Contract Law (UK)
Part 5 - Exclusion of Liability for Misrepresentation
2012///
Below are a few relevant principles and leading cases regarding the exclusion of liability for misrepresentation:
S Pearons v Dublin Corporation: It is not possible to exclude liability for fraudulent misrepresentation.
Walker v Boyle: The exclusion clause will only be effective if the party seeking to rely on it can prove the clause was reasonable (MA1967 s(2), UCTA 1977).
Inntrepreneur Pub Co v East Crown: `Entire Agreement' clauses fall within the scope of s.3 as far as liability for misrepresentation is concerned (i.e., such term has no effect except in so far it satisfies the reasonableness as stated in section 11(1) of the UCTA 1997).
S Pearons v Dublin Corporation: It is not possible to exclude liability for fraudulent misrepresentation.
Walker v Boyle: The exclusion clause will only be effective if the party seeking to rely on it can prove the clause was reasonable (MA1967 s(2), UCTA 1977).
Inntrepreneur Pub Co v East Crown: `Entire Agreement' clauses fall within the scope of s.3 as far as liability for misrepresentation is concerned (i.e., such term has no effect except in so far it satisfies the reasonableness as stated in section 11(1) of the UCTA 1997).
Part 4 - Remedies for Misrepresentation
2012///
Below are a few relevant principles and leading cases regarding the remedies for misrepresentation:
Car & Universal Finance Co Ltd v Caldwell: Rescission is, in principle, available to all types of misrepresentation by notifying the other party or taking some other reasonable action to indicate the intention to rescind (e.g., contacting the police, applying to the courts for a formal order to recision). A formal order of rescission provides that any property exchanged under the contract reverts to its original owner.
Whittington v Seale-Hayne: Payment of money known as an indemnity designed to put the parties back to their former positions with regards to obligations necessarily created by the contract (i.e., it is a restitutionary claim). Note an indemnity payment is different and separate from damages.
Doyle v Olby: In the case of fraudulent misrepresentation the party must be compensated (damages) for `all the actual damage directly flowing from the fraudulent inducement' (i.e., it does not matter that the loss was not foreseeable, only that the misrepresentation caused the loss).
Royscot Trust Ltd v Rogerson: Damages under s.2(1) should be calculated in the same way as if the statement was made fraudulently (i.e., all looses are recoverable, not simply those that were reasonably foreseeable as it would be the case for negligent mis-statement under Hedley Bryne.
Car & Universal Finance Co Ltd v Caldwell: Rescission is, in principle, available to all types of misrepresentation by notifying the other party or taking some other reasonable action to indicate the intention to rescind (e.g., contacting the police, applying to the courts for a formal order to recision). A formal order of rescission provides that any property exchanged under the contract reverts to its original owner.
Whittington v Seale-Hayne: Payment of money known as an indemnity designed to put the parties back to their former positions with regards to obligations necessarily created by the contract (i.e., it is a restitutionary claim). Note an indemnity payment is different and separate from damages.
Doyle v Olby: In the case of fraudulent misrepresentation the party must be compensated (damages) for `all the actual damage directly flowing from the fraudulent inducement' (i.e., it does not matter that the loss was not foreseeable, only that the misrepresentation caused the loss).
Royscot Trust Ltd v Rogerson: Damages under s.2(1) should be calculated in the same way as if the statement was made fraudulently (i.e., all looses are recoverable, not simply those that were reasonably foreseeable as it would be the case for negligent mis-statement under Hedley Bryne.
Part 3 - Types of Misrepresentation
2012///
Below are a few relevant principles and leading cases regarding the types of misrepresentation:
Derry v Peek: Fraudulent misrepresentation is a false statement that is made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly as to whether it be true of false. Fraudulent misrepresentation, in addition to being a ground on which a contract may be rescinded, constitutes the tort of deceit. The burden of proof is on the claimant.
Hedley Byrne v Heller: Negligent misrepresentation at common law is available where the maker of the statement and the party relying on it are in a `special relationship' requiring a `duty of care' and the maker of the statement acts in breach of this duty. The burden of proof is on the claimant. The representation may be made by a third party who is not a party to the contract.
