Advanced Level in Law (A-Level prospectus) pre-legal studies in UK: Part 4 — Contractual Law
Abstract: This unit is designed to help you to study the Contract law of England and Wales. This guide is not a textbook and it must not be taken as a substitute for reading the texts, cases, statutory materials and journals referred to in it. The purpose of the guide is to take you through each topic in the syllabus for Contract law in a way which will help you to understand contract law. The guide is intended to ‘wrap around’ the recommended textbooks and casebook. It provides an outline of the major issues presented in this subject. Each chapter presents the most important substantive aspects of the topic and provides guidance as to essential and further reading. Each chapter also provides you with activities to test your understanding of the topic and self-assessment exercises designed to assist your progress. Feedback to many of these activities is available at the back of this guide. There are also sample examination questions, with appropriate feedback, which will assist you in your examination preparation and quick quizzes to measure your progress, with answers on the virtual learning environment (VLE). The method of study described is the result of the accumulated experience of highly experienced teachers and writers on this topic. Your knowledge of the subject will be maximised when you use this guide in the intended way. Any other approach (e.g. reading the feedback before or alongside the self-assessment) might give false confidence in your knowledge and ability to answer questions under examination conditions. In the study of contract law, it is essential to try to gain an understanding of the underlying basis of contract law — what the law is trying to do in response to particular issues. This is then supplemented and exemplified by a more detailed knowledge of its substantive principles. The rote memorisation of rules and cases alone will not equip you to analyse a legal problem or statement of the sort that form the basis of formative and summative examination in this subject. To do this you need to acquire an overview of the topic, understand its structure, parts and inter-relationships. When this is supplemented by a more detailed knowledge and skills of analysis you will be able to apply the law in written answers that gain maximum credit. To do this it is most likely that you will need to read passages or chapters in the guide (and the relevant suggested reading materials) several times in order to understand the principles of law being covered.
English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth (such as Australia, Canada, India), from membership in the European Union, continuing membership in Unidroit, and to a lesser extent the United States. Any agreement that is enforceable in court is a contract. A contract is a voluntary obligation, contrasting to the duty to not violate others rights in tort or unjust enrichment. English law places a high value on ensuring people have truly consented to the deals that bind them in court, so long as they comply with statutory and human rights.
Generally a contract forms when one person makes an offer, and another person accepts it by communicating their assent or performing the offer’s terms. If the terms are certain, and the parties can be presumed from their behaviour to have intended that the terms are binding, generally the agreement is enforceable. Some contracts, particularly for large transactions such as a sale of land, also require the formalities of signatures and witnesses and English law goes further than other European countries by requiring all parties bring something of value, known as “consideration”, to a bargain as a precondition to enforce it. Contracts can be made personally or through an agent acting on behalf of a principal, if the agent acts within what a reasonable person would think they have the authority to do. In principle, English law grants people broad freedom to agree the content of a deal. Terms in an agreement are incorporated through express promises, by reference to other terms or potentially through a course of dealing between two parties. Those terms are interpreted by the courts to seek out the true intention of the parties, from the perspective of an objective observer, in the context of their bargaining environment. Where there is a gap, courts typically imply terms to fill the spaces, but also through the 20th century both the judiciary and legislature have intervened more and more to strike out surprising and unfair terms, particularly in favour of consumers, employees or tenants with weaker bargaining power.
Contract law works best when an agreement is performed, and recourse to the courts is never needed because each party knows their rights and duties. However, where an unforeseen event renders an agreement very hard, or even impossible to perform, the courts typically will construe the parties to want to have released themselves from their obligations. It may also be that one party simply breaches a contract’s terms. If a contract is not substantially performed, then the innocent party is entitled to cease their own performance and sue for damages to put them in the position as if the contract were performed. They are under a duty to mitigate their own losses and cannot claim for harm that was a remote consequence of the contractual breach, but remedies in English law are footed on the principle that full compensation for all losses, pecuniary or not, should be made good. In exceptional circumstances, the law goes further to require a wrongdoer to make restitution for their gains from breaching a contract, and may demand specific performance of the agreement rather than monetary compensation. It is also possible that a contract becomes voidable, because, depending on the specific type of contract, one party failed to make adequate disclosure or they made misrepresentations during negotiations.
Unconscionable agreements can be escaped where a person was under duress or undue influence or their vulnerability was being exploited when they ostensibly agreed to a deal. Children, mentally incapacitated people, and companies whose representatives are acting wholly outside their authority, are protected against having agreements enforced against them where they lacked the real capacity to make a decision to enter an agreement. Some transactions are considered illegal, and are not enforced by courts because of a statute or on grounds of public policy. In theory, English law attempts to adhere to a principle that people should only be bound when they have given their informed and true consent to a contract.
4.1 The Rules of Contract Law
A contract may be defined as a legally binding agreement which creates rights and obligations. If these are not complied with, they can be enforced in the courts and remedies include the common law damages but also equitable remedies such as rescission, injunctions, and specific performance.
Contracts may be divided into two broad classes:
- Contracts by deed — A deed is a formal legal document signed, witnessed and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract. A deed is not necessary for all contracts and it will depend upon the type of contract as to whether a deed is required. For example, the contract of a sale of land must be made in writing but does not need to be witnessed.
- Simple contracts — These are more informal contracts which are not made by deed and can be made expressly in writing or orally or can also be implied by the courts.
Another way of classifying contracts is according to whether they are “bilateral”. or “unilateral”.
- Bilateral contracts — This is where one party makes a promise in exchange for a promise by the other. The ‘promise is known as consideration which is explained later in this module. Thus, in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods. I.e., both parties make a promise.
- Unilateral contracts — A unilateral contract is where one party makes promises to do something in return for an act of the other party, e.g., a reward is offered (the promise) to anyone who finds a lost item (the act).
In order for a contract to be legally binding it must consist of various essential elements:
- Agreement — This involves an offer by one party which is accepted by the other.
- Consideration — Each side must promise to give or do something for the other.
- Intention to create legal relations — The parties must have intended their agreement to have legal consequences. There are two presumptions the law will use depending upon whether the agreement was for a domestic/social reason or a commercial reason.
- Form — As stated above, in some cases, certain formalities must be observed. For example, the contract of a sale of land must be in writing.
- Capacity — The parties must be legally capable of entering into a contract. There are various rules relating to minors or those without mental capacity to enter into a contract.
- Consent — The agreement must have been entered into freely. Consent may be vitiated by duress or undue influence. There are also other vitiating factors such as mistake and misrepresentation.
