Business law handbook 2012

BA[Hons] Business Studies Level One 2011 – 2012 Introduction to Business Law [DRAFT]

Module Leader: Helen Simpson Room: ND03 E-‐mail: [email protected] Tel: 01724 294626 [Weds & Thurs]

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TABLE OF CONTENTS Module Synopsis 3

Learning Outcomes 3-‐4

Teaching and Learning Strategy/Methods 5

Reading & Internet 6

Assessment 7

Assessment Marking Criteria-‐ report 8-‐9

Assessment Marking Criteria-‐presentation 10

Assessment Grading Criteria 11-‐12

Lecture Programme 13

APPENDICES :

CASE DETAILS 14-‐30

HOMEWORK QUESTIONS 31-‐35

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Introduction to Business Law Module Synopsis Together the law and the system by which it is generated comprise one of the key contexts in which businesses operate. This module will examine some of the essential areas of business law and the legal processes to consider how legal concerns may in some circumstances help businesses to attain their goals whilst in others they may act as restrictions on commercial activities. In doing so, the module will develop a perspective on the role of legal considerations in the management of business. Students will be prepared so as to apply such legal rules and principles to factual business situations. Outline Syllabus The module comprises the following areas :-

• Contract formation – offer & acceptance, consideration,

• Express/implied terms, misrepresentation, exclusion clauses

• Contract discharge & remedies Learning Outcomes On completion of the module the student will be able to :

• Identify the content of certain legal rules • Demonstrate a comprehension of the relevance in certain situations of

referring to legal rules • Analyse factual situations to determine the applicability of particular rules and

identify areas of legal uncertainty • Logically explain and apply these legal rules to given situations, supporting,

by reasoned argument, conclusions drawn, making reference to appropriate authority in support of their argument.

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Extract from Programme Specification :

Knowledge and understanding On successful completion of this module a student will be able to demonstrate knowledge and understanding of:

A2.business as a phenomenon arising from, and operating within particular economic, environmental, ethical, legal, political and ideological contexts;

Subject specific skills and attributes On successful completion of this module a student will be able to:

B4.Select and apply appropriate communication and information resources to support the effective analysis and communication of business data: communicate information;

Transferable skills and attributes On successful completion of this module a student will be able to: C2.Listen and communicate effectively in an range of contexts and through a range of media; C3.Manage themselves and work in teams to deliver outputs; C4.Deploy skills of critical thinking, analysis and synthesis to recognise assumptions, false logic and implicit reasoning;

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Teaching and Learning Methods The module comprises of a series of participative workshops. A highly participative format will be used where students lead certain sessions having undertaken appropriate research into the topics. Students will be provided via Moodle with an overview of a topic area each week and will be encouraged to broaden their knowledge through discussion questions, problem scenarios, and further reading. The participative style of delivery is designed to encourage the application of the legal rules to typical business scenarios. Lecture notes & materials will be placed on Moodle each week, students MUST ensure that they are prepared for these practical sessions by thoroughly reading the lecture notes in conjunction with the case scenarios and recommended ‘textbook’ reading ‘ON A WEEKLY BASIS’ and ‘In advance of the class’ so as the gain the full benefit from these sessions. Student groups will ‘lead’ a selection of workshops, the role of the tutor will be to question, clarify and sum up the main points of law.

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Reading Reading is vital to successful performance in higher education. You are expected to read frequently, as information gained from your workshops alone will not be sufficient for success in assessment. Apart from quality newspapers, tv and radio programmes are a useful source of information about current legal topics. ‘You and yours’ and ‘The money programme’ and ‘The Law programme’ on radio 4 deal with a variety of topical legal issues. Key Reading

• Alix Adams, 2010, Law for Business Students (6th ed), Pearson Publishing • Ewan Macintyre,2009, Business Law (5th ed),Pearson Publshing

Additional Reading

• Anne Ruff,2007, Nutcases for Contract Law [5th Ed] Sweet and Maxwell

• Ewan Macintyre, 2009, Essentials of Business Law [2nd Ed] Pearson Publishing

• Keenan & Riches, 2011, Business Law [10th ed), Sweet and Maxwell

• Robert Duxbury, Nutshells, 2009, Contract Law [8th Ed] Sweet and Maxwell

• Smith & Keenan, 2006, Law for Business (13th ed), Sweet and Maxwell Internet Resources The most updated legal resources will be available via the internet – here are a selection of useful websites :- Podcasts : [some of these incur a small charge £3 per topic] http://www.lawinabox.tv/product_detail.asp?productid=1 http://www.sweetandmaxwell.co.uk/lecturers-students/podcasts.aspx Other Materials & Case details : http://www.lawteacher.net/contract-law/lecture-notes/ http://www.bailii.org/ Weblinks to other Law resources : http://www.oup.com/uk/orc/bin/qanda/books/03contract/weblinks/ www.carbolicsmokeball.co.uk www.mylawchamber.co.uk/adams en.wikipedia.org/wiki/portal:law

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Assessment [100% Single grade awarded] Students are required to complete two pieces of assessed work for the module, a single % grade is awarded applying the following weightings : These are :-

TASK ONE :[25%] Group Presentation : 15 minutes and 1000 word handout. Past Consideration is no consideration . Discuss. Date of presentation – during normal class time : 25th April 2012

TASK TWO :[75%] An Individual report – based around a problem scenario giving legal advice [2500 words] DEADLINE FOR SUBMISSION OF REPORT : 6TH June 2012. Hand-‐in Procedure You are required to submit one hard copy of each assignment and one electronic copy. The electronic copy must be uploaded electronically via Moodle by 11pm on the date due. When submitting the hard copy you must remember to:

1. Use the appropriate front sheet, signed and dated with correct module title and module code, found on the front of this handbook.

2. Receive a receipted signature on your Assignment Record Sheet from the person accepting

the assignment at the reception. In-‐Course Retrieval (ICR) For any element of the module which falls below a pass mark above 40%, In-‐course retrieval (ICR) can be offered. Any work resubmitted as an ICR will be remarked, and capped at 40%, thus allowing you to pass the module.

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Case Study Report ~ Assessment Marking Criteria

Programme BA[Hons]Business Studies

Level 1 Credit Points 15

Module Introduction to Business Law

Date of Distribution/Submission Distribution 20th February 2012 Submission 6th June 2012

Word Limit 2500 words Report Assignment Weighting 75% Title of Assignment

Legal Advice Report – based on problem based scenario Specific Learning Outcomes of Assignment

On completion of this assessment, the student will be able to:

Knowledge and understanding

Demonstrate knowledge and understanding of:


Subject specific skills and attributes


Transferable skills and attributes

C2.Listen and communicate effectively in an range of contexts and through a range of media; C4.Deploy skills of critical thinking, analysis and synthesis to recognise assumptions, false logic and implicit reasoning

Content of Assignment Sarah is going abroad for three months. She asks Laura, who is a police officer and who lives in the same

street, to keep an eye on her house for her while she is away, Sarah says that she will pay Laura £100 for

doing this when she returns.

Sarah has an expensive art magazine delivered fortnightly. She arranges with the paperboy, Kevin, that

while she is away he will post this through the letter box in the back door, rather than leave it in the front

porch which lets in the rain, She pays him £10 to do this.

On her return from abroad Sarah finds that Kevin has left the magazines in the front porch and that half the

copies have been damaged by rain. It will cost Sarah £25 to replace them.

Laura asks Sarah for the £100. Sarah explains that she is overdrawn at the bank and short of money. She

does however have £80 in travellers cheques. She offers these to Laura saying ‘ your not going to get any

more out me’ . Laura accepts the travellers cheques, but on discovering the following week that Sarah has

taken a very well paid job now wishes to recover the additional £20.

Advise Sarah.

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Marking Criteria

Identify – Identify the relevant areas [10%] Demonstrate – a knowledge and understanding of the relevant legal principles, including analysis of them [35%] Construct -‐ coherent arguments and cite evidence/cases to back up alternative arguments that are relevant to answering the question[35%] Present – work which is well written, appropriately referenced, logical and with evidence of research and reading [20%]

Remember there is not necessarily a right or wrong answer you are being tested on your reasoning skills & the facts of the problem may be capable of more than one interpretation.

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Group Presentation ~ Assessment Marking Criteria

Programme BA[Hons]Business Studies

Level 1 Credit Points 15

Module Introduction to Business Law

Date of Distribution/Submission Distribution 20th February 2012 Submission 25th April 2012– in normal class time

Word Limit 15minutes Group presentation & 1000 word handout

Assignment Weighting 25%

Presentation Title : ‘Past Consideration is no Consideration’ – Discuss…. Specific Learning Outcomes of Assignment On completion of this assessment, the student will be able to:

Knowledge and understanding

Demonstrate knowledge and understanding of:


Subject specific skills and attributes


Transferable skills and attributes C2.Listen and communicate effectively in an range of contexts and through a range of media;

C4.Deploy skills of critical thinking, analysis and synthesis to recognise assumptions, false logic and implicit reasoning

Content of Assignment

A presentation which discusses the rules of past consideration, and culminates in either agreeing or disagreeing using reasoned arguments and reference to a selection of relevant cases with the statement ‘Past consideration is no consideration’ ?!?