Howard Marine v Odgen: Statutory misrepresentation is available where the maker of the statement has no reasonable grounds for believing it to be true (S.2(1) Misrepresentation Act 1976). The burden of proof is on the defendant to show that the misrepresentation was not made fraudulently by proving ``that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true". The party making the misrepresentation bears a heavy burden of proof under s.2(1). The burden of proof for the claimant is that a misrepresentation was made and that it induced the contract.
Whittington v Seale-Hayne: Representation that is neither fraudulent nor negligent is innocent misrepresentation.
Derry v Peek: Fraudulent misrepresentation is a false statement that is made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly as to whether it be true of false. Fraudulent misrepresentation, in addition to being a ground on which a contract may be rescinded, constitutes the tort of deceit. The burden of proof is on the claimant.
Hedley Byrne v Heller: Negligent misrepresentation at common law is available where the maker of the statement and the party relying on it are in a `special relationship' requiring a `duty of care' and the maker of the statement acts in breach of this duty. The burden of proof is on the claimant. The representation may be made by a third party who is not a party to the contract.
Howard Marine v Odgen: Statutory misrepresentation is available where the maker of the statement has no reasonable grounds for believing it to be true (S.2(1) Misrepresentation Act 1976). The burden of proof is on the defendant to show that the misrepresentation was not made fraudulently by proving ``that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true". The party making the misrepresentation bears a heavy burden of proof under s.2(1). The burden of proof for the claimant is that a misrepresentation was made and that it induced the contract.
Whittington v Seale-Hayne: Representation that is neither fraudulent nor negligent is innocent misrepresentation.
Part 2- Actionable Misrepresentation
2012///
Below are a few relevant principles and leading cases regarding actionable misrepresentation:
Bisset v Wilkinson: In general, for a misrepresentation to be actionable it must be a false statement of past or existing fact which is material and induces the contract.
Edgington v Fitzmaurice: A statement of intention or a statement of opinion (i.e., a statement of what a person is thinking) can be considered a statement of fact, and it if is false it can amount to a misrepresentation.
Redgrave v Hurd: In order for the misrepresentation to be actionable, it must induce the party to enter into the contract. The misrepresentation does not need to be the only reason why the innocent party entered the contract (Edginton).
Spice Girlds Ltd v Aprilia World Service: Conduct can be treated as implicitly making a statement that if untrue may be a misrepresentation.
Dimmock v Hallet: A statement which is literally true may be treated as a misrepresentation if relevant information to the statement is not disclosed (e.g., the literal statement will be no longer true by the time the contract is executed or shortly afterwards).
Lambert V Co-operative Insurance Society: There are certain contracts (e.g., insurance) that require uberrimae fidei (the utmost good faith). In such contacts silence (i.e., failure to disclose relevant information even if not asked for) may amount to a misrepresentation.
Bisset v Wilkinson: In general, for a misrepresentation to be actionable it must be a false statement of past or existing fact which is material and induces the contract.
Edgington v Fitzmaurice: A statement of intention or a statement of opinion (i.e., a statement of what a person is thinking) can be considered a statement of fact, and it if is false it can amount to a misrepresentation.
Redgrave v Hurd: In order for the misrepresentation to be actionable, it must induce the party to enter into the contract. The misrepresentation does not need to be the only reason why the innocent party entered the contract (Edginton).
Spice Girlds Ltd v Aprilia World Service: Conduct can be treated as implicitly making a statement that if untrue may be a misrepresentation.
Dimmock v Hallet: A statement which is literally true may be treated as a misrepresentation if relevant information to the statement is not disclosed (e.g., the literal statement will be no longer true by the time the contract is executed or shortly afterwards).
Lambert V Co-operative Insurance Society: There are certain contracts (e.g., insurance) that require uberrimae fidei (the utmost good faith). In such contacts silence (i.e., failure to disclose relevant information even if not asked for) may amount to a misrepresentation.