- Legality — The purpose of the agreement must not be illegal or contrary to public policy.
If one or more of the above are missing it will render the contract either void, voidable or unenforceable. The terms of the contract may be either expressly made (orally or in writing) or they may be implied through statute, custom or the courts.
- Void contracts
If a contract is deemed as “‘void’” it is considered to have never existed. Any goods or money obtained under the agreement must be returned. If the items cannot be returned because they have already been resold toa third party, they may be still be recovered by the original owner as the other party never had the Ownership or right to sell them to the third party.
- Voidable contracts
If a contract is voidable, it is a valid contract unless and until one of the parties takes steps to avoid it. Again, anything obtained under the contract must be returned, however, unlike a void contract, if goods have been resold before the contract was avoided, the original owner will not be able to reclaim them.
- Unenforceable contracts
This is a valid contract, but it cannot be enforced in the courts if one of the parties refuses to carry out its terms. Items received under the contract cannot generally be reclaimed.
4.2 Essential Requirements of Contract
When a person makes an offer, they are expressing their willingness to make a contract as soon as it is accepted.
In order to ascertain whether an offer is genuine it must be distinguished from an invitation to treat. An invitation to treat invites the other person to make an offer which the owner of the property is then free to accept or reject. There are various examples:
When an item is auctioned, the bids are treated as offers. The acceptance occurs when the hammer is hit.
Display of Goods
Items in a shop, whether in the window or on the shelf, are also invitations to treat. When you go to the till you make an offer which the cashier is free to accept or reject.
Fisher v Bell 
A shopkeeper displayed a flick knife with a price tag in the window which contravention of the Restriction of Offensive Weapons Act 1959. The shopkeeper was not convicted as there had been no offer.
P.S.G.B. v Boots Chemists [1953)
This concerned the sale of drugs under a self-service system. Again, the contract was only completed once the cashier accepted the buyer’s offer.
Advertisements of goods for sale are normally interpreted as invitations to treat.
Partridge v Crittenden 
In a newspaper advert the defendant advertised wild birds for sale which was illegal. This was deemed to be an invitation to treat.
Consider this scenario: you advertise your car for sale in your local newspaper. Three people telephone you and agree to pay your asking price. Which one do you sell it to? If it were an offer you would be obliged to sell to all three, however you do not have 3 cars to sell. However, as it would be an invitation to treat you can accept or reject any of the 3 offers.
Some advertisements in newspapers are deemed to be valid offers and this is where they are unilateral, i.e. open to all the world to accept.
In Carlill v Carbolic Smoke Ball Co  an advert was placed for ‘smoke balls’ to prevent influenza with a reward of E100 to anyone who used the ball but still came down with flu. In order to show their sincerity, they deposited E1,000 with a bank.
The plaintiff bought one, but still contracted flu and it was held that she was entitled to the £1,000.
Mere Statements of Price
If someone states the minimum amount which they would sell, it does not mean they have made an offer.
Harvey v Facey 
The plaintiffs sent a telegram to the defendant, “Will you sell Bumper Hall Pen? Telegraph lowest cash price”. (request for information) The defendant ‘s reply was Lowest price E9007. (Statement of price) The plaintiffs telegraphed: “We agree to buy for £900 asked by you. (offer)
Goods advertised for sale by tender is an invitation to treat.
Termination of the Offer
If the offer is accepted, then it will come to an end, Likewise, if the offer is rejected it will also come to an end. For example, I offer to sell you my car for E5,000. The offer is valid. f you reject the offer it will come to an end. If you contact me 2 weeks later to state that you wish to buy my car for the E5,000 this would be a new offer by you to me which I would be free to accept or reject.
A person who has made an offer can revoke it at any tíme. In the scenario above if I offered to sell you my car, I could change my mind at any time prior to your acceptance, however I must communicate the revocation to you for it to be effective.
Byrne v Van Tienhoven 
1 Oct. D posted a letter offering goods for sale (offer)
8 Oct. D revoked the offer: (not valid until recelved by P)
11 Oct. P accepted by telegram (occurred before receiving the notice of revocation). (Valid contract made)
15 Oct. P posted a letter confirming acceptance. (Irrelevant as telegram was deemed acceptance)
20 Oct: letter of revocation received by P (Too late!)
The revocation can be done via a reliable third party.
Dickinson v Dodds 
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 notified that the property had been sold by Berry, the estate agent, yet he still delivered an acceptance before 9am Friday. As he was aware the property was no longer available before he put his acceptance in, his claim for specific performance failed.
Once the offeree has commenced performance of a unilateral offer, the offer or may not revoke the offer. See:
Errington v Errington [1952)
A father bought a house for his son and daughter in law on the basis that they would pay the mortgage and he would then transfer the house into their name once it was paid off. Before they finished paying the instalments he died, and his widow claimed the house, Possession of the house was given to the daughter in law.
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.”
The acceptance of the offer must be in the same terms as that made by the offeror. If the offeree introduces a new term or varies the offer, then this is said to be a counteroffer which can be accepted or rejected.
I.e., I offer to sell you my car for E5,000 (offer). You come back to me and state that you will pay me E4,750 for my car (counteroffer). I am now free to accept or reject your offer.
Hyde v Wrench 
6 June W offered to sell his estate to H for £1000; (offer)
H offered £950 (counteroffer)
27 June W rejected Hs offer (rejection of offer — no offers current in place as both terminated)
29 June H offered £1000. (new offer)
W refused to sell (no acceptance)
H sued for breach of contract. (unsuccessful)
A counteroffer should be distinguished from a mere request for information.
Stevenson v McLean :
Saturday: the defendant offered to sell iron to the plaintiff at 40 shillings a ton, open until Monday. (offer)
On Monday at 10am, the plaintiff sent a telegram asking if he could have credit terms. (request for information)
At 1.34pm the plaintiff sent a telegram accepting the defendant’s offer. (acceptance)
However, at 1.25pm the defendant had sent a telegram: Sold iron to third party arriving at 1.46pm. (breach of contract- successful claim)
Lapse of Time
How long should an offer be valid? If a time was imposed as part of the offer, then this will stand. If not, it will be valid for a reasonable time as it could not remain open forever.
Ramsgate Victoria Hotel v Montefiore [1866)
The defendant offered to buy shares in the plaintiff company but did not hear anything for 6 months when the plaintiff accepted and said he would sell them. The defendant no longer required the shares and it was held the offer had lapsed and was no longer valid.
