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2013-05-22 10:28:27
Contract law

contract law
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  1. Treitel- offer
    An expression of willingness to contract on certain terms, made with the intention it shall become binding as soon as it is accepted by the person to whom it is addressed.
  2. Pharmaceutical Society v Boots [1953]
    Goods on display in a supermarket are I.T.T rather than an offer to sell at the suggested price. At the checkout till the buyer offers to buy at the suggested price and the seller (the person at the checkout) accepts that offer.
  3. Fisher v Bell
    Goods on display in a shop window are ITT
  4. Partridge v Crittendon
    Advertisements are ITT, even when 'offering for sale'
  5. Carlill v Carbolic Smoke Ball Co
    If the wording of an advertisement (through implication) forfeits the need for the buyer to communicate acceptance, the advertisement may be an offer to the world.

    As in this case, it could be a unilateral contract (a promise in return for an action). In this case the promise was to pay 100 in return for carrying out instructions on advertisement.

    1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff.

    2. It is quite possible to make an offer to the world.

    3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance.

    4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls.

    5. The defendants would have value in people using the balls even if they had not been purchased by them directly.
  6. Williams v Carwardine
    Rewards are unilateral contracts promising payment in return for action (supplying info, returning pet etc)
  7. s57(2) Sale of Goods Act 1979
    For auctions, sale is only completed on the fall of the hammer. Therefore listing the item for auction is an ITT, the bid is the offer and the fall of the hammer acceptance.
  8. Barry v Davies
    When an item is listed as without reserve there is a unilateral contract. There is an offer (to sell to the highest bid) inviting an action (to make the highest bid).
  9. Harvela Investments Ltd
    Invitations for tenders may be an offer and give rise to a unilateral contract if it is made clear the highest bid will be accepted.
  10. Blackpool & Fylde Aero Club
    If 'clear, orderly and familiar procedure' is laid down for submitting bids and this is then complied with by the bidder, the inviting party could be liable for loss of opportunity if the tender is not given due consideration. This would be a breach of a unilateral contract.
  11. Routeledge v Grant
    If the offeror makes a gratuitous promise to keep an offer open for a certain time, he will not be bound by that promise and is still entitled to withdraw the offer.
  12. Mountford v Scott
    If some consideration is given for the promise to keep an offer open, the promise will be binding.
  13. Byrne & Co v Van Tienhoven & Co
    Revocation of an offer must actually be communicated. Withdrawal of an offer was held to take effect on receipt.

    Therefore, postal rule does not apply for revocation.

    The question for when revocation has occurred is when was it communicated (eg read, heard, known).
  14. Shuey v United States
    Revocations of offers made to the public (like Carbolic Smoke Ball) may be revoked if notice is published just as prominently as the initial offer was.
  15. The Brimnes
    If revocation is sent to a business and arrives during normal office hours, it is likely to be effective at that point. However, it depends on what is reasonable.
  16. Dickinson v Dodds
    Revocation may be communicated by a reliable third party. The third party need not be authorised by the offeror to communicate revocation, be he must be objectively perceived as being reliable.
  17. Errington v Errington & Woods
    In terms of revocation of unilateral offers, the general rule is that acceptance only occurs when performance is complete. However, Prof. Treitel said there is an implied promise not to revoke if the act if the specified act is started within a reasonable time.

    In this case the father promised to transfer a house to his daughter and husband if they made mortgage repayments, which they duly commenced doing. The father's widow was not allowed to revoke this offer as the other party had already begun making the payments. Only if they stopped performing their act could the widow revoke her promise.
  18. Hyde v Wrench
    A counter-offer made by the offeree serves as an implied rejection of the original offer. As such, the original offer will be destroyed and no longer capable of acceptance.
  19. Stevenson Jacques & Co v McLean
    A simple request for information does not affect the offer as there is no implied rejection. It still stands and can be accepted.
  20. Treitel- acceptance
    Final, unqualified assent to the terms of an offer.
  21. Butler Machine Tool Co Ltd
    Where two contracts contain conflicting terms, the final terms on which the two parties did business will usually prevail. In this case, the final act was C returning a tear-off acknowledgement slip which provided D's terms were to prevail.
  22. Brogden v Metropolitan Railway
    Delivery of goods could be considered acceptance by conduct of the last set of terms to be proffered.
  23. Scammell v Ouston
    The parties entered an agreement whereby Scammell were to supply a van for £286 on HP terms over 2 years and Ouston was to trade in his old van for £100. There was then some disagreement and Scammel refused to supply the van.

    • Held:
    • There was no certainty as to the terms of the agreement. Whilst there was agreement on the price there was nothing in relation to the HP terms stating whether it would be weekly or monthly instalments or how much the instalments would be.

