Tech Level Unit LAW OF CONTRACT. Level: Level 3. Credit Value: 10. Guided Learning Hours. Learning outcomes. Knowledge, understanding and skills

Transcription

1 Tech Level Unit Title: LAW OF CONTRACT Level: Level 3 Credit Value: 10 Guided Learning Hours 60 Learning outcomes Assessment criteria Knowledge, understanding and skills The learner will: 1. Understand what is meant by a contract The learner can: 1.1 Define what is meant by a contract Agreement Valid Void Voidable Form o Contracts which must be by deed o Contracts which must be in writing 1.2 Explain the essentials of a valid enforceable contract with reference to: offer acceptance intention capacity consent consideration legality possibility of performance 1.1 Definition of a contract e.g. a contract is an agreement giving rise to obligations which can be enforced or recognised by law. (Treitel) to be valid there must be some existence of a bargain void contract is treated as having no legal effect from the beginning. voidable contracts are valid until they are avoided by one of the parties. e.g ( void) Craven-Ellis v Cannons Ltd1936. Examples of voidable contracts e.g. minors, rescission. Contracts can be made orally, verbally or by conduct subject to certain exceptions. Contracts which require a deed e.g. the conveyance of of a legal estate in land (s52(1) law of Property Act 1925) contracts required to be in writing e.g. hire purchase and credit sales agreements ( Consumer Credit Act 2006) 1.2 Explanation of the essential elements required for there to be a legally binding contract e.g an offer is an expression of willingness to contract on certain terms acceptance final and unqualified assent to be bound by the terms intention both parties must intend for it to be a legally binding contract both parties must have entered into the contract with true and informed consent e.g without undue influence or coercion consideration the price paid for the promise

2 illegality contracts which are forbidden by either statute, common law or public policy. Lawful contracts that may be illegal because of the way they are performed there must be possibility of performance the contract must not be impossible to complete 2 Understand what an offer is, how it is made and how it may be terminated 1.3 Explain what is meant by intention to contract: Capacity Presumptions: o Social and domestic agreements o Commercial agreements o Rebuttal 1.4 Explain what is meant by privity of contract Exceptions o Common law o Statutory 2.1 Define what is meant by an offer Tenders Auctions 2.2 Define what is meant by an invitation to treat: Advertisements Displays Self-service/ticket machines 2.3 Distinguish between an offer and an invitation to treat 1.3 a contact will not be valid if there is no intention to create a legal relationship. Explanation of the presumption that there is no intention to contract in social and domestic situations: Jones v Padavatton (1969). The presumption can be rebutted in the case of separated or divorcing spouses: Merritt v Merritt (1970), or in social situations where a practical benefit has been obtained or party at a disadvantage: Simpkins v Pays (1955). The presumption is that there is an intention to create legal relations in commercial situations Edmonds v Lawson (2000). The exceptions to the presumption in commercial situations including: Mere puffs Honour clauses: Rose & Frank v J R Crompton (1925) 1.4 Doctrine of privity: only the parties to a contract can sue or be sued on it: Tweddle v Atkinson (1861) and Dunlop v Selfridge (1915). The exceptions in the Contracts (Rights of Third Parties) Act 1999 (ie: ss1(1)(a) and (b); s.1(2)). Exceptions at common law e.g. third- party insurance 2.1 Definition of an offer e.g. an expression of willingness to contract on certain terms with the intention it shall become binding upon acceptance. Explanation of who an offer can be made to ie: individual, group, world. Advertisements for unilateral contracts: Carlill v Carbolic Smoke Ball Co (1893). Auctions The Bids are the offers; Payne v Cave 1789, Sale of Goods Act 1979 s57(2). The circumstances in which a tender may be considered an offer e.g Blackpool and Fylde Aero Club Ltd. 2.2 Definition of invitation to treat : an invitation for offers or to open negotiations. Examples of invitations to treat eg: advertisements for bilateral contracts, display of goods and self-service/ticket machines. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1953). Chapleton v Barry UDC 1940, Thornton v Shoelane Parking ltd The differences between invitations to treat and offers : invitations do not incur any liability; offers do incur liability. Gibson v Manchester City Council (1979).

