CONTRACT LAW CASES - Complete Set-small

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Harvey v Facey [1893] UKPC 1

Offer

In order to amount to an offer it must

Harvey sent a Telegram to Facey which stated: -

"Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid;"

Facey replied by telegram:-

"Lowest price for Bumper Hall Pen 900."

Carlill v Carbolic Smoke Ball co [1893] 1 QB 256

Offer

In order to amount to an offer it must be shown that

the offeror had the intention to be bound:

A Newspaper advert placed by the defendant stated:-

100 reward will be paid by the Carbolic Smoke Ball Company to any personwho contracts the influenza after having used the ball three times daily for two

weeks according to the printed directions supplied with each ball...

1000 is deposited with the Alliance Bank, shewing our sincerity in thematter."

Pharmaceutical Society of Great Britain v Boots

[1953] 1 QB 401

Goods on display in shops

Goods on display in shops are generally not offers

Boots introduced the then new self service system into their shops wherebycustomers would pick up goods from the shelf put them in their basket andthen take them to the cash till to pay. The Pharmaceutical Society of Great

Britain brought an action to determine the legality of the system with regard tothe sale of pharmaceutical products which were required by law to be sold inthe presence of a pharmacist. The court thus needed to determine where the

contract came into existence.

Fisher v Bell [1961] 1 QB 394

Goods on display in shops

Goods on display in shops are

The defendant had a flick knife displayed in his shop window with a price tagon it. Statute made it a criminal offence to 'offer' such flick knives for sale. Hisconviction was quashed as goods on display in shops are not 'offers' in thetechnical sense but an invitation to treat. The court applied the literal rule of

statutory interpretation.

Partridge v Crittenden (1968) 2 AllER 421

Advertisements

The defendant placed an advert in a classified section of a magazine offeringsome bramble finches for sale. S.6 of the Protection of Birds Act 1954 made itan offence to offer such birds for sale. He was charged and convicted of the

offence and appealed against his conviction.

Held:

The defendant's conviction was quashed. The advert was an invitation to treat

Spencer v Harding Law Rep. 5 C. P. 561

Contract by Tender

The request for tenders represents an invitation totreat and each tender submitted amounts to an offer

unless the request specifies that it will accept the

The defendants advertised a sale by tender of the stock in trade belongingEilbeck & co. The advertisement specified where the goods could be viewed,the time of opening for tenders and that the goods must be paid for in cash.No reserve was stated. The claimant submitted the highest tender but the

defendant refused to sell to him.

Held:

Heathcote Ball v Barry [2000] EWCA Civ 235Auctions

Where an auction takes place with reserve, each

bid is an offer which is then accepted by theauctioneer. Where the auction takes place without

The claimant had submitted the highest (and only) bids at an auction stated tobe without reserve. The items were two Alan Smart engine analysers which

were worth 14,000. The claimant had submitted bids of 200 each. Theauctioneer refused to sell them at that price. The claimant brought an action

for breach of contract claiming damages of 27,600.

Held:

Thornton v Shoe Lane Parking [1971]

2 WLR 585 Court of AppealMachines

The machine represents the offer, the

The claimant was injured in a car park partly due to the defendant'snegligence. The claimant was given a ticket on entering the car park after

putting money into a machine. The ticket stated the contract of parking wassubject to terms and conditions which were displayed on the inside of the carpark. One of the terms excluded liability for personal injuries arising through

negligence. The question for the court was whether the term was incorporated

into the contract ie had the defendant brought it to the attention of the claimantbefore or at the time the contract was made. This question depended upon

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Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109Termination of offers

An offer may be terminated by:

1. Death of offeror or offeree

2. Lapse of time

The defendant offered to purchase shares in the claimant company at acertain price. Six months later the claimant accepted this offer by which timethe value of the shares had fallen. The defendant had not withdrawn the offer

but refused to go through with the sale. The claimant brought an action forspecific performance of the contract.

Held:

Dickinson v Dodds (1876) 2 Ch D 4633. Revocation

An offeror may revoke an offer at anytime before acceptance takes place:

The defendant offered to sell his house to the claimant and promised to keepthe offer open until Friday. On the Thursday the defendant accepted an offer

from a third party to purchase the house. The defendant then asked a friend totell the claimant that the offer was withdrawn. On hearing the news, theclaimant went round to the claimant's house first thing Friday morning

purporting to accept the offer. He then brought an action seeking specificperformance of the contract.

