholls [1991]* The defendants were building contractors who entered an agreement with Shepherds Bush Housing Association to refurbish a block of 27 flats. This contract was subject to a liquidated damages clause if they did not complete the contract on time. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was concerned about completing the contract on time. The defendant agreed to pay the claimant an additional £575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional £500. He then ran out of money and refused to continue unless payment was made. The defendant engaged another carpenter to complete the contract and refused to pay the claimant the further sums promised arguing that the claimant had not provided any consideration as he was already under an existing contractual duty to complete the work. Held Consideration was provided by the claimant conferring a benefit on the defendant by helping them to avoid the penalty clause. Therefore the defendant was liable to make the extra payments promised.

lf one party's contractual obligation confers additional benefit to a party, the fulfilling of the contractual obligation can be good consideration for a binding promise, provided that no economic duress is involved.

Promissory Estoppel and Waivers - Promissory Estoppel - *Hughes v Metropolitan Railway Co (1887)* A landlord gave a tenant 6 months notice to carry out repairs failure to do so would result in forfeiture of the lease. The landlord and tenant then entered into negotiations for the tenant to purchase the freehold of the property. It was thought by both parties that a conveyance of the property would take place. The tenant had not carried out the repairs as they believed they would be purchasing the freehold and the repairs required by the landlord were not essential to his use of the property. At the last minute negotiations broke down and the Landlord gave the tenant notice to quit for failure to carry out the repairs. Held: The time limit imposed for carrying out the repairs was suspended during the negotiations.

lf you promise a person something, and that person relies on said promise, then you cannot operate on previous agreements modified or postponed by that promise. [ ]

Privity of Contract - Right to Claim Damages - *Woodar Investment Development v Wimpey Construction [1980]* Wimpey, the purchasers, entered into a contract with Woodar to buy land. It was agreed that part of the purchase price would be paid on completion of the build. There was a clause in the contract that allowed the purchasers to rescind in the event that an authority were to negotiate an acquisition of the property. Wimpey later sent a notice to rescind the contract to Woodar after it was confirmed that the an Environmental secretarial authority had commenced the procedure for the compulsory acquisition of part of the land. Woodar brought action claiming Wimpey had no right to rescind the contract and also claimed damages for breach of contract. Issues Whether the sum outstanding on the purchase was recoverable in action by Woodar and whether Wimpey were entitled to rescind the contract in the circumstances. Held The appeal by Wimpey was allowed, overturning the court's previous decision that the contract has been wrongfully repudiated.

ln cases of repudiatory breach (a severe case of breach) the rules of Privity could be ignored. [ ]

Consideration - Consideration for the variation of contractual terms - *Pinnells Case (1602)* The claimant was owed £8 10 shillings. The defendant paid £5 2 shillings and 2p. The claimant sued for the amount outstanding. Held The claimant was entitled to the full amount even if they agreed to accept less. Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made either: a). before the due date or b). with a chattel or c). to a different destination

ln general, paying a smaller amount of money will never discharge a larger debt. [Doctrine of Part Payment]

Promissory Estoppel and Waivers - When does promissory estoppel exist? *Woodhouse A.C. Israel Cocoa v Nigerian Produce Marketing co. [1972]* A contract for the sale of some coffee beans was agreed to be payable in pound sterling. The sellers mistakenly sent an invoice stating price was payable in Kenyan Shillings. At the time the value of pound sterling and Kenyan shillings was equal. The buyers accepted the delivery and invoice with out objection. Subsequently the value of the pound fell quite dramatically in relation to Kenyan shillings. The buyers then sought to revert to pound sterling as stated in the contract. Held The buyers conduct in accepting the invoice unquestionably amounted to an implied clear and unambiguous promise to accept on those terms.

ln order for promissory estoppel to exist, a person must promise that he or she will not enforce his or her legal rights. [ ]

Intention to Create Legal Relations - Commercial Agreements - *Esso Petroleum Co Ltd v Customs and Excise [1976]* Esso ran a promotion whereby any person purchasing four gallons of petrol would get a free coin from their World Cup Coins Collection. The question for the court was whether these coins were 'produced in quantity for general resale' if so they would be subject to tax and Esso would be liable to pay £200,000. Esso argued that the coins were simply a free gift and the promotion was not intended to have legal effect and also that there was no resale. Held: 3:2 There was an intention to create legal relations. The coins were offered in a commercial context which raised a presumption that they did intend to be bound. However, the coins were not exchanged for a money consideration and therefore the coins were not for resale.

lt is largely assumed that, in commercial agreements, the parties possess intention to create legal relations. It is unlikely that the courts will consider this differently without strong evidence otherwise. [ ]