3 2.4 Explain how an offer is made form communication 2.5 Explain how an offer is terminated by: Acceptance Rejection Withdrawal/revocation Counter-offer Lapse of time 2.6 Explain how an offer may be effectively withdrawn/revoked 2.7 Explain the nature and effect of a counteroffer 2.8 Explain how a lapse of time may terminate an offer 2.4 Offers may be verbal, written, or by conduct. Can be made to an individual or to the world at large. e.g Carlill v Carbolic Smoke Ball Co The offer must be communicated/ received by the offeree: Taylor v Laird (1856) Acceptance offer is terminated once accepted. If the offoree rejects the offer. Rejections are not effective until communicated to the offoror. Counter- offers reject/destroy the original offer Hyde v Wrench (1840). Differences between a counter-offer and a request for information; Stevenson, Jacques Co v McLean (1880). Only the original offeror can reinstate the original offer. If the offoror withdraws/revokes the offer. Revoked any time prior to acceptance Payne v Cave (1789).. Revocation must be communicated to the offeree to be effective Byrne v Van Tienhoven (1880). even if by a reliable third-party: Dickinson v Dodds (1876) : withdrawal of an offer to enter a unilateral contract: Errington v Errington & Woods (1952). Lapse of time; There is no specific time to keep the offer open (Routledge v Grant)Unless stated otherwise an offer will last for a reasonable period of time e.g Ramsgate Victoria Hotel Co ltd v Montefiore Understand what constitutes valid acceptance of an offer and its effect 3.1 Explain the rules of acceptance of an offer: Communication Method: o Offeror's terms o Verbal o Acceptance by post o Acceptance "subject to contract" o Instantaneous methods o Exceptions 3.1 Acceptance is the final and unqualified assent to all the terms of an offer. Acceptance of the offer amounts to agreement; consensus ad idem Acceptance must be communicated to offeror; silence is never valid acceptance: Felthouse v Bindley (1862). Exceptions to the communication rule. offeror may waive need for communication: Carlill v Carbolic Smoke Ball Co (1892). the acceptance must mirror the offer. Acceptance by post the postal rule: Adams v Lindsell (1818). acceptance 'subject to contract' the parties have no intention to be bound until a condition has been fulfilled Exceptions to the postal rule: Acceptance by instantaneous modes of communication: Entores Ltd v Miles Far East Corporation (1955) & Brinkibon v Stahag Stahl und Stahlwarenhandelsgesellschaft (1983). The time of the formation of the contract: the postal rule & reg11 Electronic

4 Commerce (EC Directive) Regulations Explain the effect of acceptance of an offer 3.2 once an offer is accepted. An agreement is formed 4 Understand the concept of consideration 4.1 Define consideration 4.2 Explain the rules of consideration: The issue of adequacy Must move from the promisee Sufficiency Legality Must not be past Existing contractual duties 4.1 Definition of consideration: a benefit to one or a detriment to the other: Currie v Misa (1875) or the price for which the other party s promise is bought: Dunlop v Selfridge (1915). The types of consideration: executed and executory 4.2 The rules of consideration: adequacy- the consideration must have a degree of economic value even if they are not relative e.g Chappell & Co. Ltd v Nestle Co. Ltd Consideration must move from the promisee: Dunlop v Selfridge but not necessarily to the promissor relevance of doctrine of privity of contract: Tweddle v Atkinson (1861) - Contracts (Rights of Third Parties) Act 1999; Consideration must be sufficient: Thomas v Thomas (1842). illegality - contracts prohibited by statute or at common law. Past consideration is not good consideration: Re McArdle (1951) - exception of implied assumpsit: Lampleigh v Braithwait (1615). Rules relating to performance of an existing duty eg: i) Performance of an existing public duty is not good consideration: Collins v Godefroy (1831) unless promise goes beyond what they are bound to do: Harris v Sheffield United FC Ltd (1988). ii) Performance of an existing contractual duty is not good consideration: Stilk v Myrick (1809) unless additional duties have been performed: Hartley v Ponsonby (1857). But see also the position regarding the contractual duty to supply goods and services: Williams v Roffey & Nicholls (Contractors) (1991) and the contractual duty to pay debts: the rule in Pinnel s Case (1602). Exceptions to the rule in Pinnel s Case: payment before the debt is due, payment at some place other than where it is due, payment using something different as payment, This specification is for 2016 examinations 3.3 A disputed claims, unliquidated claims, composition agreements, payment by third-party iii) Existing contractual duty to a third party e.g Scotson v Pegg 1861