    If the contract does not provide sufficient details (duration, quantity, amount of repayment etc) it may be too vague to be a contract.
  24. Hillos v Arcos
    A contract that is prima facie uncertain may in fact be certain in the context of the trade or course of dealing. In this case 'fair specification' was held to be sufficiently certain to form a contract between parties that had dealt with each other on the past and were well-acquainted with the timber trade.
  25. Entrose v Miles Far East Company
    The general rule is that acceptance must be communicated.
  26. Powell v Lee
    Acceptance must be communicated either by the offeree or his duly authorised agent (contrast with with Dickinson v Dodds rule for revocation, which may be through a reliable third party).
  27. Felthouse v Blindley
    An offeree cannot bind an offeror to acceptance through silence. In this case 'If I don't hear from you, I'll assume the horse is mine'.

    However, In Re Selectmove the CofA accepted that an offeree may bind himself by silence (eg 'If you don't hear from me, assume I accept your offer).
  28. Adams v Lindsell
    Exception to rule in Entores v Miles Far East Corp that acceptance of an offer must be communicated.

    A letter of acceptance which is posted is complete on posting and the contract will be formed at this point.
  29. Holwell Securities v Hughes
    Use of the postal rule must not create 'manifest inconvenience or absurdity'

    Also, the postal rule my have been expressly excluded by words requiring 'notice in writing' or other words such as 'I need to know
  30. Re London & Northern Bank
    For the postal rule to apply, the letter of acceptance must be properly stamped and addressed.

    Also, in this case the letter was handed to the postman not authorised to collect, only deliver. Therefore the letter had never been posted.
  31. Brinkibon v Stahag Stahl
    Lord Wilberforce on modern communication (emails, faxes etc):

    'No universal rule can cover all such cases, they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgment of where the risk should lie.'

    In Brinkibon, Wilby said that a telex sent outside of normal business hours should not be considered an instantaneous means of communication. It could only be effective when the office reopened.
  32. Merritt v Merritt
    Presumption of lack of intention to create legal relations in family/ social setting may be rebutted where parties (here a married couple) have bargained at arms length.
  33. Rose and Frank Co v Crompton Bros
    Intention to create legal relations may be rebutted where an agreement was to be binding in honour only.
  34. Chappell v Nestle
    Consideration need not be adequate, but must be sufficient.
  35. Homer v Sidway
    Forbrearance can sometimes be consideration. Abstaining from drinking and smoking was considered good consideration for $5,000
  36. White v Bluett
    'Stopping moaning' was not consideration.
  37. Roscorla v Thomas
    Past consideration is no consideration.
  38. Lampleigh v Brathwait
    For past consideration to be good consideration, the act must have done done at the promisor's request.
  39. Casey's Patents
    For past consideration to be good consideration, the parties must have understood from the outset that the act was to be rewarded in some way.
  40. Collins v Godefroy
    As a general rule, existing legal duties are not sufficient consideration.

    In this case, attending court as a witness was a legal obligation, not consideration.
  41. Ward v Byham
    If a legal duty has been exceeded, this can be consideration. Lord Denning said a woman who had exceeded her basic duties as a mother had good consideration for receiving payment.
  42. Glasbrook Bros v Glamorgan Council
    Performance over and above an existing duty may be sufficient duty, even if for traditional public service jobs. Police could give consideration for extra payments if a 'special duty' has been performed.
  43. Stilk v Myrick
    Performance of an existing contractual obligation is not normally sufficient consideration.

    Sailors who asked for more money to complete voyage had not given consideration.
  44. Hartley v Ponsonby
    If the terms of a contract have changed to involve a greater detriment to a contracted party, the greater detriment can be taken as consideration.
  45. Williams v Roffey
    i) If A entered into a contract with B to do work for, or supply goods or services to, B in return for payment from B; and

    ii) at some stage before completion B doubts A can complete the contracted obligation; and

    iii) B promises additional payment to A to complete contractual obligations on time; and

    iv) as a result of giving the promise, B obtains in practice a benefit or obviates a disbenefit; and

    v) the promise is not given as a result of economic duress or fraud on A's part; then

    vi) the benefit of B is capable of being consideration for B's promise and will be legally binding.

    NB- the CofA said it could not extend WvR judgment (for promise to pay more) to promise to accept less because it was bound by Foakes v Beer.
  46. Scotson v Pegg
    Performance of an existing contract with one party may be good consideration for another contract with a third party.
  47. Foakes v Beer
    A promise to accept less than an agreed amount will not in itself be good consideration for accepting less.

    Therefore, a person who agrees to accept a partial payment of a debt can go back on a promise and demand full repayment.
  48. Pinnel's Case
    Payment of a lesser sum may discharge the full sum if some additional consideration is provided ('horse, hawk or robe').