Errington v Errington Woods [1952] 1 KB 290 Court

of Appeal

RevocationAn offeror may revoke an offer at any time before

acceptance takes place:

A father-in-law purchased a house for his son and daughter-in-law to live in.The house was put in the father's name alone. He paid the deposit as a

wedding gift and promised the couple that if they paid the mortgageinstalments, the father would transfer the house to them. The father then

became ill and died. The mother inherited the house. After the father's deaththe son went to live with his mother but the wife refused to live with the motherand continued to pay the mortgage instalments. The mother brought an action

to remove the wife from the house.

Dahlia v Four Millbank Nominees [1978] Ch 231Court of Appeal

Revocation

An offeror may revoke an offer at any time beforeacceptance takes place:

The claimant wished to purchase some property from the defendant. Theterms had been agreed but no written contract had been completed. The

defendant promised the claimant that if he arranged for a bankers draft for thedeposit to be delivered to the defendant before 10.00 am on the 22nd

December he would complete the written contract. The claimant duly compliedwith the request but the defendant refused to complete. The claimant broughtan action stating that unilateral contract existed and the defendant was thus

bound by that contract to complete the written contract for the sale of the

Hyde v Wrench (1840) 49 ER 132 Chancery

Division (Decided by Lord Langdale MR)Counter offer

A counter offer is where an offeree responds to an

The defendant offered to sell a farm to the claimant for 1,000. The claimantin reply offered 950 which the defendant refused. The claimant then sought

to accept the original offer of 1,000. The defendant refused to sell to theclaimant and the claimant brought an action for specific performance.

Held:

There was no contract. Where a counter offer is made this destroys the

Entorres v Miles Far East [1955] 2 QB 327 Court of AppealAcceptance

Once valid acceptance takes place a binding contract is formed. It is thereforeimportant to know what constitutes a valid acceptance in order to establish if

the parties are bound by the agreement. There are three main rules relating toacceptance:

The claimant sent a telex message from England offering to purchase 100tons of Cathodes from the defendants in Holland. The defendant sent back atelex from Holland to the London office accepting that offer. The question for

the court was at what point the contract came into existence. If the acceptancewas effective from the time the telex was sent the contract was made in

Holland and Dutch law would apply. If the acceptance took place when thetelex was received in London then the contract would be governed by English

law.

Felthouse v Bindley [1862] EWHC CPJ35 Court of Common Pleas

The general rule is that the offeror

must receive the acceptance before it

A nephew discussed buying a horse from his uncle. He offered to purchasethe horse and said if I don't hear from you by the weekend I will consider him

mine. The horse was then sold by mistake at auction. The auctioneer hadbeen asked not to sell the horse but had forgotten. The uncle commenced

proceedings against the auctioneer for conversion. The action depended uponwhether a valid contract existed between the nephew and the uncle.

Held:

Brogden v Metropolitan Railway

(1877) 2 App. Cas. 666

Acceptance can be through

The claimants were the suppliers of coal to the defendant railway company.They had been dealing for some years on an informal basis with no writtencontract. The parties agreed that it would be wise to have a formal contract

written. The defendant drew up a draft contract and sent it to the claimant. Theclaimant made some minor amendments and filled in some blanks and sent it

back to the defendant. The defendant then simply filed the document and

never communicated their acceptance to the contract. Throughout this periodthe claimants continued to supply the coal. Subsequently a dispute arose and

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Butler Machine Tool v Ex-Cell-O

Corporation [1979] 1 WLR 401

Court of Appeal

Ex-Cell-O wished to purchase a machine from Butler. Butler sent out aquotation of 75,535 along with a copy of their standard terms of sale. The

terms included a price variation clause and a term that the seller's terms wouldprevail over any terms submitted by a purchaser. The machine would be

delivered in 10 months. Ex-Cell-O put in an order for the machine at the statedprice and sent a set of their terms which did not include the price variation

clause. The order contained an acknowledgement slip which required asignature by Butler and was to be returned to Ex-Cell-O. This slip stated that

Adams v Lindsell (1818) 106 ER 250

The postal rule

Where it is agreed that the parties will use the post

as a means of communication the postal rule will

The defendant wrote to the claimant offering to sell them some wool andasking for a reply 'in the course of post'. The letter was delayed in the post. On

receiving the letter the claimant posted a letter of acceptance the same day.However, due to the delay the defendant's had assumed the claimant was not

interested in the wool and sold it on to a third party. The claimant sued forbreach of contract.

