Contents

Preface ix Table of Cases xxv Table of Legislation xlv

PART ONE: THE FORMATION OF A CONTRACT

1. OFFER AND ACCEPTANCE 3 1. Introduction 3 (1) What is a Contract? 3 (2) Offer and Acceptance 4 2. Offers and Invitations to Treat 4 (1) Two General Illustrative Cases 5 Harvey v Facey 5 Gibson v Manchester City Council 5 (2) Display of Goods for Sale 7 Fisher v Bell 7 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd 8 (3) Advertisements 10 Partridge v Crittenden 10 Carlill v Carbolic Smoke Ball Company 11 (4) Auction Sales 16 Barry v Davies 16 (5) Tenders 19 Spencer v Harding 19 Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd 20 Blackpool and Fylde Aeroclub Ltd v Blackpool Borough Council 22 3. Acceptance 26 (1) Acceptance by Conduct 26 Brogden v Metropolitan Railway Co 26 (2) 'Battle of the Forms' 27 Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd 27 (3) Communication of Acceptance 33 (a) The General Rule: Acceptance must be Received by Offeror 33 Entores Ltd v Miles Far East Corporation 33 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH 35 (b) Acceptance by Post 37 xii Contents

Household Fire and Carriage Accident Insurance Co Ltd v Grant 37 Holwell Securities Ltd v Hughes 39 (c) Waiver by Offeror of the Need for Communication of Acceptance 41 Felt house v Bindley 41 (4) Prescribed Mode of Acceptance 43 Manchester Diocesan Council for Education v Commercial and General Investments Ltd 43 (5) Acceptance in Ignorance of an Offer 45 R v Clarke 45 (6) Acceptance in Unilateral Contracts 47 Errington v Errington 47 4. Termination of an Offer 49 (1) Revocation 49 Byrne & Co v Van Tienhoven & Co 49 Dickinson v Dodds 51 (2) Rejection 53 Hyde v Wrench 53 Stevenson, Jacques & Co v McLean 53 5. Problematic Offer and Acceptance 55 The Satanita 55 Additional Reading 57

2. CERTAINTY AND INTENTION TO CREATE LEGAL RELATIONS 59 1. Certainty 59 (1) Vagueness 59 Hillas & Co Ltd v Arcos Ltd 59 Scammell and Nephew Ltd v Ouston 62 (2) Price Not Fixed 64 May and Butcher Ltd v R 64 Sudbrook Trading Estate Ltd v Eggleton 67 (3) Agreements to Negotiate 69 Walfordv Miles 69 (4) A Non-contractual Solution 74 British Steel Corporation v Cleveland Bridge and Engineering Co Ltd 74 2. Intention to Create Legal Relations 77 (1) Social and Domestic Agreements 77 Balfour v Balfour 11 Jones v Padavatton 79 (2) Commercial Agreements 81 Esso Petroleum Co Ltd v Commissioners of Customs and Excise 81 Additional Reading 84