    Some other benefit, such as early repayment at the creditor's request may also suffice as consideration.

    Alternative consideration:

    • a). before the due date
    • b). with a chattel
    • c). to a different destination
  49. Central London Property Trust v High Tress House
    1) There must be a promise to waive the promisor’s strict legal rights, and the promise must be intended to be acted on by the other party.  In Alan v El Nasr Export, Lord Denning stated the requirement as being that the promisee simply has to act differently from the way in which he would otherwise have acted, and that it was not necessary to show that he has acted to his detriment.

    2) Tthe promise does not give rise to a cause of action, but can only be used as a defence to an action to enforce legal rights which have been waived – Combe v Combe

    3) It must be inequitable for the promisor to go back on the promise - D & C Builders v Rees.

    Assuming the conditions for the doctrine to be satisfied, consider how the doctrine operates 

    4) Does it extinguish or merely suspend the promisor’s rights?  The cases of Central London Property v High Trees House and Tool Metal Manufacturing v Tungsten Electric were concerned with ongoing payments.  With ongoing payments the doctrine appears to operate both to suspend and extinguish legal rights.  So provided reasonable notice is given, the creditor is entitled to full payment in the future, but probably cannot recover arrears.

    However, neither case applies in terms to lump sum payments.  With lump sum payments, Lord Denning MR said obiter in D & C Builders v Rees that the right to the balance of the lump sum payment may be extinguished.  However there is no case where the doctrine has been applied in this situation and it seems likely that the courts would feel bound by Foakes v Beer and allow the creditor to give notice and recover the balance.  Finally consider the proviso in Ajayi v Briscoe, that the promise only becomes final and binding if the promisee cannot resume his original position.
  50. D & C Builders v Rees
    If the promise to accept less was given under duress a person may not rely on this doctrine.

    Promissory estoppel is an equitable remedy and he who seeks equittable relief must have clean hands.

    In this case there was evidence that the debtor learned of the creditors difficult financial circumstances and exploited this situation to gain a promise to accept less. It was not inequitable for Cs to enforce the original promise in this case.
  51. Combe v Combe
    Promissory estoppel is only available as a defence. 'Equity is a shield, not a sword', it does not create new rights.

    In this case a wife attempted to enforce her husband's promise to pay even though it had been given without consideration.

    Denning said that consideration is still a crucial element of contract formation so promissory estoppel cannot be used to circumnavigate this requirement and found an action in its absence.
  52. Freeman and Lockyer v Buckhurst Park Properties
    Actual authority is a legal relationship between principal and agent created by consensual agreement to which they alone are the parties .

    Ostensible authority is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of the kind within the scope of the apparent authority.
  53. W.J Alan & Co v El Nasr Export and Import Co
    For promissory estoppel, Denning said there is no need for detrimental reliance on a promise.

    Whether or not they 'altered their position' is sufficient.
  54. Hutton v Warren
    Certain terms may be implied into a contract if it is clearly understood to have been a custom of a certain trade or locality.

    In this case a term was implied into the contract as there was nothing in the contract to suggest that it should not have been.
  55. Sale of Goods Act 1979 s8
    If no price is specified in the contract, there is an implied term that a reasonable price must be paid.
  56. Sale of Goods Act 1979 s14(3)
    Where the seller sells good in the course of business there is an implied term that the goods must fit the buyer's purpose.
  57. Sale of Goods Act 1979 s14(2)
    Where seller sells goods in the course of business, there is an implied term that the goods supplied are of satisfactory quality.
  58. Sale of Goods Act 1979 s13(1)
    There is an implied term that goods must fit their description.

    (although the buyer must have relied on that description- Christopher Hull Fine Art)
  59. Sale of Goods Act 1979 s48B
    Where goods do not conform to contract, consumer may require seller to repair or replace them free of charge.
  60. Sale of Goods Act 1979 s48A
    If goods do not conform to contract within six months of date of delivery, there is a rebuttable presumption of nonconformity at date of purchase.
  61. Sale of Goods Act 1979 s11(4) and s35
    Any buyer cannot reject goods if he is deemed to have accepted them- s11(4), considered in s35.

