UCL FACULTY OF LAWS
CONTRACT TUTORIALS 2009/10
Summary: 1. Weeks 7 & 8
Introductory Tutorial
2. Weeks 9 &10
Offer and Acceptance
3. Week 11
Reading Week (no tutorials)
4. Weeks 12 & 13
Consideration
Weeks 14 & 15
Promissory Estoppel
Weeks 16
Mistake & Misrepresentation
5. Week 20
Week 21
Mid-sessional Examination Mistake & Misrepresentation
Tutorial 1 INTRODUCTORY TUTORIAL
Contract: ‘An agreement between competent persons, upon legal consideration, to do or abstain from doing some act’ or ‘an agreement enforceable at law.’ However, there is no formal definition for contract in English law. Freedom of contract: Everyone has the freedom to enter a contract on their terms and to break the contract in certain context. The courts will intervene when there is an unequal bargaining power. They like to uphold contracts in the interest of certainty. Things will always be examined objectively. Only the parties in a contract may sue in it unless they fall under the exceptions outlined in the Third parties act 1999. Tutor’s e-mail:
[email protected]
Make sure I do the problem every week! (aswell as the discussion)
Reading:
Mckendrick Text and Materials: ch.1 Mckendrick: “English Contract Law: A Rich Past, an Uncertain Future” [1997] Current Legal Problems 25 In the tutorial, we will discuss the following issues. Please make sure you have thought about the following issues before you come to the class: 1. Techniques for reading and tutorial preparation.
2. When did YOU last make a contract?
Please identify recent occasions on which you have entered a contract. At the beginning beginning of the tutorial each person will briefly describe their contract. Ordered some goods from a website. They offered to sell the goods for a certain price I accepted by electronic means. This is a bilateral contract, I am bound to pay the agreed price and the company are bound to deliver the goods to me. I bought McKendrick from a second year. She offered to sell the book, we negotiated a price, I mae a counter offer and then she accepted. She agreed to sell the book I agreed to pay. Contract complete. 3. Looking for Problems
Possible problems problems arising from my contracts: 1) Delivery time not agreed upon. If goods are damaged in post who is liable? 2) Was this contract intended to be legally binding in a court? The Group will then discuss the problems that might arise from the contracts described and go on to consider the potential practical problems you would foresee at this stage (before studying the Law) if two companies made the following arrangements: Company A and Company B agree by exchanging letters that Company A will deliver five tons of beans to Company B every month at a price of £100
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per ton. Deliveries will take place on 5th of each month and payment will be made within 14 days after delivery of each month's beans. Letters may not have arrived, there may be some confusion with correspondence corresponde nce of this nature. If the 5 th of the month is not a working day arguments/complications argumen ts/complications may arise. If either party fails to fulfil their obligations the consequences have not been discussed. What is the time period for this agreement? Indefinite? Indefinite? One party may wish to withdraw from the agreement at some point. Can they do this? Does the payment have to be sent or received within 14 days? (electronic/other methods of payment may take a few working days to process). Do you think that the law Why?
should be
involved in such arrangements? arrangements?
Yes, such agreements were made with the intention that they would be enforceable enforceab le in court. Regulatio Regulation n of agreeme agreements nts is necessary. As we have highlighted there are many problems so the law is needed for the purposes of dispute resolution.
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Tutorial 2 OFFER AND ACCEPTANCE
Reading: McKendrick Text and Materials, pp.21-38 & Chapter 3.
