Attention to all who are thinking of taking up law!
Here is a taste of what you have to go through if you study law.
You'll have to memorise all the names of all these cases and ofcourse, you have to understand what it is all about and know how to apply them in your arguments.
Here is a list of about half of the cases you have to know in Contract Law only. Don't forget that you still have to go through criminal, land, constitutional, Malaysian, Tort, Eduity & Trust, family, and private and international law.
Sources: www.lawteacher.net kevinboone.com Ms Png's(My lecturer) notes
Offers:
An offer is the willingness expressed by an offeror to enter into a contract on the terms stated with the person to whom it is addressed to.
Carlill v Carbolic Smoke Ball Co (1893)
An advert was placed for 'smoke balls' to prevent influenza. The advert offered to pay £100 if anyone contracted influenza after using the ball. The company deposited £1,000 with the Alliance Bank to show their sincerity in the matter. The plaintiff bought one of the balls but contracted influenza. It was held that she was entitled to recover the £100. The Court of Appeal held that:
(a) the deposit of money showed an intention to be bound, therefore the advert was an offer;
(b) it was possible to make an offer to the world at large, which is accepted by anyone who buys a smokeball;
(c) the offer of protection would cover the period of use; and
(d) the buying and using of the smokeball amounted to acceptance.
Storer v Manchester City Council (1974)
The court of appeal found that there was a binding contract. The council had sent Storer a communication that they intended would be binding upon his acceptance. All Storer had to do to bind himself to the later sale was to sign the document and return it.
Invitation To Treat:
An invitation to treat is simply an invitation to do business and is not an offer ie where a party is merely inviting offers like display of goods in a shop, advertisements like in newspapers and magazines, price lists, catalogues, circulars, and internet shopping.
Fisher v Bell (1960)
A shopkeeper displayed a flick knife with a price tag in the window. The Restriction of Offensive Weapons Act 1959 made it an offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in the magistrates' court but the Justices declined to convict on the basis that the knife had not, in law, been 'offered for sale'.
This decision was upheld by the Queen's Bench Divisional Court. Lord Parker CJ stated: "It is perfectly clear that according to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract."
PSGB v Boots (1953)
The defendants' shop was adapted to the "self-service" system. The question for the Court of Appeal was whether the sales of certain drugs were effected by or under the supervision of a registered pharmacist. The question was answered in the affirmative. Somervell LJ stated that "in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract is completed."
Partridge v Crittenden (1968)
It was an offence to offer for sale certain wild birds. The defendant had advertised in a magazine 'Quality Bramblefinch cocks, Bramblefinch hens, 25s each'. His conviction was quashed by the High Court. Lord Parker CJ stated that when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale.
Grainger v Gough [1896]
"The transmission of such a price list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity.
Gibson v Manchester City Council (1979)
The council sent to tenants details of a scheme for the sale of council houses. The plaintiff immediately replied, paying the £3 administration fee. The council replied: "The corporation may be prepared to sell the house to you at the purchase price of £2,725 less 20 per cent. £2,180 (freehold)." The letter gave details about a mortgage and went on "This letter should not be regarded as a firm offer of a mortgage. If you would like to make a formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible." G filled in and returned the form. Labour took control of the council from the Conservatives and instructed their officers not to sell council houses unless they were legally bound to do so. The council declined to sell to G.
In the House of Lords, Lord Diplock stated that words italicised seem to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by G's written acceptance of it. It was a letter setting out the financial terms on which it may be the council would be prepared to consider a sale and purchase in due course.
Auctions:
An auctioneer’s request for bids is an invitation to treat. Each bid constitutes an offer. The auctioneer signals his acceptance of the highest bid with the fall of the hammer. Until this point any bid may be withdrawn.
Payne v Cave (1789)
The defendant made the highest bid for the plaintiff's goods at an auction sale, but he withdrew his bid before the fall of the auctioneer's hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer. Note: The common law rule laid down in this case has now been codified in s57(2) Sale of Goods Act 1979.
An advertisement that an auction will be held at a certain time and place is merely a statement of intention. It is not an offer to hold the auction which someone can accept by turning up at the appointed time and place:
Harris v Nickerson (1873)
Warlow v Harrison (1858)
When an item is advertised in an auction without reserve, then the usual auction rule applies, that a bid is an offer and it can be accepted or declined. However, there is a further, unilateral offer, by the auctioneer to whomever turns out to be the highest bidder. That offer is to accept the highest bid. Therefore, the auctioneer can be sued if he does not accept the highest bid.
Barry v Davies (2000)
A sale of machinery by auction was advertised as being “without reserve”. Two machines were put up, whose list price would have been 14000 pounds each, but the only bid of 200 pounds each was made by C. The auctioneer D refused to accept the bid and withdrew the machines from sale. C sued, and the judge’s award of 17600 pounds damages was affirmed on appeal.
Advertisements For Tenders:
Where someone places an advertisement asking for the submission of tenders for the supply of specified goods or services, the advertiser is free to select one or none of the tenders. The advertisement for tender is an invitation to treat.
Spencer v Harding
The case established that an offer inviting tenders to be submitted for the purchase of stock did not amount to an offer capable of acceptance to sell that stock, but rather amounted to an invitation to treat.
Blackpool Aero Club v Blackpool Borough Council (1990)
BBC invited tenders to operate an airport, to be submitted by noon on a fixed date. The plaintiffs tender was delivered by hand and put in the Town Hall letter box at 11am. However, the tender was recorded as having been received late and was not considered. The club sued for breach of an alleged warranty that a tender received by the deadline would be considered. The judge awarded damages for breach of contract and negligence. The council's appeal was dismissed by the Court of Appeal.
Harvela v Royal Trust (1985)
Royal Trust invited offers by sealed tender for shares in a company and undertook to accept the highest offer. Harvela bid $2,175,000 and Sir Leonard Outerbridge bid $2,100,000 or $100,000 in excess of any other offer. Royal Trust accepted Sir Leonard's offer. The trial judge gave judgment for Harvela.
In the House of Lords, Lord Templeman stated: "To constitute a fixed bidding sale all that was necessary was that the vendors should invite confidential offers and should undertake to accept the highest offer. Such was the form of the invitation. It follows that the invitation upon its true construction created a fixed bidding sale and that Sir Leonard was not entitled to submit and the vendors were not entitled to accept a referential bid."
Mere statements of price:
Harvey v Facey (1893)
The plaintiffs sent a telegram to the defendant, "Will you sell Bumper Hall Pen? Telegraph lowest cash price".
The defendants reply was "Lowest price £900".
The plaintiffs telegraphed "We agree to buy … for £900 asked by you".
It was held by the Privy Council that the defendants telegram was not an offer but simply an indication of the minimum price the defendants would want, if they decided to sell. The plaintiffs second telegram could not be an acceptance.
Gibson v Manchester City Council (1979)
The council sent to tenants details of a scheme for the sale of council houses. The plaintiff immediately replied, paying the £3 administration fee. The council replied: "The corporation may be prepared to sell the house to you at the purchase price of £2,725 less 20 per cent. £2,180 (freehold)." The letter gave details about a mortgage and went on "This letter should not be regarded as a firm offer of a mortgage. If you would like to make a formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible." G filled in and returned the form. Labour took control of the council from the Conservatives and instructed their officers not to sell council houses unless they were legally bound to do so. The council declined to sell to G.
In the House of Lords, Lord Diplock stated that words italicised seem to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by G's written acceptance of it. It was a letter setting out the financial terms on which it may be the council would be prepared to consider a sale and purchase in due course.
Acceptance:
An acceptance is a final unqualified acceptance of the terms of the offer. To make a binding contract, the acceptance must exactly match the offer.
Trentham v Luxfer (1993)
T built industrial units and subcontracted the windows to L. The work was done and paid for. T then claimed damages from L because of defects in the windows. L argued that even though there had been letters, phone calls and meetings between the parties, there was no matching offer and acceptance and so no contract.