    Acceptance will be found if the buyer has retained the goods for an unreasonable amount of time, which is determined having regard for all the circumstances.
  62. Sale of Goods Act 1979 s15A
    If the buyer is a business he may not reject the goods if the breach is so slight that it would be unreasonable to reject them.
  63. Supply of Goods and Services Act 1982 s3
    There is an implied term that goods supplied by transferor must correspond with the description.
  64. Supply of Goods and Services Act 1982 s4(2)+(3)
    There is an implied term that goods transferred (installed/ fitted) in the course of business (by contractors) must be of satisfactory quality and be reasonably fit for purpose
  65. Supply of Goods and Services Act 1982 s13
    There is an implied term that a supplier of a service acting in the course of business must provide the service with reasonable skill and care.
  66. Supply of Goods and Services Act 1982 s14
    There is an implied term that a service must be carried out within a reasonable time if the time is not specified in the contract.
  67. Supply of Goods and Services Act 1982 s15
    If no consideration (price) is specified, a reasonable charge must be paid by the recipient of the service/ goods.
  68. Tool Metal Manufacturing v Tungsten Electric Co
    The doctrine of promissory estoppel temporarily suspends rights, it does not extinguish them.

    Therefore, a promisor can give reasonable notice to end the agreement. If they do not give reasonable notice (eg demand immediate payment) this may be inequitable.

    NOT AUTHORITY- Sometimes notice will not be necessary if the promise was clearly meant to last for a certain period of time (eg the end of the war- High Trees).
  69. L'Estrange v Graucob
    The general rule is that if you sign a contractual document, then the clauses in the document will normally be incorporated as part of the contract, even if the document has not been read.

    The exemption clauses itself must be legible, even if the print is 'regrettably small'.
  70. Curts v Chemical & Dyeing Co
    The exemption clauses won't be incorporated if the effect of the clause has been misrepresented and the innocent party has relied on the inaccurate description.
  71. Chapelton v Barry Urban District Council
    If the exemption clause is incorporated by notice through a document, the document must be contractual in nature (ie something a reasonable person would expect to contain terms).

    A ticket issued by a deckchair attendant could not be relied upon to exclude liability since the ticket was a mere voucher or receipt for money paid rather than a contractual document.
  72. Parker v South Eastern Railway
    For a clause to be incorporated by notice, it is not necessary for the innocent party to actually know about the clause. What is essential is that the party seeking to rely on the clause has taken reasonable steps to draw the clause to the other's attention.

    In this case, a ticket that said 'see back' on it drew attention to the existence of a limited liability clause. It was found that it was reasonable to for an exclusion clause to be contained on a ticket, provided it was that a reasonable person would appreciate that there was writing containing conditions on the ticket.
  73. Thornton v Shoe
    An exemption clause for a car park that excluded liability for personal injury was an unusual notice for a car park.

    In this case, there was a notice at the entrance to a barrier-operated car park which stated that parking was to be 'at owner's risk'. An automatic barrier controlled entry to the car park. When the motorist drove up to the barrier, a machine dispensed a ticket. The ticket stated that it was 'issued subject to conditions displayed on the premises'. Inside the car park there was a notice excluding liability for personal injury to customers.

    The CofA held that the exemption on the ticket was too late, because the contract for use of the car park was concluded when the motorist drove up to the barrier and activated the machine. (However, if the clause had been included on the ticket, this may have been valid)

    For automated ticket machines, the machine makes a standing offer which the customer accepts when does what is required to activate the machine (eg by putting money in). Therefore, any terms included on the ticket will not be incorporated into the contract.
  74. Spurling Ltd v Bradshaw
    In order to incorporate an onerous or unusual clauses into a contract, Lord Denning said it would be necessary to for the clause to be 'printed in red ink with a red hand pointing to it or something equally startling'.

    Also, terms may be implied into a contract through a course of dealings (eg by including a post-contractual document such as a receipt)
  75. Interfoto Picture Library
    Although it was normal for a library to charge a fee for late returns, in this case the penalty was uncommon and unreasonably high. As such, Interfoto library were required to go to greater lengths to draw the other party's attention to the clause. The clause was tucked away in normal sized typeface- they therefore failed to incorporate the clause.
  76. Olley v Malrborough Court
    Reasonable steps to incorporate an exemption clause into a contract must have taken place before the contract is finalised. This is because a party should have the opportunity to see all the terms of a contract before he enters into it.

    In this case, the innocent party did not have an opportunity to see a sign exempting a hotel from liability for lost or stolen goods until he got into his room (after entering into a contract at the reception desk).
  77. Kendall & Sons v Lillico and Sons
    An exemption clause on a 'sold note' were incorporated into a contract by a course of dealing. The parties had been dealing with each other 3 or 4 times a month over three years, so the recipient had had plenty of time to read the clauses.
  78. Hollier v Rambler Motors
    Contrast with Kendall & Sons v Lillico & Sons. The parties had dealt with each other a few times over five years- which did not amount to a course of dealing. The clause could not therefore be incorporated into the contract.
  79. McCuthcheon v David MacBrayne
    Even if parties have dealt with each other frequently enough to constitute a course of dealings, the dealings must have been consistent.