Marking Criteria

Identify – Identify the relevant aims and objectives of the session [5%] Demonstrate – a knowledge and understanding of the relevant legal principles relating to past consideration[25%] Demonstrate – a knowledge and understanding of relevant cases to illustrate your discussion[25%] Conclude your discussion with reasoned arguments for your decision [25%] Knowledge & Understanding – ascertain that the audience have understood what has been delivered[10%] Presentation – Appropriately referenced, logical and with evidence of research and reading [10%]

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GENERIC GRADING CRITERIA FOR LAW ASSESSMENTS : First Class [70%+] Students are able to demonstrate the following with respect to the assessment criteria :-‐ • Comprehensive and deep understanding of key concepts and knowledge and of a range

of supporting evidence • Excellent, in depth consideration of key issues, with skilful interpretation and use of a

wide range of evidence • Excellent ability to integrate materials from a variety of sources and to deploy accurately

and imaginatively established techniques of analysis and enquiry • Evidence of insightful analysis and of critical or imaginative thinking and of the ability to

question the validity of accepted approaches • Excellent skills in communicating the above knowledge and understanding and in the

presentation of ideas • A high level of command and application of the key legal principles, creatively and high

level conceptual skills • An excellent level of competence Upper Second [60-‐69%] Students are able to demonstrate the following with respect to the assessment criteria :-‐ • A thorough understanding of key concepts and knowledge and of a range of supporting

evidence • Informed consideration of key issues and interpretation of evidence • Ability to integrate material from a variety of sources and to deploy established

techniques of analysis and enquiry accurately and effectively • Evidence of analytical or critical thinking of insight and recognition of the level of validity

of alternative approaches • Good skills in communicating the above knowledge and understanding • Good command and application of the key legal principles, creatively & good conceptual

skills • A high level of competence Lower Second [50-‐59%] Students are able to demonstrate the following with respect to the assessment criteria :-‐ • Understanding of key concepts and knowledge and of a range of supporting evidence,

and an awareness of alternative accepted approaches • Adequate consideration of key issues demonstrating emerging ideas, but revealing gaps

in coverage

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• Ability to integrate materials from a variety of sources and to deploy established techniques of analysis and enquiry but limited in depth and in evidence of analytical or critical thinking

• An adequate level of ability to communicate the above knowledge and understanding • Some command and application of the key legal principles, creatively and acceptable

conceptual skills • A satisfactory level of competence Third [40-‐49%] Students are able to demonstrate the following with respect to the assessment criteria :-‐ • Some understanding of key concepts and knowledge, and an awareness of the existing

of supporting evidence • Some consideration of key issues but revealing significant gaps in coverage • Some ability to integrate material from a variety of sources and to deploy established

techniques of analysis and enquiry but very limited in depth and evidence of critical thinking

• An adequate level of ability to apply key legal principles, lacking in creativity and conceptual skills

• Some limited competence Fail [less than 40%] To the extend that the following assessment criteria apply, students demonstrate no or very limited evidence of :-‐ • Knowledge and understanding of key concepts and supporting evidence • Consideration of key issues • Ability to integrate material from a variety of sources to deploy established techniques

of analysis and enquiry and think critically • Ability to communicate knowledge and understanding • Competence and ability to apply key legal principles, creativity or conceptual skills •

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BUSINESS LAW – programme of topics 2012

Dates W/C

TOPIC

30.1.12 Intro to Unit. Sources of Law [RG]

6.2.12 [double session]

Essential elements of a contract . Offer - the General rules [HS]

13.2.12 Acceptance – the General rules [RG]

20.2.12 Problem scenario workshop 27.2.12 Consideration 5.3.12 Problem scenario workshop 12.3.12 Contract Terms 19.3.12 Unfair Contract Terms 26.3.12

‘presentation support’ tutorials & Group meetings

2.4.12 EASTER 9.4.12 EASTER 16.4.12 EASTER 23.4.12

IN CLASS ASSESSMENT – group presentation

30.4.12 Misrepresentation 7.5.12 Problem scenario workshop 14.5.12 Discharge of Contracts I 21.5.12 Discharge of Contracts II &

Remedies 28..5.12 e week

Preparing for your final assessment -tutorials

4.6.12 Final Assessment submission on 6th June

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INTRODUCTION TO BUSINESS LAW

CASE DETAILS

Produced by Helen Simpson

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LAW OF CONTRACT - OFFER AND ACCEPTANCE CASE SUMMARIES

fISHER V BELL: Shopkeeper displaying flick knives in window — was an invitation to treat. Customer asking to buy knife would make an offer, sales person could accept the offer or refuse to sell.

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V BOOTS: Display of items on shelves in self service store was inviting customers to buy them (invitation to treat NOT offers). Offer made by customer at checkout where sale was ‘supervised’ (important in this case — ‘poisons’ — similar with sale of alcohol)

PARTRIDGE V CRITTENDEN : Advertising wild birds for sale in magazine —invitation to treat NOT offer. Decision so as to avoid problems if demand exceeded supply. Person responding to the advert is making the offer — if birds all sold the advertiser does not accept — no contract — no redress

Also see — Lefkowitz v Great Minneapolis Surplus Stores 1957 — Defendants published advert stating ‘Saturday 9am sharp; 3 brand new fur coats worth $100. First come first served $1 each’. Plaintiff was one of first customers — Company refused to sell him a coat stating offer only open to women. Court held advert constituted an offer (due to wording of advert & and no problem of limited supply), Plaintiff accepted and was entitled to coat.

CARLILL V CARBOLIC SMOKE BALL CO : Defendants issued advert claiming would pay £100 to any person contracting flu after correctly using one of their smoke balls. Also stated they had deposited £1000 in a bank to show sincerity in the matter. Mrs C caught flu after use of smoke ball and claimed the £100.

The following matters arose out of the various defences raised by the Company

a) ‘Offer too vague’ — no time limit re: contraction of flu — Court said NO — intention should be that ball would protect the user during the period of its use (as was the case) b) ‘Mere advertising puff’ — no intention to create legal relations' -. Court held that the deposit of £1000 indicated the Company’s intention to pay claims c) ‘Contract with the whole world impossible in English Law’ — Court held the offer was to world but not an attempt to contract with the whole world — just a limited portion who came forward on the faith of the advert. d) Mrs C had not provided any ‘consideration’ — Court held that the ‘inconvenience’ of using the ball three times daily for 2 weeks was sufficient. e) No communication of acceptance — Court held not necessary with Unilateral reward type cases — acceptance by conduct i.e. use of ball.

HELD: Company had to pay Mrs C!

HARRIS V NICKERSON Office furniture auction advertised, Plaintiff travelled to sale intending to bid but lots were withdrawn from sale. He sued to recover losses for 2 days loss of time. Advert was deemed an invitation to treat — ‘Bid’ is the offer, ‘Hammer fall’ the acceptance. (Also see Warlow v Harrison 1859, Payne v Cave 1789)

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HARVEY V FACEY : Telegrams sent regarding sale of ‘Bumper Hall Pen in Jamaica’ 1) H to F : a) ’Will you sell us BHP ? b)Telegraph lowest cash price’ 2) F to H ‘Lowest price for BHP £900’ 3) H to F : ‘We agree to buy BHP for £900 asked by you’ F refused to sell. H sued claiming contract made. No contract. Telegram (2) simply answered question in Telegram (1)b) — gave no answer to (1)a) ‘Would F sell’.

ROUTLEDGE V GRANT: G offered to buy R’s house, requiring acceptance within 6 weeks. Within the 6 weeks G withdrew his offer. As there was no ‘option agreement’ (for which consideration’ must be given) G could revoke his offer at any time. - COMPARE WITH -

MOUNTFORD V SCOTT: S offered to buy M’s house — paid £1 to keep option open for 6 weeks. M could not withdraw his offer during this time (nb/Consideration need not be adequate ! )

BYRNE V VAN TIENHOVEN : Defendants offered to sell 1000 boxes of Tinplate to Plaintiff in New York. Defendants changed their mind and wrote on 8th October revoking their offer. Letter did not arrive until 25th October. In the meantime, Plaintiff telegraphed acceptance on 11 October & confirmed this in a letter posted on 20 October. Important to establish date offer ceased to exist — shown diagramatically below

DICKINSON V DODDS : 10th June Dodds gave Dickinson a written offer for sale of properties. ‘To be left open until 12th June’. During afternoon ii June Dickinson was told by an Estate Agent that Dodds was in negotiation with another person for the sale of the property. At 7pm 11 June Dickinson delivered letter of acceptance to Dodds home (not seen by Dodds). 12 June Dickinson sent duplicate acceptance letter but found out that Dodds had sold the property to someone else on 11 June. HELD It was obvious to Dickinson on 11 June that Dodds had changed his mind. Dickinson had been advised through a ‘reliable’ third party of the revocation of offer.

HYDE V WRENCH : Defendant offered to sell farm for £1000. Plaintiff initially counter offered to buy it for £950. Defendant refused counter offer. Plaintiff then said would buy for original asking price of £1000. Defendant did not respond. Plaintiff brought action for specific performance (an order to carry out the contract). HELD : NO CONTRACT — Counter offer of £950 terminated original offer, so no offer in existence when Plaintiff agreed to pay original price.