5 5. Understand the terms of a contract 5.1 Distinguish between express terms and implied terms 5.2 Explain how terms may be implied by: statute custom the courts 5.1 Definition of express terms -Terms that are distinctly or overtly stated rather than implied. Terms that are agreed by the parties. Definition of implied terms terms that are either implied by fact e.g Shirlaw v Southern Foundries 1926, The Reborn 2009 or by implied Law e.g Liverpool City Council v Irwin Examples of terms implied by statute under ss.13, 14 (2), 14(3) of the Sale of Goods Act 1979; and ss.3 and 4, and ss.13, 14 and 15 Supply of Goods and Services Act Post 1 st October 2015, when the Consumer Rights Act 2015 comes into effect, the following sections will be examples of implied terms in consumer contracts: ss. 9,10 & 11 (supply of goods), ss.34, 35 & 36 (supply digital content) and ss.49, 51 & 52 (supply of services) The criteria for implying a term by custom/trade usage : long duration, reasonable and not inconsistent with an express term; for implying by trade use: existence of usage and it is acceptable to the court. e.g. Hutton v Warren examples of terms implied by the court to give the contract business efficacy e.g. 'officiious bystander' test and 'business efficacy' test. The exceptions to the officious bystander test e.g Spring v National Amalgamated Stevedores and Dockers Society or Shell v UK Ltd v Lostock Garages Ltd 5.3 Distinguish between conditions and warranties 5.4 Explain what is meant by an exclusion clause 5.5 Explain the impact of the Unfair Contract Terms Act Explain how terms are incorporated into a contract 5.3 Definition of condition Term going to the root of the contract. Effect of breach: the innocent party may repudiate (contract can continue if innocent party wishes) the contract and claim damages: Poussard v Spiers & Pond (1876). definition of a warranty -Less important term. Effect of breach: the innocent party may claim for damages only and the contract must continue: Bettini v Gye (1876). 5.4 definition of an exclusion clause- a provision in a contract disclaiming liability for a particular eventuality 5.5 the Unfair Contract Terms Act 1977 makes certain terms or notices totally ineffective it applies to liability in tort and contract in the course of business.e.g negligence and manufacture's guarantees. Some terms may be subject to the test of reaonableness e.g George Mitchell (Chesterhall )Ltd v Finney Lock Seed Ltd 5.6 terms can in be incorporated either by (a) signature:

6 L estrange v Graucob (1934); Curtis v Chemical Cleaning & Dying Co (1951) (b) notice: Olley v Marlborough Court Hotel (1949); Parker v South Eastern Railway (1877), Thornton v Shoe Lane Parking (1971), Chapelton v Barry UDC (1940) (c) course of dealings: Hollier v Rambler Motors (1972); (d) common understanding of the parties: British Crane Hire Corp Ltd v Ipswich Plant Hire (1975). Onerous clauses must be drawn to the attention of the other party: Interfoto Picture Library v Stiletto Visual Programmes Ltd (1988). 6. Understand what is meant by misrepresentation 5.7 Explain how the courts approach interpretation of a contract 6.1 Distinguish between a representation and a misrepresentation 5.7 courts approach contract interpretation by considering that clear, unambiguous words in a contract should not be overturned merely because they are not commercially sensible even if the outcome is commercially disastrous. Arnold (Respondent) v Britton and others (Appellants) Definition of a misrepresentation; Untrue statement of fact or law made by one party to the other, inducing the other to enter the contract; must be actual and reasonable reliance on the misrepresentation. Must not be statement of opinion, intention or trade puff. Non-disclosure: silence does not normally amount to a misrepresentation but note: i. Consumer Protection from Unfair Trading Regulations 2008; ii. Half-truths: Nottingham Patent Brick & Tile Co v Butler (1866); iii. Subsequent falsity: With v O Flanagan (1936); iv. Contracts of the utmost good faith; v. Fiduciary relationships; Voluntary assumption of responsibility. Definition of a representation -Statements normally made outside the contract which may induce a party to enter into the contract but which do not constitute a term of the contract. This can include mere puffs. 6.2 Explain the types of misrepresentation: innocent fraudulent negligent 6.3 Explain the relevance of the Misrepresentation Act 1967 to types of misrepresentation Fraudulent: Derry v Peek (1889); Negligent (under the Misrepresentation Act 1967): Howard Marine & Dredging Co Ltd v Ogden & Sons Ltd (1978); and Innocent. 7.3 Ss 2(1) (negligent) and 2(2) (innocent) Misrepresentation Act i. Fraudulent misrepresentation: rescission and/or damages based on tort of deceit; ii. Negligent misrepresentation: rescission (subject to court s discretion) and damages based on tort of deceit: Royscot Trust v Rogerson (1991); iii. Innocent misrepresentation: rescission or damages in lieu of rescission. Bars to rescission:

7 6.4 Explain the remedies for misrepresentation: innocent, fraudulent negligent affirmation; lapse of time; parties cannot be restored to previous positions; acquisition of rights by an innocent third party. 7. Understand the meaning and effect of mistake 7.1 Explain the general rule of mistake 7.2 Explain the effect of mistake as to: Common mistake Unilateral mistake Identity of subject matter Existence of subject matter Quality of subject matter Identity of other party 7.1 for a mistake to exist there must be a fundamental mistake of law or fact at the time the contract was made. This will render the contract void. 7.2 Explanation of common mistake where both parties have made the same mistake explanation of unilateral mistake- where one party has made a mistake and the other party is aware of this but does nothing to correct it. Mistake as to the idenity of the subject matter where both parties are mistaken as to the identity of the essential item of the contract e.g.raffles v Wichelhaus 1864] / existence of subject matter e.g Courtier v Hastie, McRae v Commonwealth Disposals Commission. Quality of the subject matter renders the contract void on the basis it is not of the quality both parties expected e.g Bell v Lever Bros Associated Japanese Bank V Credit du Nord. Mistake as to the identity the identity of the other person must be of fundamental importance to the innocent party. The criteria to prove unilateral mistake as to the identity Shogan Finance Ltd v Hudson 8. Understand how a contract may be discharged 7.3 Explain the effect and rectification of mistake in Equity 8.1 Identify and explain ways in which a contract may be discharged with reference to: Performance Breach Accord and satisfaction Frustration Time 7.3 Explain the effect and rectification of mistake in Equity 8.1 Explanation of performance. The basic rule that performance should be carried out in accordance with the contract. Both parties must fulfil their obligations. The entire performance rule. Mitigation of the rule: i. Acceptance of partial performance: Cutter v Powell (1795); ii. Substantial performance: Hoenig v Isaacs (1952) but consider: Bolton v Mahadeva (1972); iii. One party prevents performance: Planché v Colburn (1831); iv. Divisible or severable contracts; and vi. Breach of terms concerning time and whether or not time is of the essence Explain how a breach of a condition entitles the innocent party to repudiate the contract e Poussard v Spiers & Pond