    This case failed the consistency test because sometimes the document containing the clause had been signed, sometimes it had not.
  80. Houghton v Trafalgar Insurance
    Application of the contra preferentum rule. If a party tries to rely on a clause that is ambiguous or unclear the court will interpret the clause against him.

    In this case, an insurance company relied on an clause exempting it from paying out if the driver was carrying an 'excessive load'. 'Load' was considered ambiguous as it normally refers to goods.
  81. Canada Steamship Lines v The King
    If a clause expressly exempts a party from liability for negligence (ie the word negligence or a synonym is used) then it will be effective.

    If there is no express reference to negligence then the court must decided whether the words used are wide enough to exclude liability for negligence (eg no liability for any damage, howsoever caused).
  82. UCTA 1977 s7
    If a company seeks to exclude liability for breach of an implied term that transferred goods must match their description, or that goods transferred must be of satisfactory quality and fit for purpose under ss3-4, such a clause will be void for all consumer contracts under s7(2).

    However, in cases of non-consumer contracts, the clause will be valid if reasonable under s7(3)
  83. UCTA 1977 s11
    Reasonableness test for UCTA.

    The exemption clause must have been a fair and reasonable one to include having regard to the circumstances which were (or ought reasonably to have been) known to the parties or within the contemplation of the parties at the time the contract was made- s11(1)

    The burden of proof is on the party relying on the exemption clause to establish that the clause is reasonable.

    Also, if the court is considering the reasonableness of a limitation clause, under s11(4) the court will have regard to:

    - the resources which D could expect to be available to hm for the purpose of meeting the liability should it arise; and

    - how far it was open to D to cover himself by insurance.

    (For both factors see St. Albans v International Computers)
  84. UCTA 1977 Schedule 2
    Application of reasonableness test under s11 UCTA 1977

    - Relative strength of bargaining positions. If both parties have equal bargaining powers, clause is more likely to be reasonable (see St. Albans v International Computers).

    - Did the customer receive an inducement to agree to the exemption clause? (eg lower price)

    - Could the customer have gone elsewhere and avoided the clause? If they did but decided to enter into the contract anyway, court are less likely to interfere. (see St. Albans v International Computers)

    - Did the customer know about the clause or could he have been expected know if its existence? If it was clearly worded and set out, the clause is more likely to be reasonable than if the customer was unaware of its existence.

    - Does the exemption clause ask the customer to comply with a condition that is not practicable? For example, if it stipulates that the seller will not be liable if defects are not notified within 7 days, would it be possible to uncover such defects within that timeframe?
  85. UCTA 1977 s2
    If a party attempts to exclude liability for death or personal injury, such an exemption clause will be void under s2(1)

    A consumer or business can exclude or restrict liability for loss or damage (eg physical damage or loss of profit) caused by negligence, provided the clause is reasonable under s2(2)
  86. UCTA 1977 s6
    If a company seeks to exclude liability for breach of an implied term relating to the description, quality or fitness for purpose of goods under s13-14 Sale of Goods Act 1979, this clause will be void for all consumer sales under s6(2).

    However, in cases of non-consumer sales, the clause will be valid if reasonable under s6(3)
  87. UCTA 1977 s3
    A clause may only exclude liability for breach of an express term if the exemption clause is reasonable.

    However, this only applies if the party challenging the clause is a consumer, or if two businesses have used standard term contracts.

    If two business negotiate and change standards terms, UCTA will not intervene.
  88. Monarch Airlines v London Luton Airport
    The court made it clear that a relaxed approach should be taken in commercial cases when deciding whether a company has excluded liability for negligence. The court should look at the realities of the situation at the time of the contract and ask what potential liability the parties had in mind.
  89. Stewart Gill v Horatio Myer
    Must the whole clause be reasonable?

    Lord Donaldson said referred to the wordsing of s11(1) UCTA and said: 'the issue is whether the term (the whole term and nothing but the term) shall have been fair and reasonable one to be included'

    Contrast with Watford Computers v Sanderson
  90. Photo Productions Ltd v Securicor Ltd
    An exemption clause may cover what appears a fundamental breach, if it deals clearly and unambiguously with the with the breach that occurs.

    In this case a security guard started a fire that destroyed the factory. Securicor had included an exemption excluding liability for any 'injurious act' by one of their employees unless they could have foreseen or prevented it. This covered the breach and the HofL allowed the Securicor to rely on it.
  91. St. Albans City & District Council v International Computers
    Breach of an express term in the contract (software contained an error) but International Computers sought to limit liability to 100,000 through limitation clause.

    Council brought an action under s3 UCTA and, as Council was not a consumer and they had dealt on IC's standard terms, it would be valid if it satisfied the reasonableness test.