Important Cases: Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 Gibson v Manchester City Council [1978] 1 WLR 520 (CA); [1979] 1 WLR
294 (HL) Storer v Manchester City Council [1974] 1 WLR 1403 Pharmaceutical Pharmaceutical Society of GB v Boots [1953] 1 QB 101 Hyde v Wrench (1840) 49 ER 132 Stevenson Jacques & Co v McLean [1880] 5 QBD 346 Adams v Lindsell (1818) 1 B&Ald 681 Henthorn v Frazer [1892] 2 Ch. 27 Household Fire and Carriage Accident Insurance Co. Ltd. v Grant (1879) 4
ExD. 216 Holwell Securities v Hughes [1974] 1 ALL ER 161 Entores v Miles Far Eastern Corporation [1955] 2 ALL ER 493 Brinkibon Ltd. v Stahag Stahl [1983] AC 34 Errington v Errington [1952] 1 ALL ER 149 Routledge v Grant (1828) 4 Bing 653
Discussion: 1. Do you you think think that, if an an offeror offeror promis promises es to keep keep an offer open open for for a stated period, then that offeror should be held to that promise and not allowed to retract the offer within that period? Is it possible for an offeror to incur liability pending the acceptance of the offer? 2. What What is the postal postal rule rule of accep acceptan tance ce? ? Does Does it have any any merit? merit? Does it apply in respect of contracts concluded over the internet? How do the rules of offer and acceptance apply in the case of intern internet et contr contract acts? s? How How far do you you think think the rules rules of Offer Offer & Acceptance are adequate for regulating transactions in a modern, technologically developed society? 3. Is there there a differ differenc ence e between between silen silence ce and condu conduct ct when it comes comes to acceptance? If so, what is the significance of the distinction? 4. What What is a unila unilater teral al contra contract? ct? How does does it differ differ from a bilater bilateral al contract and how does it work? Could the Carbolic Smoke Ball Company have revoked its offer – if so, when and how?
Problem: Try to work out which legal issues are raised by the facts and then apply the relevant legal rules to them. There will be some areas of uncertainty because the information you have is limited and some because there is uncertainty about what the law is on the basis of the case law. On 2nd October Galvatron PLC sends identical letters to three local firms asking if they wish to buy an unused widget making machine that they have acquired. acquired. The letters state that “the best offer received by 9.30am on 10 th October will secure the machine.” The following day day Prime PLC sends a fax saying: “Is it a 5XL model? If so we will offer $5000, if not, $3000.” Unfortunately Unfortunately due to a transmission
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fault, the final ‘0’ is missing so that the last figure appears appears to be $300. The machine is not a 5XL. Optimus PLC sends a letter offering $2500 or $100 more than your highest offer you receive under $3500.” Megatron PLC sends a telex on the evening of the 9 th October offering $3500. The offer is received on Galvatron’s telex machine at 6pm on 9 th October, but not read until 10.30am on 10 th October. Advise Galvatron whether it is obliged to sell the widget making machine and if so, to whom.
Further reading:
Treitel 12th ed: Ch 2.
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Tutorial 3 CONSIDERATION AND INTENTION TO CREATE LEGAL RELATIONS Reading: McKendrick Text and Materials chapter 5 (pp149-219) and chapter 7
Important cases: Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Pao On v Lau Yiu Long [1980] AC 614 Foakes v Beer (1884) 9 App Cas 605 In Re Selectmove Ltd [1995] 1 WLR 474. South Caribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyds Rep
128 Balfour v. Balfour [1919] 2 K.B. 571 Esso Petroleum Ltd v Commissioners Commissioners of Customs and Excise [1976] 1 All
ER 117
Discussion: We will focus on the rules surrounding the concepts of consideration and intention to create legal relations. 1. 2. 3.
4.