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.
This is a final and unqualified acceptance of the terms of an offer and therefore no changes can be made (otherwise this would be a counteroffer) and it must match the offer exactly except in certain cases:
Example case: Brogden v Metropolitan Railway Co. : http://osclinks.com/4430
The following rules have been developed by the courts with regard to acceptance:
As per the information under termination of offers above, a counteroffer is not an acceptance. A further case is: Butler Machine Tool v Excell-o-Corp [1979): http://osclinks.com/4349
If the offeree puts a condition in the acceptance, then it will not be binding.
Communication of the Acceptance
The general rule is that an acceptance must be communicated to the offeror.
Lord Denning in Entores v Miles Far East Corp. : http://osclinks.com/4350
The acceptance must be communicated by the offeree or someone authorised by the offeree. If someone accepts on behalf of the offeree, without authorisation, this will not be a valid acceptance:
Powell v Lee  where the plaintiff applied for a job as a headmaster. The school managers initially wanted to employ him, however later decided to appoint someone else. One of the mangers had told him he was accepted before they changed their mind but had no authority to do so, It was held that there was no valid contract.
Silence will not amount to acceptance.
In Felthouse v Bindley  the plaintiff discussed buying a horse from his nephew and wrote to him “fI hear no more about him, I consider the horse mine, No reply was given and although the nephew had intended to accept the offer the horse was accidentally sold at auction. It was held that there was no valid offer and so the plaintiff was unsuccessful.
If the method of communication is instantaneous, e.g., telex, it will take effect when and where it is received.
See Entores v Miles Far East Corp  (above).
Exceptions to the Communication Rule:
a) Carrying out a task in a unilateral contract is sufficient to be acceptance.
b) If the communication is waived by the offeror either expressly or impliedly,
c) The Postal Rule- acceptance is complete as soon as the letter of acceptance is posted, If the letter does not actually reach the offeror because it was lost or destroyed, the acceptance it is still valid. This is also the case if it is delayed.
Adams v Lindsell 
2 Sept. The defendant wrote to the plaintiff offering to sell goods asking for a reply “’in the course of post’” (offer)
5 Sept. The plaintiff received the letter and sent a letter of acceptance. (acceptance valid from this date)
9 Sept. The defendant received the plaintiff’s acceptance but on 8 Sept had sold the goods to a third party. (Breach of contract)
Household Fire Insurance Co. v Grant 
Grant applied for shares (offer) which were allotted to him by way of a letter which was posted (acceptance as soon as posted). The letter never arrived; however, Grant was still liable to contribute the amount outstanding when the company went bust as the contract was binding.
There are now various methods of communication such as email, fax, etc. A traditional method was telegram. Where the mode is ‘instantaneous’ such as fax or email, the rule does not apply. With non-instantaneous methods, i.e., physically posting a letter, the postal rule will not apply:
(i) If the letter has not been properly posted. It must go through the post box and cannot be handed to a postman: Re London and Northern Bank ,
(ii) If the address is incorrect.
(iii) If the express terms of the offer exclude the postal rule,
(iv) where it would produce a “‘manifest inconvenience or absurdity’”.
Example case: Holwell Securities v Hughes : http://osclinks.com/4351
Offer and acceptance (agreement) alone does not make a contract. There must also be consideration unless the contract is made by deed.
If I promise to clean your house, l am the promisor, and you are the promisee. If I did this for free and for nothing in return you would not be able to enforce this contract with me unless you also provided consideration. If you were paying me to clean your house, then you would be providing consideration.
Consideration was defined by Lush J. in Currie v Misa  as:
“… some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
The definition given by Sir Frederick Pollock, approved by Lord Dunedin in Dụnlop v Selfridge Ltd  AC 847, is as follows:
An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.”
Types of Consideration
Executory: the promise has not yet been fulfilled but it is agreed that it will be at a later date.
Executed: Once the promise has been fulfilled it is executed.
Rules Governing Consideration
Consideration Must Not Be Past
You cannot make a promise based on an act you have already performed. For example, I give you a lift home. The next day, you offer to give me money for the petrol when you have been paid next week, and I accept. I cannot enforce this against you as my consideration had already been executed and was in the past before we made our agreement.
Re McArdle 
The defendant’s daughter in law did some decoration works at the property they lived in and the defendant later promised to pay her £488 and they signed a document (not a deed) to this effect, The contract was unenforceable as the decoration works were past consideration.
Exceptions to the Rule
If the promisor has previously asked the other party to provide goods or services, then a promise made after they are provided will be treated as binding. See:
Lampleigh v Braithwaite (1615)
Braithwaite killed someone and then asked Lampleigh to get him a pardon. Lampleigh got the pardon and gave it to Braithwaite who promised to pay Lampleigh £100 for his trouble. The request for the pardon was treated as part of the agreement. Had it not been then the promise to pay would have been based on past consideration. However, as they looked at the scenario the agreement was legally binding. If something is done in a business context and it is clearly understood by both sides that it will be paid for, then past consideration will be valid.
Re Casey’s Patents 
Two parties owned a patent and offered a third share in the same to a manger who had worked on the same for two years. Despite transferring the share over the two initial parties claimed their return. They were unsuccessful due to the business nature.
Under s27(1) of the Bills of Exchange Act 1882 it is provided that any antecedent debt or liability is valid consideration for a bill of exchange. For example, I mow your lawn and a week later you give me a cheque for £10. The work I carried out on your lawn is valid consideration in exchange for the cheque despite there being no agreement about the money at the time the lawn was mown.
Consideration Must Be Sufficient but Need Not Be Adequate
The courts are not concerned whether the consideration is adequate or equal. It is considered as ‘real’ or ‘sufficient’ provided it has some value.
Chappell & Co Ltd v Nestle Co Ltd 
Wrappers from a chocolate bar were held to be valid consideration when used as part of an offer where members of the public could send them off to Nestle in return for a music record.
Consideration Must Move from the Promisee
The consideration must be provided by the person who was part of the agreement and not someone else.
Price v Easton 
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.
Forbearance to Sue
If a person has a valid claim against another (in contract or tort) but promises to forbear from enforcing it in return for a promise by the other to settle the claim, it will be deemed to constitute valid consideration.
Alliance Bank v Broom 
An unsecured debt was owed to the plaintiffs. The defendant promised to provide goods as security and the plaintiff forbore the debt on this basis. The goods were never delivered, and the plaintiff sought to enforce the contract for the goods. There forbearance to sue was deemed to be valid consideration.