Offer exists Contract exists

Defendants post letter revoking offer. This does not revoke offer

Defendants letter of revocation arrives. This is now too late as contract made on the 11th

- UNTIL -

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STEVENSON V MC CLEAN: Defendant offered to sell iron to Plaintiff, offer open until Monday. Plaintiff asked whether could buy on credit. No reply from Defendant. Plaintiff telegraphed acceptance on Monday. HELD: enquiry re: credit terms was mere request for information — so the offer remained open.

RAMSGATE VICTORIA HOTEL V MONTEFIORE: Offer to buy shares made 8 June. Acceptance not until 25 November. HELD: Offer no longer existed — could not be accepted. Delay was too great.

FINANCINGS V STIMSON: Contract for purchase of car on hire purchase — before agreement finalised car was stolen from dealers premises and badly damaged. HELD Car should remain in same state until acceptance ! No Contract.

ADAMS V LINDSELL: (Established ‘old’ postal rule: 2nd Sep Defendants wrote to Plaintiff offering to sell wool — required answer in the course of the post. Letter was incorrectly addressed and did not arrive until 5 Sep — same day Plaintiff posted acceptance letter — Arrived 9 Sept (normal course — reply would have been 7th Sep). Defendants sold wool to someone else on 8 Sep. HELD Contract came into existence on 5 Sep when Plaintiff posted letter of acceptance. Shown diagramatically

HENTHORN V FRASER: Plaintiff lived in Birkenhead was handed a note in Defendants offices in Liverpool —gave him option to purchase property within 14 days. Next day Defendant posted letter withdrawing offer — did not reach Birkenhead until 5pm. Meanwhile, Plaintiff posted letter at 3.30pm accepting offer. Letter delivered whilst Defendants offices were closed — not opened until next morning. HELD : Postal rule applied Contract concluded at 3.30pm. NB! Where panics are communicating over a distance it is likely to be reasonable to use the post, even if the offer has been made in some other way (eg by hand)

HOUSEHOLD FIRE INSURANCE V GRANT: Defendant applied for shares, paid a deposit and requested allotment of 100 shares — balance to be paid within 12 months. Company accepted the application and a letter of allotment was posted to Grant but never arrived. Company went into liquidation — liquidators sought balance from Grant who refused to pay on the basis there was no valid contract. HELD : Contract completed the moment the letter was posted, regardless of fact it never arrived ! Grant had to pay.

QUENERDUAINE V COLE: Offer made by telegram impliedly required an equally speedy reply. A reply by post

would not therefore take effect on posting.

HOLWELL SECURITIES V HUGHES (Exception to the Postal Rule): Dr Hughes granted Holwell an option to buy his premises. Option was exerciseable by ‘notice in writing’ within 6 months. Holwell posted a letter of acceptance but it was never delivered. HELD : No contract. Dr. Hughes had stipluated actual ‘notice’ of acceptance therefore postal rules did not apply — acceptance only effective when received by the Doctor.

OFFER EXISTS CONTRACT EXISTS

Offer Posted Offer arrives Acceptance posted Contract completed

Wool sold to someone else b.o.c. made 5 Sep

Acceptance arrives

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LEEDS TO LONDON SCENARIO : When is acceptance complete? Is it when the acceptor starts to perform ? or when

performance is complete ? If I offer a prize of £100 for the first person to walk from the town hall in Leeds to Trafalgar Square in London during the month of October, do you

accept this offer when you take your first step away from Leeds, or only when you arrive at Trafalgar Square? An acceptor in a Unilateral contract is generally regarded as

incurring no obligations until the specified act is completed, so if you decide to give up half way to London, I will have no claim against you for breach of contract. This

suggests that acceptance only occurs with complete performance. Clearly this is unfair therefore under certain circumstances ‘Partial performance’ will amount to acceptance

and so prevent withdrawal of offer without redress.

ERRINGTON V ERRINGTON: Father promised son & daughter in law that if they paid off the mortgage on his house he would transfer it to them. Young couple started to make payments but made no promise that they would continue .— appeared to be a unilateral contract. Father died — His representatives denied there was a contract — stating their withdrawal of the offer. HELD : Offer could not be withdrawn due to partial performance rule — Fairplay

SHUEY V UNITED STATES 1875: Offer of reward in newspaper withdrawn by similar means even though revocation did not come to the attention of offeree. Offeror had taken necessary steps to revoke his offer. NB! The rule established in Shuey is not dependent on the contract being a unilateral one. Its rationale is the impossibility of contacting all the offerees directly

BROGDEN V METRO RAILWAY 1877: For many years B supplied coal to M — he suggested they enter into a written agreement — M’s agent sent a draft for him to consider. B made some alterations & returned it to M’s agent indicating approval. M’s agent took no further action — B continued to supply coal to M — dispute arose and it was claimed only draft agreement — no contract HELD : draft became contract as soon as M ordered and B supplied coal after the return by B of the draft to M’s agent.

R V CLARKE : If X offers a reward to anyone who finds and returns his lost property & Y, in ignorance of the offer, does in fact return it to him, is Y entitled to the promised reward ? There is agreement by conduct, but Y is not accepting X’s offer since he is unaware of it. There is no contract by which X is obliged to pay the reward to N’.

FELTHOUSE V BINDLEY : Plaintiff wrote to his nephew offering to buy a horse for £30.15s, following a discussion he said ‘If I hear no more I will consider the horse to be mine’. Nephew intended to accept but did not reply & owing to a misunderstanding the horse was sold at auction to someone else. Felthouse sued for his loss, claiming he had a contract with his nephew to buy the horse HELD : as his nephew had not communicated his acceptance of the offer no contract existed.

WILLIAMS V CARWARDINE : Plaintiff was living with a man she knew had been involved in the murder of Mr Carwardine. Defendant published a notice offering a £20 reward for information leading to a conviction. Plaintiff was beaten by her partner and, fearing death she confessed that her partner was involved in the murder and claimed the reward. Defendant refused to pay. HELD : Motive of the Plaintiff was irrelevant, court satisfied that Plaintiff had seen the reward poster, supplied the information and therefore entitled to reward.

PROBLEM WORKSHOP QUESTION Bob places the following advertisement in the Oldburn Weekly Gazette published on 1st May

Scoop purchase — a dozen brand new 16 inch colour fl’s, £100 each. Will be sold to the first 12 replies received enclosing cheque for £100. Write to PO Box 12.

On the 7th, Fred posts a letter saying he wishes to buy one of the sets and enclosing £100 cash. ln the meantime Bob’s supplier has let him down and so Bob places an advertisement in the Weekly Gazette published on the 8th. announcing that the sets are no longer available. Fred’s letter arrives on the 9th and is among the first 12 received DISCUSS….

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THE LAW OF CONTRACT - CONSIDERATION CASE SUMMARIES ROSCORLA V THOMAS: T sold home to R for £30. After the sale T promised ‘the horse was sound and free from vice’. Horse turned out to be vicious. R sued for breach of promise. HELD: Promise made after contract concluded — past consideration — no value.

Re: McARDLE : Under a will the testators children were entitled to a house at their mothers death. In the mothers lifetime one of the children and his wife lived in the house with the mother. The wife made improvements to the house. Children later agreed in writing to repay her £488 spend on improvements. When mother died — children refused to pay — HELD : At the time of the promise the improvements were past consideration — promise not binding.

Lampleigh v Braithwait: B was in Jail, asked L to obtain a royal pardon for him. L went to considerable trouble and made journeys to arrange this. Afterwards B promised to give him £100 for his services. HELD : B’s initial request implied a promise to pay which was therefore given before L rendered the service at B’s request. The promise was binding.

Re Caseys Patents, Stewart v Casey : A & LB — joint owners of patent rights — asked their employee C, as an extra task to find licensees to work the patents. After C had done so A & B agreed to reward C for his past services with one third of the patent rights. A died and his executors denied the promise made was binding. HELD : Promise to C was binding since it merely fixed the ‘reasonable renumeration’ which A & B by implication promised to pay before the service was given

Tweddle v Atkinson: T & G agreed to pay money to T’s son W, who had married G’s daughter. G died without paying his share. W sued G’s executor (A) — claim failed — he had not provided any consideration for the promise to pay.

White v Bluett : In dispute with his fathers executors, W said he had given consideration to his father for a promise of benefits under his will by promising not to complain continually that his father had disinherited him. HELD :No consideration for promise.

Thomas v Thomas : After the death of her husband Mrs T agreed to pay rent of £1 a year in order to continue living in the same house. Payment of £ was valid consideration.

Collins v Godefroy : C was subpoenaed to give evidence in case which G was party. G promised to pay C for his loss of time. C failed to recover the money as he was under a legal duty to attend court — had done nothing extra

Glasbrook Bros v Glamorgan County Council : Glasbrook Bros were owners of ‘strike hit mine’ —asked for police protection for safety workers — unhappy with local policing arrangments. Agreed to station 70 policemen at colliery — G to pay for extra security. HELD Police had provided more protection than thought necessary — therefore consideration present — must be paid extra amount.