Held:

Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by LordLangdale MR)

The terms of the acceptance must exactly match the terms of the offer.

If the terms differ this will amount to a counter offer and no contract will exist:

The defendant offered to sell a farm to the claimant for 1,000. The claimantin reply offered 950 which the defendant refused. The claimant then sought

to accept the original offer of 1,000. The defendant refused to sell to theclaimant and the claimant brought an action for specific performance.

Held:

There was no contract. Where a counter offer is made this destroys the

Scammell and Nephew v Ouston

[1941] AC 251 House of LordsThe agreement must be certain

The parties entered an agreement whereby Scammell were to supply a vanfor 286 on HP terms over 2 years and Ouston was to trade in his old van for

100. There was then some disagreement and Scammel refused to supply thevan.

Held:

There was no certainty as to the terms of the agreement. Whilst there was

Sudbrook Trading Estate v Eggleton

[1983] AC AC 444 House of LordsThe agreement must be certain

A lease gave the tenant an option to purchase the freehold of the property at aprice to be agreed by two surveyors one appointed by the tenant and oneappointed by the landlord. The tenant sought to exercise the option but thelandlord refused to appoint a surveyor. The landlord claimed that the clause

was too vague to be enforceable as it did not specify a price.

Held:

Jones v Padavatton [1969] 1 WLR 328Court of Appeal

Intention to create legal relations insocial and domestic agreements

A mother promised to pay her daughter $200 per month if she gave up her jobin the US and went to London to study for the bar. The daughter was reluctant

to do so at first as she had a well paid job with the Indian embassy inWashington and was quite happy and settled, however, the mother persuaded

her that it would be in her interest to do so. The mother's idea was that thedaughter could then join her in Trinidad as a lawyer. This initial agreement

wasn't working out as the daughter believed the $200 was US dollars whereasthe mother meant Trinidad dollars which was about less than half what she

Balfour v Balfour [1919] 2 KB 571Intention to create legal relations in

social and domestic agreements

In social and domestic agreements the

A husband worked overseas and agreed to send maintenance payments tohis wife. At the time of the agreement the couple were happily married. The

relationship later soured and the husband stopped making the payments. Thewife sought to enforce the agreement.

Held:

The agreement was a purely social and domestic agreement and therefore it

Errington v Errington Woods [1952] 1 KB 290 Court

of AppealIn social and domestic agreements the law raises a

presumption that the parties do not intend to create

legal relations:

A father-in-law purchased a house for his son and daughter-in-law to live in.The house was put in the father's name alone. He paid the deposit as a

wedding gift and promised the couple that if they paid the mortgageinstalments, the father would transfer the house to them. The father then

became ill and died. The mother inherited the house. After the father's deaththe son went to live with his mother but the wife refused to live with the mother

and continued to pay the mortgage instalments. The mother brought an actionto remove the wife from the house.

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Merritt v Merritt [1970] 1 WLR 1211 Court of Appeal

In social and domestic agreements the law raises apresumption that the parties do not intend to create

legal relations:

This presumption may be rebutted by evidence to

A husband left his wife and went to live with another woman. There was 180left owing on the house which was jointly owned by the couple. The husband

signed an agreement whereby he would pay the wife 40 per month to enableher to meet the mortgage payments and if she paid all the charges in

connection with the mortgage until it was paid off he would transfer his shareof the house to her. When the mortgage was fully paid she brought an action

for a declaration that the house belonged to her.

Simpkins v Pays [1955] 1 WLR 975 Queen's Bench

Division

In social and domestic agreements the law raises apresumption that the parties do not intend to create

legal relations:

A Grandmother, granddaughter and a lodger entered into a weeklycompetition run by the Sunday Empire News. The coupon was sent in the

Grandmothers name each week and all three made forecasts and they took itin turns to pay. They had agreed that if any of them won they would share thewinnings between them. The grandmother received 250 in prize money andrefused to share it with the other two. The lodger brought the action to claim

one third of the prize money.