    Therefore s11(4) and Sch 2 guidelines were considered, along with Smith v Eric Bush.

    1) Financial power: IC were a huge company with substantial resources to meet any liability.

    2) Insurance: IC had liability insurance of 50milion so could not justify 100,000 limitation clause in terms of potential or actual loss.

    • 3) Bargaining power:
    • - IC was in a very strong position relative to Council since it was one of a limited number of company's the could fulfill the Council's requirements.
    • - There were few alternatives since other companies used similar limitation clauses.
    • - Council was not a business so not entirely equal bargaining positions.

    4) Practical consequences: while IC had insurance to cover loss, Council's loss would be passed on to local population either through reduced services or higher taxes.
  92. Smith v Eric Bush
    The House of Lords found that a clause excluding liability for negligent advice was unreasonable.

    The case also built on the reasonableness criteria in schedule 2 UCTA 1977 and added some other points for consideration:

    - How difficult is the task being undertaken? If very risky, may be reasonable to exclude liability.

    - What are the practical implications of court's decision on, for example, future insurance premiums. (see St. Albans v International Computers)

    In considering if such a clause was reasonable under the Unfair Contract Terms Act 1977 the court took into account the fact that it was a modest house to be used as the family home and concluded that it was an unreasonable clause and therefore ineffective. The House of Lords held that it might be reasonable for a surveyor to exclude liability if the property was of higher value or to be used for investment or business purpose
  93. Contracts (Rights of Third Parties) Act 1999 s1
    Exception to the general rule that exemption clauses do not protect third parties. The Act extends to the benefit of exemption clauses under s1(6)

    - A third party can acquire rights if the contract expressly provides that he may acquire a benefit- s1(1)(a)

    - the term purports to confer a benefit on him- s1(1)(b)

    The third party must be expressly identified in his own right or as a member of a class (eg 'employees')
  94. Adler v Dickinson
    The general rules is that an exemption clause in a contract cannot protect a third party, as the privity rule provides that only someone who is party to the contract can rely on a clause in that contract.

    Mrs Adler sued the master and boatswain who had not secured the gangplank after she got injured boarding a ship.

    The master and boatswain were not protected by the exemption clause in the contract she had agreed with the shipping company.
  95. Watford Computers v Sanderson
    In commercial dealings it is more likely that the parties will have discussed and bargained the terms of the contract and therefore there is likely to be informed allocation of risks between parties.

    Such companies "should be taken to be the best judge of the commercial fairness of an agreement" (Chadwick LJ)

    Also contrast with Stewart Gill v Horatio Myler, in this case it was found that a single exemption clause could be divided into two parts as each part served a distinct purpose.
  96. Poussard v Spiers and Pond
    It was found that the term breached was a condition. An actress missed the first performance of an operetta and she was subsequently replaced by the understudy. The court found that as the lead performer she was of crucial importance to the success of the production.

    Her appearance was therefore a condition of the contract which she had breached by failing to attend the first performances. The producers were therefore entitled to repudiate and terminate the contract.
  97. Bettini v Gye
    Contrast with Poussard v Spiers and Pond.

    In this case the singer missed rehearsals, not the performance itself. This was held to be peripheral to the main purpose of the contract, so the singer had breached a warranty. The producers could sue for damages, but could not repudiate and terminate the contract.

    • Bettini was in breach of warranty and therefore the employer was not entitled
    • to end the contract. Missing the rehearsals did not go to the root of the contract.
  98. Hong Kong Fir Shipping Co v Kawasaki
    The court introduced the innominate term approach. Rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the benefit of the contract. Only if the answer is affirmative will there be a breach of condition.

    In this case, Kawasaki chartered a vessel for 2 years but it was not seaworthy and was docked for 18 weeks while it was being repaired. Kawasaki attempted to repudiate the contract.

    However, the court found that 20 weeks loss of use out of a 2 year contract did not substantially deprive Cs of the benefit of the contract. Thus there had been a breach of warranty. Cs could sue for damages, but could not repudiate.
  99. Robinson v Harman
    Where a party sustains loss by reason of a breach of contract, he is to be placed in the same situation as he would have been had the contract been performed.

    This could be the cost of cure or difference in value.
  100. Ruxley Electronics and Construction v Forsyth
    In some cases, the cost of cure expectation loss may be wholly disproportionate to the benefit that would have been gained had the contractual term not been breached.

    In this case, the swimming pool had been  built to incorrect specifications in breach of contract. There was no difference in value, but the cost of cure would have been 20,000- the cost of digging up and re-building an entirely new swimming pool.

    Therefore, the HofL awarded a much smaller amount of compensation for the loss of amenity caused by having the pool built to incorrect specifications.
  101. The Mamola Challenger
    In order to claim for expectation loss, the claimant must actually have suffered loss.