3. CONSIDERATION AND PROMISSORY ESTOPPEL 87 1. Consideration 87 Contents xiii

(1) The Consideration Need Not Be Adequate 88 Chappell & Co Ltd v Nestle Co Ltd 88 (2) Past Consideration Does Not Count 92 Eastwood v Kenyon 92 PaO On v Lau Yiu Long 93 (3) Consideration and the Promise to Perform, or Performance of, a Pre-existing Duty 96 (a) Pre-existing Duty Imposed by the General Law (ie a Non-contractual Duty) 96 Collins v Godefroy 96 Glasbrook Brothers Ltd v Glamorgan County Council 96 Ward v Byham 98 Williams v Williams 99 (b) Pre-existing Duty under a Contract with a Third Party 100 Shadwell v Shadwell 100 Scotson v Pegg 102 PaO On v Lau Yiu Long 103 (c) Pre-existing Duty under a Contract with the Promisor 104 StilkvMyrick 104 Williams v Roffey Bros & Nicholls (Contractors) Ltd 106 Foakes v Beer 111 Re Selectmove Ltd 115 2. Promissory Estoppel 117 (1) The Emergence of Promissory Estoppel 118 Hughes v Metropolitan Rly Co 118 Central London Property Trust Ltd v High Trees House Ltd 119 (2) Promissory Estoppel Not a Cause of Action 121 Combe v Combe 121 Crabb v Arun District Council 124 Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd 128 Waltons Stores (Interstate) Ltd v Maher 131 Baird Textiles Holdings Ltd v Marks & Spencer pic 136 (3) Promissory Estoppel Requires a Clear and Unequivocal Promise 140 Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd 140 (4) Does Promissory Estoppel Require Reliance or Detrimental Reliance? 142 WJ Alan & Co Ltd v El Nasr Export and Import Co 142 Societe Italo-Belge pour le Commerce et I'Industrie SA v Palm and Vegetable Oils (Malaysia) Sdn Bhd, The Post Chaser 144 (5) Promissory Estoppel Cannot be Founded on a Promise Induced by the Promisee's Inequitable Conduct 146 D&C Builders Ltdv Rees 146 (6) Does Promissory Estoppel Extinguish or Suspend Rights? 148 Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd 148 Additional Reading 151 xiv Contents

PART TWO: THE TERMS OF A CONTRACT

4. IDENTIFYING THE TERMS 157 1. Terms or Mere Representations? 157 Oscar Chess Ltd v Williams 158 Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd 162 Esso Petroleum Co Ltd v Mardon 164 2. Incorporation of a Party's Written Terms 166 (1) Signature 167 L'Estrange v F Graucob Ltd 167 Curtis v Chemical Cleaning and Dyeing Co 168 (2) Reasonable Notice 170 Parker v The South Eastern Railway Company 170 Chapelton v Barry Urban District Council 173 Olley v Marlborough Court Ltd 174 Thornton v Shoe Lane Parking Ltd 175 Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd 179 AEG ( UK) Ltd v Logic Resource Ltd 182 O'BrienvMGNLtd 187 (3) Course of Dealing 189 McCutcheon v David MacBrayne Ltd 189 Hollier v Rambler Motors (AMC) Ltd 193 (4) The Parties' Trade Practice 195 British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd 195 3. Implied Terms 197 (1) Terms Implied by the Courts 197 (a) Terms Implied by Fact 197 The Moorcock 197 (b) Terms Implied by Law 201 Liverpool City Council v Irwin 201 Shell UK Ltd v Lostock Garage Ltd 206 Scally v Southern Health and Social Services Board 209 (2) Terms Implied by Statute 213 (a) Contracts for the Sale of Goods 213 Sale of Goods Act 1979, sections 12-15 213 (b) Contracts for Services 216 Supply of Goods and Services Act 1982, sections 13-15 216 Additional Reading 217

5. INTERPRETING THE TERMS 219 1. The Modern Approach to Construction 219 Investors Compensation Scheme Ltdv West Bromwich Building Society 219 2. Construction of Exemption Clauses 222 (1) Excluding or Limiting Liability for Negligence 223 Alderslade v Hendon Laundry Ltd 223 Contents xv

Canada Steamship Lines Ltd v R 225 Hollier v Rambler Motors (AMC) Ltd 228 (2) Excluding or Limiting Liability for Fundamental Breach 231 Photo Production Ltd v Securicor Transport Ltd 231 (3) Construing Limitation Clauses 235 Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd 236 George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd 237 Additional Reading 240