Esso Petroleum v Customs & Excise [1976] 1 WLR 1 House of LordsIntention to create legal relations in commercial agreements

Where an agreement is made in a commercial context, the law raises apresumption that the parties do intend to create legal relations by the

agreement:

Esso ran a promotion whereby any person purchasing four gallons of petrolwould get a free coin from their World Cup Coins Collection. The question for

the court was whether these coins were 'produced in quantity for generalresale' if so they would be subject to tax and Esso would be liable to pay

200,000. Esso argued that the coins were simply a free gift and thepromotion was not intended to have legal effect and also that there was no

resale.

Edwards v Skyways [1964] 1 WLR 349 Court ofAppeal

Intention to create legal relations in commercial

agreements

The claimant was an airline pilot working for the defendant. He was to bemade redundant. The defendants said that if he withdrew his contributions tothe company pension fund, they would pay him the equivalent of company

contributions in an ex gratia payment. The claimant agreed to this andwithdrew his contributions. The company then ran into further financial

difficulty and went back on their promise relating to the ex gratia payment.

Held:

Rose & Frank Co v Crompton Bros [1925] AC 445 House of Lords

Intention to create legal relations in commercial agreementsWhere an agreement is made in a commercial context, the law raises apresumption that the parties do intend to create legal relations by theagreement:Again this presumption can be rebutted by evidence to the

contrary:Binding in honour only clauses:

The claimants and defendants entered an agreement for the supply of somecarbonised tissue paper. Under the agreement the claimants were to be the

defendant's sole agents in the US until March 1920. The contract contained anhonourable pledge clause which stated the agreement was not a formal orlegal agreement and shall not be subject to the jurisdiction of the courts in

neither England nor the US. The defendants terminated the agreement earlyand the claimants brought an action for breach.

Ferrera v Littlewoods Pools [1998] EWCA Civ 618

Court of Appeal

Intention to create legal relations in commercialagreements

Where an agreement is made in a commercial

The facts were almost identical to those of Jones v Vernon Pools whereby theclaimant filled in a winning entry and sent it off to Littlewoods Pools.

Littlewoods disputed ever receiving the entry and denied the fact that theywould be legally obliged to pay out even if they had received the entry due to

the binding in honour only clause and based on the Court of Appeal precedentset in Jones v Vernon Pools. The claimant, a litigant in person, argued that the

decision in Jones v Vernons was outdated and should be overruled.

Kleinwort Benson (KB) v Malaysia MiningCorporation BHD (MMC BHD) [1989] 1 WLR 379

Court of Appeal

Intention to create legal relations in commercialagreements

Malaysia Mining Corporation Metals Ltd (MMC Metals) was a wholly ownedsubsidiary of the defendant, MMC BHD. MMC Metals approached the

claimant KB Bank for a loan. MMC Metals was a relatively newly formedcompany lacking in the size and resources of MMC BHD. The bank

approached MMC BHD asking if they would act as guarantor for the loan.MMC refused to act as guarantor but stated they it was their company policy

to ensure that their subsidiaries are always in a position to meet their debts. Inreliance of this letter of comfort the bank advanced money to MMC Metals.

Coward v MIB [1963] 1 QB 359 Court of Appeal

The distinction between social and domesticagreements and commercial agreements can be

fine.

Compare the case:

Coward was killed whilst riding pillion on a motorcycle driven by a friend andwork colleague on the way to work. The collision was due to the negligence of

the friend. Coward's widow sought to claim damages from the MotorInsurance Bureau since the rider's insurance did not cover pillion passengers.The Motor Insurance Bureau would only be obliged to pay if insurance for thepillion was compulsory. Insurance was only compulsory for pillions if they were

carried for hire or reward. Coward paid the friend a small weekly sum to takehim to and from work each day. The widow therefore argued that this was a

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Albert v MIB [1971] 3WLR 291 House of Lords

The distinction between social and domesticagreements and commercial agreements can be

fine.

Compare the case:

A docker was killed in a road collision on his way to work. He was apassenger in a car owned and driven by a work colleague. The driver gavelifts to the deceased and other dockers in return for payment. He had given

lifts to different dockers over a period of eight years. A claim was madeagainst the Motor Insurance Bureau (MIB) as the driver had no insurancecover for passengers. The MIB was only obliged to pay if there existed a

contract between the docker and the driver.