    In this case it was found that Cs had mitigated their loss by re-chartering the vessel they had spent money improving. Therefore it was not wasted expenditure, there was no loss.
  102. Anglia Television v Reed
    If expectation loss is not recoverable (eg because there is no way of knowing what profits would have been if the contract had been performed) reliance loss may be claimed instead.

    This would be all expenditure wasted as a result of the breach. In this case it was the money Anglia TV had spent on production costs in anticipation of Reed acting in the feature.
  103. Chaplin v Hicks
    C was awarded damages for loss of opportunity after she had been selected as one of 50 contenders for 12 winners, yet the Daily Express failed to tell her the time and place of the audition.
  104. Addis v Gramaphone Co
    The courts will generally not award damages for mental distress.
  105. Jarvis v Swan's Tours
    Court may award damages for mental distress where the purpose of the contract was to provide entertainment and enjoyment. In such cases, providing a distressful experience would effectively be a breach of contract.
  106. Farley v Skinner
    The HofL found that entertainment, pleasure or peace of mind need not be the sole aim of the contract to claim for mental distress or disappointment. It is sufficient that it is an important object of the contract.
  107. Hadley v Baxendale
    Alderson B said that damages the innocent party ought to receive in respect of a breach of contract should be loss which is within reasonable contemplation. This would be:

    1) Damages that arise naturally (according to the usual course of things); or

    2) Unusual things if the special circumstances are known to both parties at the time the contract is made.

    In HvB, C claimed for loss of profit during the delayed period D was fixing their mill shaft. It was found that:

    1) The loss of profit did not arise naturally (most millers would have had a replacement shaft); and

    2) D had know knowledge of the special circumstances (that C had no backup shaft).
  108. Parsons v Uttley Ingham
    • The Claimant pig farmers purchased a food storage hopper from the defendant for the storage of pig feed. The hopper was installed negligently and lack of ventilation caused
    • the pig feed to go mouldy.

    As a result, many of the pigs contracted e-coli and died. The Claimant claimed over £36k in respect of the loss of profit, vet bills and other costs relating to the death of the pigs. The Defendant contended this damage was too remote as it was not in the contemplation of the parties that the poor ventilation would cause e-coli and death of the pigs.

    • Held:
    • The death of the pigs was a natural result of feeding the pigs mouldy food within the first
    • limb of Hadley v Baxendale [1854] EWHC Exch J70. There was no need to consider whether the death by e-coli was in the reasonable contemplation of the parties under the second limb.

    Loss of lucrative contract could merely be a more extensive example of the contemplatedloss.
  109. Victoria Laundry v Newman Industries
    An example of limb 2 in HvB.

    Victoria Laundry bought a new boiler from D, making it clear that the boilers were needed for the business to expand. Therefore, they were able to claim for additional profits (above normal expected profits) under limb 2 because although they did not arise naturally, the unique circumstances were known to Ds.

    However, they could not claim for the lucrative government contract because this was unknown to Ds.
  110. The Heron II
    • A contract for the carriage of a cargo of sugar was delayed by 9 days. The market price of
    • sugar dropped following this delay due to the arrival of another cargo of sugar. The claimant sought to recover the difference from the defendant for their breach of contract. The defendant argued the damages were too remote since it was just as likely that the market price could increase.

    • Held:
    • Under the second limb in Hadley v Baxendale it was only necessary that the losses were in
    • the reasonable contemplation of the parties as a possible result of the breach.

    There was no requirement as to the degree of probability of that loss arising. Since the defendant must have known that market prices fluctuate, the loss would have been in his contemplation as a possible result of the breach.

    The current test for remoteness can thus be summarised as whether the loss claimed was of a kind which would have been within the reasonable contemplation of the parties at the time the contract was made as being not unlikely to occur.
  111. Brown v KMR Services
    Loss of profit from ordinary business not necessarily different from that flowing from a high profit contract.
  112. British Westinghouse
    C must take reasonable steps to ensure that losses are kept to a minimum.

    If C does take reasonable steps to mitigate loss, he can claim any expenses incurred in trying to mitigate, even if his attempt is unsuccessful.
  113. Dunlop Pneumatic Tyre Co v New Garage & Motor Co
    Deciding whether a clause is a penalty or specified damage clause is a question of construction and the court should examine the circumstances at the time of contracting, not the time of the breach.

    The House of Lords set out the following guidelines:

    1) If the sum stated is extravagant or unconscionable compared to the greatest conceivable loss (at time of contracting, not at time of breach), it will be a penalty.

    2) If the breach consists only in not paying a sum of money then if the sum stated in the clause is greater than the amount which ought to have been paid it will be a penalty.