Stilk v Myrick (1809) : During a voyage 2 of ships crew deserted — captain promised to share deserters wages with remaining crew — HELD : Sailors already contractly bound to meet such emergencies — no consideration over and above what were expected to do. This decision has been reconsidered in the following case:

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Williams v Roffey Bros Nichols Contractors 1990: W was a carpenter subcontracted to work on block of flats by Defendants. He met financial difficulty and was promised £575 per completed flat if completed on time and enabled Defendants to avoid a penalty clause. Defendants did not fully honour their promise. W stopped work and sued for recovery. Defendants argued W merely fulfilling existing contractual obligations and had not provided consideration for the extra payment HELD : Valid contract — To offer to make an extra payment to enable a contract to be completed on schedule thus enabling promisor to avoid a penalty clause, where the offer is made without duress, could constitute sufficient consideration. HOWEVER, at a more recent case the CA refused to apply the rule established in Roffey and preferred to follow that established in Foakes v Beer (See Later)

Re SELECTMOVE LTD, CA THE TIMES 13.1.94: Company entered into agreement with the Inland Revenue to pay outstanding debts by

instalments and other payments as they fell due. The Company suggested that the agreement constituted consideration i.e. Inland Revenue would gain some practical

benefit from it. Court rejected this — applying rule as in Foakes v Beer — Part payment of debts does not constitute consideration (see later)

HARTLEY V PONSONBY : Almost half the crew deserted — captain offered to pay £40 to remaining to complete the voyage — Ship seriously undermanned and journey extremely hazardous. HELD: Sailors discharged from existing contracts and free to enter into new contract for rest of journey — entitled to money.

PINNELS CASE (1602): Part payment of debts not sufficient — debt £8.10 shillings, paid £5.2 shillings 6

Pennies.

— As confirmed in —

FOAKES V BEER (1884) : Mrs B obtained a judgement against Dr F for the sum of £2091 with interest. Dr F agreed to pay the sum of £2091 by instalments. Later Mrs B claimed the interest. HELD Mrs B entitled to debt with interest. No consideration given by Dr F for waiver of any part of Mrs B’s rights against him.

CENTRAL LONDON PROPERTY TRUST V HIGH TREES HOUSE 1947: In 1939, Y let a block of flats to X at an annual rent of £2500 pa. During wartime it was difficult to let the individual flats. Y agreed to reduced rent of £1250 pa. — No time limit was set on the arrangement — but it related to wartime conditions. The reduced rent was paid from 1940 — 1945. In 1945 the flats were fully let. Y demanded a full rent of £2500 pa. both (i) for part of the previous period in which £1250 had been accepted and (ii) in the future. HELD : Y was entitled to the full rent £2500 for the future (claim (ii) was valid), but claim (i) was rejected and the principle of ‘Promissory Estoppel’ was established.

D & C Builders v Rees 1966 (Doctrine of Promissory Estoppel DOES NOT APPLY HERE —PINNELS CASE DOES !) X owed £482 to Y (Small firm of builders) who were in financial difficulties. Y reluctantly accepted £300 in full settlement (in order to receive the money quickly). X had been aware of and had exploited Y’s financial difficulties (“Held Y to ransom”) — Builder later claimed the balance. HELD : Debt must be paid in full. Promissory Estoppel only applied to a promise voluntarily given. NB/ In this important case it was also held that payment by cheque (instead of cash) is normal and gives no extra advantage which could be treated as consideration of the waiver under the rule in Pinnels Case.

Coombe v Coombe 1951(Sheild and not a sword !) : A divorced wife obtained a promise from her ex husband to pay her £100 pa maintenance — she did not apply to the divorce court for maintenance — but not as a result of any request from her husband to this effect. The husband never paid and his wife sued for arrears HELD : She was not entitled as there had been no consideration for the husbands promise. cannot rely on promissory estoppel — as cannot be used as a sword.

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TERMS OF CONTRACT ~ CASE SUMMARIES

Bannerman v White : Negotiation for sale of hops, buyer emphasised it was essential to him that the hops had not been treated with sulphur. Seller replied explicitly no sulphur had been used. Later discovered traces of sulphur. HELD : the absence of sulphur was intended to be a term of the contract.

Dick Bentley v Harold Smith Motors : Defendant honestly assured the Plaintiff that the Bentley he was buying had only done 20,000 miles since fitting of new engine and gear box. Later discovered that it had done 100,000 miles. HELD : Statement was a term of the contract — dealer should have specialist knowledge about the car.

Oscar Chess Ltd (Garage) v Willaims : Defendants owned a Morris and traded it in with the Plaintiff as a 1948 model for £290. It was in fact a 1939 model (Trade value £175).. Plaintiff discovered this 8 mths later and sued for b.o.c. (There was no fraud on the defendants part — log book stated 1948 model).. HELD : Not a term in the contract only a representation — the dealer should have the necessary expertise compared to the Plaintiff to have realised the error. Also, time lapse too long.

Wallis v Pratt : Buyer of seed found when it grew it was not what he had ordered. Sellers relied on a clause excluding all ‘warranties, express or implied, as to growth or description’. HELD :This did not protect them, because the term broken was a condition not a warranty.

The Hansa Nord : Plaintiff agreed to sell consignment of citrus pulp to Defendants. Arrived in a damaged state. Defendants refused to accept them — Plaintiff sought to hold them to the contract or claim damages. There was a clause in the contract ‘goods would be shipped in good condition’ the argument centred on the nature of this clause. In this case it will depend on the seriousness of the breach to decide whether the injured party can repudiate the contract or not HELD : Breach not serious — only small part of cargo damaged —Buyers not entitled to reject cargo. (Was an Innominate/Intermediate Term).

Poussard v Spiers and Pond : Plaintiff, an opera singer turned up one week later for her performance due to illness. Defendants had employed a substitute & refused Plaintiff services. HELD : Plaintiff failure to perform the contract from the start was a breach of CONDITION — Defendant could rescind the contract.

Bettini v Gye : Plaintiff agreed to sing on a tour commencing 30th March & to attend rehearsals for 6 days before this date. Plaintiff ill and did not arrive until 28th March. Defendant refused to accept Plaintiff services. HELD Rehearsals considered a subsidiary term therefore breach of it is only a breach of warranty. Defendant in breach of contract Plaintiff could claim damages.

Hong Kong Fur Shipping Case : Contract for 2 year charter of ship — when supplied the engines were faulty (would take 6 months to repair).. There was a term in the contract that the ship would be ‘fitted in every way for ordinary cargo services’ Defendant refused to continue with contract due to breach of this term HELD : only breach of warranty — contract still had 1yr 6 months to run ... would however, get damages for the 6 month delay (engine repair)..

British Crane Hire v Ipswich Plant Hire : Plaintiff & Defendant both engaged in hiring earth moving equipment. Defendants working on marshy ground urgently needed a crane — Hired from Plaintiff — No mention of conditions of hire. Plaintiff sent copy of conditions, but before Defendant signed — the crane sank ! — Plaintiff claimed from Defendant the cost of recovery HELD : Plaintiffs conditions of hire applied — both parties in the same trade (terms had been drawn up by trade association — applicable to all Company’s dealing in hiring). Defendants claimed that the condition had not been incorporated in the contract of hire — Plaintiffs succeeded due to ‘common understanding’ between parties.

The Moorcock (Definition of ‘Business Efficacy Test’) :

Agreement to use jetty to unload ship — at low tide ship grounded — damaged — Riverbed was not owned by defendant, who owned the jetty, but they had not taken steps to ascertain the suitability of the mooring for the ship. HELD : Even though the riverbed was not the Defendants, a term should be implied into the contract requiring the Defendants to take reasonable care to ascertain whether it was safe to moor a vessel at that particular place. Plaintiff could sue Defendant for

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EXCLUSION CLAUSES SUMMARY OF CASES

L’Estrange v Graucob 1934 : Defendant sold a cigarette machine to Plaintiff (a shopkeeper). — under conditions which excluded the Plaintiff’s normal rights under SOGA 1893. Plaintiff signed the sales agreement — clauses were legible although very small print — she did not read. Machine jammed & unworkable after a few days. She claimed repayment of installment already paid, saying she was not bound by the term as she had not read it! HELD :The fact that she’d signed the document meant that she was bound by its terms (NB/ Would be decided differently today as there are certain terms which cannot be excluded under latest SOG legislation).

Curtis v Chemical Cleaning Co 1951 : Plaintiff took wedding dress to cleaners. Asked to sign a receipt on which there were conditions. Before signing, she enquired what was the effect of the document and was told that it restricted the cleaners liability in certain ways — particulary with regard to any damage caused to the beads and sequins. (It had actually stated that the Company would not be held liable for ANY DAMAGE howsoever caused). Dress was badly stained. HELD : Cleaners could not rely on their disclaimer since they had misled the Plaintiff as to the effect of the document which she signed. She was entitled to assume that she was only running the risk of damage to the beads and sequins only.

Chapelton v Barry UDC : There was a pile of deck chairs and a notice stating ‘Hire of chairs 2d per session of three hours’. The Plaintiff took two chairs, paid for them and received two tickets which he put in his pocket. One of the chairs collapsed and he was injured. Defendant council relied on the notice on the back of the tickets by which it disclaimed liability for injury. HELD : the notice advertising the chairs for hire gave no warning of limiting conditions and it was not reasonable to communicate them on a receipt ! The disclaimer of liability was NOT binding on the Plaintiff.

