Introduction to the terminology of contracts (part 3)

Anne Brunon-ErnstLecturer in Legal English

Paris 2 University

Outline of the lecture

• Introductory note• Classification of contracts (I)• Doctrine of privity of contracts (II)• Statutory contractual provisions (III)

Introductory note

A contract is :- a promise (Eng Law)

- e.g. see contract =/= estoppel- an agreement (US Law)

Terminology:Estoppel = a promise which is enforceable because it

has been relied upon by the promisee

(I) Classification of contracts

(I) Why classify contracts?• Not for the mere sake of defining and classifying– Defining a concept allows a bird’s-eye view of the whole

subject– Introduction to the terminology =/= substance

• 6 different ways of classifying contracts:– According to formation (A)– According to performance (B)– According to the nature of the contract (C)– Specific to English law (D)– According to its effects (E) – Other contracts (F)

I-A/Classification according to formation/mode of creation

I-A-1/Express contract

A contract expressed in oral or written words

Note: Contracts, no matter how important, may be made without any

writing (i.e. word of mouth)Two exceptions (see caselaw):- Contract can be made orally or by conduct, but canot be

inforced by the courts, unless written evidence of it- Contract is required to be made in writing

I-A-2/Implied contract

Definition:A contract which is is inferred from the acts or conducts of

the parties or course of dealings between themDistinction implied/express:- Intention of the parties expressed =/= intention inferred

from conduct- No significant difference at law- But different method by which contract provedE.g:Coins inserted in slot machine

I-A-3/Quasi-ContractDefinition:These contracts do not arise by the virtue of any agreement,

expressed or implied between the parties but the law infers or recognizes a contract under certain special circumstances

Aim: A person should not obtain a benefit or an unjust enrichement

as against another because there is no obligation in contractRemedy:The courts imply a fictitious promise to account for the benefit.

The promise forms the basis of an action in quasi-contracte.g.: A painter painting the wrong house, with the knowledge of

the owner of the house.Terminology:In the past also referred to as implied-in-law contract =/=

implied-in-fact contract (= genuine contracts)

Quasi-Contract vs Implied Contract• Belong to different legal category• Nothing in common with contracts• for lack of a better option, the same procedure is used for

actions in contract and actions in quasi-contracts• Now considered as new branch of the law, independent from

contract law, part of the law of restitution• Legal obligations do not arise from promiseTerminology:The law of restitution covers cases where one person is held

obliged to restore or pay for some benefit received from another (or at the expense of another) in order that he should not be unjustly enriched. If he has promised or agreed to pay for the benefit, his liability is contractual, but if he has not done so, his liability is restitutionary

I-B/Classification according to performance/extent of execution

I-B-1/Executed contract Definition:A contract that is fully performed on both sidese.g.:. If they do so immediately, the possession of the

good and the right to the good are transferred together and the contract is executed

Chose in possession

I-B-2/Executory contractDefinition:A contract that is not fully performed by one or both parties

e.g.:A and B agree to exchange A’s pen for B’s notebook. If they do so

the following day, the right to the good is transferred but not the possession and the contract is executory

Chose in action

Terminology: To carry out an obligation = to do what the contract requires

Rules and exceptions

• Classical contract law: contractual obligations arise out of promises – Makes no difference if contract is partly executed

or wholly executory

• Signs of change– Now an executory contract is more likely to be

held void for uncertainty than a contract which is part performed

I-C/Classification according to the nature of the contract

I-C-1/Bilateral contract As a result of the court’s inference of the

intention of the parties (generally):

a promise for a promise= > both parties are bound by the performance

of their promises

Courts have tended to construe transactions as bilateral

I-C-3/Unilateral contract

A promise for an act= > only one party (promisor) is bound by the

performance of his promisee.g.: estate agency case

I-D/Classification of contracts in English law

I-D-1/Formal contract

A contract that requires a special form or method of creation

I-D-2/Informal contract

A contract that requires no special form or mode of creation

I-D-1/Formal contract

I-D-1(a)/Contracts of records

A contract of record is either a judgment of court or Recognizance

Contracts of records derive their binding force from the authority of the court. They lack the essential element consensus. They are enforced by court

