Chapter 2 Contract Formation Cases

Terms in this set (36)

both parties agreed to the sale (and purchase) of a horse for £30. As they were concluding the transaction the Purchaser stated that he "assumed that the animal was sound and free from vice". The Vendor assured him that it was. Subsequent to money changing hands and the horse being handed over to the Purchaser, the horse bit another horse and the Purchaser sued the Vendor. The Purchaser claimed that the horse had been sold upon the representation that it was free from vice, and as the horse was not free from vice then an essential term of the contract had been broken. However, the Courts rejected this argument stating that the transaction could be broken down into two separate contracts: Contract A: The agreement to sell the horse for £30 was a valid contract with consideration, whose terms and conditions had been agreed before the contract was concluded. Contract B: The warranty/assurance that the "animal was free from vice" was an invalid contract because of the absence of consideration, given that the purchase price of £30 could not be consideration as it was past and therefore not legally enforceable. This situation could have been avoided if the Purchaser had either: (1) enquired as to the health of the horse prior to concluding the contract; or (2) if the Purchaser had requested a guarantee of health and paid a nominal amount for it. However, the question of past consideration should involve an examination of the facts of each case - because in some instances if the promise and the consideration are substantially one transaction or at least dependent upon each other, then the promise will probably be enforceable. For example, guarantee cards with electrical items.