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Week 1 and 2 - Introduction and Basic Elements
Terms in this set (50)
- Pre-Contractual (Negotiations)
- Contract Formation
- Determining the substance of the contract
- Performance of the contract
What are the 5 stages of contracting?
Parties are free to contract on whichever terms they choose... the court's role is to enforce them (Lord Toulson)
What is the doctrine of freedom of contract?
Arnold v Britton (2015)
- The problem here was inflation resulting in a lease agreement becoming extortionate. Despite this the court had to uphold it. It's not the courts fault you entered into an unbalanced contract and the parties have to accept the consequences of what they have agreed.
What case demonstrates parties have to accept the consequences of what they have agreed and the courts cannot alter what they have agreed?
- penalty clauses
- clauses granting wide discretion to one party
- Unfair contract terms act 1977
- Consumer rights act 2015
What are the common law and statutory limits to freedom of contract?
- Intention to be legally bound
- Agreement (offer & acceptance)
- Enforceability Criteria (intention to create legal relations & consideration)
What are the 4 requirements for a legally binding contract in English law? What two categories do these requirements fall into more broadly?
Smith v Huges 1971
What case sets out whether or not parties have reached an agreement is determined objectively?
Words and Actions
How is the intent of the parties in relation to an agreement usually determined?
- The final agreement does not reflect the intentions of one of the parties.
- Parties at cross purpose.
- One party is mistaken as to the terms of the contract or the identity of the other party and the other party knows (or should know) about that.
In what situations will there be no agreement? (3)
Hartog v Colin and Shields (1939)
- In negotiations the price was quotes per piece. In the final document the price was expressed as a price per pound. This was to the detriment of the seller. Not an agreement because it was not a reflection of the parties intentions based on what had been said and done.
What case demonstrates there will be no agreement when the agreement does not reflect the intentions of one of the parties?
Raffles v Wichelhaus (1864)
- misunderstanding as to which ship because the two ships had the same name. No agreement because the parties were not actually sure of which ship they were talking about.
What case demonstrates there will be no agreement when the parties are at cross-purposes?
Shogun Finances Ltd v Hudson (2004)
- Stolen driving license used to purchase a car. No agreement because the person on the contract was not the person who purchased the car.
What case demonstrates there will be no agreement where one party is mistaken as to the terms of the contract or the identity of the other party, and the other party knows or should know this, there will be no contract?
- An offer is: 'An expression, by words or conduct, of a willingness to be bound by specified terms' Burrows
- An Invitation to Treat is: an invitation to negotiate and for the other party to make an offer.
What is the difference between an offer and an invitation to treat?
Partridge v Crittenden (1968)
- Deciding an advert is an invitation to treat, not an offer. The buyer makes the offer when they choose to buy something as a result of the advert.
Pharmaceutical Soc v Boot (1953)
- Goods displayed in a shop are an invitation to treat, when the customer takes the item to the till and pay they are the one making the offer and the shop is the one accepting it.
What cases show examples of invitations to treat?
Acceptance must be communicated - either by words or inferred by conduct of the parties, unless a specific method for acceptance is stipulated by the offeror.
Typically, how is an offer accepted?
- Offeror has promised something in return for performance by the offeree.
- Acceptance therefore occurs through performance.
What is a unilateral offer and how does acceptance of a unilateral offer occur?
Carlill v Carbolic Smoke Ball Company (1892)
What case is extremely significant in relation to unilateral offers?
Each party must promise to do something in return for the other party's promise. (bilateral contract)
What is consideration?
How is consideration achieved in a unilateral contract?
Chappell and Co Ltd v Nestle and Co Ltd (1960)
- three empty chocolate bar wrappers enough to amount to consideration
Ward v Byham (1956)
- making a child happy enough to amount to consideration.
What cases show consideration can be nominal?
Esso Petroleum v Custom & Excise (1976)
What case sets out the intention to create legal relations is presumed in commercial agreements?
Balfour v Balfour (1919)
What case sets out a presumption against intention to create legal relations in domestic and social arrangements?
Contract has to be drafted, verified and signed before it becomes legally binding even though an agreement has been made.
What does an agreement subject to contract mean?
- Undue Influence
What four doctrines provide the basis for undoing a contract and what are these factors often refereed to as collectively?
- When a contract is made by mistake, the contract is treated as never having been made in the first place, it no longer exists.
- Misrepresentation, undue influence and duress make a contract voidable, meaning the innocent party can choose to put it aside, if they choose to.
How do misrepresentation, undue influence and duress differ in their effect from mistake?