The Court of Appeal held that the fact that there was no written, formal contract was irrelevant, a contract could be concluded by conduct. Plainly the parties intended to enter into a contract, the exchanges between them and the carrying out of instructions in those exchanges, all supported T's argument that there was a course of dealing between the parties which amounted to a valid, working contract. Steyn LJ pointed out that:
(a) The courts take an objective approach to deciding if a contract has been made.
(b) In the vast majority of cases a matching offer and acceptance will create a contract, but this is not necessary for a contract based on performance.
Counter offers:
If in his reply to an offer, the offeree introduces a new term or varies the terms of the offer, then that reply cannot amount to an acceptance. Instead, the reply is treated as a “counter offer”, which the original offeror is free to accept or reject. A counter offer also amounts to a rejection of the original offer which connot then be subsequently accepted. A counter offer destroys the original offer.
Hyde v Wrench (1840)
6 June W offered to sell his estate to H for £1000; H offered £950
27 June W rejected H's offer
29 June H offered £1000. W refused to sell and H sued for breach of contract.
Lord Langdale MR held that if the defendant's offer to sell for £1,000 had been unconditionally accepted, there would have been a binding contract; instead the plaintiff made an offer of his own of £950, and thereby rejected the offer previously made by the defendant. It was not afterwards competent for the plaintiff to revive the proposal of the defendant, by tendering an acceptance of it; and that, therefore, there existed no obligation of any sort between the parties.
Mere Request For Information:
A mere request for information will not destroy the original offer.
Stevenson v McLean (1880)
On Saturday, the defendant offered to sell iron to the plaintiff at 40 shillings a ton, open until Monday. On Monday at 10am, the plaintiff sent a telegram asking if he could have credit terms. At 1.34pm the plaintiff sent a telegram accepting the defendant's offer, but at 1.25pm the defendant had sent a telegram: 'Sold iron to third party' arriving at 1.46pm. The plaintiff sued the defendant for breach of contract and the defendant argued that the plaintiff's telegram was a counter-offer so the plaintiff's second telegram could not be an acceptance.
It was held that the plaintiff's first telegram was not a counter-offer but only an enquiry, so a binding contract was made by the plaintiff's second telegram.
If X Makes an offer on his standard document and Y accepts on a document containing his conflicting standard terms, a contract will be made on Y’s term if X acts upon Y’s communication, eg by delivering goods. This situation is known as battle of the forms. (The battle is likely to be won by the last party to send their terms, the other party then acting upon them and so accepting them)
Butler Machine Tool v Ex-Cell-O Corporation (1979)
The plaintiffs offered to sell a machine to the defendants. The terms of the offer included a condition that all orders were accepted only on the sellers' terms which were to prevail over any terms and conditions in the buyers' order. The defendants replied ordering the machine but on different terms and conditions. At the foot of the order was a tear-off slip reading, "We accept your order on the Terms and Conditions stated thereon." The plaintiffs signed and returned it, writing, "your official order … is being entered in accordance with our revised quotation … ".
The Court of Appeal had to decide on which set of terms the contract was made. Lord Denning M.R. stated:
In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out-of-date. This was observed by Lord Wilberforce in New Zealand Shipping Co Ltd v AM Satterthwaite. The better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them. As Lord Cairns L.C. said in Brogden v Metropolitan Railway Co (1877):
… there may be a consensus between the parties far short of a complete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description.
Applying this guide, it will be found that in most cases when there is a "battle of forms" there is a contract as soon as the last of the forms is sent and received without objection being taken to it. Therefore, judgment was entered for the buyers.
Conditional acceptance:
Sometimes an offeree accepts but indicates that he does not intend to be bound until some condition is fulfilled. At this stage no agreement has been reached and neither party is subject to any obligations. It is common practice to agree to sales “subject to contract”. The parties expressly declare they have no intention to be bound until they sign a formal document. Each is able to withdraw until such time as the formalities have been completed.
Winn v Bull (1877)
Acceptance by conduct:
Confetti Records v Warner Music (2003)
The P owned the copyright in a particular piece of music, but agreed “subject to contract” that it might be included on an album to be produced by the D. The P sent the D the track with an invoice, the D began to process the track, and the P then changed their mind and e-mailed the D purporting to withdraw their consent. The judge said that in the light of the earlier agreement, the P by sending the track and invoice had made and offer which the D had accepted by conduct; the contract was complete at that point and the purported withdrawal came too late.
Brogden v Metropolitan Railway Co (1877)
B supplied coal to MRC for many years without an agreement. MRC sent a draft agreement to B who filled in the name of an arbitrator, signed it and returned it to MRC's agent who put it in his desk. Coal was ordered and supplied in accordance with the agreement but after a dispute arose B said there was no binding agreement.
It was held that B's returning of the amended document was not an acceptance but a counter-offer which could be regarded as accepted either when MRC ordered coal or when B actually supplied. By their conduct the parties had indicated their approval of the agreement.
Acceptance Of Tenders:
A tender is an offer, the acceptance of which leads to the formation of a contract. However, difficulties arise where tenders are invited for the periodical supply of goods.
Great Northern Railway v Witham (1873)
GNR advertised for tenders for the supply of stores and W replied 'I undertake to supply the company for 12 months with such quantities as the company may order from time to time'. GNR accepted this tender and placed orders which W supplied. When W later refused to supply it was held that W's tender was a standing offer which GNR could accept by placing an order. W's refusal was a breach of contract but it also revoked W's standing offer for the future, so W did not have to meet any further orders.
Communication Of Acceptance:
The general rule is that acceptance must be communicated to the offeror by the offeree or someone authorised by the offeree. Until and unless the acceptance is so communicated, no contract comes into existence.
Powell v Lee (1908)
The plaintiff applied for a job as headmaster and the school managers decided to appoint him. One of them, acting without authority, told the plaintiff he had been accepted. Later the managers decided to appoint someone else. The plaintiff brought an action alleging that by breach of a contract to employ him he had suffered damages in loss of salary. The county court judge held that there was no contract as there had been no authorised communication of intention to contract on the part of the body, that is, the managers, alleged to be a party to the contract. This decision was upheld by the King's Bench Division.
Mere silence cannot amount to acceptance.
Felthouse v Bindley (1862)
The plaintiff discussed buying a horse from his nephew and wrote to him "If I hear no more about him, I consider the horse mine … " The nephew did not reply but wanted to sell the horse to the plaintiff, and when he was having a sale told the defendant auctioneer not to sell the horse. By mistake the defendant sold the horse. The plaintiff sued the defendant in the tort of conversion but could only succeed if he could show that the horse was his.
It was held that the uncle had no right to impose upon the nephew a sale of his horse unless he chose to comply with the condition of writing to repudiate the offer. It was clear that the nephew intended his uncle to have the horse but he had not communicated his intention to his uncle, or done anything to bind himself. Nothing, therefore, had been done to vest the property in the horse in the plaintiff. There had been no bargain to pass the property in the horse to the plaintiff, and therefore he had no right to complain of the sale.
Where instantaneous / electronic method of communication is used, eg telephone, telex, fax, and the use of answering machine, it will take effect when and where it is received.
Entores v Miles Far East Corp (1955)
The plaintiffs in London made an offer by Telex to the defendants in Holland. The defendant's acceptance was received on the plaintiffs' Telex machine in London. The plaintiffs sought leave to serve notice of a writ on the defendants claiming damages for breach of contract. Service out of the jurisdiction is allowed to enforce a contract made within the the jurisdiction. The Court of Appeal had to decide where the contract was made.
Denning L.J. stated that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received. The contract was made in London where the acceptance was received. Therefore service could be made outside the jurisdiction.