6. STATUTORY CONTROL OF UNFAIR TERMS 243 1. The Unfair Contract Terms Act 1977 244 The Unfair Contract Terms Act 1977, sections 1-14, 26-27, 29, Schedules 1 and 2 244 (1) Overview of the Central Scheme of UCTA 1977 252 (2) Excluding Liability for Breach of the Statutory Implied Terms in Contracts for the Sale of Goods and Analogous Contracts 253 (3) Cases on UCTA 1977 254 (a) What is Meant by 'Dealing as Consumer'? 254 R&B Customs Brokers Co Ltd v United Dominions Trust Ltd 254 (b) What Counts as an Exclusion of Liability, or as Equivalent to such an Exclusion, so as to Fall within the Act? 258 Phillips Products Ltd v Hyland 258 Thompson v T Lohan (Plant Hire) Ltd 260 Smith v Eric S Bush 263 Stewart Gill Ltd v Horatio Myer & Co Ltd 265 Tudor Grange Holdings Ltd v Citibank NA 266 (c) Does the Clause Pass, or Fail, the Reasonableness Test? 269 George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd 269 Phillips Products Ltd v Hyland 271 Smith v Eric S Bush 275 Stewart Gill Ltd v Horatio Myer & Co Ltd 277 St Albans City and District Council v International Computers Ltd 279 Watford Electronics Ltd v Sanderson CFL Ltd 282 2. The Unfair Terms in Consumer Contracts Regulations 1999 285 Unfair Terms in Consumer Contracts Regulations 1999 285 (1) Overview of the Central Scheme of the 1999 Regulations 292 (2) What is the Relationship Between the 1999 Regulations and UCTA 1977? 293 (3) Case-law on the 1999 Regulations 293 Director General of Fair Trading v First National Bank Pic 294 (4) A Note on Good Faith 299 3. Reform of the Legislation on Unfair Terms 299 Additional Reading 301 xvi Contents

PART THREE: REMEDIES FOR BREACH OF CONTRACT

7. TERMINATION 305 1. The Meaning of Termination for Breach 306 Photo Production Ltd v Securicor Transport Ltd 306 2. Conditions, Warranties and Innominate Terms 308 Sale of Goods Act 1979, sections 12-15 308 Hongkong Fir Shipping Co Ltd v Kawasaki Risen Kaisha Ltd 309 Maredelanto Compania Naviera SA v Bergbau - Handel GmbH, The Mihalis Angelos 313 L Schuler AGv Wickman Machine Tool Sales Ltd 315 Cehave NVv Bremer Handelsgesellschaft mbH, The Hansa Nord 318 Bunge Corporation v Tradax Export SA 321 Sale of Goods Act 1979, section 15A 324 3. Termination Clauses 325 Lombard North Central pic v Butterworth 325 Rice v Great Yarmouth Borough Council 328 4. Anticipatory Breach 332 Hochster v De La Tour 332 5. Restitution after Termination for Breach 334 Additional Reading 335

8. DAMAGES 337 1. Compensatory Damages 337 (1) Basic Issues in Applying the Compensatory Aim 338 (a) The Precise Aim of Contractual Compensation: Protecting the Expectation Interest 338 Robinson v Harmon 338 (b) Difference in the Value of Property or Cost of Cure? 339 Radford v de Froberville 339 Ruxley Electronics and Construction Ltd v Forsyth 342 (c) Assessment According to the Chances 347 Chaplin v Hicks 347 (d) Contractual Damages Protecting the Reliance Interest? 350 Anglia TV v Reed 350 C&PHaulage v Middleton 352 CCC Films (London) Ltd v Impact Quadrant Films Ltd 354 (2) Limitations on Compensation 357 (a) Remoteness 357 Hadley v Baxendale 357 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd 358 Koufos v C Czarnikow Ltd, The Heron II 361 Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd 364 Brown v KMR Services Ltd 370 Jackson v Royal Bank of Scotland pic 372 Contents xvii