- A party makes a false statement of fact or sometimes law to another party when entering into a contract.
- The party claiming misrepresentation has to show that the decision to enter the contract was 'materially influenced' by the misrepresentation.
What has to happen for there to be a misrepresentation?
Spice Girls Ltd v Aprilia World Service BV (2002)
- The misrepresentation was represented through the conduct of all the spice girls participating in a shoot, even though one of them knew they were planning on leaving the band.
What case shows a misrepresentation can occur through conduct, as well as statement?
Fraudulent - Tort of deceit used to make claim
Negligent - Tort of negligence used to make claim
What are the three different types of misrepresentation?
Misrepresentation Act 1967
What is the most common way to claim damages for misrepresentation?
Smith v Hughes (1871)
- Seller did not have to disclose to the buyer that the oats the buyer was buying were new oats, not old oats like the buyer thought.
Sykes v Taylor-Rose (2004)
- Did not have to disclose body parts from a previous murder were hidden in the house.
What cases show there is no general duty of disclosure?
Not having free and independent judgement, usually because of your relationship to the party causing the undue influence.
What does it generally mean to be under undue influence?
- Relationship of trust and confidence
- Contract seems unfavourable to the claimant
What has to be shown to establish a rebuttable presumption of undue influence?
O'Sullivan v Management Agency & Music Ltd (1985)
- musical artist under the undue influence of his manager.
What case shows an example of a relationship of trust and confidence?
- Spiritual Advisor/Follower
What types of relationships will give rise to an irrebuttable presumption of undue influence?
Royal Bank of Scotland v Etridge (No.2) (2001)
- Banks must ensure in relation to wives being husbands guarantors that the wives have received sufficient independent legal advice, in order to avoid a future claim of undue influence.
What is the etridge protocol and what case established it?
- When one party makes an illegitimate threat to another party and this threat causes the claimant party to enter the contract.
When will duress arise?
The Atlantic Baron (1979)
- Stopping work until a higher price (than the original agreement) was paid was an illegitimate threat.
Carillion Construction Ltd v Felix (UK) Ltd (2001)
- Stopping supply of good was seen as an illegitimate threat
What cases shows an examples of an illegitimate threat?
Times Travel (UK) Ltd v Pakistan International Airlines Corporation (2019)
What case shows exerting lawful pressure may be seen as illegitimate if exerted in bad faith?
- Both parties believe a certain state of affairs exist, which in fact do not
- If the state of affairs in fact do not exist the contract will not exist
What are the requirements for mistake?
- There is a provision in the contract which provides for the risk of this mistake.
- One of the parties is at fault in respect of the non-existence of that state of affairs.
What are the two exceptions to mistake?
- Classical Theory
- Reliance Based Theory
What are the different theories of the law of contract?
- Promise is the core of the theory and what obligation is based on.
- Parties have the power and unrestricted freedom to determine how their relationship is governed.
What is the classical theory of contract law?
- the reaction of the law is independent of the will of the parties.
- the timid, yet growing, acknowledgement of the category of commercial contracts, referred to as 'relational contracts', a category particularly linked to good faith.
What are the limits of the classical theory of contract law?
- The important factor isn't the promise made, but the fact of reliance on it.
- The source of obligation is reliance.
What is the reliance based theory of contract law?
- Under classical theory arguably any promise (even a social one) could be legally enforceable, whereas with the reliance based theory, the breach of contract is assessed in relation to the consequences of reliance.
How is reliance based theory better than classical?
- wholly executory contracts, which are enforceable after the mere exchange of promises.
- Promissory estoppel, which, although a source of obligation, is only a qualified source: it does not create any new obligations where none existed previously.
What are the problems with reliance based theories?
regards the rule book as a closed system of principles that are to be mechanically applied, and it is therefore divorced from the results in individual cases.
What is formalism?
Involve challenges to the rule book where it stands in the way of achieving justice.
What is realism?
Henderson v Merrett Syndicates Ltd (1995)
What case sets out contract law is superior to tort law because contracts can exclude tortious liability?
Does English Law recognise a general concept of good faith in terms of negotiation, content, or performance of contracts?
Yam Seng Pte Ltd v International Trade Corporation Ltd (2013) 'the conduct would be regarded as commercially unacceptable by reasonable and honest people'
- So far the principle has only been applied confidently in cases relating to 'relational contracts'
When may the principle of good faith apply? what case demonstrates this?
OTHER SETS BY THIS CREATOR
W19 - Mortgages
W18 and W19 - Theft
W18 Duress and Duress of Circumstance
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