9 th 9 CASE TH editio EDITIO n 9TH Paul Richard’s Law of Contract, now in its ninth edition, presents a trusted EDITIOn account of the main principles of contract law, using clear explanations and N A R law law O contemporary applications. In an area of law that is growing in complexity n V I G A T and importance, a firm grasp of the fundamental principles is essential. POWERED BY This book provides this necessary foundation whilst also considering recent paul richards proposals for reform so that the reader can gain an understanding of the overall development of the law. law of contract This new edition has been thoroughly revised and fully updated to include: • O’Brien v MGN Ltd and Sterling Hydraulics Ltd v Dichtomatik Ltd, on the requirement of ‘reasonable notice’ in exemption clauses of • Careful consideration of exemption clauses and the principles governing non-intervention of the courts under the Unfair Contract Terms Act 1977and the case of Regus (UK) Ltd v Epcot Solutions Ltd contract • Further analysis of restitutionary damages and differences between the Wrotham Park and Blake decisions by the Court of Appeal in WWF World Wide Fund for Nature v World Wrestling Federation Entertainment • Analysis of the House of Lords’ decision on breach of contract in Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (‘The Golden Victory’) • Commentary on the House of Lords’ decision in Transfield Shipping Inc v Mercator Shipping Inc (‘The Achilleas’) and the rule in Hadley v Baxendale www.mylawchamber.co.uk/richards • Over forty new cases which represent important developments in the law This text is supported by a mylawchamber website which includes: of contract • Updates to chapters on Agreement, Consideration, Mistake, For students: regular case and legislation updates, web links, interactive self-test Misrepresentation, and Privity of Contract questions, practice assessment questions, an online glossary and flashcards for key terms. In addition the text offers a wealth of study support that includes: For lecturers: a testbank of multiple-choice • Clearly distinguished case summaries that enable students to quickly questions that can be used to assess students’ progress. recognise the key cases and differentiate them from surrounding commentary CASE • Chapter summaries that highlight the main points covered in each N chapter, cementing understanding R A O V I G A T POWERED BY • Further reading lists at the end of each chapter that direct students to subject-specific resources to enrich understanding Visit www.pearsoned.co.uk/casenavigator for unique online support that helps improve • Easy-to-read, two-colour text design with tabbed glossary and case reading and analysis skills in Contract pedagogical features for quick reference Law. • Marginal cross-references that help students understand how the material The LexisNexis element of Case Navigator is only fits together available to those who currently subscribe to RICHARD LexisNexis Butterworths services. paul RICHARDs About the Author paul richards is Head of the Department of Law at the University of Huddersfield. He has had many years of experience as a lecturer in contract law, land law and trusts, and serves as an examiner and moderator for various of s law contract examining bodies. www.pearson-books.com Cover © Getty Images CVR_RICH9079_09_SE_CVR.indd 1 25/3/09 10:32:43 LAWO_A01.qxd 3/16/09 1:54 PM Page i Law of Contract LAWO_A01.qxd 3/16/09 1:54 PM Page ii =fle[Xk`feJkl[`\j`eCXnJ\i`\j Ni`kk\en`k_c\Xie`e^`ed`e[#k_\j\k\okjXccfnjkl[\ekjkf^X`eXjfc`[ le[\ijkXe[`e^f]k_\cXn%<XZ_Yffbgi\j\ekjk_\jlYa\ZkZc\XicpXe[ XZZ\jj`Ycp]fi\]]\Zk`m\Xe[jXk`j]p`e^jkl[p% K_\=fle[Xk`feJkl[`\j`eCXnJ\i`\j`jjlggfik\[YpdpcXnZ_XdY\in_`Z_ _fjkji\^lcXilg[Xk\jkfk_\cXnXe[XiXe^\f]i\jfliZ\j]ifddZhËj# n\Yc`ebj#ÕXj_ZXi[jXe[Xefec`e\^cfjjXip]fijkl[\ekjkflj\ k_ifl^_flkk_\`iZflij\% 8mX`cXYc\]ifdXcc^ff[Yffbj_fgj fifi[\ifec`e\Xk1 nnn%g\Xijfe\[%Zf%lb&cXn LAWO_A01.qxd 3/16/09 1:54 PM Page iii Ninth edition Law of Contract PAUL RICHARDS Head of the School of Law, University of Huddersfield LAWO_A01.qxd 3/16/09 1:54 PM Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 1992 Ninth edition published 2009 © Longman Group UK Limited 1992 © Pearson Professional Limited 1995 © Financial Times Professional Limited 1997 © Pearson Education Limited 1999, 2002, 2004, 2006, 2007, 2009 The right of Paul Richards to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Crown Copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland Law Commission Reports are reproduced under the terms of the Click-Use Licence ISBN: 978-1-4058-9907-9 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Richards, Paul, 1951– Law of contract / Paul Richards. – 9th ed. p. cm Includes index. ISBN 978-1-4058-9907-9 (pbk.) 1. Contracts–England. 