What doe does it me mean to sa say tha that the the cou courts wil will not not ass assess the the adequacy of consideration? Is this the same thing as saying that consideration need not have an economic value? Can Can you you expl explai ain n why why past past cons consid ider erat atio ion n is is not not good good cons consid ider erat atio ion? n? Do you agree with the rule? Are there exceptions? Does Does the the doc doctr trin ine e of of inte intent ntio ion n to crea create te lega legall rel relat atio ions ns add add any anyth thin ing g to the need for consider consideratio ation? n? First, explain explain (with reference reference to decided cases) how that concept is applied by the courts and then think about what it seeks to achieve. Is it a way of leaving power relations within the family untouched by legal rules that apply to the outside world? Who might gain or lose by such an approach? Use th the main main cas case es refe referr rre ed to in in the the boo book and and in in you your lec lectur ture notes notes and and hand handou outs ts to suppo support rt your your answe answerr to the follo followin wing g problem question. First identify the legal issues that arise and then decide which of the rules you have studied might be relevant:
Problem: P.C. Plod rescues Mrs Cheshire’s cat from a tree. On his way home he buys the Daily News and reads that Fifoot, an eccentric millionaire has offered a reward of £10,000 to every policeman who rescues a cat. The following day while while on duty, he rescues Mr Furmston’s cat. Can he claim anything from Fifoot for either or both of his rescues? Further reading:
Treitel 12th ed: Ch 2 pp 74-106 & 135-141
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Tutorial 4 PROMISSORY ESTOPPEL Reading McKendrick Text and Materials: chapter 5 (pp 219-252)
Important Cases: Hughes v. Metropolitan Railway Co. (1877) 2 App. Cas. 439 Central London Property Trust v. High Trees House Ltd . [1947] K.B.130
Discussion 1. Did the the developm development ent of promisso promissory ry estoppel estoppel deal deal a severe severe blow blow to the doctrine of consideration. If so, how severe? How firm is the rule that promissory estoppel cannot be used as a sword? How firm is the requirement that the promisee must not have behaved in an inequitable manner (and what does this mean?)? 2. If it can be good good conside consideratio ration n for a promis promise e to pay more more than than the contract price, should it also be good consideration for a creditor’s prom promis ise e to acce accept pt less less than than the the amou amount nt of the the debt debt in full full satisfaction? 3. Identify Identify the full facts facts and and decisio decision n in the the High High Trees Trees case. case. What is needed for a promise to operate as a promissory estoppel? What are the limits on the effectiveness of such an obligation? 4. How has has the idea idea of promis promissory sory estopp estoppel el develop developed ed since since that case? 5. How does does estoppe estoppell work in the variati variation on of existing existing contra contracts? cts? How is it affected by the case of Williams v Roffey?
Problem: (a) Jeffrey is a tenant t enant of Fragrant Ltd. He has a 10 year tenancy, which started in 2002. Jeffrey normally pays his rent of £5,000 at the end of June. In 2004, he asked the landlord to accept £4,500 at the end of each August when his erratic earnings as a professional cricketer were at their peak. Fragrant’s manager agreed and continued to accept the lower rent each August. Jeffrey retired from cricket in 2007 and became a pupil barrister. Fragrant’s new manager, Eric, issued proceedings on 1 st July 2008 to evict Jeffrey for failing to pay the 2008 rental payment. He also seeks to claim back rent for the period 2004-7. 2004-7. Advise Jeffrey. Could Fragrant serve notice to require the payment of future rent according to the original agreement? (b) Louise and Jasmin contracted to work as gardeners gardeners for Grass Ltd, a landscape gardening company owned by Deborah, their aunt. They are to work on a contract to landscape the grounds grounds of High Hall, a large stately home and have agreed to finish the work by 20 th September 2008. The work on the project was delayed due to weather conditions and problems with acquiring certain plants and seeds. On the evening of 18 th September 2008, Deborah met Louise and Jasmin in the local coffee bar after work and told them that the work at High Hall was so far behind schedule that she feared missing the deadline and losing
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future contracts with the Hall. Deborah offered Jasmin and Louise Louise an extra £2,500 each if they completed the work by the contract date. Louise and Jasmin managed to get the work done on time but, when they approached Deborah to collect their £2,500 each, Deborah refused to pay. Further Reading:
Treitel 12th ed: pp111-130 & 135-146.
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Tutorial 5 MISTAKE AND MISREPRESENTATION MISREPRESENTATION
Reading: McKendrick Cases and Materials: Chapters 16 & 17.