(b) Intervening Cause 375 Quinn v Burch Bros (Builders) Ltd 375 Galoo Ltd v Bright Grahame Murray 376 (c) The Duty to Mitigate and Mitigation 378 British Westinghouse Electric v Underground Electric Railways Co of London Ltd 378 (d) Contributory Negligence 380 Law Reform (Contributory Negligence) Act 1945 sections 1(1) and4 380 Forsikringsaktieselskapet Vesta v Butcher 381 Barclays Bank Pic v Fairclough Building Ltd 383 (e) Mental Distress 387 Addis v Gramophone Co Ltd 387 Jarvis v Swan's Tours Ltd 388 Watts v Morrow 390 Farley v Skinner 391 (f) Loss of Reputation 397 Mahmud v Bank of Credit and Commerce International SA 397 2. Restitutionary Damages/An Account of Profits 401 A ttorney- General v Blake 401 Experience Hendrix LLC v PPX Enterprises Inc 407 3. Agreed/Liquidated Damages 412 Dunlop Pneumatic Tyre Ltd v New Garage and Motor Co Ltd 412 Philips Hong Kong Ltd v A ttorney General of Hong Kong 414 Additional Reading 417

9. DIRECT ENFORCEMENT 423 1. The Award of an Agreed Sum 423 White and Carter (Councils) Ltd v McGregor 424 Clea Shipping Corporation v Bulk Oil International Ltd, The Alaskan Trader 428 Reichman v Beveridge 430 2. Specific Performance 432 (1) The Primary Restriction—Adequacy of Damages 432 Falcke v Gray 432 Sky Petroleum Ltd v VIP Petroleum Ltd 433 Beswick v Beswick 435 (2) The Constant Supervision Objection 436 Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd 436 (3) Contracts for Personal Service 442 Trade Union and Labour Relations (Consolidation) Act 1992, section 236 442 Powell v Brent London Borough Council 442 (4) Want of Mutuality 444 Price v Strange 444 3. Injunctions 447 xviii Contents

Liimley v Wagner 448 Warner Bros Pictures Inc v Nelson 449 Page One Records v Brit ton 451 Warren v Mendy 451 LauritzenCool AB v Lady Navigation Inc 455 Additional Reading 457

PART FOUR: PRIVITY OF CONTRACT AND THIRD PARTY RIGHTS

10. PRIVITY OF CONTRACT AND THIRD PARTY RIGHTS 461 1. Introduction 461 2. Four Cases Establishing or Confirming the Privity Doctrine (on its Benefit Side) 462 Tweddle v Atkinson 462 Dunlop Pneumatic Tyre Co Ltd v Selfridge 463 Scruttons v Midland Silicones Ltd 466 Beswick v Beswick 468 3. Exceptions to Privity (on its Benefit Side) 473 (1) Agency 475 (2) Assignment 475 (3) Trusts of the Promise 475 (4) Statutory Exceptions 476 (5) Covenants Concerning Land 476 (6) The Tort of Negligence 477 (7) Enforcement by Third Parties of Exemption Clauses 477 New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The Eurymedon 477 4. The Promisee's Remedies in a Contract made for the Benefit of a Third Party 482 (1) Specific Performance and Injunctions 482 Beswick v Beswick 482 (2) Damages 482 Jackson v Horizon Holidays Ltd 482 Woodar Investment Development Ltd v Wimpey Construction UK Ltd 484 Darlington Borough Council v Wiltshier Northern Ltd 488 Alfred Me Alpine Construction Ltd v Panatown Ltd 491 5. The Contracts (Rights of Third Parties) Act 1999 501 Contracts (Rights of Third Parties) Act 1999 502 (1) The Tests of Enforceability 506 Nisshin Shipping Co Ltd v Cleaves & Co Ltd 508 Laemthong International Lines Company Ltd v Artis, The Laemthong Glory (No 2) 515 (2) Variation and Rescission by the Contracting Parties 519 (3) Defences Available to the Promisor 520 Contents xix

(4) Promisee's Rights 521 (5) Exclusions from the Act 521 (6) Existing Exceptions 522 (7) The Relationship with the Unfair Contract Terms Act 1977 523 (8) The Meaning of 'Contract' under the 1999 Act 523 6. Exceptions to the Privity Doctrine on its Burden Side 523 (1) Bailment or Sub-bailment on Terms 523 Morris vCW Martin & Sons Ltd 523 KH Enterprise v Pioneer Container, The Pioneer Container 525 (2) Burden Running with Goods 526 Lord Strathcona Steamship Company Ltd v Dominion Coal Company Ltd 526 Swiss Bank Corporation v Lloyds Bank Ltd 529 Additional Reading 532