The Brimnes (1975)
The defendants hired a ship from the plaintiff shipowners. The shipowners complained of a breach of the contract. The shipowners sent a message by Telex, withdrawing the ship from service, between 17.30 and 18.00 on 2 April. It was not until the following morning that the defendants saw the message of withdrawal on the machine.
Edmund-Davies L.J. agreed with the conclusion of the trial judge. The trial judge held that the notice of withdrawal was sent during ordinary business hours, and that he was driven to the conclusion either that the charterers' staff had left the office on April 2 'well before the end of ordinary business hours' or that if they were indeed there, they 'neglected to pay attention to the Telex machine in the way they claimed it was their ordinary practice to do.' He therefore concluded that the withdrawal Telex must be regarded as having been 'received' at 17.45 hours and that the withdrawal was effected at that time.
Note: Although this is a case concerning the termination of a contract, the same rule could apply to the withdrawal and acceptance of an offer.
Brinkibon v Stahag Stahl (1983)
The buyers, an English company, by a telex, sent from London to Vienna, accepted the terms of sale offered by the sellers, an Austrian company. The buyers issued a writ claiming damages for breach of the contract.
The House of Lords held that the service of the writ should be set aside because the contract had not been made within the court's jurisdiction. Lord Wilberforce stated that the present case is, as Entores itself, the simple case of instantaneous communication between principals, and, in accordance with the general rule, involves that the contract (if any) was made when and where the acceptance was received. This was in Vienna.
Exception to The Communication rule:
In unilateral contracts, the normal rule for communication of acceptance to the offeror does not apply. Carrying out the stipulated task is enough to constitute acceptance of offer. Carlill v Carbolic Smoke Ball
The offeror may expressly or impliedly waive the need for communication of acceptance by the offeree, eg, where goods are dispatched in response to an offer to buy.
The postal rule - Where acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete as soon as the letter of acceptance is Properly posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror. The postal rule also applies to communication of acceptance by cable, including telegram.
Adams v Lindsell (1818)
2 Sept. The defendant wrote to the plaintiff offering to sell goods asking for a reply "in the course of post"
5 Sept. The plaintiff received the letter and sent a letter of acceptance.
9 Sept. The defendant received the plaintiff's acceptance but on 8 Sept had sold the goods to a third party.
It was held that a binding contract was made when the plaintiff posted the letter of acceptance on 5 Sept, so the defendant was in breach of contract.
Household fire Insurance v Grant (1879)
G applied for shares in the plaintiff company. A letter of allotment of shares was posted but G never received it. When the company went into liquidation G was asked, as a shareholder, to contribute the amount still outstanding on the shares he held. The trial judge found for the plaintiff.
The Court of Appeal affirmed the judgment. Thesiger LJ stated that "Upon balance of conveniences and inconveniences it seems to me … it was more consistent with the acts and declarations of the parties in this case to consider the contract complete and absolutely binding on the transmission of the notice of allotment through the post, as the medium of communication that the parties themselves contemplated, instead of postponing its completion until the notice had been received by the defendant."
The postal rule does not apply to:
Re London And Northern Bank (1900)
Where the letter of acceptance has not been properly posted: It is not sufficient to hand the letter to a postman on his way to the sorting office, or an off duty postman outside the office.
Gmbh v Contimar (1953)
Where the letter is not properly addressed
Holwell Securities v Hughes (1974)
Where the express terms of the offer exclude the postal rule (Actual notice had to be received rather than simply posted) - The defendant gave the plaintiff an option to buy property which could be exercised "by notice in writing". The plaintiffs posted a letter exercising this option but the letter was lost in the post and the plaintiffs claimed specific performance. The Court of Appeal held that the option had not been validly exercised. Lawton LJ stated that the plaintiffs were unable to do what the agreement said they were to do, namely, fix the defendant with knowledge that they had decided to buy his property. There was no room for the application of the postal rule since the option agreement stipulated what had to be done to exercise the option.
Revocation Of Posted acceptance:
It would seem that an offeree, having posted his letter of acceptance, is unable to revoke the acceptance by some quicker method of communication which arrives first because the strict application of the postal rule would not permit such a withdrawal.
A-Z Bazaars v Ministry Of Agriculture (1974)
Method Of acceptance:
If some expeditious means of communication is mentioned by the offeror some other, but equally speedy means, will suffice.
Tinn v Hoffman (1873)
Acceptance was requested by return of post. Honeyman J said: "That does not mean exclusively a reply by letter or return of post, but you may reply by telegram or by verbal message or by any other means not later than a letter written by return of post."
Yates v Pulleyn (1975)
The defendant granted the plaintiff an option to buy land, exercisable by notice in writing to be sent by "registered or recorded delivery post". The plaintiff sent a letter accepting this offer by ordinary post, which was received by the defendant who refused to accept it as valid.
It was held that this method of acceptance was valid and was no disadvantage to the offeror, as the method stipulated was only to ensure delivery and that had happened.
Knowledge Of Offer:
To be effective, an offer must be communicated or there can be no acceptance of the offer without knowledge of the offer as there is no meeting of the minds.
R v Clarke (1927) (Australia)
The Government offered a reward for information leading to the arrest of certain murderers and a pardon to an accomplice who gave the information. Clarke saw the proclamation. He gave information which led to the conviction of the murderers. He admitted that his only object in doing so was to clear himself of a charge of murder and that he had no intention of claiming the reward at that time. He sued the Crown for the reward. The High Court of Australia dismissed his claim. Higgins J stated that: "Clarke had seen the offer, indeed; but it was not present to his mind - he had forgotten it, and gave no consideration to it, in his intense excitement as to his own danger. There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or forgetting it after hearing."
Williams v Carwardine (1833)
The defendant offered a reward for information leading to the conviction of a murderer. The plaintiff knew of this offer and gave information that it was her husband after he had beaten her, believing she had not long to live and to ease her conscience. It was held that the plaintiff was entitled to the reward as she knew about it and her motive in giving the information was irrelevant.
Cross – Offers:
X writes to Y offering to sell certain property at a stated price. Y writes to X offering to buy the same property at the same price. The letters cross in the post. There is no binding contract in these cases.
Tinn v Hoffman (1873)
Termination Of Offer:
Revocation of an offer is possible at any time until acceptance.
Even where an offeror promises to keep his offer open for a specified length of time, he is under no obligation unless his promise has been bought by consideration from the offeree.
Mountfort v Scott
Revocation must be communicated to the offeree even where revocation is sent by post, otherwise the revocation is ineffective.
Byrne v Van Tienhoven (1880)
1 Oct. D posted a letter offering goods for sale.
8 Oct. D revoked the offer; which arrived on 20 Oct.
11 Oct. P accepted by telegram
15 Oct. P posted a letter confirming acceptance.
It was held that the defendant's revocation was not effective until it was received on 20 Oct. This was too late as the contract was made on the 11th when the plaintiff sent a telegram. Judgment was given for the plaintiffs.
Revocation need not be communicated by the offeror personally, it is sufficient if it is done by a reliable third party.
Dickinson v Dodds (1876)
Dodds offered to sell his house to Dickinson, the offer being open until 9am Friday. On Thursday, Dodds sold the house to Allan. Dickinson was told of the sale by Berry, the estate agent, and he delivered an acceptance before 9am Friday. The trial judge awarded Dickinson a decree of specific performance. The Court of Appeal reversed the decision of the judge.
James LJ stated that the plaintiff knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if Dodds had told him in so many words, "I withdraw the offer." This was evident from the plaintiff's own statements. It was clear that before there was any attempt at acceptance by the plaintiff, he was perfectly well aware that Dodds had changed his mind, and that he had in fact agreed to sell the property to Allan. It was impossible, therefore, to say there was ever that existence of the same mind between the two parties which is essential in point of law to the making of an agreement.
An offer contained in an advertisement could be revoked by another advertisement.