Existing Public Duty
If someone is under a public duty to do a particular task, then agreeing to do that task is not sufficient consideration for a contract.
Collins v Godefroy  1 B & Ad 950.
Godefroy promised to pay Collins if Collins would attend court and give evidence for Godefroy. However, as he had already been served with a subpoena (i.e. a court order telling someone they must attend) he was under a legal duty to attend in any event, so the action failed.
If someone exceeds their public duty, this may be valid consideration.
Glassbrooke Bros v Glamorgan County Council .
The police protected a coal mine during a strike by being stationed on the premises upon the request of the mine owner. As mobile units would have sufficed instead of being stationed, they were going above their duty as police and were entitled to the payment for the extra protection.
Existing Contractual Duty
There is no consideration where someone promises to do something they are already bound to do under an existing contract.
Stiltk v Myrick [1809)
There was no consideration when two out of eleven sailors deserted a ship and the remaining nine were promised extra money to sail the ship back.
Hartley v Ponsonby 
There was consideration where nineteen out of thirty-six Crew of a ship deserted and the remaining were promised extra money to sail back as the ship was so seriously undermanned that the rest of the journey had become extremely hazardous and therefore above the normal duties.
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 Ltd 
Roffey had a contract to refurbish a block of flats and had sub-contracted the carpentry work to Williams who unfortunately underestimated the cost of the work and was in financial difficulties. This would have an impact on Roffey who would be in breach of his own contract and would sustain a penalty. To ensure the work would be completed on time, Roffey agreed to pay Williams an extra payment per flat. Williams completed the work on more flats but did not receive full payment so stopped work and brought an action for payment. It was held that where an incentive or bonus is offered to ensure that the terms of a contract are performed, this is legally binding, and he was entitled to the additional payment.
Existing Contractual Duty Owed to a Third Party
If a party promises to do something for a second party but is already bound by a contract to do this for a third party, this is good consideration.
Example case: Scotson v Pegg (1861]: http://osclinks.com/4352
Part Payment of a Debt
If I owe you £50 and I ask you to accept £40 in full and final payment and you agree, this is not considered good consideration and you could still seek the balance of the £10 at a later date.
In Pinnel’s Case , Cole owed Pinnel E8–10s-0d (E8.50) which was due on 11 November. Pinnel requested that this was paid on an earlier date, 1 October at a lower rate of £5–2s-2d (£5.11) and stated that he would accept this as full and final settlement. Cole paid the lower sum on the earlier date. Pinnel later sued Cole for the balance. It was held that although the part-payment was not consideration, there was fresh consideration in bringing the date forward and this should be taken into account and the part payment was valid. Other types of fresh consideration could be a different place rather than time, a different method of payment such as a chattel instead of money.
Apart from the exceptions to the rule mentioned in Pinnel’s Case itself, there are two others in common law and one exception in equity.
- Part payment by a third party Hirach and Punamchand v Temple  A father cleared his son’s debts by paying a smaller sum to a money lender which they accepted in full settlement. The lender later sued for the balance but was unsuccessful.
- 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 (e.g. 50p in the pound) in full settlement.
This is an equitable doctrine which was set out in the obiter in Central London Property Trust Ltd v High Trees House Ltd . The principle is that if someone acts upon a promise that has been made to them, it would be inequitable to go back on this promise, even if they did not provide consideration.
Hughes v Metropolitan Railway : http://osclinks.com/4353
High Trees (1947]: http://osclinks.com/4354
Tool Metal Case : http://osclinks.com/4355
In order to be satisfied certain requirements must be satisfied:
- There must be a contractual or legal relationship.
- The promisor must make a clear and unambiguous statement that he will not enforce his legal rights
- The promisee must have acted in reliance on the promise.
- It must be inequitable for the promisor to go back on his promise and revert to his strict legal rights.
- Equity can only be used a shield and not as a sword. I.e. it can be used as a defence to a claim but not as a basis for a case.
Intention to Create Legal Relations
In order to be legally binding the parties must have intended the contract to be enforceable. As this is difficult to ascertain two presumptions are applied by the courts depending upon whether the contract is a social and domestic agreement or a business/commercial one.
Let’s say you agree to meet your friends for a meal, and you put down a deposit as the restaurant is an award winning one has to be booked 6 months in advance. Is it intended that your agreement to meet is legally binding? if your friends cannot make it would you insist upon them paying you back the deposit?
The law presumes that social agreements are not intended to be legally binding unless the presumption can be rebutted.
Balfour v Balfour : http:/llosclinks.com/43 56
Merritt v Merritt : http://osclinks.com/4357
Jones v Padavatton : http:/losclinks.com/4358
Simpkins v Pays  http://osclinks.com/4359
In business agreements the presumption is that the parties intend to create legal relations and make a contract unless this presumption can be rebutted.
Jones v Vernons Pools : http://osciinks.com/4360
Edwards v Skyways : http://osclinks.cam/4361
4.3 Contract Terms
Representations and Terms
In order to ascertain what the terms of a contract are, one must initially establish what the parties said or wrote.
- A representation is not a term of the contract; however, it is a statement of fact made by one party which induces the other to enter into the contract and can lead to an action for misrepresentation if incorrect.
- A term of the contract can be categorised as either a condition or a warranty. Depending upon which type, the breach of a term will entitle the injured party to claim damages and/or repudiate the contract.
This is where the courts will look at what the parties said and wrote. If the terms are set out in a document, extrinsic evidence is not admissible to vary or interpret the document. This is known as the parol evidence rule. The exemptions to this will be if the written document was not intended to be the whole document, if the contract was deemed not to be valid or the contract was silent on terms which are normally implied by law.
Burges v Wickham [(1836] where a ship was known to be unseaworthy by the insurer, yet they insured it in any event, Therefore, the usual implied warranty of seaworthiness did not apply in this case.
City & Westminster Properties v Mudd  when a lease of a shop was renewed a new term was included to change it to business use only. The Landlord knew the tenant had resided at the shop during the previous term of the Lease over the last 6 years and the defendant therefore questioned the new term, The landlord assured him he could continue to sleep there, however the term was not removed from the new Lease. The defendant was able to rely upon the verbal assurance of the landlord which acted as a collateral contract.
These are terms which are not expressly made by the parties, but can be implied either by custom, the court or statute.
An example of a custom is a baker’s dozen which is 13 instead of the usual 12.