Part 1 - Review of Case Law on Misrepresentation
2012///
The next series of posts are intended as a summary that includes relevant legal principles derived from the English case law dealing with pre-contractual statements and their effect on a subsequent contract. In particular, the summary is concerned with false statements of existing fact that induce a party to enter into a contract. Such statements may amount to actionable misrepresentations. The principal remedies for actionable misrepresentation are rescission and damages. The full-text transcript of the cases is freely available at http://www.bailii.org.
Part 5 - Consideration and Promissory Estoppel
2012///
Below are a few relevant principles and leading cases regarding promissory estoppel:
Central London Property Trust Ltd v High Trees House Ltd: Under the equitable doctrine of promissory estoppel, a contracting party who -without duress- promises not to enforce a contractual right will not be able to enforce that right later if the promisee has been relied upon by the other party. Estoppel allows promises to accept a modified performance of a contract to be binding in the absence of consideration. Lord Denning stated ``a promise intended to be binding, intended to be acted on, and in fact acted on, is binding so far as its terms properly apply".
Combe v Combe: Promissory estoppel is `a shield and not a sword' and cannot be used to create entirely new rights or extend the scope of existing ones, only to prevent the enforcement of rights already held.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd: Whereas a contract modification which is supported by consideration will generally have permanent effect (lasting for the duration of the contract), the same is not necessarily true for promissory estoppel (it can be limited to a particular time period and future rights are not destroyed).
Central London Property Trust Ltd v High Trees House Ltd: Under the equitable doctrine of promissory estoppel, a contracting party who -without duress- promises not to enforce a contractual right will not be able to enforce that right later if the promisee has been relied upon by the other party. Estoppel allows promises to accept a modified performance of a contract to be binding in the absence of consideration. Lord Denning stated ``a promise intended to be binding, intended to be acted on, and in fact acted on, is binding so far as its terms properly apply".
Combe v Combe: Promissory estoppel is `a shield and not a sword' and cannot be used to create entirely new rights or extend the scope of existing ones, only to prevent the enforcement of rights already held.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd: Whereas a contract modification which is supported by consideration will generally have permanent effect (lasting for the duration of the contract), the same is not necessarily true for promissory estoppel (it can be limited to a particular time period and future rights are not destroyed).
Part 4 - Consideration and Performance of an Existing Duty
2012///
Below are a few relevant principles and leading cases regarding past consideration:
Stilk v Myrick: Performance of an existing contractual duty owned to a promisor is not normally consideration. (Increasing Pact)
Pinnel's Case: A debtor offer to pay a reduced sum back to the lender in full and final settlement will only be sufficient consideration if the lender 1) agrees to accept it without duress, and 2) the debtor provides some extract element that can be treated as consideration (e.g., paying early, paying using a more convenient mode of payment). Without something extra, part payment of an existing debt on or after the date for the payment will never provide consideration for a promise to forgo the balance. (Decreasing pact)
Glassbrook Brothers v Glasmorgan County Council: Where the promisee is under a public duty but does something which goes beyond what is required by the existing obligation (duty), then the promises of payment will be enforceable (i.e., the extra act can amount to consideration).
Williams v Roffey: If one party's promisee to perform an existing contractual duty to deliver good or services owned to a promisor confers an additional practical benefit and no duress is involved, the promisee will be sufficient consideration to make a promise given in return of the ``practical benefit" binding. (Increasing pact)
Re Selectmove Ltd: The Williams v Roffey practical benefit is not sufficient for promises for the part-payment of a debt. (Decreasing pact)
Stilk v Myrick: Performance of an existing contractual duty owned to a promisor is not normally consideration. (Increasing Pact)
Pinnel's Case: A debtor offer to pay a reduced sum back to the lender in full and final settlement will only be sufficient consideration if the lender 1) agrees to accept it without duress, and 2) the debtor provides some extract element that can be treated as consideration (e.g., paying early, paying using a more convenient mode of payment). Without something extra, part payment of an existing debt on or after the date for the payment will never provide consideration for a promise to forgo the balance. (Decreasing pact)
Glassbrook Brothers v Glasmorgan County Council: Where the promisee is under a public duty but does something which goes beyond what is required by the existing obligation (duty), then the promises of payment will be enforceable (i.e., the extra act can amount to consideration).