Shuey v U.S. (1875)
On 20 April 1865, the Secretary of War published in the public newspapers and issued a proclamation, announcing that liberal rewards will be paid for any information that leads to the arrest of certain named criminals. The proclamation was not limited in terms to any specific period. On 24 November 1865, the President issued an order revoking the offer of the reward. In 1866 the claimant discovered and identified one of the named persons, and informed the authorities. He was, at all times, unaware that the offer of the reward had been revoked.
The claimant's petition was dismissed. It was held that the offer of a reward was revoked on 24 November and notice of the revocation was published. It was withdrawn through the same channel in which it was made. It was immaterial that the claimant was ignorant of the withdrawal. The offer of the reward not having been made to him directly, but by means of a published proclamation, he should have known that it could be revoked in the manner in which it was made.
In a unilateral offer, once the offeree has commenced performance of the unilateral offer, the offeror may not revoke the offer.
Errington v Errington and Woods (1952)
A father bought a house on mortgage for his son and daughter-in-law and promised them that if they paid off the mortgage, they could have the house. They began to do this but before they had finished paying, the father died. His widow claimed the house. The daughter-in-law was granted possession of the house by the trial judge and the Court of Appeal.
Denning LJ stated: "The father's promise was a unilateral contract - a promise of the house in return for their act of paying the instalments. It could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete and unperformed, which they have not done. If that was the position during the father's lifetime, so it must be after his death. If the daughter-in-law continues to pay all the building society instalments, the couple will be entitled to have the property transferred to them as soon as the mortgage is paid off; but if she does not do so, then the building society will claim the instalments from the father's estate and the estate will have to pay them. I cannot think that in those circumstances the estate would be bound to transfer the house to them, any more than the father himself would have been."
Daulia v Four Millbank Nominees (1978)
In unilateral contracts the offeror is entitled to require full performance of the condition imposed otherwise he is not bound. That must be subject to one important qualification - there must be an implied obligation on the part of the offeror not to prevent the condition being satisfied, an obligation which arises as soon as the offeree starts to perform. Until then the offeror can revoke the whole thing, but once the offeree has embarked on performance, it is too late for the offeror to revoke his offer.
Lapse Of Time:
Where there is no express time, an offer is normally open for a reasonable time.
Ramsgate v Montefiore (1866)
On 8 June, the defendant offered to buy shares in the plaintiff company. On 23 Nov, the plaintiff accepted but the defendant no longer wanted them and refused to pay. It was held that the six-month delay between the offer in June and the acceptance in November was unreasonable and so the offer had 'lapsed', ie it could no longer be accepted and the defendant was not liable for the price of the shares.
Financings Ltd v Stimson (1962)
The defendant at the premises of a dealer signed a form by which he offered to take a car on HP terms from the plaintiffs. He paid a deposit and was allowed to take the car away. He was dissatisfied with it and returned it to the dealer, saying he did not want it. The car was stolen from the dealer's premises and damaged. The plaintiffs, not having been told that the defendant had returned the car, signed the HP agreement.
It was held by the Court of Appeal (a) that the defendant had revoked his offer by returning the car to the dealer. (b) In view of an express provision in the form of the contract that the defendant had examined the car and satisfied himself that it was in good order and condition, the offer was conditional on the car remaining in substantially the same condition until the moment of acceptance. That condition not being fulfilled, the acceptance was invalid.
Death:
The offeree cannot accept an offer after notice of the offeror’s death. However, if the offeree does not know of the offeror’s death, and there is no personal element involved, then he may accept the offer.
Bradbury v Morgan (1862)
JM Leigh requested Bradbury & Co to give credit to HJ Leigh, his brother. JM Leigh guaranteed his brother's account to the extent of £100. Bradbury thereafter credited HJ Leigh in the usual way of their business. JM Leigh died but Bradbury, having no notice or knowledge of his death, continued to supply HJ Leigh with goods on credit. JM Leigh's executors (Morgan) refused to pay, arguing that they were not liable as the debts were contracted and incurred after the death of JM Leigh and not in his lifetime. Judgment was given for the plaintiffs, Bradbury.
Social and Domestic Agreements:
This covers agreements between family members, friends and workmates. The law presumes that social agreements are not intended to be legally binding.
Lens v Devonshire Club (1914)
It was held that the winner of a competition held by a golf club could not sue for his prize where "no one concerned with that competition ever intended that there should be any legal results flowing from the conditions posted and the acceptance by the competitor of those conditions".
Coward v MIB (1962)
The court found that an agreement to take a friend to work in exchange for petrol money was an agreement which lacked contractual intention.
Balfour v Balfour (1919)
The defendant who worked in Ceylon, came to England with his wife on holiday. He later returned to Ceylon alone, the wife remaining in England for health reasons. The defendant promised to pay the plaintiff £30 per month as maintenance, but failed to keep up the payments when the marriage broke up. The wife sued. It was held that the wife could not succeed because: (1) she had provided no consideration for the promise to pay £30; and (2) agreements between husbands and wives are not contracts because the parties do not intend them to be legally binding.
Taylor v Dickens
The presumption against a contractual intention will not apply where spouses are not living together in amity (good relations) at the time of the agreement.
Merrit v Merrit (1970)
The husband left his wife. They met to make arrangements for the future. The husband agreed to pay £40 per month maintenance, out of which the wife would pay the mortgage. When the mortgage was paid off he would transfer the house from joint names to the wife's name. He wrote this down and signed the paper, but later refused to transfer the house.
It was held that when the agreement was made, the husband and wife were no longer living together, therefore they must have intended the agreement to be binding, as they would base their future actions on it. This intention was evidenced by the writing. The husband had to transfer the house to the wife.
Darke v Strout (2003)
The court found that an agreement for child maintenance following the breakdown of a couple’s relationship did not lack an intention to create legal relations given the formality of the letter nor could it be said to be unenforceable for want of consideration since the woman had, in entering the agreement, given up statutory rights to maintenance.
If social agreement will have serious consequences for the parties, it may rebut the presumption.
Parker v Clarke (1960)
Mrs Parker was the niece of Mrs Clarke. An agreement was made that the Parkers would sell their house and live with the Clarkes. They would share the bills and the Clarkes would then leave the house to the Parkers. Mrs Clarke wrote to the Parkers giving them the details of expenses and confirming the agreement. The Parkers sold their house and moved in. Mr Clarke changed his will leaving the house to the Parkers. Later the couples fell out and the Parkers were asked to leave. They claimed damages for breach of contract.
It was held that the exchange of letters showed the two couples were serious and the agreement was intended to be legally binding because (1) the Parkers had sold their own home, and (2) Mr Clarke changed his will. Therefore the Parkers were entitled to damages.
Tanner v Tanner (1975)
A man promised a woman that the house in which they had lived together (without being married) should be available for her and the couple's children. It was held that the promise had contractual force because, in reliance on it, the woman had moved out of her rent-controlled flat.
Agreements of a domestic nature between parent and child are likewise presumed not to be intended to be binding.
Jones v Padavatton (1969)
In 1962, Mrs Jones offered a monthly allowance to her daughter if she would give up her job in America and come to England and study to become a barrister. Because of accommodation problems Mrs Jones bought a house in London where the daughter lived and received rents from other tenants. In 1967 they fell out and Mrs Jones claimed the house even though the daughter had not even passed half of her exams.
It was held that the first agreement to study was a family arrangement and not intended to be binding. Even if it was, it could only be deemed to be for a reasonable time, in this case five years. The second agreement was only a family agreement and there was no intention to create legal relations. Therefore, the mother was not liable on the maintenance agreement and could also claim the house.
Where the parties to the agreement share a household but are not related, the court will examine all the circumstances
Simpkins v Pays (1955)
The defendant, her granddaughter, and the plaintiff, a paying lodger shared a house. They all contributed one-third of the stake in entering a competition in the defendant's name. One week a prize of £750 was won but on the defendant's refusal to share the prize, the plaintiff sued for a third.