Terms can be implied by the court in two circumstances:
(i) Intention of the Parties/Terms Implied as Fact. The court will look at the intention of the parties including the ‘business efficiency and if an officious bystander were to suggest the provision the parties would reply with ‘oh of course’.
The Moorcock : http://osclinks.com/4362
Shirlaw v Southern Foundries : http://osclinks.com/4363
(ii) The law will impose model or standardised terms as a form of regulating some types of relationship. For example, landlord and tenants.
Example case: Liverpool City Council v Irwin : http://osclinks.com/4364
Terms can also be implied by statute.
Consumer Rights Act 2015
Conditions and Warranties
This is a major term which is vital to the main purpose of the contract and breach of the same would entitle the injured party to repudiate the contract and claim damages.
Poussard v Splers : http://osclinks.com/4369
This is a less important term and as it does not go to the root of the contract an injured party can only claim damages if the warranty is breached and cannot repudiate the Contract.
Bettini v Gye : http://osclinks.com/4370
Sometimes it is not possible to classify a term into a condition or warranty and therefore the courts must look at these individually. These are known as innominate terms. Depending upon the outcome, the court may award damages only and/or repudiation.
Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha : http://osclinks.com/4371
4.3.2 Specific Terms Implied by Statute and in Relation to Consumer Contracts
The Act consists of 3 parts and 10 Schedules. The general arrangement of the Act is outlined in the explanatory notes of the Act which can be viewed at: http://osclinks.com/4372
The Consumer Protection Act 2015 only applies to contacts between traders and consumers and therefore existing legislation which relates to other types of contract (for instance, those between businesses) continue to apply. A summary of the legislation affected is set out below http://osclinks.com/4373
The main provisions of the Act you should be aware of are as follows:
Terms Implied into a Contract to Supply Goods:
S9: Goods to be of Satisfactory Quality
To ascertain whether goods are of satisfactory quality, this section provides that factors which will be taken into account include the description of the goods, the price and other relevant circumstances. If the state and condition of the goods is described then the quality will be assessed as to whether it is fit for purpose, the appearance and finish, and the freedom from minor defects. Safety and durability are also taken into account. If the quality 1s brought to the consumer’s attention before the contract or the consumer has first examined the goods, then this not apply.
S10: Goods to be Fit for Particular Purpose
If the consumer makes the trader aware of their purpose for the goods. The contract is to be treated as including a term that the goods are reasonably fit for that purpose. This applies even if the consumer is intending to use the goods for a purpose that they are not usually used for.
S11: Goods to be as Described
The goods should match the description. This includes a sale by sample, It also includes the situation where the goods were selected by the consumer before the contract was made.
Remedies for the Breach of a Term Implied into a Contract to Supply Goods
s20: Right to Reject
There are various rights to reject depending upon whether the rejection is made short term or as a final matter. Either way, the consumer is entitled to reject the goods and treat the contract as at an end. The consumer is entitled to a refund but is under a duty to make the goods available for collection by the trader or (if there is an agreement for the consumer to return rejected goods) to return them as agreed.
With regard to the costs involved of returning goods, these must be borne by the trader.
The amount of the refund will depend upon the type of contract. For example, if the contract is for the hire of goods, the entitlement to a refund extends only to anything paid or otherwise transferred for a period of hire that the consumer does not get because the contract is treated as at an end.
Refunds must be given without undue delay, and in any event within 14 days beginning with the day on which the trader agrees that the consumer is entitled to a refund using the same method of payment as the consumer used unless the consumer accepts an alternative method.
S23: Right to Repair or Replacement
If goods are faulty, the consumer has the right to have these repaired or replaced with an alternative. This must be done within a reasonable time (which will depend upon the nature of the goods and purpose for which they were acquired) and without significant inconvenience to the consumer. The trader will bear any costs involved in this. The trader is not under an obligation to repair or replace goods where it would be impossible to do so, or it is disproportionate compared to other remedies.
S24: Right to Price Reduction or Final Right to Reject
A trader may be required to reduce by an appropriate amount the price the consumer is required to pay under the contract. This may involve providing the consumer with a partial refund. This, however, does not apply if the contract cannot be divided up to calculate the reduction, or where the items cannot be given back in its original state. It will apply where after one repair or one replacement, the goods do not conform to the contract or the goods cannot be repaired. The legislation provides for various circumstances as to whether how long the consumer had the goods, whether the trader failed to collect them at an agreed time and the types of goods. For example, no deduction may be made if the final right to reject is exercised in the first 6 months, unless:
(a) the goods consist of a motor vehicle, or
(b) the goods are of a description specified by order made by the Secretary of State by statutory instrument.
Terms Implied into a Contract to Supply Services:
S49: Service to be Performed with Reasonable Care and Skill
Where a Contract is to supply a Service, there is an implied term that that service will be exercised and carried out with reasonable care and skill.
S52: Service to be Performed within a Reasonable Time
If the contract is silent as to the timescale for which it must be completed, this term implies that it must be performed within a reasonable time. This is a question of fact depending upon the circumstances.
Remedies for the Breach of a Term Implied into a Contract to Supply Services
S55: Right to Repeat Performance
This is where the trader is expected to perform the service agreed again. This can only be requested by the consumer if it will enable conformity with the contract. When requested, the trader must at their own cost (i.e. labour and materials) provide the service within a reasonable time and without significant inconvenience to the consumer. What is a reasonable time will depend upon the circumstances?
S56: Right to Price Reduction
This term enables a consumer to pay a reduced price which may be by way of a refund. This may even be the full amount rather than just a partial reduction.
There are two situations where this provision takes effect:
- the consumer cannot require repeat performance; or
- the consumer has required repeat performance, but the trader is in breach of the requirement to do it within a reasonable time and without significant inconvenience to the consumer.
The refund must be given within 14 days using the same means of payment as the consumer used to pay for the service unless the consumer expressly agrees otherwise.
4.3.3 Exclusion Clauses
A clause may be inserted into a contract which aims to exclude or limit one party’s liability for breach of contract or negligence. You will see examples of these in car parks where it states that cars are parked at the owner’s risk. The clause is only effective if it has been incorporated into the contract. Even if it is incorporated it can still fail if the wording is ambiguous or it is deemed unfair under the Consumer Rights Act.
An exclusion clause can be incorporated in the contract by signature, by notice, or by a course of dealing.
An exclusion clause must be interpreted to see whether it covers the breach that has occurred. The basic approach is that liability can only be excluded by clear words. If this is not the case, then the contra proferentem rule is applied. I.e., the courts will look in favour of the other party and not the person who inserted it into the contract.