Note: Recognizance is a written acknowledgement of debt due to the Crown. It is usually met with in connection with criminal proceedings

I-D-1(b)/Contracts under sealIt derives its binding force from its form alone. It is in writing and is signed,

sealed and delivered by the partiesContracts which must be made under seal , includes:• Contracts made without consideration• Contract made by corporations

• See Companies Act 1985• Conveyance in legal estate of land or any interest in land (lease more

than 3 yrs)• See Law of Property (Miscellaneous Provisions) Act 1989

Terminology:Contract under seal = deed = convenant = speciality contractConveyance = transfer of property = agreement by the vendor of land to

convey his title or ownership and the agreement of the purchaser to take it

I-D-1(b)/Seal vs attestation• When the deed is entrered into by an individual– No requirement for sealing– Signature of individual witnessed and attested

• When the deed is entered into by a company– The company may execute documents by putting its

common seal on it– Any document signed by the director and the secretary

and said to be executed by the company will be regarded as if the seal had been put on it

• Terminology:To attest = to make a statement that the deed has been signed in the presence of a

witness and make clear that the document intended to be a deed (e.g. ‘signed as a deed by A in the presence of B’)

A seal = originally recognised wax seals. By the 20th century a small circle of red tape affixed to the document (contract for the sale of land), although the courts also held that a circle containing the letters "L.S." was adequate

I-D-1(b)/deed vs simple contract

A deed is a superior document to a contract

e.g. mergers

I-D-3/Simple contracts

I-D-3/Simple contracts

• All contracts which are not made under seal are simple contracts

• Simple contracts may be made orally or in writing

• Needs valid offer, valid acceptance and needs to be supported by consideration

Terminology:Simple contract = parol contract

I-D/Classification of contract according to effects

1. Valid contract – A contract that meets all of the essential elements to establish a contract

2. Void contract – No contract exists3. Voidable contract – One or both of the parties has the option

of voiding or enforcing the contract4. Unenforceable contract – A contract that cannot be enforced

in court, but can be used as a defence5. Illegal contract – contravenes the criminal law, but not

necessarily (contrary to the public interest) => often voidTerminology: To void a contract = to set it asideTo enforce a contract = to carry out one’s obligations under it

I-F/Other Contracts

• An offeree can prevent the offeror from revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed-upon period of time

• This payment is called an option contract• The offeror agrees not to sell the property to

anyone but the offeree during the option period

Questions• Define a contract• Is a contract a promise or an agreement?• What do you mean by a void contract?• What is an illegal contract?• What is an unenforceable contract?• What is an implied contract?• What are quasi-contracts?• Wat is an executory contract?• What do you mean by an unilateral contract?• What do you mean by a bilateral contract?• Distinguish between void contracts and voidable contracts• State whether all void agreements are illegal• Distinguish between executed and executory contract• Distinguish between express and implied contract• Essay question: Discuss the following statement: ‘An agreement

enforceable by law is a contract’.

(II) Privity of contract

• Origins• Problems• Contracts (Rights of Third Parties) Act 1999

• Definition:Relationship between the parties to a contract,

which makes the contract enforceable as between them.

A third party cannot sue under the contractOther form of action: in the tort of negligence

(see Donoghue v Stevenson)

The doctrine: where does it come from?