Williams v Roffey: If one party's promisee to perform an existing contractual duty to deliver good or services owned to a promisor confers an additional practical benefit and no duress is involved, the promisee will be sufficient consideration to make a promise given in return of the ``practical benefit" binding. (Increasing pact)
Re Selectmove Ltd: The Williams v Roffey practical benefit is not sufficient for promises for the part-payment of a debt. (Decreasing pact)
Part 3 - Past Consideration
2012///
Below are a few relevant principles and leading cases regarding past consideration:
Roscorla v Thomas: Consideration must be given in return for the specific promise of the other party (i.e., it can not be past, an unrelated promise not in connection with the specific bargain, or a promise given only when the alleged consideration had been completed is generally unenforceable).
Pao On v Lau You Long: A promise to perform an existing obligation can constitute good consideration in certain cases. The circumstances in which a promise made after the acts can constitute consideration are derived from Lampleight V Braithwait and Re Casey's Patents.
Lampleigh v Braithwait: Past consideration is sufficient when it is provided at the request of the promissor.
Re Casey's Patents: The parties must have understood that the work was to be paid for in some way either by money or some other benefit.
Roscorla v Thomas: Consideration must be given in return for the specific promise of the other party (i.e., it can not be past, an unrelated promise not in connection with the specific bargain, or a promise given only when the alleged consideration had been completed is generally unenforceable).
Pao On v Lau You Long: A promise to perform an existing obligation can constitute good consideration in certain cases. The circumstances in which a promise made after the acts can constitute consideration are derived from Lampleight V Braithwait and Re Casey's Patents.
Lampleigh v Braithwait: Past consideration is sufficient when it is provided at the request of the promissor.
Re Casey's Patents: The parties must have understood that the work was to be paid for in some way either by money or some other benefit.
Part 2 - Consideration and Sufficiency
2012///
Below are the most relevant principles and leading cases regarding consideration and sufficiency:
Dunlop v Selfridge: The claimant must show that he or she has bought the defendant's promises, by doing, giving, or promising something in return for it (i.e., a promise not supported by consideration -a gratuitous promise- is not enforceable in law).
Thomas v Thomas: Consideration must be sufficient but not be adequate. The courts are not generally interested in whether there is a match in value between what is being offered by each contracting party.
White v Bluett: Consideration will not be sufficient if it has not economic value.
Dunlop v Selfridge: The claimant must show that he or she has bought the defendant's promises, by doing, giving, or promising something in return for it (i.e., a promise not supported by consideration -a gratuitous promise- is not enforceable in law).
Thomas v Thomas: Consideration must be sufficient but not be adequate. The courts are not generally interested in whether there is a match in value between what is being offered by each contracting party.
White v Bluett: Consideration will not be sufficient if it has not economic value.
Part 1- Review of Case law on Consideration
2012///
The next series of posts are intended as a summary that includes the most relevant legal principles derived from the English case law dealing with the contractual formative requirement of consideration and promissory estoppel. In particular, the summary is concerned with the concepts of sufficiency, past consideration, consideration in cases involving performance of an existing duty, and the equitable doctrine of promissory estoppel. The full-text transcript of the cases is freely available at http://www.bailii.org.
Part 4 - Acceptance
2012///
Below are the most relevant principles and leading cases regarding “Acceptance:”
Felthouse v Bindley: Acceptance cannot not be made through silence. Acceptance needs to be communicated.
Tinn v Hoffman: Acceptance must be unconditional (acceptance of all the terms in the offer -i.e., mirror image of the offer).
Butler Machine Tool Ltd v Ex-Cell-O Corp Ltd & Tekdata Ltd v Amphenol Ltd: When contracting on standard terms resulting in a ``battle of the forms" the ``last shot" wins the battle.