    3) If a single lump sum is payable on the happening of one or more of several events, some of which may cause serious and some minor damage, it is presumed (rebuttable) to be a penalty.

    4) The clause can be a specified damage clause even if it is difficult or impossible to pre-estimate the loss which might be caused by the breach.
  114. Balfour Beatty v Scottish Power
    Contracting parties are not expected to have detailed knowledge of each others' business practices. However, the HofL said that the simpler the activity, the easier it would be to imply knowledge.

    In this case, Scottish Power could not have known that concrete required a constant pour that if disrupted by a break in the flow of electricity, would result in considerable damage. Therefore, the damage was too remote.
  115. Chappell v Times News Paper
    The court will not order specific performance of an employment or service contract where one party has 'no faith in the honesty, integrity or the loyalty of the other' as this would be a 'plain recipe for disaster.'
  116. Cohen v Roche
    If C can purchase the same product elsewhere, damages will be awarded of specific performance.
  117. Page One Record v Britton
    An injunction will not usually be used to enforce negative promises in a contract of personal services, where it would result in one party remaining idle or performing positive covenants.

    In this case, the Troggs had contracted with their manager not to hire another manager. When trust broke down the manager sought an injunction to prevent the band hiring a replacement manager.

    The court said that a pop band needs a manager and would not enforce an injunction that would in effect force the band to stop working or bring back the manager with whom working would now be extremely difficult.
  118. Warner Brothers v Nelson
    In this case the court granted an injunction against Nelson which prohibited her from taking screen roles with other production companies in keeping with the negative covenant in the contract.

    The court said she would be able to find alternative work elsewhere, albeit not as a screen actress. This may tempt her to work with Warner Brothers again, but she was not being forced to.
  119. British Steel Corp v Cleveland
    If goods have been supplied or work has been done but a contract has not been formed, the supplier may be able to bring a claim in restitution for a reasonable sum for work done or goods supplied.
  120. Cutter v Powell
    The doctrine of complete performance provides that performance of contractual obligations must be precise and exact.

    Therefore, if one party only has to pay money upon the completion of specified contractual duties, if such duties have not been carried out precisely, the payer does not have to pay any part of the price.

    In this case, Cutter had not fulfilled his duties having died at sea. He had agreed to a lump sum payment upon completion (substantially more than a monthly wage) so had consented to the risk. His widow was entitled to nothing, even though he had completed most of his duties.
  121. Planche v Colburn
    Where a party is wrongly prevented from performing its contractual obligations by the other party then the strict rule (of complete performance) does not apply.

    C can either claim damages for breach of contract (ie recover lost profit- usually more lucrative as can take into account multiple factors) or on a quantum meruit basis for work done.
  122. Sumpter v Hedges
    A party may voluntarily accept partial performance, in which case the other party can claim a quantum meruit. However, the acceptance must be voluntary (ie it must be a free choice).

    In this case, D had no choice but to accept the benefit of the construction work carried out on his own land. He therefore had not voluntarily accepted the partial performance and did not have to pay quantum meruit.

    However, he had used the building materials (bricks etc) left on site, thus voluntarily accepting them. He was therefore liable to pay a reasonable sum for the materials but no more.
  123. Hoenig v Isaacs
    In this case the court found that there had been substantial performance, despite defects in the finished work.

    If the performance has been 'substantial' then the contract may be enforced, minus the cost of remedying the defects.

    In deciding that there had been substantial performance in this case, the important factors were:

    - The official referee decided there had been substantial performance.

    - The work had been 'completed'- minus a few defects.

    - The cost of remedying the defects was just 1/14 of the final sum.

    Nb- this case was borderline- illustrating how strict the doctrine of complete performance is.
  124. Ritchie v Atkinson
    • By contract the claimant agreed to carry
    • a cargo of specified quantity of hemp and iron. The price agreed was £5 per ton for the hemp and 5 shillings per ton of iron. The claimant only carried part of the agreed quantity. The defendant argued the contract  had not been fully performed and therefore no payment was due.

    • Held:
    • The contract could be divided into separate parts as the parties had agreed a price per ton. The claimant was thus entitled to payment for  the amount carried although the defendant was entitled to damages for non performance in relation to the amount not carried.
  125. Bolton v Mahadeva
    In this case the court decided there had not been substantial performance for the following reasons:

    - The heating system did not perform effectively the function which it was intended to perform (it was not warm enough and the heat varied from room to room).

    - The defects were extensive and could not be remedied by some slight amendment of the system.

    - The cost of remedying the defect was 1/3 of the cost.

    Nb- in this case, the court said the contractor should have offered to remedy the defects before resorting to litigation. If he had remedied the defects, he could have justified claiming the full contract price.