In contract law consideration isconcerned with the bargain of the

contract. A contract is based on anexchange of promises. Each party to a

Consideration must be something of value in the eyes of the law - (Thomas vThomas) (1842) 2 QB 851. This excludes promises of love and affection,gaming and betting etc. A one sided promise which is not supported by

consideration is a gift. The law does not enforce gifts unless they are made bydeed.

Whilst the common law strictly adheres to the requirement of consideration(although in some instances the courts seem to go to some lengths to inventconsideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros

Rules of consideration

There are various rules governing the law of consideration:

1. The consideration must not be past.

2. The consideration must be sufficient but need not be adequate.

3. The consideration must move from the promisee.

Re McArdle (1951) Ch 669 Court

of Appeal

Consideration must not be past:

Majorie McArdle carried out certain improvements and repairs on a bungalow.The bungalow formed part of the estate of her husband's father who had diedliving the property to his wife for life and then on trust for Majorie's husbandand his four siblings. After the work had been carried out the brothers andsisters signed a document stating in consideration of you carrying out the

repairs we agree that the executors pay you 480 from the proceeds of sale.However, the payment was never made.

Lampleigh v Braithwaite [1615] EWHC

KB J17Consideration must not be past:

Past consideration may be valid

The defendant had killed a man and was due to be hung for murder. He askedthe claimant to do everything in his power to obtain a pardon from the King.

The claimant went to great efforts and managed to get the pardon requested.The defendant then promised to pay him 100 for his efforts but never paid

up.

Held:

Chappel v Nestle [1960] AC 87 House of Lords

Consideration must be sufficient but need not be

adequate:There is no requirement that the consideration must

be market value, providing something of value is

Nestle ran a sales promotion whereby if persons sent in 3 chocolate barwrappers and a postal order for 1 shilling 6d they would be sent a record.

Chappel owned the copyright in one of the records offered and disputed theright of Nestle to offer the records and sought an injunction to prevent the

sales of the records which normally retailed at 6 shillings 8d. Under s.8 of theCopyright Act 1956 retailers were protected from breach of copyright if they

gave notice to the copyright holders of the ordinary retail selling price and paidthem 6.25% of this. Nestle gave notice stating the ordinary selling price was

Tweddle v Atkinson [1861] EWHC QBJ57 Queen's Bench Division

Consideration must move from the

promisee

A couple were getting married. The father of the bride entered an agreementwith the father of the groom that they would each pay the couple a sum of

money. The father of the bride died without having paid. The father of the sonalso died so was unable to sue on the agreement. The groom made a claim

against the executor of the will.

Held:

Collins v Godefrey (1831) 1 B & Ad

950 King's Bench DivisionAn existing public duty will not amount

to valid consideration

The claimant, Collins, had been subpoenaed to attend court as a witness inseparate court case involving the defendant, Godefrey. Godefrey had sued hisattorney for malpractice and Collins was required by the court to attend as anexpert witness. In fact Collins never gave evidence but was required to be on

standby for six days in case he was called. After the trial Collins gaveGodefrey an invoice to cover his time spent at court and demanded payment

by the next day. Without giving him the full day to pay, Collins commenced anaction to enforce payment.

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Glasbrook Bros v Glamorgan County Council [1925]

AC 270 House of LordsAn existing public duty will not amount to valid

consideration

The defendant owners of a colliery asked the police to provide protectionduring a miner's strike. The police provided the protection as requested and

provided the man power as directed by the defendants although they disputedthe level of protection required to keep the peace. At the end of the strike the

police submitted an invoice to cover the extra costs of providing the protection.The defendants refused to pay arguing that the police were under an existing

public duty to provide protection and keep the peace.

Ward v Byham [1956] 1 WLR 496Court of Appeal

An existing public duty will not amountto valid consideration

An unmarried couple had a child together and lived together for five years.The father then turned the mother out of the house and sent the child to livewith a neighbour and the father paid the neighbour 1 per week. The motherthen got a job as a live in house keeper and wished to have the daughter live

with her. The father agreed to allow the daughter live with the mother andagreed to pay her 1 per week provided she ensured the child was well

looked after and happy. The father made payments but then when the motherremarried he stopped making payments. The mother brought an action to

Stilk v Myrick [1809] EWHC KB J58King's Bench Division

An existing contractual duty will notamount to valid consideration

The claimant was a seaman on a voyage from London to the Baltic and back.He was to be paid 5 per month. During the voyage two of the 12 crew

deserted. The captain promised the remaining crew members that if theyworked the ship undermanned as it was back to London he would divide thewages due to the deserters between them. The claimant agreed. The captain

never made the extra payment promised.