PART FIVE: FACTORS ALLOWING ESCAPE FROM A CONTRACT

11. 537 1. Requirements of Misrepresentation 538 (1) False Statement of Fact or Law 538 (a) Statements of Opinion 539 Smith v Land and House Property Corporation 539 Bisset v Wilkinson 540 (b) Statements of Intention 541 541 (c) Silence: No Duty of Disclosure 542 With v O'Flanagan 543 (2) Reliance 544 544 Edgington v Fitzmaurice 547 2. Rescission for Misrepresentation 548 (1) What Does Rescission Mean? 549 Whittington v Seale-Hayne 549 (2) Bars to Rescission 550 Leaf v In ternational Galleries 551 Erlanger v New Sombrero Phosphate Co 553 (3) How Does One Rescind? 555 Car and Universal Finance Co Ltd v Caldwell 555 3. Damages for Misrepresentation 557 (1) Fraudulent Misrepresentation: the Tort of Deceit 558 Derry v Peek 558 Doyle v Olby (Ironmongers) Ltd 559 Smith New Court Ltd v Scrimgeour Vickers (Asset Management) Ltd 561 xx Contents

(2) Negligent Misrepresentation Actionable in the Tort of Negligence 564 Hedley Byrne & Co Ltd v Heller & Partners Ltd 564 Esso Petroleum Co Ltd v Mardon 565 (3) Negligent and Purely Innocent Misrepresentation under the Misrepresentation Act 1967 567 Misrepresentation Act 1967, section 2 567 (a) Overview of Section 2 567 (b) Cases on Section 2(1) of the Misrepresentation Act 1967 567 Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd 567 Royscot Trust Ltd v Rogerson 569 (c) Cases on Section 2(2) of the Misrepresentation Act 1967 573 William Sindall Pic v Cambridgeshire County Council 573 Government of Zanzibar v British Aerospace (Lancaster House) Ltd 577 4. Exclusion of Liability for Misrepresentation: Misrepresentation Act 1967, section 3 580 Misrepresentation Act 1967, section 3 580 (1) What Counts as an Exemption Clause Falling Within Section 3? 581 Overbrooke Estates Ltd v Glencombe Properties Ltd 581 Cremdean Properties Ltd v Nash 582 Government of Zanzibar v British Aerospace (Lancaster House) Ltd 583 (2) Does the Clause Pass or Fail the Reasonableness Test? 585 Howard Marine & Dredging Co v A Ogden & Sons (Excavations) Ltd 585 586 Additional Reading 588

12. MISTAKE 591 1. Unilateral Mistake 592 (1) The General Position: No Escape for Unilateral Mistake 592 Smith v Hughes 592 (2) Exceptions where Unilateral Mistake Invalidates the Contract 595 (a) Objective Ambiguity 595 Raffles v Wichelhaus 595 Scriven Brothers & Co v Hindley & Co 595 (b) Unilateral Mistake as to Terms or Identity Known to the Other Party 597 Hartog v Colin & Shields 597 Cundy v Lindsay 598 600 Ingram v Little 602 Lewis v Averay 604 Shogun Finance Ltd v Hudson 606 (c) Non Est Factum 617 Sounders v Anglia Building Society (sub nom Gallie v Lee) 617 (d) Equitable Rectification for Unilateral Mistake 620 Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd 621 Commission for the New Towns v Cooper (GB) Ltd 623 Contents xxi