Thompson v LMS Railway 1930 : An elderly lady who could not read asked her niece to buy her a railway excursion ticket on which it was printed ‘Excursion: for conditions see back’. On the back it was stated that the ticket was issued subject to conditions contained in the companys timetables, These conditions excluded liability for injury HELD : Conditions had been adequately communicated and therefore had been accepted. (The test is ‘ Has the defendant done what was reasonably necessary to give notice to the Plaintiff or to that class of persons to which the Plaintiff belongs).

NB! In the Chapelton case, the ticket was a mere receipt showing only the time of hire & acknowledging payment of a fee. In the Thompson case it should have been obvious to a ‘reasonable person’ that the ticket had ‘contractual effect’ as tickets of this kind generally contain contract terms.

Olley v Marlborough Court 1949 :

A husband and wife arrived at a hotel and paid for a room in advance. On reaching their bedroom they saw a notice on the wall by which the hotel disclaimed liability for loss of valuables unless handed to the management for safe keeping. The wife locked the room and handed the key in at reception desk. A thief obtained the key and stole the wife’s furs from the bedroom. HELD : Hotel could not rely on the notice disclaiming liability since the contract had been made previously (when the room was booked and paid for). and the disclaimer was too late.

( Since the terms of the contract are fixed at the moment of acceptance of the offer, a term cannot be introduced thereafter except by mutual consent. Each party must be aware of the contract’s terms at the time of entering the contract if they are to be

binding)

HOWEVER, complications arise when it is difficult to determine at exactly what point in time the contract is formed — so as to determine whether or not a term in validly included — SEE Thornton v Shoe Lane Parking 1971 : Plaintiff wanted to park in defendants ‘automatic car park’ — drove to unattended machine — automatically dispensed a ticket. He had seen a sign ‘all cars parked at owners risk’ — outside the car park, before he obtained his ticket, and when he received his ticket he saw it contained words which he did not read. These actually made the contract subject to conditions displayed on the premises. Had he looked hard enough in the car park he would have seen that these not only disclaimed liability for damage but also excluded liability for injury. When he returned to collect his car, there was an accident and he was badly injured. HELD Contract formed before the plaintiff got the ticket (acceptance was his putting

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money into the machine to receive the ticket). ; so the reference on the ticket to conditions was received too late for the conditions to be included as contractual terms. At any rate it was unreasonable for a term disclaiming liability for personal injury to be presented so obscurely. (NB! Since the UCTA 1977 — personal injury clause would have been unenforceable).

J.Spurling Ltd v Bradshaw :

Having dealt with a company of warehousemen for many years, the defendants gave it eight barrels of orange juice for storage. A document he received a few days later acknowledged receipt and contained a clause excluding liability for damage caused by negligence. When he collected the barrels they were empty and he refused to pay HELD : It was a valid clause as it had also been present in the course of previous dealings even though he had never read it.

Hollier v Rambler Motors : CA held that bringing in a car to be serviced or repaired at a garage on three or four occasions over a period of five years did not establish a course of dealings — there was no evidence to show that the Plaintiff knew of and agreed to the condition as a continuing term of his contracts with the garage

Adler v Dickson : Mrs A was a passenger on a P&O ferry — contract excluded P&O liability for the negligence of its employees. Mrs A was injured due to negligence of the captain and sued him. Claimed that ex.cl related to the actions of P&Os employees and was therefore not liable HELD : The captain was not party to the contract between Mrs A and P&O and was unable to rely on the clause. The clause related to P&Os vicarious liability for negligence of its employees and to the personal liability of its employees.

White v Blakemore 1972 : Plaintiffs husband was killed whilst watching motor racing — notices around the arena excluded liability for any accidents. HELD Notices were effective — Defendant was protected and not liable HOWEVER, since 1977 — S2.UCTA cannot exclude liability for death personal injury — therefore would not be effective after 1977.

Spriggs v Sothebys : Plaintiff, a businessman left a diamond at Sothebys to be auctioned, he signed a document which excluded the auctioneers liability for negligence, he was given the opportunity to insure the diamond —but didn’t. The diamond was stolen despite Sothebys comprehensive security system. Plaintiff sued and Defendants relied on the clause. HELD Defendants could rely on the clause due to the case circumstances — Plaintiff was a businessman —therefore used to such contracts with clauses, he had equal bargaining power and the risk could have been covered by insurance but he turned this down.

Smith v Eric Bush : (Criteria for ‘Test of reasonableness’ was established in this case — Lord Griffiths) Plaintiff wanted to buy a house, approached Abbey National for mortgage, paid for a survey, which included a valuation report by a surveyor hired by the society. Plaintiff relied on the report, however, surveyor had negligently failed to notice the chimney was in a dangerous state. Plaintiff moved in and the chimney collapsed. Stated on the mortgage application form “ Neither the building society nor the surveyor gave any warranty that it was accurate and it was supplied without responsibility HELD :Disclaimer was unreasonable under the circumstances where the surveyor knew the borrower would be supplied with a copy of the report and would rely on it despite the disclaimer. Plaintiff was successful in her action.

Warren v Truprint Ltd 1986 : Photographs of Plaintiff’s silver wedding sent to Defendant for processing were lost and defendant tried to rely on clause printed on envelope which limited their liability to the cost of unexposed films plus a refund of processing charge and postage. The clause also said ‘We will undertake further liability at a supplementary charge, written details on request’ HELD : clause was not reasonable — a reasonable clause would plainly and clearly set out the alternative with details of the cost to the consumer . Plaintiffs claim succeeded and was awarded £50 damages.

George Mitchell Ltd v Finncy Lock Seeds Ltd 1983 : Plaintiff a farmer, ordered 30 pounds of dutch winter cabbage seeds from the defendants who were seed merchants. The purchase price was £201.60. The defendants standard term contract limited their liability to a refund of the amount paid by the Plaintiff. The wrong type of cabbage seed was planted over 63 acres — not fit for consumption when grew. Plaintiff claimed £61,500 damages plus £30,000 interest. HELD : At common law the exclusion clause would have protected the defendant, but the court decided in favour of the Plaintiff, relying exclusively on the statutory grounds of reasonableness.

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MISREPRESENTATION

CASE SUMMARIES

Edgington v Fitzmaurice: Directors of Defendant Company obtained an investment from the Plaintiff, representing that the money would be used to expand the Company. Directors had no such intention and used money to pay off creditors. Plaintiff discovered this and sued for damages. Defendants argued statement was merely a statement of future intention (therefore, No misrepresentation) HELD: Representation could be treated as the directors intentions at time of contract — therefore statement of fact — NOT of future intention. Plaintiff could sue.

Bisset v Wilkinson : Seller of a farm told the purchaser in his judgement that land would support 2000 sheep. Land had never been used for sheep and seller was not a sheep farmer HELD: Contract cannot be rescinded — statement of opinion only (No Misrepresentation). — to establish fraud it would be necessary to prove an intention to mislead (unlikely due to facts of case).

Smith v Land and House Property Cow: Contract for sale of hotel, Vendors stated that it was let to Mr Frederick Reck (a most desirable tenant).. In fact he was a walking disaster, behind with rent and went bankrupt. Purchasers refused to complete, claiming misrepresentation. Plaintiff claimed their statement was mere opinion only. HELD :Statement of opinion amounted to a misrepresentation due to previous dealings with the tenant which implied that it was an informed opinion

Curtis v Chemical Cleaning & Dyeing Co: Plaintiff took wedding dress with beads/sequins to dry cleaners. Asked to sign receipt — on reverse ‘Company not liable for damage howsoever arising’. Plaintiff asked what this meant. Assistant said Plaintiff would have to risk damage to beads and sequins. Signed without reading clause. Dress was stained when returned. Plaintiff sued for damages — Company sought to rely on exemption clause. HELD The assistant had misrepresented the effect of the document so the Plaintiff was merely taking the risk of damage to beads/sequins.

With v O’Flanagan : A doctor selling his private practice truthfully told purchaser in January that the income was £2000 pa. Sale completed in May by which time income had fallen to £5/wk as Dr had been ill. When purchaser discovered wanted to rescind contract. HELD : Doctor has duty to disclose change in circumstances. Innocent Misrepresentation due to remaining silent — Could rescind.

Redgrave v Hurd : Solicitor advertised for partner in Law Times — at various meetings with the Defendant he claimed the business was worth £300—400 pa. He produced papers which in fact showed income of only £200 pa. when asked about the difference he produced additional papers which if the Defendant had read would have shown only a further £5 pa. ! He did not read them. Later discovered truth and refused to complete. Plaintiff sued for specific performance HELD : Defendant had been induced by the misrepresentation, notwithstanding the fact that he had been given means of discovering the truth. Contract could be rescinded by Defendant.

Attwood v Small : A vendor of a mine exaggerated statements as to earning capacity. Purchaser hired an expert to assess the earning capacity and bought the mine when experts said vendor was true. Turned out to be false ! HELD : Purchaser did not rely on vendors misrepresentation brought in their own agents. Could however take action against ‘experts’ for negligence ! But no come back on original mine owner

Peek v Gurney : Shareholder had bought shares on the stock market relying on details from the Company prospectus, sought to gain redress from the directors who made false statements in the document. HELD : Plaintiff could not succeed. The misrepresentation was only meant to induce people to invest at the time the prospectus was published. After that time its use was spent.