8 9. Understand the remedies available for breach of contract 9.1 Identify the range of remedies available for breach of contract with reference to: damages injunction specific performance 9.2 Explain the nature and purpose of damages for breach of contract (1876). Distinguish breach of a warranty, Bettini v Gye (1876) Accord and satisfaction- - a promise from both parties not to enforce the contract. Explanation of Frustration - An event which is the fault of neither party, rendering the contract impossible or illegal to perform or completely pointless. Frustrating events, including: i. Destruction of subject-matter: Taylor v Caldwell (1863); ii. Illness/death of a party: Condor v Barron Knights (1966); iii. Supervening illegality: Fibrosa Spolka Akcyjna v Fairborn Lawson Combe Barbour Ltd (1943): iv. Event, the sole reason for the contract, does not take place: Krell v Henry (1903); Nonfrustrating events including: i. Events anticipated and provided for; ii. Events making contract more onerous/expensive; iii. Selfinduced frustration. Effect of frustration at common law. Explanation of the time of the performance- time is of the essence if a person wishes to terminate a contract Raineri v Miles e.g Unied Scientific Holdings ltd Burnley Borough council to 56 of the Consumer Rights Act 2015 will imply certain remedies in respect of consumer contracts when it comes in force. Common law remedy of damages which is monetary compensation. Equitable remedies of injunction which is a court order requiring an individual to perform, or is refrain from performing, a particular act and specific performance which is an order for a party to an agreement to perform their obligations according to the terms of the agreement. Equitable remedies are discretionary and granted where damages are not sufficient. Outline of criteria used when granting these. 9.2 damages aim to put the innocent party in position he would have been had the contract been properly performed: Robinson v Harman (1848). 9.3 Explain the effect of the statutory provisions of the Law Reform (Frustrated Contracts) Act Explain the types of loss for which compensation might be awarded 9.3 Statutory intervention: Law Reform (Frustrated Contracts) Act 1943: s1(2) payments made are refundable, court may allow reasonable expenses to be deducted, monies owing are not payable: Gamerco S.A. v I.C.M.(1995). 9.4 Explanation of: damages for non-pecuniary loss: loss of enjoyment, inconvenience, distress: Jarvis v Swans Tours Ltd

9 Pecuniary loss Non-pecuniary loss 9.5 Explain what is meant by remoteness of damage 9.6 Explain what is meant by mitigation of loss 9.7 Explain how specific performance and injunction provide a remedy for breach of contract (1973), Farley v Skinner No. 2 (2001); damages for pecuniary loss: reliance loss: Anglia TV v Reed (1972) expectation loss (cost of cure, cost of replacement etc: Ruxley Electronics and Construction Ltd v Forsyth (1996)), loss of bargain; consequential loss 9.5 in contract law the damages for breach of contract will be too remote and not recoverable unless the defendant could have reasonably foreseen the losses as a likely occurance. The Claimant needs to show: (a) the breach caused the loss, (b) the loss was not too remote: Hadley v Baxendale (1854), Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949), The Heron II (1969), Transfield Shipping v Mercator Shipping (The Achilleas) (2008) and (c) that the innocent party has attempted to mitigate the losses claimed 9.6 The claimant is required to take all reasonable steps to mitigate the loss caused by the breach 9.7 Definitions of the remedies; equitable nature of the remedies, discretionary, granted where damages inadequate; outline of criteria used when granting these remedies. 10. Understand how to apply Contract Law 10.1 Apply Contract Law to a given situation 10.1 Students are required to analyse the facts of the given scenario and relate the facts to the relevant laws stating the correct legal authority

10 Additional information about the unit Unit aim(s) The learner will understand key concepts, terms and processes in the Law of Contract Name of the organisation submitting the unit CILEx (The Chartered Institute of Legal Executives) Availability for use Only available to owning awarding body Availability for delivery 1 September 2016