2. Contracts–Wales. I. Title. KD1554.R53 2009 346.4202–dc22 2009002731 10987654321 13 12 11 10 09 Typeset in 9/12 pt Stone Serif by 35 Printed by Ashford Colour Press Ltd., Gosport The publisher’s policy is to use paper manufactured from sustainable forests. LAWO_A01.qxd 3/16/09 1:54 PM Page v For Phillip and William LAWO_A01.qxd 3/16/09 1:54 PM Page vi LAWO_A01.qxd 3/16/09 1:54 PM Page vii Brief contents Guided tour xiv Preface xvii Table of cases xx Table of statutes xxxvi Part 1 The formation of a contract 1 1 The evolution and definition of the modern contract 3 2 The fact of agreement 13 3 Consideration 57 4 Intention to create legal relations 85 5 Capacity 93 6 Formalities 109 Part 2 The contents of the contract 121 7 The terms of the contract 123 8 Exemption clauses 159 Part 3 Factors that vitiate a contract 215 9 Misrepresentation 217 10 Mistake 241 11 Duress, undue influence and inequality of bargaining power 279 12 Illegality 311 Part 4 Discharge of contracts 339 13 Discharge by performance and breach 341 14 Discharge by agreement 363 15 Discharge by frustration 369 Part 5 Remedies for breach of contract 385 16 The common law remedy of damages 387 17 Equitable remedies and limitation of actions 435 18 Quasi-contract and the law of restitution 445 vii LAWO_A01.qxd 3/16/09 1:54 PM Page viii BRIEF CONTENTS Part 6 The rights and liabilities of third parties to the contract 459 19 Privity of contract 461 20 Agency 495 21 Assignment of contractual rights 523 Glossary 537 Index 545 viii LAWO_A01.qxd 3/16/09 1:54 PM Page ix Contents Guided tour xiv Preface xvii Table of cases xx Table of statutes xxxvi Part 1 The formation of a contract 1 The evolution and definition of the modern contract 3 Evolution 3 Definition 9 Summary 11 Further reading 11 2 The fact of agreement 13 Introduction 13 Offer 15 Acceptance 25 The fact of acceptance 27 The termination of offers 42 Certainty of terms 49 Summary 52 Further reading 55 3 Consideration 57 Introduction 57 The definition of consideration 58 Consideration may be executed or executory but not past 59 Consideration must move from the promisee though not necessarily to the promisor 61 Consideration must be sufficient though not necessarily adequate 62 Summary 82 Further reading 84 4 Intention to create legal relations 85 Introduction 85 Social and domestic arrangements 85 Commercial agreements 87 Summary 90 Further reading 91 ix LAWO_A01.qxd 3/16/09 1:54 PM Page x CONTENTS 5 Capacity 93 The scope of this chapter 93 The capacity of natural persons 93 The capacity of corporations 100 Summary 105 Further reading 107 6 Formalities 109 Introduction 109 Contracts required to be made by deed 109 Contracts required to be in writing 110 Contracts required to be evidenced in writing 115 Summary 119 Further reading 120 Part 2 The contents of the contract 7 The terms of the contract 123 Introduction 123 Express terms 123 Implied terms 132 The classification of contractual terms 152 Summary 156 Further reading 157 8 Exemption clauses 159 Introduction 159 Incorporation of the exclusion clause into the contract 159 Construing exemption clauses 167 Other factors limiting the effectiveness of exemption clauses 172 The future of exemption clauses and unfair terms 209 Summary 210 Further reading 213 Part 3 Factors that vitiate a contract 9 Misrepresentation 217 Introduction 217 The nature of the inducement 217 The fact of the inducement 221 The nature of the misrepresentation 224 The remedies available for misrepresentation 227 Exclusion of liability for misrepresentation 237 Summary 237 Further reading 240 x LAWO_A01.qxd 3/16/09 1:54 PM Page xi CONTENTS 10 Mistake 241 Introduction 241 Mistake at common law 242 Mistake in equity 267 Mistake as to the nature of the document signed 274 Summary 275 Further reading 277 11 Duress, undue influence and inequality of bargaining power 279 Introduction 279 The common law concept of duress 279 The equitable concept of undue influence