Smith v Chadwick:

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A prospectus contained a false statement that a certain man was on the board of directors of a Company. Plaintiff admitted that on purchasing his shares this statement had not influenced him. He sued on the grounds of Misrepresentation HELD : The misrepresentation was not of a material nature, he’d taken no notice of it anyway — no misrepresentation.

Derry v Peek: An act of Parliament gave Plymouth Tramways power to run trains by animal power and subject to consent by board of trade by mechanical or steam power. Company issued prospectus stating they had authority to run trains by steampower — BUT — board of trade did not grant permission and Company was wound up. Sharesubscriber sued directors for fraud. HELD : There had been negligence but carelessness is not fraud, though it may be actionable under the misrepresentation act. Fraud involves a degree of dishonesty —not mere absence of reasonable grounds for believing the statement to be true as in negligent misrepresentation HELD : Directors were not fraudulent, honestly believed the statement in the prospectus to be true.

Hedley Byrne & Co v Heller & Partners: HB was advertising agents and respondents were merchant bankers. Contract between HB and Easipower Ltd to newspaper and TV advertising. HB sought a credit reference from Easipowers bankers Heller. Who said Easipower was respectably constituted and considered good, though they did say the statement was ‘made without responsibility on their part’. Easipower went into liquidation and HB lost over £17,000. HB claimed Negligence on part of bankers for their statement. HELD : HB could not succeed because of the disclaimer — Heller avoided liability for their reference. HOWEVER, this case established that, in the absence of the disclaimer, the Plaintiff would have been able to succeed. The facts of the case gave rise to a ‘duty of care’ between the two parties.

Long v Lloyd : Plaintiff bought lorry from Defendant who assured him it was in excellent condition. Broke down on first journey — several serious defects discovered. Defendant agreed to pay half towards repair. But, Lorry broke down on next journey. Plaintiff sought to rescind contract. HELD: Plaintiff cannot rescind as has affirmed contract through acceptance of Defendants half payment for repairs. However, could claim damages for negligent misrepresentation

Leaf v International Galleries : Plaintiff was induced to buy a painting by an innocent misrepresentation that it was a Constable. Five years later he discovered the truth and immediately claimed rescission. HELD : Could not claim due to time lapse. However, would have been decided differently if Fraudulent Misrepresentation — can claim up to six years later.

Vigor v Pike : Contract to buy mine. Statement was made about its contents which only appeared false once the mine had been worked out. Plaintiff sued for rescission HELD : Too late to rescind — Restitutio in integriin (parties cannot be restored to original position).

Phillips v Brooks Ltd : North entered Jewellery shop (Plaintiff). and bought emerald ring. Wrote cheque and signed ‘George Bullough’ — bringing this to the attention of the assistant and confirming his address as St.James Square. Plaintiff had heard of Sir George Bullough and confirmed address was correct in a directory. Plaintiff allowed North to take the ring — cheque bounced and North was subsequently convicted of obtaining ring by false pretences. Meanwhile though he had pledged the ring with a pawnbroker (Defendant).. Plaintiff now sought its return HELD :Third party rights had been acquired by pawnbroker — Plaintiff could not rescind contract.

Production Technology Consultants v Bartlett: Plaintiff bought a freehold house which was divided into four flats from Defendant at auction. Particulars supplied at auction innocently failed to say that one of the flats was let on 99 yr lease. Before completion, the lease was sent to Plaintiffs solicitors, but without waiting, Plaintiff completed the transaction, then sued for damages under MA 1967. HELD : At first, courts held that by completing, the Plaintiff had exhausted his remedies. On appeal Court of Appeal held Plaintiff had lost right to rescind (due to affirmation) but still retained right to sue for damages. This case illustrates the courts right to award damages in lieu even when the right to rescind is lost for some reason.

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DISCHARGE OF CONTRACT SUMMARY OF CASES

Cutter v Powell : This case involved the second mates contract on a ship called the ‘Governor Parry’. The master promised to pay him 30 guineas 10 days after the ship completed its voyage from Jamaica to Liverpool. The ship sailed on August 2nd and arrived in Liverpool October 9th. Unfortunately Cutter had died on September 25th . His widow sued for his pay up to that date as a Quantum Meruit (as much as he’d earned/deserved) HELD : The contract was entire and as Cutter had only partially performed his obligation, he was entitled to nothing. (nb/In the case of seamen, this rule was modified by provisions now contained in the Merchant Shipping Act 1970 — also, the wife could now claim under the Law Reform (Frustrated Contracts) Act 1943 which would enable her to recover for the services rendered by her husband — see later)

Bolton v Mahadeva 1972 : Plaintiff installed a central heating system in the defendants house, for a lump sum payment of £560. The system was poorly installed and gave off fumes and failed to work properly. It was estimated that it would cost £179 to make it work properly. The defendants refused to pay for the central heating system, and the Plaintiff brought the action to recover lump sum payment HELD : Plaintiff could not succeed as central heating system was so defective that the Plaintiff had not fully performed his contractual obligations. The nature of payment by lump sum and the serious nature of the defect ie. a price for the whole job, meant that it was an entire contract and the Plaintiff could recover nothing.

Ritchie v Atkinson : Contract for carriage of hemp @ £5 ton — the carrier took only part of the cargo HELD : contract was severable therefore entitled to £15 ton of what was taken.

Planche v Colburn : Plaintiff had contracted to write about ‘Costume and Ancient Armour’ for a series called the ‘Juvenile Library’ — the series was eventually abandoned and he sued for the considerable amount of work he had already put into the book. HELD :It was part performance but, Plaintiff would have completed had Defendant not prevented him from doing so ! Therefore entitled to payment for as much as he’d done.

Sumpter v Hedges : Plaintiff agreed to build two houses on defendant’s land for £565. He did part of the work (worth about £330). — he was paid part of the price but later abandoned the contract. He sued for further payment to recover the value of what he had done before leaving the site HELD : Didn’t get any extra money — just the part of the price which he’d already received. He did not complete the stage of work therefore not entitled to further payment.

Hoenig v Isaacs : Defendant employed Plaintiff to decorate and furnish a one bed flat. Payment to be made in installments — first two paid in accordance with the contract. The Plaintiff then claimed to have finished the work and asked for the balance of £450. The defendant moved into the flat but was unhappy with the work, refusing to pay the full amount, sending £100, leaving an outstanding balance of £350. The Plaintiff sued to recover the outstanding amount. The defendant argued that there had not been complete performance or, alternatively that the work had been completed negligently HELD : Contract had been substantially performed, as all work agreed under the contract had been completed. The Plaintiff could recover the £350, less an amount of £55.18s.2d, the cost of correcting the poorly completed work.

Charles Rickards Ltd v Oppenheim : Plaintiff agreed to deliver a Rolls Royce by March 1948. The car was not ready. Defendant waited until June and wrote saying he would not accept delivery after end of July. Car eventually ready October. Defendant had bought elsewhere. Garage sued him. Although he waived his right to a March delivery he made it clear that he would only wait until July. Garage has not performed their part of the contract as agreed — therefore Defendant does not need to accept the car.

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DISCHARGE OF CONTRACT CASE SUMMARIES - FRUSTRATION

Paradine v Jane 1647 : The lessee was evicted from his property during the Civil War but still had to pay his rent — even though he could not enjoy the property due to circumstances beyond his control.

Taylor v Caldwell 1863 : C agreed to let a music hall to T for 4 concerts. Before first concert is burnt down. T claimed damages for C’s failure to make the hall available ! HELD Claim for breach of contract failed — became impossible to fulfil.

Robinson v Davison : (A personal service contract): Pianist to give a concert on a specific date —became ill and unable to appear — contract was frustrated

Condon v Baron Knights : Plaintiff a member of band had illness and Doctor said could not perform more than four times each week. Band required him more often, therefore dismissed him. He sued for unfair dismissal — Failed as contract had been frustrated due to his inability to perform.

Avery v Bowden : Contract to load cargo at Odessa was eventually discharged by the outbreak of the Crimean War — contract would have been illegal — to trade with the enemy. (nb/ The 1990 Gulf War with Iraq affected a number of export contracts in this way).

Norris v Southampton City Council : Plaintiff a cleaner was imprisoned for various offences. Defendants, his employers wrote and dismissed him. Norris claimed unfair dismissal. Case went to tribunal — HELD : Contract was not frustrated — frustration was dependent on neither party being at fault. Norris had rendered himself unable to perform the contract. His actions amounted to a repudiatory breach of contract

Walton Harvey Ltd v Walker and Homfrays : Contract to display advertisements on hotel roof. Hotel was compulsorily purchased under existing legislation — HELD : They should have been aware of the possibility of compulsory purchase (Was it forseeable) — no frustration although could claim damages.

Chandler v Webster 1904 : Contract to hire room in Pall Mall for the day of Edward VII’s coronation procession. Rent was over £140 as the procession would pass under the window. BUT the coronation was postponed when the king became ill. Contract was frustrated.