Held:

Hartley v Ponsonby [1857] 7 EB 872

An existing contractual duty will notamount to valid consideration

If a party has an existing contractual

Half of a ship's crew deserted on a voyage. The captain promised theremaining crew members extra money if they worked the ship and completed

the voyage. The captain then refused to pay up.

Held:

The crew were entitled to the extra payment promised on the grounds thateither they had gone beyond their existing contractual duty or that the voyage

Williams v Roffey Bros [1990] 2 WLR

1153An existing contractual duty will not

amount to valid consideration

The defendants were building contractors who entered an agreement withShepherds Bush Housing Association to refurbish a block of 27 flats. This

contract was subject to a liquidated damages clause if they did not completethe contract on time. The defendants engaged the claimant to do the

carpentry work for an agreed price of 20,000. 6 months after commencingthe work, the claimant realised he had priced the job too low and would be

unable to complete at the originally agreed price. He approached thedefendant who had recognised that the price was particularly low and was

Scotson v Pegg [1861] EWHC Exch J2

An existing contractual duty will not amount to valid

considerationIf a party has an existing contractual duty to do an

act, this act can not be used as consideration for a

A purchaser of some coal paid the defendant to carry and to unload the coal.The claimant was the supplier of the coal who had also paid the defendant to

carry and unload the coal. The claimant brought an action to recover themoney paid arguing the defendant was already under an existing duty to carry

and unload the coal and thus provided no consideration.

Held:

Pinnel's Case 1602 5 Rep, 117 Court of Common PleasPart payment of a Debt

Part payment of a debt is not valid consideration for a promise to release thedebt in full:

Part payment of a debt is not valid consideration for a promise to forebear thebalance unless at the promisor's request part payment is made:

a). before the due dateb). with a chattel

Pinnel's Case 1602 5 Rep, 117 Court of Common Pleas

The claimant was owed 8 10 shillings. The defendant paid 5 2 shillings and2p. The claimant sued for the amount outstanding.

Held:

The claimant was entitled to the full amount even if they agreed to accept less.

Foakes v Beer (1883-84) LR 9 App Cas 605 House of LordsPart payment of a debt is not valid consideration for a promise to forebear the

balance unless at the promisor's request part payment is made:

a). before the due dateb). with a chattel

c). to a different destinationThis rule from Pinnel's case was affirmed by the House of Lords in:

Dr Foakes owed Mrs Beer 2,000 after she had obtained judgment againsthim in an earlier case. Dr Foakes offered to pay 500 immediately and the

rest by instalments, Mrs Beer agreed to this and agreed she would not seekenforcement of the payment provided he kept up the instalments. No mention

was made in this agreement of interest although judgment debts generallyincurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer

then brought an action for the interest.

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Hirachand Punamchand v Temple

[1911] 2 KB 330 Court of AppealPart payment of a Debt

Where part payment is made by a

The claimants were money lenders in India. They lent money to the defendantLieutenant Temple who was an army officer serving in India. The claimants

sought return of the money from the claimant but were unable to get anyresponse so they contacted his father. Some correspondence went betweenthe claimant and the father's solicitors. The claimants asked how much the

father would be prepared to pay to settle the son's accounts. An amount was

agreed which was a substantial, amount although not the full amount due. Theclaimant promised to send the promissory note relating to the son's debt to the

Promissory estoppel

Promissory estoppel is an equitable doctrine which in some instances canstop a person going back on a promise which is not supported by

consideration. Promissory estoppel was developed by an obiter statement byDenning J (as he then was) in Central London Property Trust Ltd v High Trees

Ltd [1947] KB 130 (Case summary). Denning J based the doctrine on thedecision in Hughes v Metropolitan Railway (1876-77) L.R. 2 App. Cas. 439(Case summary). The House of Lords affirmed the existence of promissory

estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR

Central London Property Trust v HighTrees House [1947] KB 130 High

CourtPromissory estoppel was developed

High Trees leased a block of flats from CLP at a ground rent of 2,500. It wasa new block of flats at the time the lease was taken out in 1937. The

defendant had difficulty in getting tenants for all the flats and the ground rentleft High Trees with no profit. In 1940 many of the flats were still unoccupiedand with the conditions of the war prevailing, it did not look as if there was tobe any change to this situation in the near future. CLP agreed to reduce therent to 1,250 during the war years. The agreement was put in writing and