It was held that the presence of the outsider rebutted the presumption that it was a family agreement and not intended to be binding. The mutual arrangement was a joint enterprise to which cash was contributed in the expectation of sharing any prize.
Business/Commercial Agreements:
In business or commercial agreements the presumption is that the parties intend to create legal relations and make a contract. The presumption can be rebutted by the inclusion of an express statement to that effect in the agreement.
Rose v Crompton Bros (1925)
The defendants were paper manufacturers and entered into an agreement with the plaintiffs whereby the plaintiffs were to act as sole agents for the sale of the defendant's paper in the US. The written agreement contained a clause that it was not entered into as a formal or legal agreement and would not be subject to legal jurisdiction in the courts but was a record of the purpose and intention of the parties to which they honourably pledged themselves, that it would be carried through with mutual loyalty and friendly co-operation. The plaintiffs placed orders for paper which were accepted by the defendants. Before the orders were sent, the defendants terminated the agency agreement and refused to send the paper.
It was held that the sole agency agreement was not binding owing to the inclusion of the "honourable pledge clause". Regarding the orders which had been placed and accepted, however, contracts had been created and the defendants, in failing to execute them, were in breach of contract.
Football pools stated to be “binding in honour only” are not legal contracts so that a participant may not recover his winnings.
Jones v Vernon Pools (1938)
The plaintiff claimed to have won the football pools. The coupon stated that the transaction was "binding in honour only". It was held that the plaintiff was not entitled to recover because the agreement was based on the honour of the parties (and thus not legally binding).
Contractual intention may be negative by evidence that “the agreement was a goodwill agreement....made without any intention of creating legal relations”
Orion Insurance v Sphere Drake Insurance
The plaintiffs claimed that the agreement between themselves and the defendants was a goodwill agreement only. The court of appeal conceded that from the overall impression (notes, memos, etc) there was no contractually binding agreement.
If a clause is put in an agreement and the clause is ambiguous then the courts will intervene and interpret it:
Edwards v Skyways (1964)
The plaintiff pilot was made redundant by the defendant. He had been informed by his pilots association that he would be given an ex gratia payment (ie, a gift). The defendant failed to pay and the pilot sued. The defendant argued that the use of the words "ex gratia" showed that there was no intention to create legal relations.
It was held that this agreement related to business matters and was presumed to be binding. The defendants had failed to rebut this presumption. The court also stated that the words "ex gratia" or "without admission of liability" are used simply to indicate that the party agreeing to pay does not admit any pre-existing liability on his part; but he is certainly not seeking to preclude the legal enforceability of the settlement itself by describing the payment as "ex gratia".
JH Milner v Percy Bilton (1966)
A property developer reached an "understanding" with a firm of solicitors to employ them in connection with a proposed development, but neither side entered into a definite commitment. The use of deliberately vague language was held to negative contractual intention.
Advertisments:
Advertisements will not normally be considered as showing an intention to contract as they are exaggerated and only mere puffs. They are frequently so vague that in any event they could not be regarded as sufficiently definite to constitute offers capable of acceptance.
By contrast, more specific pledges such as “ If you can find the same holiday at a lower price in a different brochure, we will refund you the difference”, are likely to be binding.
A statement will not be binding if the court considers that it was not seriously meant:
Weeks v Tybald (1605)
The defendant "affirmed and published that he would give £100 to him that should marry his daughter with his consent." The court held that "It is not reasonable that the defendant should be bound by such general words spoken to excite suitors."
Heilbut, Symons & Co v Buckleton (1913)
The plaintiff said to the defendants' manager that he understood the defendants to be "bringing out a rubber company." The manager replied that they were, on the strength of which statement the plaintiff applied for, and was allotted, shares in the company. It turned out not to be a rubber company and the plaintiff claimed damages, alleging that the defendants had warranted that it was a rubber company. The claim failed as nothing said by the defendants' manager was intended to have contractual effect.
Letters Of Comfort:
This is a document supplied by a third party to a creditor, indicating a concern to ensure that a debtor meets his obligations to the creditor. Depending on the terms, such letters may be either binding contracts or informal and uncertain assurances resting entirely upon business goodwill.
Kleinwort Benson v Malaysia Mining Corp (1989)
The plaintiff bank agreed with the defendants to lend money to a subsidiary of the defendants. As part of the arrangement, the defendants gave the plaintiffs a letter of comfort which stated that it was the company's policy to ensure that the business of its subsidiary is at all times in a position to meet its liabilities. The subsidiary went into liquidation and the plaintiffs claimed payment from the defendants.
It was held that the letters of comfort were statements of the company's present policy, and not contractual promises as to future conduct. They were not intended to create legal relations, and gave rise to no more than a moral responsibility on the part of the defendants to meet the subsidiary's debt.
Letters Of Intent:
Refer To Notes (Parties will be bound if they acted on the document for a long period of time or have expended considerable sums of money in reliance on it)
Turriff construction v regalia Knitting Mills (1971)
Industrial Collective Agreements:
In industry, agreements may be made between an employer and a trade union covering pay and conditions of employees. If such terms are incorporated into the employment contracts of the individual employees they will, following the general rule, be presumed to be part of a binding contract.
National Coal Board v Galley (1958)
Ford Motor Co LTD v AUEFW (1969)
Held that the original collective agreement itself between an employer and trade union was not binding.
Free Gifts:
Esso Petroleum Ltd v Commissioners of Customs and Excise [1976]
In 1970 the taxpayers ('Esso') devised a petrol sales promotion scheme. The scheme involved the distribution of millions of coins to petrol stations which sold Esso petrol. Each of the coins bore the likeness of one of the members of the English soccer team which went to Mexico in 1970 to play in the World Cup competition. The object of the scheme was that petrol station proprietors should encourage motorists to buy Esso petrol by offering to give away a coin for every four gallons of Esso petrol which the motorist bought. The coins were of little intrinsic value but it was hoped that motorists would persist in buying Esso petrol in order to collect the full set of 30 coins. The scheme was extensively advertised by Esso in the press and on television with phrases such as: 'Going free, at your Esso Action Station now', and: 'We are giving you a coin with every four gallons of Esso petrol you buy.' Folders were also circulated by Esso to petrol stations which stated, inter alia: 'One coin should be given to every motorist who buys four gallons of petrol - two coins for eight gallons and so on.' 4,900 petrol stations joined the scheme. Large posters were delivered by Esso to those stations, the most prominent lettering on the posters stating: 'The World Cup coins', 'One coin given with every four gallons of petrol'. The Customs and Excise Commissioners claimed that the coins were chargeable to purchase tax under s2(1) of the Purchase Tax Act 1963 on the ground that they had been 'produced in quantity for general sale' and therefore fell within Group 25 of Sch 1 to the 1963 Act.
Held (Lord Fraser of Tullybelton dissenting) - The coins had not been 'produced … for … sale', within Group 25 of Sch 1, and were not therefore chargeable for the following reasons -
(i) On the basis that the posters and other advertising material constituted an offer by the garage proprietors to enter into a contract with each customer to supply a coin with every four gallons of petrol sold, the contract envisaged was not a contract of 'sale', since the consideration for the transfer of the coins was not a money payment but the undertaking by the customer to enter into a collateral contract to purchase the appropriate quantity of Esso petrol.
(ii) (per Viscount Dilhorne and Lord Russell of Killowen, Lord Wilberforce and Lord Simon of Glaisdale dissenting) Furthermore, in the circumstances, and in particular in view of the fact that the coins were of little intrinsic value to customers, it could not be inferred that either Esso or the petrol station proprietors on the one hand, or the customers on the other, intended that there should be a legally binding contract to supply the coins to customers who bought the appropriate quantity of petrol. It followed that the coins had been produced for distribution by way of gift and not by way of sale.