Herne Bay Steamboat Co v Hutton : HBS Company agreed to hire a steamboat to Hutton for a fee of £250 for a period of 2 days for the purpose of taking passengers to Spithead to cruise round the fleet and see the naval review on the occasion of Edward VII’s coronation. Review was cancelled but the boat could have been used to cruise round the assembled fleet. HELD : contract not frustrated — could still cruise around the assembled fleet.

Davis Contractors v Fareham 1956 : Plaintiff agreed to build 78 houses at a fixed price of £92,000 within a period of 8 months. There were unforseen shortages of skilled labour and certain materials. It took 22 months to complete the contract and the Plaintiff incurred extra expenditure of £17,000. Plaintiff claimed that the original contract had been frustrated by the shortages and he sued on a Quantum meruit basis for the total cost of the work HELD : Contract had not been frustrated, merely more onerous/expensive than initially expected — no basis for frustration or Quantum meruit payment.

Tsakiroglou v Noblee Thorl... Contract involved a quantity of ground nuts to be shipped from the Sudan to Hamburg in Germany. Usual route via Suez

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Canal — but this was closed on 2.11.56 after contract was made. Cargo was not shipped, buyer sued for breach — shipment via the Cape of good hope was possible. ‘Through the Suez canal’ — was not an implied term of the contract HELD : No frustration as it was not impossible to perform — could have taken an alternative route (even if more onerous/expensive).

Maritime National Fish Ltd v Ocean Trawlers : Case involved contract for hire of trawler. Hirers who owned four ships of their own applied for five licences to go fishing with special nets . They were only granted three. Hirers argued that the contract of hire had been frustrated HELD : Could have used one of the three licences granted for the hire boat. No frustration — had to pay hire charges.

The Fibrosa Case : An English company agreed in 1939 to make some machinery for a Polish buyer at a price of £4800. Buyer paid initial sum of £1000 — when war broke out the contract was frustrated (illegal to trade with the enemy!). HELD :The Polish buyer had no further liablity and could recover the £1000 paid.

BREACH OF CONTRACT CASE SUMMARIES

White & Carter (Councils) v Mc Gregor : Plaintiff agreed to advertise Defendants business on litterbins (Plates). Defendant repudiated the contract on the same day it was made. Plaintiff nevertheless continued and displayed plates as agreed and claimed full amount due. — Went to House of Lords HELD : Upheld the claim because repudiation does not in itself bring the contract to an end — but allows the innocent party a choice of whether or not to determine the contract. If he chooses to affirm the contract it remains in full effect. nb/ To Repudiate — To indicate by words or deeds that a contract will not be completed

Hochster v Dc La Tour 1853 : Defendant agreed to employ Plaintiff as a courier for 9 months commencing June 1. Before this date Defendant told Plaintiff he wouldn’t be needed (Therefore, Anticipatory Breach). — Plaintiff entitled to sue for damages immediately

Avery v Bowden — (Further information) : Defendant chartered ship from Plaintiff to carry goods from Odessa. Charter allowed 45 days for loading — BUT during this period Defendants agent told the captain (Plaintiffs agent). that he had no cargo and that he should therefore leave. BUT the captain stayed whilst he pressed for performance — Before the 45 days had expired the Crimean War broke out and frustrated the contract. If the Plaintiff had accepted Defendant’s anticipatory breach immediately he could have sued for damages — since he did not do so he kept the contract alive for both parties so the frustration operated to relieve Defendants from liablility — Plaintiff claim failed due to frustration

REMEDIES FOR BREACH OF CONTRACT CASE SUMMARIES

Hadley v Baxendale : Plaintiff, a miller, hired the defendant to transport a broken mill shaft to be repaired at the manufacturers. The defendant promised to deliver the shaft on the following day. They failed to do so, however and delayed the transportation for an unreasonable period of time. Plaintiff claimed damages for loss of production. HELD : Plaintiff could not succeed. Damages were too remote to be awarded. Damages can only be awarded where they were reasonably and fairly considered to have arisen under the following circumstances 1. Losses arising naturally; according to the normal course of things 2. Losses that may reasonably be supposed to have been in the contemplation of the parties, at the time that they made the contract, and were the probable result of a breach of that contract

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In the Hadley case; the loss did not arise from the normal course of events because normally a miller would be expected to have a spare shaft. The special circumstances, that the mill could not function without the part, were not considered to be contemplated by the parties when the contract was formed i.e. the carrier did not know the mill couldn’t work without the shaft

Pinnock v Lewis : Seller of poisonous cattle food was held liable for the loss of the cattle to which it was fed. This loss arose naturally from his breach

Pilkington v Wood : Plaintiff bought a house in Hampshire, his solicitor (Defendant). failed to notice title was defective. Defendant was held liable for the difference between the value of the house with good title and with defective title (The loss was naturally arising). — However, Plaintiffs son soon moved to Lancashire and therefore wanted to sell up. Defendant title made sale difficult and meant Plaintiff was delayed in paying off a bank overdraft out of the sale proceeds. Defendant was not liable for this additional loss — How could he have anticipated that Plaintiff would want to move so soon; also he didn’t know the Plaintiff had an overdraft. Therefore the loss was not and could not reasonably be supposed to have been in his contemplation.

Koufos v Czarnikow (The Heron II).: Shipowners contracted to carry sugar to Basrah but deviated from the agreed route for their own benefit — resulting in a 9 day delay in delivery. Sugar was sold on arrival but for £4000 less than if it had been delivered on time. HELD : Loss of profit was recoverable from shipowners. They knew it was likely sugar would be sold immediately on arrival, that prices fluctuated daily and that there was an even chance that the price would fall during the period of delay. (The market price could also have risen !!).

Victoria Laundry v Newman Industries 1949 : Plaintiff ordered a boiler from the Defendants, to be delivered on 5 June 1946, Defendants failed to deliver until 8 November (5 months late).. Plaintiff sued for loss of normal profits and loss of special profits of £262 per week, which they would have made from a special contract with the Ministry of Supply. HELD : Plaintiff could recover for the normal profits, but they couldn’t succeed in recovering the special profits. The special profits were not in the contemplation of both parties at the formation of the contract.

H. Parsons Livestock v Littley Ingham & Co 1977 : Defendant supplied a feed hopper to Plaintiff — a pig breeder who needed to store nuts for his pigs. Hopper was defective, nuts went mouldy and some pigs died from a rare stomach disease as a result of eating the nuts. Plaintiff claimed: a). Damages for the deaths of the pigs — and also for b) Consequent financial loss from lost sales HELD : Damages recoverable under a] — because parties would have contemplated a ‘serious possibility’ of some harm coming to the pigs if the hopper failed to keep food in good condition (It was not relevant that the parties would not have foreseen the extent of harm ie. fatal stomach disease).. BUT damages under b) were not recoverable as they were too remote under the Hadley rule.

Jarvis v Swan Tours : Plaintiff paid £63 for 2 week winter sports holiday. It differed vastly from what was

advertised. There was very little atmosphere, hotel staff spoke no English and he was the only guest in the second week. Plaintiff recovered £125 damges for upset and

annoyance due to having his holiday spoilt

Dieson v Sampson : Bride claimed damages for anxiety and distress when photographer failed to turn up to take photos at her wedding.

Darbishire v Warren : Plaintiff owned an old but immaculate car — market value was £85. Car damaged due to defendant’s negligence. Plaintiff was advised it would cost £192 to repair. Plaintiff went ahead and claimed the £192 from the defendant plus the cost of hiring a car whilst repairs carried out. Claim failed — expenditure on repairs not justified. Plaintiff should have mitigated his loss by buying a replacement on the open market.

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Dunlop Pneumatic Tyre Co v New Garage & Motor Co: Plaintiff supplied goods to Defendant under an agreement whereby, in consideration for a trade discount, the defendants undertook not to tamper with marks on the goods; not to sell below list prices and not to supply certain persons named by the Plaintiffs; not to export any of the goods; and to pay £5 by way of liquidated damages for each breach. The £5 was stated not to represent a penalty. Defendants sold an item in breach of the agreement and were sued HELD : Plaintiff could succeed — the £5 represented a pre—estimate of what the breach would cost the Plaintiffs.

Cellulose Acetate Silk Co v Widnes Foundry : Parties entered into contract for construction of a foundry. It contained a liquidated damages clause— which agreed £20 would be payable for each week that the foundry was not erected, past the contractual date. Defendants were 30 weeks late — Plaintiff sought to recover their actual losses of nearly £6000. HELD : Plaintiffs could only recover the amount of £20 per week as agreed in the contract.

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HOMEWORK QUESTIONS FOR IN CLASS DISCUSSION

Students will be advised which questions to do – DO NOT COME UNPREPARED !!

TOPIC : CONTRACT FORMATION 1.What are the main elements in the formation of a contract?

2.In Pharmaceutical Society of GB v Boots (1953), the display of goods on a supermarket shelf was held to be an invitation to treat. Suggest why the display of goods should not be regarded as a contractual offer. Where goods are displayed at a price below the intended price suggest why a shopkeeper might sell at that marked price rather than the intended price?