Consumer Rights Act 2015
S62 There is a requirement for all consumer contract terms and notices to be fair.
S65 Prohibits exclusion or restriction of liability for death or personal injury resulting from negligence.
4.4 Vitiating Factors
A misrepresentation is a false statement of fact made by one party to another that induces the other party to enter the contract. It will not be a term of the contract; however, it can make the contract voidable if it is untrue and the innocent party will be entitled to rescind the contract and/or claim damages.
False Statement of Fact
Opinions are not actionable, and it must be a false statement of fact.
Bisset v Wilkinson : http://osclinks.com/4399
Some expressions of opinion are mere puffs. Thus, in Dimmock v Hallet  the description of land as ‘fertile and improvable’ was held not to constitute a representation.
Statements as to the Future
This cannot be a misrepresentation unless the person making the statement knows that his promise, which has induced another to enter into a contract, will not in fact be carried out.
Statements as to the Law
These are not actionable as everyone is presumed to know the law.
The maxim caveat emptor which means ‘let the buyer beware’ applies and generally, silence is not a misrepresentation.
Smith v Hughes : http://osclinks.com/4400
However, there are three fundamental exceptions to this rule:
(i) Half-truths-i.e. telling only part of the truth and remaining silent on the rest.
(ii) Statements which become false — i.e. providing a true statement which later becomes false and then not disclosing this.
(iii) Contracts uberrimae fidei (contracts of the utmost good faith) where one party is in a stronger position to know the truth they must disclose this.
The Misrepresentation must have Induced the Contract
The misrepresentation must be material and it must have been relied on.
Types of Misrepresentation:
For there to be a valid contract the parties must act freely. If one of the parties is forced to make the contract by violence or the threat of violence, that is duress, and renders the contract voidable.
Duress to the Person
Although recognised during the 19h century the scope of this was very limited and to succeed there must be an actual or threatened violence to the victim.
The courts now recognise that certain forms of commercial pressure could amount to economic duress.
The Sibeon and The Sibotre ; Pao On v Lau Yiu Long [1980): http://osclinks.com/4404
All that is now required is a suppression of the victim’s will and voluntary consent.
4.5 Discharge of a Contract
When a contract is discharged, it is brought to an end. There are various methods of achieving this and these include performance, agreement, breach, or frustration.
In order to discharge obligations, all the terms of the contract must be completed. However, there are a few exceptions to this rule.
Acceptance of Partial Performance
If the other party accepts the partial performance and has received the benefit of the work carried out to date and it is possible to infer from the circumstances that an agreement has been made, he is obliged to pay a reasonable price for this. Had he rejected the work no payment would be required, and the contract would still be valid.
Entire and Divisible Contracts
An entire contract would be a contract whereby the consideration, that is the act to be performed in return for payment, is not broken down into stages but is instead to be carried out in full, In such a contract, total performance must be completed in line with the terms of the contract and a party who has not performed his obligations in their entirety cannot claim anything for the work that they have carried out towards the performance of the contract.
An example of such an occurrence can be seen in the case of Cutter v Powell , whereby Cutter was promised payment if he worked as Second Mate on a voyage from the West Indies to Liverpool. Unfortunately, Cutter died before the ship reached Liverpool, but his widow failed in her claim for payment in respect of the work he had carried out before his untimely death.
Another example of this can be seen in the case of Sumpter v Hedges  where the Claimant agreed to build a house for the Defendant for E565.00. He partially completed the building work required and did work to the value of £333.00. He then stopped the job because he ran out of funds. The Defendant, using the Claimant’s materials that had been left on site, finished the construction work himself. The Claimant claimed £333.00 for work carried out plus the value of his materials used by the Defendant. He failed in his claim for the £333.00 because the Court found that this was an entire contract and that the Claimant had not completely fulfilled his obligations as set out in it.
A divisible contract on the other hand, is that which enables a party to sue in respect of work carried out, even though the contract has not been totally performed. Building contracts nowadays make use of divisible contracts, allowing for payment on satisfactory completion of each stage of the build and thus avoiding the issue as previously discussed in the case of Sumpter v Hedges.
A divisible contract is therefore that which may be divided into several parts and payments for the parts that have been carried out can be claimed.
Whether a contract is divisible or not will depend on the intentions of the party when the contract is first drafted. If the contract does not specify what the intentions of the party are in respect of the contract being an entire/divisible Contract, then they are reluctant to infer it as being an entire contract.
For example, in Roberts v Havelock , the Claimant agreed to repair a ship. The contract did not state when payment was to be made. The Court held that the Claimant was not bound to complete all the repairs before being able to claim some payment.
Prevention of Performance
If a party is prevented from performing his terms under an entire contract by the promisee he can recover a reasonable price for what he has in fact done on a quantum meruit basis in an action in quasi-contract.
Example case: Planche v Colburn  http://osclinks.com/4405
When a contract has been substantially performed but not entirely performed, the party performing will be entitled to some payment for the work done. The court will calculate this by assessing the contractual sum and reducing it by considering the work not yet done.
An example of substantial performance can be seen in the case of Hoenig v Isaacs  where the Claimant agreed to decorate and furnish the Defendant’s flat for £750.00, It was an ‘entire’ contract, but he did not completely finish the work and tried to claim on the basis that he had substantially completed it. The work had several defects which could have been fixed for E55.00. The Defendant argued that the Claimant was only entitled to a reasonable remuneration for the work that he had done under the contract. The Court however, held that since he had substantially performed the contract, the Claimant was entitled to the full contract rate, less the cost of fixing the defects.
This should be contrasted with Bolton v Mahadeva  where the cost of rectifying defects for a central heating system which had not be fully installed was £174. As the contract was for £560 the difference between the cost of the work and cost of rectifying it was too wide and therefore there had been no substantial performance.
A breach if where part or whole of the contract has not been complied with by one party. Depending upon the seriousness of this, it may be sufficient to bring the contract to an end. This may be an anticipatory breach where one party expressly or impliedly indicates they will not be able to perform the contract: or an actual breach of a condition.
If one person anticipates that they will not be able to fulfil their promises they must communicate this to the innocent party who can accept or reject the repudiation. It is possible for silence or inaction to amount to acceptance of the anticipatory breach in some circumstances.
Vitol SA v Norelf Ltd 
The end date of the contract does not have to be breach and the contract can come terminate immediately.
