CHAR_A01.QXD 14/9/07 10:02 Page i Contract Law CHAR_A01.QXD 14/9/07 10:02 Page ii CHAR_A01.QXD 14/9/07 10:02 Page iii Contract Law Fourth edition Mary Charman CHAR_A01.QXD 14/9/07 10:02 Page iv Published by Willan Publishing Culmcott House Mill Street, Uffculme Cullompton, Devon EX15 3AT, UK Tel: +44(0)1884 840337 Fax: +44(0)1884 840251 e-mail: [email protected] Website: www.willan.publishing.co.uk Published simultaneously in the USA and Canada by Willan Publishing c/o ISBS, 920 NE 58th Ave, Suite 300, Portland, Oregon 97213-3786, USA Tel: +001(0)503 287 3093 Fax: +001(0)503 280 8832 e-mail: [email protected] Website: www.isbs.com © Mary Charman, 2007 The right of Mary Charman to be identified as the author of this book has been asserted by her in accordance with the Copyright, Designs and Patents Act of 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 the prior written permission of the Publishers or a licence permitting copying in the UK issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. First edition published 2001 Second edition published 2002 Third edition published 2005 Fourth edition published 2007 ISBN 978-1-84392-358-9 paperback British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Project managed by Deer Park Productions, Tavistock, Devon Typeset by Pantek Arts, Maidstone, Kent Printed and Bound by TJ International, Padstow, Cornwall CHAR_A01.QXD 14/9/07 10:02 Page v Contents Preface xi Table of Cases xiii Table of Statutes xix 1 Principles of the law of contract 1 Why do we need a law of contract? 1 Are all promises enforced by law? 2 The form of a contract 3 The basis of contract law 3 Part 1: The formation of a contract 5 2 Offer and acceptance 7 Offer 7 Offers and ‘non-offers’ 10 Termination of an offer 13 Acceptance 20 Certainty in a contract 31 Auction sales 32 Tenders 34 Contracts for the sale of land 35 Some non-standard situations 36 Distance trading 39 Electronic trading 40 Summary 41 Questions 44 3 Consideration 46 Executed and executory consideration 47 Consideration must be sufficient but need not be adequate 47 Consideration must not be vague 48 Consideration must move from the promisee 49 Past consideration 49 Forebearance to sue 51 Performance of an existing duty 52 Part-payment of a debt 56 CHAR_A01.QXD 14/9/07 10:02 Page vi vi Contract law The current state of the doctrine 63 Summary 64 Questions 65 4 Legal intent 67 Social and domestic arrangements 67 Commercial agreements 71 Summary 74 Questions 75 5 Capacity 77 Corporations 78 Mental disability and intoxication 78 Diplomats and sovereigns 79 Minors 80 General concerns 89 Summary 89 Questions 91 Part 2: The contents of a contract 93 6 Incorporation of terms 95 Terms and representations 95 Incorporating terms into oral contracts 97 Written contracts 101 Implied terms 102 Collateral contracts 106 Summary 106 Questions 108 7 Types of terms within a contract 109 Conditions and warranties 109 The effect of a breach 110 Condition or warranty? 110 Terms specified by the parties 111 Reference to statute 112 Consideration of the terms by the courts 112 ‘Course of dealing’ 113 Innominate terms – the Hong Kong Fir approach 113 The debate continues 115 Summary 117 Questions 118 8 Exemption clauses 119 Incorporation 120 CHAR_A01.QXD 14/9/07 10:02 Page vii Contents vii Construction 121 Legislation 122 The Unfair Contract Terms Act 1977 122 The Unfair Terms in Consumer Contract Regulations 1999 126 The current position 128 Summary 129 Questions 131 9 Privity of contract 132 The rule of privity 132 Established exceptions to the doctrine of privity of contract 136 Attempts to avoid privity of contract 138 The Contracts (Rights of Third Parties) Act 1999 141 Summary 144 Questions 145 Part 3: Vitiating factors 147 10 Duress and undue influence 149 Duress 149 Undue influence 154 Summary 162 Questions 164 11 Misrepresentation 166 Representations and terms 166 Definition 166 Silence and misrepresentation 170 Misrepresentation passed on via a third party 174 Inducement 174 Remedies 174 Fraudulent misrepresentation 175 Non-fraudulent misrepresentation 176 The Misrepresentation Act 1967 177 Indemnity 178 Rescission 179 Bars to rescission 179 Comparison with remedies for breach of contract 181 Summary 181 Questions 183 12 Mistake 185 Common mistake 185 Where the subject matter is non-existent 186 Mistake over title 187 CHAR_A01.QXD 14/9/07 10:02 Page viii viii Contract law Mistake over quality of subject matter 188 Mutual mistake 190 Unilateral mistake 191 Mistake relating to documents 195 The doctrine of mistake in general 196 Summary 197 Questions 198 13 Illegality 200 The nature of illegality 200 Restraint