Certainty Of Terms:
An enforceable contract requires certainty of terms, that is to say, for an agreement to be a contract, it must be apparent what the terms of the contract are. If an important term is not settled, the agreement is not a contract.
Scammel v Ouston (1941)
In this case (Scammell v Ouston [1941] AC 251) Ouston placed an order for a truck on hire purchase terms, but as there were a number of possible hire purchase agreements it was impossible to determine exactly what terms were offered and accepted. The court ruled that no contract had come into existence
Guthing v Lynn (1831)
P bought a horse for 63 pounds and promised D an extra 5 pounds “if the horse is lucky”. Lord Tenterden CJ said the promise was too vague to be a legally enforceable contract.
Hillas v Arcos (1932)
This case (Hillas v Arcos (1932) 38 Com Cas 23) demonstrates that a court has the option to infer terms in a Contract from the parties' previous dealings, rather than allow a contract to be voided. Courts do not usually like to do this if the wording or intention is vague, but it may be better than to allow a party to renege on a contract on a technicality.
The contract was to buy ``22,000 standards of softwood of fair specification''. The court ruled that ``fair specification'' was not sufficiently vague to void the contract, as the companies had done business before and each would have known the others' intentions.
Consideration:
Consideration consists of a detriment to the promise and a benefit to the promisor as in the case of Carrie v Misa (1875)
Consideration must not be past:
If one party voluntarily performs an act, and the other party then makes a promise, the consideration for the promise is said to be in the past.
Roscorla v Thomas (1842)
The defendant’s promise to the plaintiff that the horse which the plaintiff had already bought was sound and free from vice was unenforceable. The promise was given for a past consideration.
Re McArdle (1951)
A wife and her three grown-up children lived together in a house. The wife of one of the children did some decorating and later the children promised to pay her £488 and they signed a document to this effect.
It was held that the promise was unenforceable as all the work had been done before the promise was made and was therefore past consideration.
If the person performing the act does so at the request of the other and the context shows that both expect payment to be made, then the promise is enforceable. The act constituting the consideration must be done at the promisor’s request.
Lampleigh v Braithwait (1615)
Braithwait killed someone and then asked Lampleigh to get him a pardon. Lampleigh got the pardon and gave it to Braithwait who promised to pay Lampleigh £100 for his trouble.
It was held that although Lampleigh's consideration was past (he had got the pardon) Braithwaite's promise to pay could be linked to Braithwaite's earlier request and treated as one agreement, so it could be implied at the time of the request that Lampleigh would be paid.
Initial request by the defendant to the plaintiff is not of itself sufficient to link it to the later promise. The performance done by the plaintiff must be of business and not friendship.
Re Casey's Patent (1892)
A and B owned a patent and C was the manager who had worked on it for two years. A and B then promised C a one-third share in the invention for his help in developing it. The patents were transferred to C but A and B then claimed their return.
It was held that C could rely on the agreement. Even though C's consideration was in the past, it had been done in a business situation, at the request of A and B and it was understood by both sides that C would be paid and the subsequent promise to pay merely fixed the amount.
Pao On v Lau Yiu Long (1980)
Lord Scarman said:
"An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisors' request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit: and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance."
Consideration must be sufficient but need not be adequate:
Consideration may be merely symbolic:
Thomas v Thomas (1842)
Where a promise to pay 1 pound per annum to occupy a house was held to create a valid contract.
Chappell v Nestle (1959)
Nestle were running a special offer whereby members of the public could obtain a music record by sending off three wrappers from Nestle's chocolate bars plus some money. The copyright to the records was owned by Chapple, who claimed that there had been breaches of their copyright. The case turned round whether the three wrappers were part of the consideration. It was held that they were, even though they were then thrown away when received.
It is sometimes suggested that consideration will not be sufficient if it has no economic value.
White v Bluett (1853)
A son’s promise to stop complaining to his father about the distribution of the father’s property was held to incapable of amounting to sonsideration.
Consideration must move from the promise:
The person who wishes to enforce the contract must show that he provided consideration; it is not enough to show that someone else provided consideration.
The promisee must show that consideration moved from him. The consideration does not have to move to the promisor.
Price v Easton (1833)
Easton made a contract with X that in return for X doing work for him, Easton would pay Price £19. X did the work but Easton did not pay, so Price sued. It was held that Price's claim must fail, as he had not provided consideration. (Privity Of Contract)
Forbearance To Sue:
Alliance Bank v Broom (1864)
The defendant owed an unsecured debt to the plaintiffs. When the plaintiffs asked for some security, the defendant promised to provide some goods but never produced them. When the plaintiffs tried to enforce the agreement for the security, the defendant argued that the plaintiffs had not provided any consideration.
It was held that normally in such a case, the bank would promise not to enforce the debt, but this was not done here. By not suing, however, the bank had shown forbearance and this was valid consideration, so the agreement to provide security was binding.
A “peppercorn” rent for a lease is regarded as valuable consideration.
Consideration must be sufficient or real
If a person, through operation of the law or because of his status, for example, he is a policeman, is duty bound to act in a particular way, he does not supply consideration by promising to carry out that duty.
Collins v Godefroy (1831)
Godefroy promised to pay Collins if Collins would attend court and give evidence for Godefroy. Collins had been served with a subpoena (ie, a court order telling someone they must attend). Collins sued for payment. It was held that as Collins was under a legal duty to attend court he had not provided consideration. His action therefore failed.
If someone exceeds their public duty, then this may be valid consideration.
Glassbrooke Bros v Glamorgan City Council (1925)
The police were under a duty to protect a coal mine during a strike, and proposed mobile units. The mine owner promised to pay for police to be stationed on the premises. The police complied with this request but when they claimed the money, the mine owner refused to pay saying that the police had simply carried out their public duty.
It was held that although the police were bound to provide protection, they had a discretion as to the form it should take. As they believed mobile police were sufficient, they had acted over their normal duties. The extra protection was good consideration for the promise by the mine owner to pay for it and so the police were entitled to payment.
Harris v Sheffield United Football Club (1988)
It was argued unsuccessfully by the club that the police has a specific public duty to turn out in force for Saturday afternoon home matches as it was well known that crowd trouble was likely. The court of appeal held that the club itself had chosen to schedule most of its matches at this time when it was aware that the police presence required could only be achieved by substantial overtime payments. The police authority was entitled to be paid.
Ward v Byham (1956)
The father of an illegitimate agreed to pay the mother 1 pound per week maintenance if she could show that the child was happy and well looked after. The mother was already bound by statute to maintain child. However, the court of appeal held that the mother was furnishing consideration in promising to do more than merely maintain the child as she made the child happy and well looked after which is more than her statutory duties thus furnishing consideration.
Existing contractual duties:
No consideration is furnished at all if the plaintiff merely promises to perform what he is already under an obligation to perform for the defendant because of an existing contract between them.
Stilk v Myrick (1809)
Two out of eleven sailors deserted a ship. The captain promised to pay the remaining crew extra money if they sailed the ship back, but later refused to pay.
It was held that as the sailors were already bound by their contract to sail back and to meet such emergencies of the voyage, promising to sail back was not valid consideration. Thus the captain did not have to pay the extra money.
Contract Against:
Hartley v Ponsonby (1857)
When nineteen out of thirty-six crew of a ship deserted, the captain promised to pay the remaining crew extra money to sail back, but later refused to pay saying that they were only doing their normal jobs. In this case, however, the ship was so seriously undermanned that the rest of the journey had become extremely hazardous.
It was held that sailing the ship back in such dangerous conditions was over and above their normal duties. It discharged the sailors from their existing contract and left them free to enter into a new contract for the rest of the voyage. They were therefore entitled to the money.
If the performance of an existing contractual duty confers a practical benefit on the other party this can constitute valid consideration.