Important Cases: Bell v Lever Bros [1932] AC 161 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd ( The Great Peace) [2003] QB 679 Shogun Finance Ltd v Hudson [2003] UKHL 62
Hedley Byrne v Heller [1964] AC 465 Dimmock v Hallett (1866) 2 Ch App 21 Bissett v Wilkinson [1927] AC 177 Edgington Edgington v Fitzmaurice (1885) 29 ChD 459 Derry v Peek (1889) 14 App Cas 337 Howard Marine & Dredging v Ogden [1978] QB 574 Royscott v Rogerson [1991] 2 QB 297 Smith New Court Securities v Citibank(on appeal from Smith New Court Securities v Scrimgeour Vickers (Asset Management) [1997] AC 254 HIH Casualty & General Insurance v Chase Manhattan Bank [2003] 2
Lloyds Rep 61
Part I:
1. What is a misrep misrepres resent entati ation on? ? Given Given the existen existence ce of liabil liability ity for misrepresentation as well as breach of contract, just how important is the doctrine of common mistake? 2. "Wings" is a business specialising in the charter hire of aircraft. Bernard telephones "Wings" and makes enquiries about hiring an aircraft for use in his engineering export business. Bernard has 500 boat engines which he needs to export to Canada by 30 June as part of a lucrative contract with a Canadian pleasure boat company, "Ripple." Bernard speaks to Andrew, the managing director of "Wings", who tells Bernard that based on the weight of each boat engine his aircraft can "comfo "comfortab rtably ly carry carry 50 engine engines s on each each fligh flight." t." Based Based partl partly y on this this information and partly on an assurance that Andrew gave Bernard as to the reliability of his aircraft, Bernard enters into a contract with "Wings" for the hire of one DC12 aircraft between 18 - 28 June for a hire of £5,000. Bernard takes delivery of the DC12 aircraft on 18 June and loads it with 50 boat engines. The DC12 is unable to lift off and the pilot informs Bernard that the engines are too heavy. Bernar Bernard d telep telepho hone nes s "Wing "Wings" s" who maint maintai ain n that that the DC12 DC12 is perfe perfectl ctly y capable of carrying 50 boat engines of the weight described. Andrew's knowledge of the carrying capacity for the DC12 is based upon the figure given for the aircraft in the "Biggle's Register", a register of all aircraft, which is regarded as highly accurate and authoritative in flying circles. If Andrew had consulted the DC12's ownership documents (which are written in French) he would have discovered discovered that the DC12 was not in fact capable of carrying a load of 50 boat engines of that weight. Fearful of being unable unable to deliver the boat engines to "Ripple" on time, Bernard returns the DC12 to "Wings" and hires a replacement aircraft, which can carry 50 boat engines,
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from "Bluebirds" at a cost of £7,000 . Bernard delivers all the boat engines to "Ripple" on time. "Wings" are now demanding that Bernard pay the £5,000 hire charges for the DC12. Bernard refuses to pay and also claims compensation for the £7,000 hire charges he had to pay to "Bluebirds." Advise Bernard. Would it make any difference to your answer if Bernard were an aircraft enthusiast with an expert knowledge of DC12 aircraft? Part II
Since this tutorial is already somewhat ambitious in its scope it is unlikely that there will be time to cover cover the following questions. questions. Please use them them instead for self-study and for revision purposes. Students Students should should be warne warned d that that exclu exclusio sion n from from the main tutori tutorial al matte matterr is in no way way indicative of exclusion of the topic from the exam.
1. Is it helpf helpful ul to make make a concep conceptua tuall disti distinct nction ion betwe between en mistak mistakes es that negative consent and mistake that nullify consent? 2. How likely likely is a court court to rule rule that that a contract contract is vitiated vitiated at commo common n law by a shared mistake? Is it simply a question of assessing the economic importance of the mistake? 3. Can Can a plau plausi sibl ble e disti distinc ncti tion on be draw drawn n betw betwee een n a mist mistak ake e as to the the identi identity ty of the other other contra contracti cting ng party party and and a mistak mistake e as to his/h his/her er attributes? 4. Having Having consult consulted ed a natio nationa nall direct directory ory of secon second-h d-han and d book book sellers sellers,, Wallis, a collector, decides to visit a Manchester shop (“Massimo’s”), which is owned and run by Massimo Bonnello, a celebrated expert in 19th century Italian literature. Wallis has started to collect the works of Federico Frangipane, a 19th century political exile and essayist. On entering entering Massimo’s, Massimo’s, he conduct conducts s a lively lively conversat conversation ion with a man whom he assumes to be Massimo Bonnello. This man advises him to purchase a particular book by Frangipane which contains the initials of a previous owner, SR. Wallis believes that these initials stand for Silvio Ruffino, a hero of the Italian unification movement. movement. He is excited by this but keeps his discovery to himself. A price of £100 is agreed and paid for the book. Several months later, Wallis discovers that the book was never owned by Silvio Ruffino. It is in fact worth only £25. He also discovers that Massimo’s had been sold a week before he visited it. The new owner, Paolo, Paolo, conti continue nued d to trade trade unde underr the name name Massi Massimo’ mo’s s as he was entitled to do under the terms of the sale of the business. It was Paolo himself who sold Wallis the book. Advise Wallis.
Further Reading:
Treitel 12th ed: Chs 8 & 9
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Dr Fiona Smith September 2009
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