Hochster v De La Tour (1853)
If the other party does not accept the breach and repudiation, the contract will remain open for a reasonable time even if it increases the costs to the defaulting party.
Avery v Bowden : http://osclinks.com/4406
White & Carter v McGiregor : http://osclinks.com/4407
If the innocent party rejects the repudiation, he cannot later change his mind — he is stopped from doing so. He must also continue to comply with his own obligations.
A contract is described as being frustrated when performance becomes impossible due to an unforeseen occurrence which is beyond the control of the contracting parties. When this occurs, neither party will be liable for breach of contract.
Common Law Position
Frustration is a fairly new concept, with the original Common Law position (known as the ‘doctrine of absolute contractual duties’) refusing to allow a party to be released from their contractual duties simply because they had become impossible to perform.
- Destruction of the specific object essential for performance of the contract
- Personal incapacity
- Non-occurrence of a specified event may frustrate the contract
- Interference by the government
- A contract may become frustrated if it later becomes illegal
A contract will only be discharged by frustration where the change of circumstance is one that could not have been foreseen and where it genuinely makes the contract impossible, as opposed to more difficult/costlier, to perform.
An example can be seen in Davis Contractors Ltd v Fareham UDC  where the Claimant agreed to build 78 houses at a price of E94,000.00 in 8 months. Labour shortages caused the work to take 22 months and cost the Claimant £115,000.00. The Claimant claimed that the contract was frustrated and claimed for their work on a ‘Quantum Meruit’ basis (a Quantum Meruit action is a claim for a percentage of the contract price in direct proportion to the percentage of work done). Lord Radcliffe denied that the contract had been frustrated: he stated instead that hardship, material loss or inconvenience did not amount to frustration.
A further example is that of Amalgamated Investment and Property Co. Ltd v John Walker and Sons Ltd , where a contract for the purchase of a warehouse for £1,7 million and where both parties knew that the intention of the purchaser was to demolish the building and re-develop, was not frustrated by a preservation order being imposed on the building after contracts were exchanged which reduced the value to £200,000.00. The contract was still possible to perform even though the Claimants had lost money on it.
In Tsakiroglou and Co. Ltd v Noblee and Thurl GmbH  a contract by the Claimants to sell a consignment of ground nuts and to deliver them to Hamburg was not frustrated by the closure of the Suez Canal which forced the consignment to be shipped via the Cape of Good Hope at far greater expense.
Elaborating on statements made above, the Court will not deem a contract to be frustrated where express provision has been made in the contract for the eventuality concerned or where the frustrating event is self-induced.
For example, in The Eugenia , the charterer of the ship, in breach of contract, ordered the ship into a warzone. The ship was subsequently detained. It was held that the charterer could not rely on its detention as a ground for frustration because it was by his own doing that the ship was detained.
The Court will of course allow a contract to be frustrated, as long the vitiating circumstances are such that they deem it appropriate. Some examples of where the Court have deemed a contract to be frustrated are as follows:
In contracts for personal services, where either party to a contract of personal service dies, becomes seriously ill, is permanently incapacitated or is called up for military services, the Court will allow a contract to be frustrated. In Condor v The Baron Knights Ltd  the Claimant was the drummer in a band. Owing to illness he was forbidden by his doctor from performing more than a few nights per week. Since the nature of the work required him to be present seven nights a week, the contract was held to be frustrated.
Where the contract depends on a state of affairs which no longer exists, the Court will allow frustration, In Taylor v Caldwell  the Defendant contracted to let a music hall to the Claimant for four days. Before the first day the music hall accidentally burnt down, The Claimant claimed damages, but it was held that the Defendant was released from his obligation when the music hall burned down. The contract was therefore frustrated.
The Court have allowed frustration in circumstances where the commercial viability of the contract has been frustrated. For example, in Jackson v Union Marine Insurance Co. Ltd , a ship was chartered to sail from Liverpool to Newport to take on a cargo of iron rails for San Francisco. The ship hit rocks on the way to Newport and was forced to return to Liverpool for repairs that took eight months to complete. The contract was held to be frustrated and the parties where therefore discharged from the contract.
The reason that the Courts are cautious with their approach to frustration is due to the impact that it has on a contract. If a contract is found to be frustrated then it is automatically discharged as to the future, but it is not made void form the beginning. (In so doing, it therefore operates similarly to a voidable contract).
Common Law Remedy
In respect of the Common Law approach, the loss was considered to lie where it fell. Any money paid before the contract was frustrated could not be recovered and money payable before the frustration remained payable. The only circumstance where this would not be the case is if there had been a total failure of consideration.
For example, in Fibrosa v Fairbairn : http://osclinks.com/4408 a purchaser of machinery who was due to pay £4,800.00 in total had paid £1,000.00 when placing his order. The machinery was to be delivered to Poland, Unfortunately, not long after the contract was made, war broke out and Poland was invaded by Germany. It was therefore impossible to deliver the machinery. The Claimant succeeded in his action to recover the £1,000.00 paid since he had received absolutely nothing in return for his payment. There had been a total failure of consideration.
The Law Reform (Frustrated Contracts) Act 1943 provides that:
- Money paid before the frustrating event is recoverable and money that is due to be paid before the frustrating event ceases to be payable.
- If one party has incurred expenses the Court may allow him to retain or be paid an amount not exceeding the amount of the expenses.
Section 1(2) of the Act states: “All sums paid or payable to any party in pursuance of the contract before the time when the parties were so discharged shall in the case of sums so paid, be recoverable from him as money received by him for the use of the party by whom the sums were paid, and, in the case of sums so payable, cease to be so payable.”
The doctrine of frustration operates in situations where it is established that due to subsequent change in circumstances, the contract is rendered impossible to perform, or it has become deprived of its commercial purpose by an event not due to the act or default of either party.
This is a common law remedy which s designed to put the injured party financially as near as possible to the position he would have been in had the promise been fulfilled.
In Addis v Gramaphone Co Ltd , Lord Atkinson said: “7 have always understood that damages for breach of contract were in the nature of compensation, not punishment.”
Remoteness of Damage
Not all damages are recoverable. If the loss flowing from the breach of contract is too remote, then it cannot be recovered. Losses, to be recoverable, must have been within the reasonable contemplation of the parties.
Hadley v Baxendale 
Under Hadley v Baxendale damages are recoverable under two limbs:
(i) Damages which may fairly and reasonably be considered as arising naturally from the breach.
(ii) Damages which may reasonably be supposed to have been in the contemplation of the parties, as liable to result from the breach, at the time of the contract.