of trade 201 The effect of European law 205 Summary 206 Questions 207 Part 4: Discharge and remedies 209 14 Discharge of a contract 211 Performance 211 Agreement 214 Breach 215 Frustration 216 Summary 222 Questions 223 15 Remedies 225 Damages 225 Basis of assessment 226 Mental distress and non-pecuniary loss 227 Remoteness of damage 228 Mitigation 229 Other remedies 229 Stop now orders 230 Summary 230 Questions 232 Part 5: Consumer protection 233 16 Consumer protection 235 The contract 236 The consumer 236 The Sale of Goods Act 1979 as amended by the Sale and Supply of Goods Act 1994 237 The Supply of Goods and Services Act 1982 243 CHAR_A01.QXD 14/9/07 10:02 Page ix Contents ix The Consumer Protection Act 1987 243 The Unfair Contract Terms Act 1977 245 The Unfair Terms in Consumer Contract Regulations 1999 247 Consumer protection other than through the law of contract 247 The current state of consumer protection 248 Summary 249 Questions 252 Part 6: General questions on contract law 253 17 Additional questions 254 Part 7: Studying contract law 259 18 Contract law in context 260 Fairness in contract law 261 Law and morals 262 Policy issues 263 Contextual skills in examination 264 Module 6: concepts of law, for AQA 264 19 Sources of contract law 265 Case law 265 Statute law 265 European law 266 OCR Special study: synoptic assessment based on legal sources 266 A strategy for using the material 279 20 Key skills 283 Key skills to be assessed 283 Answers guide 290 Legal terms and expressions 328 Legal resources 332 Index 335 CHAR_A01.QXD 14/9/07 10:02 Page x Table of Statutes Abortion Act 1967 263 s 13 238 Companies Act 1989 78 s 14(2) 238 Consumer Protection Act 1987 235, 243, s 14(3) 238, 241 248 s 15 112, 238 Contracts (Rights of Third Parties) Act s 57(2) 33 1999 49, 134, 141, 142 Supply of Goods and Services Act 1982 Courts and Legal Services Act 1990 249 ss 2–5 243 Family Law Reform Act 1969 80 ss 13–15 243 Human Fertilisation and Embryology Act Trade Descriptions Act 1968 11, 248 1990 263 Unfair Contract Terms Act 1977 102, 122, Law of Property Act 1925 35, 43, 136, 141 128, 239, 246 Law Reform (Contributory Negligence) Unfair Contract Terms Act 1977 s 1(3) 122 Act 1945 227 Unfair Contract Terms Act 1977 ss 2(1), Law Reform (Frustrated Contracts) Act 2(2) and 3 123, 246 1943 220, 221 Unfair Contract Terms Act 1977 s 6(1) 239 Married Women’s Property Act 1882 136 Unfair Contract Terms Act 1977 ss 6(2) Mental Capacity Act 2005 79 and 6(3) 239 Minors’ Contracts Act 1987 87, 88 Unfair Contract Terms Act 1977 s 12 123 s 2 87 Unsolicited Goods and Services Act (1971) s 3 88 25 Misrepresentation Act 1967 176–180, 227, 262, 266 Statutory instruments s 2(1) 177 Consumer Protection (Distance Selling) s 2(2) 180 Regulations 2000 25, 39 s 3 247 Stop Now Orders (EC) Regulations 2001 Restriction of Offensive Weapons Act 1959 10 230 Road Traffic Act 1988 136 Unfair Terms in Consumer Contract Sale and Supply of Goods Act 1994 235, Regulations 1999 3, 74, 126, 128, 247 237, 239, 240, 242, 243, 248 Unfair Terms in Consumer Contract s 1 239 Regulations 1999 Schedule 2 127, 246 s 14 240, 241 Unfair Terms in Consumer Contract Sale of Goods Act 1893 237, 242 Regulations 1999 Schedule 3 126 Sale of Goods Act 1979 3, 102, 103, 237, 238 European legislation s 2(1) 237 Electronic Commerce (EC Directive) s 3(3) 81, 90 Regulations 2002 40 s 6 186 European Directive on Unfair Terms in ss 12–15 107, 237, 238 Consumer Contracts (93/13) 126, 247 s 12, 238, 242 Treaty of Rome Article 85, 205 CHAR_A01.QXD 14/9/07 10:02 Page xi Table of Cases A to Z Bazaars v Minister of Agriculture Bannerman v White (1861) 10 CBNS 844 (1974) (4) SA 392 31 96 Adams v Lindsell (1818) 1 B & Ald 681 Barclays v O’Brien [1993] 4 All ER 417 159 28, 30 Barnett v Chelsea and Kensington Hospital Addis v Gramophone Co Ltd [1909] AC [1969] 1 QB 428 248 488 228 Barry v Davies (2000) Times 31/8/00 CA 34 Aerial Advertising Co v Batchelors Peas Barton (Alexander) v Armstrong [1975] 2 [1938] 2 All ER 788 116 All ER 465 150 Ahmed v Addy (2004) EWHC 1465 175 Barton v County NatWest [2002] All ER Ailsa Craig Fishing Co v Malvern Fishing (D)782 174 Co and Securicor [1983] 1 All ER 101 Basildon District Council v J E Lesser 128 (Properties) Ltd [1985] 1 All ER 20 227 Ajayi v Briscoe – See Emmanuel Ayodei Bank of Credit and Commerce International Ajayi v Briscoe (Nigeria) Ltd SA v Aboody [1990] 1 QB 923 159 Alan (WJ) & Co v El Nasr Export and Beale v Taylor [1967] 3 All ER 253 239 Import Co [1972] 2 All ER 127 62 Bell v Lever Bros [1932] AC 161 188 Allcard v Skinner (1887) 36 Ch D 145 155 Bernstein v Pamsons Motors [1987] 2 All Allied Dunbar v Weisinger