The doctrine of consideration and the doctrine of privity

You must have given consideration for a promise in order to be able to enforce it– Crompton J in Tweddle v Atkinson: ‘It would be a

monstruous proposition to say that a person was a party to the contract for the purpose of suing upon it for his own advantage, and not a party to it for the purpose of being sued’

The doctrine: problems (1)

How to evade the doctrine of privity(a) Beswick v Beswick • widow was not entitled to sue in her own name

because she was not a party to the agreement• Was entitled to sue in her capacity of administratrix

because she was suing on behalf of her late husband’s estate

The doctrine: problems (2)(b) Collateral contracts: i.e. the courts act as if there were two

related contractsShanklin Pier Ltd v Detel Products LtdFacts: SP owned a pier and wanted to get it painted. DP were

paint manufacurers and told SP that if their paint was used to paint the pier, the paint would last 7 yrs. SP told the contractors who were to paint the pier to buy the paint from DP. The contractors did so, but the paint only lasted 3 mths

Decision: the court decided there was a collateral contract btw SP and DP. It was related to the main contract btw DP and the contractors for the sale of the paint

The doctrine: problems (3)

Contract of salePainting contract

Collateral contract

The doctrine: problems (4)

• But for DP’s assurance that their paint would last seven years, SP would not have told the painting contractors to buy it

• Artificial approach to analysing the situation

Contracts (Rights of Third Parties) Act 1999

• Under s. 1, a third party may enforce a term of the contract in his own right if he is expressly identified in the contract by name, as a member of a class or answering a particular description

• Under s. 1(3) the third party does not have to be in existence at the time the contract is made

• The Act affects the contracting parties’ rights to vary or cancel the contract if reliance on the term by the third party

• s. 5 protects the promissor from double liability

(III) Statutory provisions

• Sale of Goods Act 1979• Supply of Goods and Services Act 1982

Sale of Goods Act (1979)

• Sale of goods by description=> e.g. when buying a good in a mail order

catalogue

• Sale of goods by sample=> e.g. a washing machine from a shop

Sale of Goods Act (1979)

The Statute implies terms into contracts for sale of goods

• S14(2): Goods are of satisfactory quality• S14(3):Goods are fit for the purpose

Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002 (SI 2002 No. 3045)

Sale of Goods Act (1979)• Other relevant provisions:

– S. 8: the buyer must pay a reasonable price– S. 13: implied term that the goods will correspond the

description given– S. 14 (see above)– S. 15A: when the breach is so slight, if the buyer does not

deal as consumer, the breach is not to be treated as a breach of condition but may be treated as a breach of warranty.

– S. 48A: if goods do not conform with the contract within 6 months, rebuttable presumption of non-conformity

– S. 48B: replace or repair within reasonable time and free of charge

– S. 48C: appropriate price reduction

Supply of Goods and Services Act 1982

Applies when provides you with a service (i.e. someone works for you in the course of business)

Applies when someone provides you with goods and does work for you in the course of their business under the same contract

Supply of Goods and Services Act 1982

• S.13: implies that service should be provided with reasonable skill and care

• S.4: implies that goods have to be of a satisfactory quality and reasonably fit for purpose

• Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002

Supply of Goods and Services Act 1982

Other relevant provisions:- s. 2: implies a term about title- s. 3: the goods correspond to the description- s. 4(2): the goods will be of satisfactory quality- s. 4(5): the goods are fit for any particular purpose which

the buyer makes known- s. 13: reasonable skill and care- s. 14: implied term that the service will be carried out

within a reasonable time and for a reasonable charge (When they are not fixed by the contracts, left to be fixed in a manner agreed by the contract or determined by parties)

Bibliography• P. S. ATIYAH, An Introduction to the Law of Contract, 5th edn,

Oxford, OUP, 1995.• Adrian Chandler & Ian Brown, Law of Contract, 7th edn,

Oxford, OUP, 2009. • Dictionary of Law, 3rd edn, London, Peter Collin Publishing,

2000. • Denis Keenan, Smith & Keenan’s English Law, 14th edn,

Harlow, Longman, 2004.• C. Draycott, W. Laws, H. Revenko, A. Smith, Law: agreements,

rights & responsibilities, 2nd edn, Oxford: OUP, 2007.• JS Smith, Smith & Thomas: A Casebook on Contract, 11th

edn, London, Sweet & Maxwell, 2000.