SEVENTH EDITION SEVENTH CASE EDITION Contract Law Contract Law Catherine Elliott & Frances Quinn N R A O V I G A T The bestselling Elliott and Quinn series of law textbooks includes reliable POWERED BY and concise texts on Criminal Law, Contract Law, Tort Law and the English Legal System. The authors draw on their extensive experience to bring an unbeatable combination of authority, readability and clarity to this series of student-friendly texts. Written in a lively and engaging style, each book: ● explains the relevant law logically and clearly ● helps students to succeed in assessments and improve their legal skills ● looks at the context of law-making and its future direction This text is supported by mylawchamber which includes: It is essential for students on law and commercial degree programmes For students: regular case and legislation to have a clear understanding of contract law, yet the subject can updates, web-links, interactive self-test be diffi cult to grasp for the newcomer. This book clarifi es the essential questions, key term fl ashcards and a concepts behind the law, making it easier for you to understand and glossary. apply the legal rules. Each chapter also includes discussion of problems For lecturers: a testbank of multiple-choice with the current law and also considers the forces affecting contract questions that can be used to assess law today, such as the increase of e-commerce and the growing students’ progress. impact of Europe, and how the law may need to reform to meet All located at: modern needs. www.mylawchamber.co.uk/elliottquinn CASE NEW TO THIS EDITION ● Leading case boxes help you identify and remember key cases N and rulings R A O V I G A T POWERED BY ● Chapter introductions identify core themes and concepts to Visit www.pearsoned.co.uk/casenavigator remember for unique online support that helps ● Topical issue boxes to help put the legal system into context improve case reading and analysis skills in ● More diagrams to visually explain points and processes of law Contract Law. The LexisNexis element of Case Navigator is only available to those who currently subscribe to LEGAL DEVELOPMENTS LexisNexis Butterworths services. Recent important changes to the law have been fully analysed, including: ABOUT THE AUTHORS ● An examination of unfair bank charges Elliott & Quinn ● The impact of pre-nuptial contracts following a divorce Catherine Elliott is a qualifi ed Barrister and ● The most recent House of Lords’ decision on remoteness of damages Lecturer in Law at City University. She has SEVENTH EDITION (Transfi eld Shipping v Mercator Shipping (2008)) extensive experience of teaching law. ● The Consumer Protection from Unfair Trading Regulations (2008) Frances Quinn is an award-winning journalist, with a particular interest and experience in law. Contract Law Catherine Elliott & Frances Quinn www.pearson-books.com Elliott & Quinn Series Cover © Getty Images CVR_ELLI9352_07_SE_CVR.indd 1 8/4/09 10:11:54 CONL_A01.qxd 4/1/09 2:25 PM Page i Contract Law CONL_A01.qxd 4/1/09 2:25 PM Page ii J^[;bb_ejjGk_ddI[h_[i \ehj^[X[ijijWhj_dbWm I]^hgZcdlcZYVji]dgiZVbYgVldci]Z^gZmiZch^kZZmeZg^ZcXZid Wg^c\VcjcWZViVWaZhZaZXi^dcd[iZmihi]Viegdk^YZidiVaXaVg^indci]Z XdgZVgZVhd[aVl# I]Z:aa^diiFj^ccHZg^Zh^hhjeedgiZYWnbnaVlX]VbWZgi]Vi ^cXajYZhgZ\jaVgjeYViZhidi]ZaVlVcYVgVc\Zd[gZhdjgXZh[gdb ^ciZgVXi^kZfjZhi^dch!ZmVbVYk^XZVcYlZWa^c`h![dghijYZcihidjhZ i]gdj\]djii]Z^gXdjghZ# ;dg[jgi]Zg^c[dgbVi^dcdgiddgYZg i]ZhZWdd`h!eaZVhZk^h^i/ mmm$f[Whied[Z$Ye$ka%bWm CONL_A01.qxd 4/1/09 2:25 PM Page iii 7th7th editionedition Contract Law Catherine Elliott and Frances Quinn CONL_A01.qxd 4/1/09 2:25 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 in Great Britain 1996 Second edition published 1999 Third edition 2001 Fourth edition 2003 Fifth edition 2005 Sixth edition 2007 Seventh edition 2009 © Pearson Education Limited 1996, 2003, 2005, 2007, 2009 The rights of Catherine Elliott and Frances Quinn to be identified as authors of this work have been asserted by them 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: 978-1-4058-9935-2 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 Elliott, Catherine, 1966– Contract law / Catherine Elliott and Frances Quinn. – 7th ed. p. cm. ISBN 978-1-4058-9935-2 (pbk.) 1. Contracts–England. 