These principles have been considered in the following cases:
Victoria Laundry v Newman Industries : http://osclinks.com/4409
The Heron ll : http://osclinks.com/4410
Pilkington v Wood : http://osclinks.com/4411
Mitigation of Loss
The claimant must ensure that they do not increase the amount of damage done and this is known as mitigating loss. Three rules are applied by the court:
(i) If the claimant could have taken reasonable steps to avoid the loss then they will to able to recover the loss.
(ii) If the claimant could actually have avoided the loss, he will not recover the losses even if he took more steps than were necessary to comply with this rule.
(iii) If the claimant took reasonable steps to mitigate the loss but did not succeed then the loss can be recovered.
The plaintiff takes reasonable steps to minimise the loss. If he fails to do so, then he cannot recover anything in respect of that extra loss.
Types of Damages
Nominal and Contemptuous
Nominal damages are awarded where the claimant has not suffered any loss but nevertheless proves that the defendant has committed a tort.
This is usually the smallest coin of the realm and are awarded where, although the claimant was successful, the claim should not have been brought as there was no merit in the same.
General and Special
General damages do not need to be pleaded as they are presumed to flow from the
Special damages do need to be pleaded as they must be proven to be part of the cause, These often relate to accrued expenses such as loss of earning, damaged goods, etc.
Aggravated and Exemplary
Aggravated damages are higher than normal to reflect a greater injury to the claimant.
Exemplary damages are awarded for conduct that shocks the court.
In Rookes v Barnard  the House of Lords held that, except where specifically authorised by statute, exemplary damages should be awarded only in two categories of case:
(a) Oppressive, arbitrary or unconstitutional action by servants of the government.
(b) Where the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable.
Referring back to Unit 1, you will recall that one of the flaws in the common law system was that the only remedy was damages, which does not always fit every situation. For example, if you have contracted to purchase a house and the seller lets you down, you could be homeless. Damages may be sufficient to return your money to you, but where are you going to live?
This compels the person to whom the ordered is addressed to fulfil their terms of the contract. In our example above regarding the house sale, it could be to compel the transaction and move out of the home so that you can move in. As it usually involves the defaulting party to do something it is usually positive in nature. The plaintiff will need to show that damages are inadequate, and the following circumstances are examples of these:
(i) Where the plaintiff cannot get a satisfactory substitute.
(ii) Where the award of damages would be unfair to the plaintiff.
(iii) Where the quantum of damages is difficult to assess.
(iv) Under S55 Consumer Rights Act 2015 — The right to require repeat performance is a right to require the trader to perform the service again, to the extent necessary to complete its performance in conformity with the contract.
Specific performance will not be granted if constant supervision by the court would be needed to ensure compliance with the order. Furthermore, it will not usually be given for a contract of personal services, such as employment or a contract without consideration.
Specific performance must be available in principle to both parties if it is to be ordered.
Unlike specific performance, these are usually negative in nature and occur where the party requests the court to restrain a party from committing a breach of Contract. For example, if the parties had a contract whereby a secret ingredient for the manufacture of some goods was disclosed to the other party, you could seek an injunction if they were about to reveal the ingredient to a third party.
There are three types of injunction:
If the injunction would compel the defendant to do something which could also be specific performance, the injunction would not be granted. This often relates to personal service contracts.
Page One Records v Britton : http://osclinks.com/4412
Exceptions to the rule:
(i) If the service contract contains negative obligations which do not require positive performance of the whole contract to be performed.
Example case: Lumley v Wagner  http://osclinks.com/4431
(ii) A negative stipulation which is too wide can be severed and enforced in part. See:
Example case: Warner Bros v Nelson : http://osclinks.com/4413
The expression quantum meruit means the amount he deserves’” or ‘what the job is worth and in most instances denotes a claim for a reasonable sum.
A claim on a quantum meruit does not usually arise if there is an existing contract between the parties to pay an agreed sum, But there may be a quantum meruit claim where there is:
(1) an express agreement to pay a reasonable sum.
(2) no price fixed- the contractor does as he is entitled to be paid a reasonable sum for his labour and the materials supplied.
(3) a quasi-contract. A reasonable sum will be paid for any work carried out during the course of negotiations before the actual agreement is reached.
(4) work outside a contract. If one party makes a request for additional work outside the main contact, an implied contract exists, and the other party is entitled to be paid a reasonable sum for the work carried out.
All agreements are not contracts but all contracts are agreements. Contract law deals with enforceable promises between parties involving present or future but not past (Anderson v Glass (1868). Contract is the agreement between two or more parties. Contracts may be expressed or implied .In common law jurisdiction the three main elements of a valid contract are agreement (offer & acceptance), consideration and intention to create legal relationship. The other elements of contract are capacity , legal object and genuine consent There is no need of consideration if a contract is made by deed. It is easy to imagine a picture where an intention to trade dishonestly leads to a contract dispute. So English law looks for objective test of agreement, attempts to look at the conduct and communication between the parties involved.
Contracts are made by every individuals for different purposes in our routine life like buying a book , leasing an apartment and buying a meal all the three involve in agreement between two parties where we assume that one party pays something in terms of value ( money or monetary benefits ) and the other renders the product or service. It is quiet confusing that some agreements are denoted as binding contracts while some are not , some people are eligible to enter into the contracts but others are not, why there is a need of valuable consideration to be a valid contract. If there is agreement, intention and consideration are present then the agreement is binding whether or not the parties have understood the contents of the agreement (l’ Estrange v Graucob ltd (1934). If the valid contract is breached the innocent party may have remedy in contract law either suing for damages or specific performance. A contract can be dissolved when the parties agree to end it, by happening of an unknown event, conditional subsequent, completing the work.
Consideration is one of the essential elements of contract in common law. It is the value to be exchanged as agreed at the time of agreement and the contact wouldn’t be valid unless and until there is sufficient consideration. It should be on the basis of present and future but not past. So the contract is future based and it applies in future.
Contract law has helped to improve the business and trade by merchants. If the contract law wouldn’t be implied there would be many practical difficulties to understand the concept for trade. No one would trust any one of the parties. International trade has been easy due to contract law; parties have remedies for the nonoccurrence of the event. Contracts are helpful to deal in partnership firms. It also helps out in some cases where the work has to be stopped in between of the completion and the payment solution like quasi contract. I think contract has a future because to run the business smoothly we need a contract by which we can solve the disputes of consumers, suppliers, and manufacturers.