Introduction to English Law of Obligations (2014/2015)

dr Jan Halberda

The Formation of Contract10 March 2015

Contract’s features

• Intention to create legal relations• Agreement (meeting of minds)• Consideration• Form• Definite terms• Legality

Two meanings of Consideration

I. Contract Formation • Consideration as an equivalent of Roman

Causa

II. Contract Performance• Consideration as a Performance • Total Failure of Consideration

Consideration

• Contract as a two-sided affair / a bargain• Mutuality/reciprocity of contract

• Consideration is an „inducement to contract, which may include money, mutual exchange of promises, or the agreement of parties to do or refrain from doing some act which they are not obligated to do”

Consideration

• Sidenham v. Worlington (1585) :

„Some moving cause or consideration precedent for which cause or consideration the promise was made”

Consideration

• Executed consideration

• Executory consideration

Consideration which is imperfect

• Past consideration• Hunt v. Bate (1568)• Eastwood v. Kenyon (1840)

Consideration which is imperfect

• Promise to perform an existing obligation • Pinnell’s case (1610)• Stilk v. Myrick (1809)• Foakes v. Bear (1884) • Williams v Roffey Bros & Nicholls (Contractors)

Ltd (1989)

Fundamentals of Anglo-American and Polish Legal Systems © Jan Halberda(UJ)

Re Selectmove Ltd (1993)• if the principle of Williams v Roffey Bros Ltd is to be extended to an obligation

to make payment, it would in effect leave the principle in Foakes v Beer without any application. When a creditor and a debtor who are at arm's length reach agreement on the payment of the debt by instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself in so doing. In the absence of authority there would be much to be said for the enforceability of such a contract. But that was a matter expressly considered in Foakes v Beer yet held not to constitute good consideration in law. Foakes v Beer was not even referred to in Williams v Roffey Bros Ltd , and it is in my judgment impossible, consistently with the doctrine of precedent, for this court to extend the principle of Williams's case to any circumstances governed by the principle of Foakes v Beer. If that extension is to be made, it must be by the House of Lords or, perhaps even more appropriately, by Parliament after consideration by the Law Commission.

Consideration which is imperfect

• Vague promises / Love and natural affection / Moral consideration

• Eastwood v. Kenyon (1840)

Consideration

• Inadequacy of consideration • Sturlyn v. Albany (1587): „for when a thing is

to be done by the plaintiff, be it never so small, this is a sufficient consideration to ground an action”

Consideration

• Consideration and Deed• Sharington v. Strotton (1565): “So, where it is

by deed, the cause or consideration is not enquirable… For every deed imports in itself a consideration, namely the will of the maker of the deed. Therefore it shall never be said nudum pactum where the agreement is by deed…”

Privity of Contract

• Consideration must move from the promisee

Promissory Estoppel

Central London Property Trust Ltd. v. High Trees House Ltd. (1947)

• Promise must be clear and equivocal• Promise must be intended to be relied on • Promisee’s reliance must result in detriment • Estoppel only suspends rights Combe v. Combe (1951) • Estoppel is only a shield and not a sword

Offer and Acceptance

• A mere invitation to treat is not an offer.• A declaration of intention is not an offer.

• An offer must be communicated to the offeree.

Duration of the offer

1. To revoke an offer / to withdraw an offer.• What if time limit for acceptance has been

set?• Routlege v. Grant (1828)

2. An offer will lapse if time limit for acceptance has been set.

Duration of the offer

3. The death of either party.

4. Rejection

5. Acceptance subject to conditions (versus „mirror image rule”)

6. Conditional offer

5. Acceptance subject to conditions

• The battle of forms

• Last shot rule

(Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd [1979])

Acceptance

• Express or implied

• Acceptance must be communicated to the offeror by the offeree (versus Silence clause)

• The offeror may dispense with communication.

• Posting rule / Mailbox rule

Implied acceptance

• Unilateral contract vs Bilateral contract

• Carlill v Carbolic Smoke Ball Co (1893)

Fundamentals of Anglo-American and Polish Legal Systems © Jan Halberda(UJ)

1. Fundamental mistake concerning subject matter of the contract

• A mutual mistake as to the identity of subject matter (always void): – The Peerless case (1864).