Manchester Diocesan Council for Education v Commercial and General Investments: Offer can be accepted by any method no less convenient to the offeror than the acceptance method stipulated unless the offer clearly indicates that such method is the only possible method acceptable.
Entores Ltd v Miles Far East Corporation: Acceptance must be communicated (i.e., in bilateral contracts the offeror must have knowledge of the acceptance except of a few exceptions listed below).
Adams v Lindsell: An acceptance by postal mail takes effect when it is posted (and not when it is communicated).
Household Fire Insurance v Grant: An acceptance by postal mail takes effect when it is posted (and not when it is communicated).
Holwell Securities Ltd v Hughes: Offeror may avoid the postal rules by making a term of the offer that actual communication of the acceptance to the offeror is required (i.e., actual notice). The case also indicates the reservations of the courts to extend the applicability of the postal acceptance rule to other modern forms of communication.
The Brimnes & Brinkibon v Stahag Stahl GmbH: Acceptance is effective when as soon as it is received by telex during normal business hours even if the offeror does not read the communication. The courts refused to apply the postal acceptance rule to these forms of modern communication.
Felthouse v Bindley: Acceptance cannot not be made through silence. Acceptance needs to be communicated.
Tinn v Hoffman: Acceptance must be unconditional (acceptance of all the terms in the offer -i.e., mirror image of the offer).
Butler Machine Tool Ltd v Ex-Cell-O Corp Ltd & Tekdata Ltd v Amphenol Ltd: When contracting on standard terms resulting in a ``battle of the forms" the ``last shot" wins the battle.
Manchester Diocesan Council for Education v Commercial and General Investments: Offer can be accepted by any method no less convenient to the offeror than the acceptance method stipulated unless the offer clearly indicates that such method is the only possible method acceptable.
Entores Ltd v Miles Far East Corporation: Acceptance must be communicated (i.e., in bilateral contracts the offeror must have knowledge of the acceptance except of a few exceptions listed below).
Adams v Lindsell: An acceptance by postal mail takes effect when it is posted (and not when it is communicated).
Household Fire Insurance v Grant: An acceptance by postal mail takes effect when it is posted (and not when it is communicated).
Holwell Securities Ltd v Hughes: Offeror may avoid the postal rules by making a term of the offer that actual communication of the acceptance to the offeror is required (i.e., actual notice). The case also indicates the reservations of the courts to extend the applicability of the postal acceptance rule to other modern forms of communication.
The Brimnes & Brinkibon v Stahag Stahl GmbH: Acceptance is effective when as soon as it is received by telex during normal business hours even if the offeror does not read the communication. The courts refused to apply the postal acceptance rule to these forms of modern communication.
Part 3 - Termination of Offers
2012///
Below are the most relevant principles and leading cases regarding “Termination of Offers:”
Financings Ltd v Stimson: When the offer is made subject to certain preconditions, the offer lapses is such conditions are not met.
Hyde v Wrench: A counter-offer terminates the original offer (i.e., the original offer is no longer available and the offeree cannot accept it unless the offeror makes a new offer on the same terms).
Payne v Cave: The offeror can withdraw (i.e., revocation is available) at any time until it is unconditionally accepted.
Dickinson v Dodds: The revocation of an offer must be communicated to the offeree and communication can be made by a third party. Once the offeree has knowledge of the revocation of the offer, the offer cannot be accepted.
Errignton v Errington: An offer for a unilateral contract cannot be revoked once the offeree has commenced performance and intends and is capable of completing performance.
Shuey V United States: Unilateral offers made by advertisement (public proclamation) in a printed publication can be revoked by a similar advertisement (i.e., it must be withdrawn through the same channel in which it was made).
Financings Ltd v Stimson: When the offer is made subject to certain preconditions, the offer lapses is such conditions are not met.
Hyde v Wrench: A counter-offer terminates the original offer (i.e., the original offer is no longer available and the offeree cannot accept it unless the offeror makes a new offer on the same terms).
Payne v Cave: The offeror can withdraw (i.e., revocation is available) at any time until it is unconditionally accepted.