2. Common Mistake 625 (1) The Narrow Scope of Common Mistake Rendering a Contract Void 626 Couturier v Hastie 626 Bell v Lever Brothers Ltd 627 McRae v Commonwealth Disposals Commission 631 Associated Japanese Bank International Ltd v Credit du Nord SA 632 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd 634 Brennan v Bolt Burdon 638 (2) A Wider Equitable Doctrine of Common Mistake Rejected 640 641 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd, The Great Peace 643 (3) Equitable Rectification for Common Mistake 645 Rose (Frederick E) (London) v Pirn ( William H) Junior & Co 645 Joscelyn v Nissen 647 Additional Reading 649

13. FRUSTRATION 653 1. The Early Approach of Absolute Liability 654 Paradine v Jane 654 2. The Kinds of Events that Amount to Frustration 654 (1) Physical Impossibility 654 Taylor v Caldwell 654 Jackson v Union Marine Insurance Co Ltd 656 (2) Legal Impossibility (ie Subsequent Illegality) 657 Metropolitan Water Board v Dick Kerr and Co Ltd 657 (3) Cancellation of Events 658 Krell v Henry 658 Herne Bay Steam Boat Company v Hutton 660 (4) No Frustration merely because Performance made more Onerous/ Expensive 662 Davis Contractors Ltd v Fareham Urban District Council 662 Ocean Tramp Tankers Corporation v VIO Sovfracht, The Eugenia 666 3. Factors Excluding Frustration 668 (1) Self-induced Frustration 668 Maritime National Fish Ltd v Ocean Trawlers Ltd 668 J Lauritzen AS v Wijsmuller BV, 669 (2) Express Provision 672 Metropolitan Water Board v Dick Kerr and Co Ltd 672 4. The Juristic Basis of Frustration 674 National Carriers v Panalpina (Northern) Ltd 674 5. The Effects of Frustration 677 Law Reform (Frustrated Contracts) Act 1943 678 (1) Overview of the Act 680 (2) Cases on the 1943 Act 681 xxii Contents

BP Exploration Co (Libya) v Hunt (No 2) 681 Gamerco SA v ICMIFair Warning (Agency) Ltd 688 6. The Relationship between Common Mistake and Frustration 690 Amalgamated Investment & Property Co v John Walker & Sons Ltd 691 Additional Reading 693

14. DURESS 695 1. Duress of the Person 696 Barton v Armstrong 696 2. Economic Duress 699 (1) Threats to Break (or to Induce Another to Break) a Contract 699 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, The Atlantic Baron 699 PaOOnv Lau Yiu Long 701 Universe Tankships of Monrovia v International Transport Workers Federation, The Universe Sentinel 702 B & S Contracts & Design Ltd v Victor Green Publications Ltd 705 Atlas Express Ltd v Kafco (Importers and Distributors) Ltd 708 Williams v Roffey Bros & Nicholls (Contractors) Ltd 709 Dimskal Shipping Co SA v International Transport Workers Federation, The Evia Luck 710 Huyton SA v Peter Cremer 711 (2) 'Lawful Act' Duress 716 CTN Cash and Carry Ltdv Gallaher Ltd 717 R v Attorney General for England and Wales 720 Additional Reading 722

15. UNDUE INFLUENCE AND EXPLOITATION OF WEAKNESS 1. Undue Influence 725 A Heard v Skinner 726 Barclays Bank pic v O'Brien 729 Cheese v Thomas 733 Credit Lyonnais Nederland NV v Burch 735 Royal Bank of Scotland pic v Etridge (No 2) Til R v Attorney General for England and Wales 753 2. Exploitation Of Weakness 756 (1) Exploitation of Mental Weakness 757 Earl of Aylesford v Morris 757 Fry v Lane 759 Cresswell v Potter 760 Boustany v Pigott 762 Portman Building Society v Dusangh 764 (2) Exploitation of the Claimant's Circumstantial Weakness 766 The Medina 767 Alec Lobb Garages Ltd v Total Oil (GB) Ltd 768 Contents xxiii

(3) Rejection of a Principle of 'Inequality of Bargaining Power' 771 Lloyds Bank Ltdv Bundy 771 National Westminster Bank v Morgan 11'4 Additional Reading 775

Index 779