3. What is the distinction between an offer and an invitation to treat? Use cases to illustrate your answer. TOPIC – ACCEPTANCE – CERTAINTY OF TERMS 1. Provide a definition of acceptance. Explain what is meant by this definition. 2. Why is a counter-offer, but not a mere request for more information, treated as a termination of the

original offer? Use cases to illustrate your answer. 3. Sophie has lost her pet spaniel. She put an advertisement in the local evening paper which read

“£100 reward for the return of Max, a three year-old liver and white springer spaniel.”

Harriet found a dog fitting the description of Max and returned the dog to Sophie. Unfortunately for Harriet, Sophie has now decided that she has got used to life without a pet and she informs Harriet that she is to keep Max as her reward. Harriet would rather have the money than the dog.

Advise Harriet. 4. Steven runs a business selling top of the range cameras to specialist camera shops. He wrote to Barry, the owner of Focus Cameras, offering to sell a special selection of cameras for £5,000. The letter says “Notice in writing of your acceptance of this offer must be received by the undersigned within 14 days. (Signed) Steven.” Three days after receiving the offer, Barry decided to accept the offer. He sent an e-mail to Steven indicating that a letter of acceptance was being posted that day. Barry has now discovered that Steven was away from the office that day on a business trip, returning the day before the deadline. His letter did not arrive until after the deadline because he had put the wrong postcode on the envelope. In the meantime, Steven has sold the cameras to someone else. Advise Barry.

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5. On Monday night, in the Kings Arms, Julian offers to sell Jonathan a yellow Mini for £1,000. The offer is open until Friday. On Wednesday, Julian sells the Mini to Frank for £2,000. Angus overhears this business deal whilst in the Kings Arms celebrating his 20th birthday. Angus leaves the pub, having had rather a lot to drink, and goes to Jonathan’s house. He tells him that his promised car has been sold by Julian to Frank. On Thursday, Jonathan takes £1,000 to Julian’s garage to accept the offer and collect the car. Advise Jonathan as to whether he has a legally binding contract with Julian.

6. Bob places the following advertisement in the Oldburn Weekly Gazette published on 1st May

Scoop purchase — a dozen brand new 16 inch colour fl’s, £100 each. Will be sold to the first 12 replies received enclosing cheque for £100. Write to PO Box 12.

On the 7th, Fred posts a letter saying he wishes to buy one of the sets and enclosing £100 cash. ln the meantime Bob’s supplier has let him down and so Bob places an advertisement in the Weekly Gazette published on the 8th. announcing that the sets are no longer available. Fred’s letter arrives on the 9th and is among the first 12 received DISCUSS…. TOPIC CONSIDERATION 1. Give a definition of consideration and explain it by means of a hypothetical example. 2. What is past consideration? Can past consideration ever be binding? Give cases to illustrate

answers 3. Summarise the facts and decision of Stilk v Myrick (1890) and Hartley v Ponsonby (1857). What is

the legal distinction between these two cases. 4. What is the common law principle relating to part payment of a debt? 5. What are the common law and equitable exceptions to this principle? 6. What are the facts and decision of Central London Property Trust Ltd v High Trees House Ltd

(1947)? Was Hughes v Metropolitan Railway Co.(1877) applied in this case? 7. What legal point does D& C Builders v Rees (1966) illustrate? 8. Part payment of a debt can never distinguish that debt. Discuss.

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Problem Question 1 Bart is the manager of Grannies Coffee Shop which is the Lincoln branch of a chain owned by Cafferty plc. The Managing Director of Cafferty plc is to visit the branch because the income for the past few months has severely fallen following complaints about dirty crockery and floors. Bart arranges that he will pay each of the staff £15 if, on the day of the visit they will come to work early and thoroughly clean the premises and the crockery. The visit passes off successfully, but Bart now refuses to pay the promised £15. Advise the staff whether they can successfully claim for the promised £15. . TOPIC CONTRACT TERMS Express terms 1. Distinguish between a ‘condition ‘ and a ‘warranty’ as terms of contract. 2. Distinguish between the cases of Poussard v Spiers (1876) and Bettini v Gye (1876). 3. What is an innominate/intermediate term? Implied Terms 1. What is the difference between express and implied terms? 2. Distinguish between the cases of Hollier v Rambler Motors (1972) and Henry Kendall v Lillico

(1969). 3. What terms does statute law imply into contracts for the sale of goods? Problem Question Percy Greenfinger is a landscape gardener who, on 1 September, contracts to landscape six acres of land surrounding the new Civic Hall in Trumpton in time for the official opening on 1 October. As his machinery is inadequate to finish the job in one month Percy contracts to hire a tractor and various attachments from Plant Hire Ltd for one month starting on 1 September. The contract of hire contains terms under which Plant Hire Ltd guarantee that the machinery will 'be maintained in good working order.' During the first fourteen days of September a number of minor faults develop in the equipment, with the consequence that Percy is only able to use the equipment for seven of those days because it stood idle waiting for the maintenance fitter to arrive and rectify the faults.

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Therefore, on 15 September Percy returns the equipment to Plant Hire Ltd and hires the necessary equipment elsewhere. Plant Hire Ltd now claims the full hire charge under the contract. Percy claims that he is under no obligation to pay and that he is entitled to treat the contract as repudiated by virtue of the breach by Plant Hire Ltd. Plant Hire Ltd admit a breach of contract but argue that Percy is not entitled to treat the contract as repudiated. Discuss the relative merits of the parties' claims. TOPIC – DISCHARGE OF CONTRACT 1. What is the general rule relating to discharge of contract by performance? 2. Read Cutter v Powell. (a) What rule of law does this case illustrate? (b)What are the exceptions to the rule? Illustrate each exception with a case. 3. Why could the doctrine of partial performance not be applied in Cutter v Powell? 4. Read the case of Charles Rickards Ltd v Oppenheim. Was the defendant entitled to repudiate the contract? If so, why? PROBLEM QUESTION In July 1999, James bought a large house in need of decoration and repair. The gardens to the back and front of the house are quite extensive. James contracts with Install Ltd to fit UPVC double glazing to all of the forty windows of the house at a price of £200 per window. Install Ltd require the total price of £80,000 to be paid on completion of the contract. James also contracts with Alan, a local builder, to build a 5 ft wall around the back garden and a 5 ft wall around the front garden at a price of £1,000 which is also payable on completion of the work. Upon completion of the UPVC installation, James inspects the windows but finds that some windows have not been double glazed and that 20 of them will still allow in a lot of noise and draughts. James also notices that the wall around the front garden has been built to 4 ft whilst the wall around the back garden has been built to 3 ft. James now resists payment for the windows and the building of the walls. Advise Install Ltd and Alan of their contractual position. TOPIC SIX FRUSTRATION 1. What is frustration in contract law? 2. What is the effect on the parties in successfully pleading frustration in contract law? 3. Distinguish between Krell v Henry (1903) and Herne Bay Steamboat Co v Hutton (1903). 4. List and illustrate four situations in which the doctrine of frustration does not apply – use cases .

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5. The Law Reform (Frustrated Contracts) Act 1943 does not apply to certain types of contract. List

three of them. 6. Tom agrees to hire a room to celebrate his engagement to Sally. He agrees to pay Viceroy Hotels

Ltd £500, of which £100 is to be paid in advance and the remainder at the end of the party. Viceroy spends £250 on food for the party. On the night before the party Tom goes drinking with his friends. The car in which he is driving is involved in an accident. Tom is injured and telephones the hotel from his hospital bed, cancelling the arrangements. Advise Tom. You must refer to the Law Reform (Frustrated Contracts) Act 1943.

7. Anthea, Entertainments Officer of the Students’ Union of the University of Blandshire, has arranged a concert for the students of the University to help celebrate the end of the examination period. She has managed to book four popular recording stars: Bobbie Williams and Teri Talliwell, vocalists; the group, Toyzone and the guitarist/vocalist Adam Bryan. Tickets sold out within a few hours of them going on sale and Anthea has booked the Hamden Hall for the concert. The artists have been paid 25% of their fees in advance and remainder is to be paid after the concert. Hamden Hall decorated the rooms the artists would be using to change into their stage clothes. Two days before the concert is due to take place Anthea is contacted by representatives of the four artists. She is told that Teri Talliwell has been killed in a road accident. Bobbie Williams has a very bad cold caught, it would seem, after taking an impromptu, rain-soaked party at the house of a friend. Toyzone have been committed to prison for non-payment of the Council Tax and Adam Bryan has badly gashed his fingers while cutting logs for the fire. However, all is not lost. At very short notice Anthea is able to secure the services of Kylie Donovan, a big-name recording star, and three local up-and-coming bands. When news of these changes are announced a big queue forms outside Anthea’s office seeking refunds. Advise Anthea on the following: 1. Anthea wishes to know what claims, if any, the Students’ Union may make against the various

artists originally booked for the concert. 1. Antheas wishes to know what liability, if any, the Students’ Union has towards the students who are

now claiming refunds. 2. Hamden Hall has sent Anthea a bill for £200 for decorating the rooms the original artists were to

use. They say they only decorated the rooms because such major recording stars were coming and would not have bothered for local bands. Must Anthea pay this bill?

Business law handbook 2012

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Transcript of Business law handbook 2012