Dickinson v Dodds: The revocation of an offer must be communicated to the offeree and communication can be made by a third party. Once the offeree has knowledge of the revocation of the offer, the offer cannot be accepted.
Errignton v Errington: An offer for a unilateral contract cannot be revoked once the offeree has commenced performance and intends and is capable of completing performance.
Shuey V United States: Unilateral offers made by advertisement (public proclamation) in a printed publication can be revoked by a similar advertisement (i.e., it must be withdrawn through the same channel in which it was made).
Part 2 - Offers vs Invitations to Treat
2012///
Below are the most relevant principles and leading cases regarding Offers vs other steps in the negotiation process:
Storer v Manchester City Council: An offer is an expression of a willingness to contract on certain terms upon acceptance.
Gibson v Manchester City Council: Negotiations to enter into a contract are invitations to treat but not offers
Carlill v Carbolic Smoke Ball Co: Advertisements for unilateral contracts can amount to offers even when addressed to the general public if the advertisement objectively person making the advertisement intends to be bound by it.
Partridge v Crittenden: Advertisements in printed publications of goods at certain price are normally considered invitations to treat and are not offers.
Fisher v Bell: Price-marked goods on display on the shelves or on windows or shops are normally considered invitations to treat and are not offers.
Pharmaceutical Society of GB v Boots Cash Chemists: Goods sold on self-service basis are invitations to treat, the customer makes the offer to buy at the cash register.
Walford v Miles: Agreements to negotiate are invitations to treat and do not amount to a binding contract, instead they are regarded as pre-contractual negotiations.
Harvela Investments Ltd v Royal Trust Co of Canada Ltd: Generally tenders are invitations to treat unless explicit language to accept the offer is stated (e.g., Harvela).
Blackpool Fylde Areo Club v Blackpool Borough Council: Invitations to tender include an implicit offer to consider all tenders correctly submitted but not necessarily to accept one.
Tiverton Estates Ltd v Wearwell Ltd: The statement “subject to contract” creates a strong presumption against there being a contract at the particular stage of contractual negotiations.
Storer v Manchester City Council: An offer is an expression of a willingness to contract on certain terms upon acceptance.
Gibson v Manchester City Council: Negotiations to enter into a contract are invitations to treat but not offers
Carlill v Carbolic Smoke Ball Co: Advertisements for unilateral contracts can amount to offers even when addressed to the general public if the advertisement objectively person making the advertisement intends to be bound by it.
Partridge v Crittenden: Advertisements in printed publications of goods at certain price are normally considered invitations to treat and are not offers.
Fisher v Bell: Price-marked goods on display on the shelves or on windows or shops are normally considered invitations to treat and are not offers.
Pharmaceutical Society of GB v Boots Cash Chemists: Goods sold on self-service basis are invitations to treat, the customer makes the offer to buy at the cash register.
Walford v Miles: Agreements to negotiate are invitations to treat and do not amount to a binding contract, instead they are regarded as pre-contractual negotiations.
Harvela Investments Ltd v Royal Trust Co of Canada Ltd: Generally tenders are invitations to treat unless explicit language to accept the offer is stated (e.g., Harvela).
Blackpool Fylde Areo Club v Blackpool Borough Council: Invitations to tender include an implicit offer to consider all tenders correctly submitted but not necessarily to accept one.
Tiverton Estates Ltd v Wearwell Ltd: The statement “subject to contract” creates a strong presumption against there being a contract at the particular stage of contractual negotiations.
Part 1 - Review of Case Law on Offer & Acceptance
2012///
This series of postings are intended as a summary that includes the most relevant legal principles derived from the English case law dealing with to the contractual formative requirements of offer and acceptance. Offers must be distinguished from other related forms of communication such as invitations to treat, advertisements, displays of goods, and request for tenders. Such forms of communication are not offers and consequently cannot result in a binding contract since they are not capable of being accepted. The requirements of communication of revocations and acceptance are reviewed. The full-text transcript of the cases is freely available at http://www.bailii.org.