Williams v Roffey Bros(1990)
Roffey had a contract to refurbish a block of flats and had sub-contracted the carpentry work to Williams. After the work had begun, it became apparent that Williams had underestimated the cost of the work and was in financial difficulties. Roffey, concerned that the work would not be completed on time and that as a result they would fall foul of a penalty clause in their main contract with the owner, agreed to pay Williams an extra payment per flat. Williams completed the work on more flats but did not receive full payment. He stopped work and brought an action for damages. In the Court of Appeal, Roffey argued that Williams was only doing what he was contractually bound to do and so had not provided consideration.
It was held that where a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or avoided a disadvantage. In the present case there were benefits to Roffey including (a) making sure Williams continued his work, (b) avoiding payment under a damages clause of the main contract if Williams was late, and (c) avoiding the expense and trouble of getting someone else. Therefore, Williams was entitled to payment.
It was held that the law regards the performance of an existing contractual obligation to a third party as sufficient to support a new contract with the defendant.
Scotson v Pegg (1861)
Scotson contracted to deliver coal to X, or to X's order. X sold the coal to Pegg and ordered Scotson to deliver the coal to Pegg. Then Pegg promised Scotson that he would unload it at a fixed rate. In an action by Scotson to enforce Pegg's promise, Pegg argued that the promise was not binding because Scotson had not provided consideration as Scotson was bound by his contract with X (a third party) to deliver the coal.
It was held that Scotson's delivery of coal (the performance of an existing contractual duty to a third party, X) was a benefit to Pegg and was valid consideration. It could also been seen as a detriment to Scotson, as they could have broken their contract with X and paid damages.
New Zealand shipping Co v Satterthwaite & Co [The Eurymedon] (1975)
The plaintiff promised the defendant that if the defendant unloaded the plaintiff’s goods from the ship (which the defendant was already contractually obliged to do for a third party) the plaintiff would not hold the defendant liable for any damage to the goods. The defendant’s performance of the task of unloading was held to constitute consideration.
Part Payment Of Debts:
Pinnel's case (1602)
This case is probably the earliest to establish the principle that if one person owes money to another, then an agreement to take a lesser sum to settle the debt, if well-attested, is not a binding obligation. The reason it is not rests on the fact that there is no new consideration to support the new agreement.
Cole owed Pinnel £8 10s, but at Pinnel's request paid £5 2s 6d one month before the full sum was due. Cole claimed that there was an agreement that the part-payment would discharge the full debt. The court found in favour of Pinnel, because part-payment of an original debt did not make for fresh consideration. Therefore the agreement was not a contract.
Although influential, this case was actually decided on a technicality. If Cole had extracted from Pinnel an agreement that the early payment was in return for accepting part payment, then Cole would have won the case.
It could be argued, and indeed has been argued, that part-payment of a debt may be more acceptable to a creditor than the ability to recover the full amount in damages; common sense would suggest that it's better to have £100 now, than £200 after a year in litigation. However, in the House of Lords supported the principle of Pinnel's case, and subsequent judgements have tended to follow this ruling
Sibree v Tripp
D owed p 1000 pounds but an action for debt was settled when P agreed to accept promissory notes for 300 pounds in full satisfaction. After one of the notes had been met, P sued again for the original debt, but the court said he must fail. If you substitute a piece of paper or a stick of sealing wax it is different, and the bargain may be carried out. A man may give in satisfaction of a debt of 100 pounds a horse worth 5 pounds but not 5 pounds itself. In the present case, if for money you give a negotiable security, you pay in a different way. The security may be worth more or less: it is of uncertain value.
Despite the harshness of the rule in pinnel’s case, the said rule was approved by the house of lords and is a settled part of contract law in:
Foakes v Beer (1884)
In this widely-cited case, the House of Lords supported the view that that part-payment of debt could not be used as consideration to support a contract. This principle was already known from Pinnel's case, but this House of Lords decision gave it additional strength
Foakes owed Beer a sum of about £2000, awarded in damages from an earlier case. The parties agreed that if Foakes paid £500 at once and the rest of the sum by installments, then Beer would not take legal action. Foakes eventually paid the debt, but not the interest, which would have accrued since the date the award was made. Beer sued Foakes for the interest. In defence, Foakes claimed that the new agreement (payment of the sum in installments) cancelled the original obligation, and the Beer had thereby waived her right to the interest. Beer claimed that the agreement was void since Foakes offered no consideration. The Court sided with Beer, allowing Pinnel's case to stand.
Re Selectmove (1994)
This case further confirms the existing principle that an offer to fulfil an existing contractual obligation cannot be seen as consideration to support a new agreement. The Inland Revenue tried to wind up Selectmove for non-payment of debts. Although it had agreed to accept payments by installments, the Revenue claimed that it could not be held to that agreement because Selectmove had offered no consideration. The Court of Appeal supported the Revenue, that is, they applied the ruling in FoakesVBeer1884 and not the (much more recent) decision in WilliamsVRoffeyBros1991.
Collier v Wright (2007)
The respondents W obtained a judgement for some 50,000 pounds against three partners, including the appellant C. Each of the partners was jointly and severally liable for the whole debt, but W allegedly agreed to accept instalments totalling one-third of the sum from each of them. C paid his agreed instalments, but the other two partners went bankrupt and W sought to enforce the whole judgement against C. In preliminary proceedings, the court of appeal said C might have an arguable case in promissory estoppels, but reaffirmed the rule in Pinnel’s case that part-payment of a debt, unsupported by any further consideration, cannot discharge the debt.
Part payment of a debt by a third party:
A promise to accept a smaller sum in full satisfaction will be binding on a creditor where the part-payment is made by a third party on condition that the debtor is released from the obligation to pay the full amount.
Hirachand v Temple (1911)
A father paid a smaller sum to a money lender to pay his son’s debts, which the money lender accepted in full settlement. Later the money lender sued for the balance. It was held that the part payment was valid consideration, and that to allow the money lender’s claim would be fraud on the father.
Composition agreements:
Wood v Robarts (1818)
The rule does not apply to composition agreements. This is an agreement between a debtor and a group of creditors, under which the creditors agree to accept a percentage of their debts in full settlement. Despite the absence of consideration, the courts will not allow an individual creditor to sue the debtor for the balance because this amounts to a fraud on the other creditors who had all agreed to the percentage.
Promissory Estoppel:
Hughes Case (1877)
A landlord was entitled, under the terms of a lease, to compel a leaseholder to carry out repairs to the property, given an adequate period of notice. The landlord gave a six month notice period but, during this time the landlord and leaseholder entered into negotiations over the sale of the land. The leaseholder was given to understand that the repairs need not be carried out if he was going to purchase the land. When the negotiations broke down, the landlord attempted to enforce the original six-month period and evict the tenant. The court ruled that the negotions over the sale constituted a promise not to enforce the repair order, and that the tenant had acted on that promise to his detriment. The principle of PromissoryEstoppel could therefore be used to estop the landlord enforcing his strict rights. In this case the suspension of the landlords strict rights were merely suspended, and a new notice period introduced. The most controversial part of the High Trees judgement was that the promisor was prevented indefinitely from claiming his strict rights.
High Trees (1947)
Central London Property Trust (CLPT) owned a block of flats which it leased -- for £2250 pa -- to High Trees Ltd (HT), and which became known as `High Trees House'. HT's plan was to let the flats individually to tenants. However, the war meant that demand was slack and HT negotiated a reduction in the cost of the lease to £1250 pa for the period 1940-1945. After the war the demand increased and the flats were all let. CLPT attempted to recover the full cost of the lease, as per the original agreement, claiming that there was no Consideration from HT to support the agreement for the reduced rates. The absence of consideration was not in dispute, and under a strict interpretation of the common law on contracts CLPT would have been able to enforce their rights to full lease value. However, Lord Justice Denning ruled that the agreement to reduce the rent was a promise, and HT had acted on that promise. If CLPT were allowed to enforce their rights then the fact that HT had acted on the promise would be to its detriment (because they would have to pay full price when most of the flats were unlet), and CLPT could be made subject to a promissory estoppel.