2. Contracts–Wales. I. Quinn, Frances. II. Title. KD1554.E44 2009 346.4202—dc22 2009003485 10987654321 13 12 11 10 09 Typeset in 9.5/13pt Stone Sans by 35 Printed and bound by Ashford Colour Press Ltd., Gosport The publisher’s policy is to use paper manufactured from sustainable forests. CONL_A01.qxd 4/1/09 2:25 PM Page v Brief contents Guided tour xiv Preface xvii Acknowledgements xviii Table of cases xix Table of statutes xxix Table of statutory instruments xxxi Table of EC legislation xxxii Introduction 1 Part 1 The formation of a contract 9 1 Offer and acceptance 11 2 Certainty 52 3 Intention to create legal relations 59 4 Capacity 69 5 Formalities 82 6 Consideration 88 Part 2 The contents of a contract 119 7 Terms of the contract 121 8 Unfair contract terms 149 Part 3 Vitiating factors 183 9 Misrepresentation 185 10 Mistake 207 11 Illegality 234 12 Duress and undue influence 251 Part 4 The rights and liabilities of third parties 271 13 Third parties 273 v CONL_A01.qxd 4/1/09 2:25 PM Page vi Brief contents Part 5 Discharge and remedies 295 14 Discharge of contract 297 15 Remedies 330 Part 6 Consumer protection 387 16 Consumer contracts 389 Appendix: Answering examination questions 415 Glossary 421 Index 425 vi CONL_A01.qxd 4/1/09 2:25 PM Page vii Contents Guided tour xiv Preface xvii Acknowledgements xviii Table of cases xix Table of statutes xxix Table of statutory instruments xxxi Table of EC legislation xxxii Introduction 1 Why do we need contract law? 2 The origins of contract law 3 Freedom of contract 4 Contract and fairness 4 The objective approach 5 The Human Rights Act 1998 6 The influence of Europe 7 Reading list 7 Reading on the internet 8 Part I THE FORMATION OF A CONTRACT 9 1 Offer and acceptance 11 Unilateral and bilateral contracts 12 Offer 12 Invitations to treat 14 How long does an offer last? 17 Acceptance 23 Acceptance must be communicated 29 Exceptions to the communication rule 29 Ignorance of the offer 34 Cross offers 34 Time of the formation of the contract 35 Offer and acceptance implied by the court 35 Auctions, tenders and the sale of land 36 How important are offer and acceptance? 41 Problems with offer and acceptance 42 vii CONL_A01.qxd 4/1/09 2:25 PM Page viii Contents Answering questions 44 Summary of Chapter 1 47 Reading list 50 Reading on the internet 51 2 Certainty 52 Provision for clarification 54 Terms implied by statute 54 Previous course of dealing 55 Reasonableness 55 Custom 55 The ‘officious bystander’ 55 Removing minor uncertain terms 56 Answering questions 56 Summary of Chapter 2 57 Reading list 58 3 Intention to create legal relations 59 Social and domestic agreements 60 Commercial agreements 62 How important is intention to create legal relations? 66 Answering questions 66 Summary of Chapter 3 67 Reading list 68 4 Capacity 69 Minors 70 Mental incapacity 75 Corporations 76 Answering questions 77 Summary of Chapter 4 79 Reading list 81 Reading on the internet 81 5 Formalities 82 Contracts which must be made by deed 83 Contracts which must be in writing 83 Contracts which must be evidenced in writing 84 Answering questions 86 Summary of Chapter 5 86 Reading on the internet 86 viii CONL_A01.qxd 4/1/09 2:25 PM Page ix Contents 6 Consideration 88 What is consideration? 89 Performance of an existing duty 95 Waiver and promissory estoppel 102 Agreement by deed 107 Consideration and conditional gifts 108 Problems with consideration 108 The future of consideration 110 Reform 111 Answering questions 112 Summary of Chapter 6 114 Reading list 117 Reading on the internet 117 Part 2 THE CONTENTS OF A CONTRACT 119 7 Terms of the contract 121 Express terms 122 Oral statements 122 Written terms 125 Collateral contracts 127 Oral and written statements 128 Interpretation of express terms 128 Implied terms 131 Terms implied in fact 131 Terms implied in law 134 Terms implied by custom 135 Terms implied by trade usage 135 Entire agreement clauses 135 The relative importance of contractual terms 137 Conditions 137 Warranties 138 Innominate terms 138 Answering questions 141 Summary of Chapter 7 144 Reading list 147 Reading on the internet 147 8 Unfair contract terms 149 Exemption clauses 150 Common law controls 150 Statutory controls 159 ix CONL_A01.qxd 4/1/09 2:25 PM Page x Contents Unfair terms 166 Unfair Terms in Consumer Contracts Regulations 1999 166 Comparison between the 1999 Regulations