Tool Metal Manufacturing v Tungsten Electric Co Ltd (1955)
Patent owners promised to suspend periodic payments of compensation due to them from manufacturers from the outbreak of war. It was held by the house of lords that the promise was binding during the suspension , but the owners could on giving reasonable notice to the other party, revert to their legal entitlement to receive the compensation payments.
The Essential Conditions Necessary for the doctrine of promissory estoppel to operate are as follows:
(A) Contractual/ Legal Relationship
High Trees (1947)
Durham Fancy Goods v Michael Jackson (Fancy Goods) (1968)
Existing contractual relationship was not necessary providing there was a “pre-existing legal relationship which could, in certain circumstances, give rise to liabilities and penalties”.
(B) Promise
The Scaptrade (1983)
(C) Reliance
Ajayi v Briscoe (1964)
The promise should have relied on the promise by changing his position to their detriment so that he is put in a worse position if the promise is revoked.
Alan Co Ltd v El Nasr Export & Import Co (1972)
The parties merely altered their position in some way, not necessarily for the worse. Detriment is not an element of promissory estoppel, it is sufficient if the debtor acted on the promise by paying the lower sum. He must have been led to act differently from what he otherwise would have done”.
(D) Inequitable to revert:
It must be inequitable for the promisor to go back on his promise and revert to his strict legal rights. If the promisor’s promise has been extracted by improper pressure, it will not be inequitable for the promisor to go back on his promise.
D & C Builders Ltd. v. Rees (1965)
D & C Builders Ltd was a two man building firm run by Mr Donaldson and Mr Casey. They had done work for Mr Rees at 218 Brick Lane, London E1, coming to £732. Mr Rees had only paid £250. £480 was owing. D&C were facing bankruptcy if they were not paid. Mrs Rees phoned up and complaining the work was bad, refused to pay more than £300. D&C reluctantly accepted and took a receipt marked ‘in completion of account’. After that, they consulted their solicitors and sued for the balance. The court of appeal held that the company was entitled to succeed. Lord Denning was of the view that it was not inequitable for the creditors to go back on their word and claim the balance as the debtor had acted inequitably by exerting improper pressure.
(E)A Shield Or A Sword:
Combe v Combe:
The doctrine may only be raised as a defence: “As a shield and not a sword”. It was held that the doctrine cannot be raised as a cause of action. This means that the doctrine only operates as a defence to a claim and cannot be used as the basis for a cese.
Evestorm Ltd v Hoptonacre Ltd (2007)
This case strengthens Combe v Combe as the court of appeal declined an invitation to allow promissory estoppel to be used as a sword.
(F) Extinctive Or Suspensive Of Rights?
(A) Where the debtor’s contractual obligation is to make periodic payments, the creditor’s right to receive payments during the period of suspension may be permanently extinguished, but the creditor may revert to their strict contractual rights either upon giving reasonable notice, or where the circumstances which gave rise to the promise have changed as in HighTrees
Tool Metal Manufacturing v Tungsten Electric Co Ltd (1955)
Patent owners promised to suspend periodic payments of compensation due to them from manufacturers from the outbreak of war. It was held by the house of lords that the promise was binding during the suspension , but the owners could on giving reasonable notice to the other party, revert to their legal entitlement to receive the compensation payments.
(B) It is not settled law that there can be no such resumption of payments in relation to a promise to forgo a single sum. In D & C Builders v Rees (1965), which concerned liability for a single lump sum, Lord Denning expressed obiter that the court would not permit the promisor to revert to his strict legal right and that the estoppel would be final and permanent if the promise was intended and understood to be permanent in effect.
Privity Of Contract:
It is a fundamental principle in English law that no one can derive rights or obligations from a contract to which he has given no consideration and hence is not a party to the contract.
Tweddle v Atkinson (1861)
Tweddle's father (whom I'll call Tweddle senior), and Atkinson -- Tweddle's father in law -- contracted to contribute a sum of money each to the support of Tweddle and his wife. Tweddle senior kept up his part of the bargain, but Atkinson died before paying anything. Tweddle sued the executors of Atkinson's estate. His suit was rejected because he himself was not party to the contract, even though it was for his benefit. It is not possible to claim that there is an implicit contract between Tweddle (junior) and Atkinson, because there is no consideration from Tweddle to Atkinson.
It seems likely that Tweddle senior could have enforced the contract at law (though he did not), because the basic requirements of a contract were fulfilled. The consideration in this case would be that Tweddle senior accepted a detriment at the request of Atkinson, rather than the Tweddle senior gave some benefit to Atkinson.
Dunlop v Selfridge (1945)
Dunlop sold types to Dew Co. with a term in the agreement that Dew would not sell more cheaply to anyone else, and that Dew would not enter into a contract with anyone else except on the same terms. Dew sold tyres to Selfridge at the stipulated terms, but Selfridge sold them more cheaply. Dunlop brough an action against Selfridge, which failed on the basis that Dunlop had no contract with Selfridge, and was not a party to the contract which had allegedly been breached.
Presumably Dunlop could have taken an action against Dew, who could certainly have taken action against Selfridge.
A third party may also be able to pursue a concurrent action in tort:
Donoghue v Stevenson (1932)
P went to a cafe with a friend, who bought her a bottle of ginger beer. After drinking most of it, P found a decomposed snail in the bottle and became ill. P had no contract with the cafe, so she sued the manufacturers in deceit (The Scottish equivalent of tort). The house of lords said the manufacturers had a duty of care to the consumer of their product.
An action may be based on a collateral contract (separate contract), which may be implied rather than explicit:
Shanklin Pier v Detel Products (1951)
The owners PP engaged contractors CC to paint to paint the pier and specified DD’s paint; the paint (bought by CC) did not wear as well as DD had promised, and the court found a collateral contract under which PP could recover damages. PP had given consideration by instructing the contractors to use DD’s paint, and that was sufficient consideration.
Several cases have turned on the question of the validity or otherwise of a third party exclusion clause.
Scruttons v Midland Silicones (1962)
A contract between the owner of goods and a carrier purported to limit the liability of the carrier’s subcontractor. Lord Reid said that there might be a contract between owner and subcontractor, making this limitation effective, if four conditions were satisfied. (i) The clause must clearly extend to the subcontractor, (ii) the carrier must clearly be acting as agent for the subcontractor (in making the contract) as well as on his own account, (iii) such a agency must be authorised or ratified by the subcontractor, and (iv) the subcontractor must have provided some consideration (Important) for a contract between himself and the owner. In the instant case the fourth condition was not satisfied and the contract could not be shown to exist, so the clause was ineffective.
New Zealand Shipping v Satterthwaite (1974)
The facts were similar to those in Scruttons, but in this case the subcontractors had performed their part of the agreement and unloaded the ship. Although they were already under a contractual obligation, this obligation was to the carrier and not to the owner, and so could form new consideration in respect of a ‘third party”.
Norwich CC v Harvey (1989)
A contract for a major shopping development provided that the owner (not the contractor) was to bear all fire risks, and a sub-contractor had dealt with the main contractor on that basis. When fire damage was caused through the sub-contractor’s negligence and the owner sued in tort, the court said it would not be just and reasonable to exclude the sub- contractor from the protection of the clause, even though he was not party to the contract in which it was contained.
The Contracts (Rights of Third Parties) Act 1999 provides that a third party to a contract can enforce a term of the contract in his own right in two circumstances:
1) Where the contract expressly provides that he may [s.1(1)(a)].
(2) Where the terms of the contract purport to confer a benefit upon him and nothing else in the contract denies the purported benefit [s.1(1)(b), s.1(2)]. [this presumption can be rebutted].