High Trees paid the reduced rent from 1941. When the war was over the flats

Hughes v Metropolitan Railway

(1876-77) LR 2 App Cas 439 House ofLords

Denning J based the doctrine of

A landlord gave a tenant 6 months notice to carry out repairs failure to do sowould result in forfeiture of the lease. The landlord and tenant then entered

into negotiations for the tenant to purchase the freehold of the property. It wasthought by both parties that a conveyance of the property would take place.The tenant had not carried out the repairs as they believed they would bepurchasing the freehold and the repairs required by the landlord were not

essential to his use of the property. At the last minute negotiations broke downand the Landlord gave the tenant notice to quit for failure to carry out the

Tool Metal Manufacturing v Tungsten

[1955] 1 WLR 761 House of LordsThe House of Lords affirmed the

existence of promissory estoppel in

Tungsten had been infringing a patent right held by TMM. When TMM heardof this they waived all infringements in return for Tungsten paying 10%

Royalty and also 30% 'compensation' if sales exceeded 50KG in any month.These sums were excessive but Tungsten agreed to pay them otherwise theywould be faced with a claim for infringing the copyright. Tungsten struggled tomake payments. They got into arrears during the war times and an agreement

was reached to waive the 'compensation' payments during the war years.

Combe v Combe [1951] 2 KB 215Court of Appeal

Requirements of promissory estoppel:

A husband promised to make maintenance payments to his estranged wifebut failed to do so. The wife brought an action to enforce the promise invoking

promissory estoppel.

Held:

Her action failed. There was no pre-existing agreement which was latermodified by a promise. The wife sought to use promissory estoppel as sword

Woodhouse A.C. Israel Cocoa Ltd. v.Nigerian Product Marketing Co. Ltd.

[1972] AC 741

Requirements of promissory estoppel:

A contract for the sale of some coffee beans was agreed to be payable inpound sterling. The sellers mistakenly sent an invoice stating price waspayable in Kenyan Shillings. At the time the value of pound sterling and

Kenyan shillings was equal. The buyers accepted the delivery and invoice without objection. Subsequently the value of the pound fell quite dramatically in

relation to Kenyan shillings. The buyers then sought to revert to pound sterlingas stated in the contract.

Alan v El Nasr [1972] 2 WLR 800

Requirements of promissory

estoppel:

By contract, the sellers agreed to sell 250 tons of coffee beans at 262 Kenyanshillings per cwt to El Nasr payable on credit. At the time of the contract thevalue of Kenyan shillings and pound sterling were of equal value. Whilst thecontract stipulated the price payable in Kenyan shillings, the credit account

referred payment in pound sterling. There were a number of otherdiscrepancies between the credit agreement and contract such as date of

shipping and the quantity to be shipped. These other discrepancies wererectified in a revised agreement however, the new agreement still referred to

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D & C Builders v Rees [1966] 2 WLR

28 Court of AppealRequirements of promissory estoppel:

It must be inequitable to allow the

Mr Rees instructed the claimant to do some building work at his home to thevalue of 746. Mr Rees paid 250 on account and the claimant reduced thebill by 14 and there was a sum owing of 482. The claimant wrote to the

defendant several times pressing for payment but was unsuccessful there hadbeen no complaints as to the workmanship at this time. The claimant at the

time was in dire financial need and the business was verging on bankruptcy a

fact that Mrs Rees was aware of. The defendant telephoned the home andMrs Rees answered she made complaints about the work and said she would

Esso Petroleum v Mardon [1976] QB 801 Court of AppealStatements made during the course of negotiations can be classified as

either:1. An express term - if not fulfilled the innocent party may bring an action for

breach of contract.2. A representation - if not fulfilled the innocent party may bring an action for

misrepresentation.3. As part of a collateral contract - the innocent party may sue on the collateral

Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of anew Petrol station. Esso's experts had estimated that the petrol station wouldsell 200,000 gallons of petrol. This estimate was based on figures which wereprepared prior to planning application. The planning permission changed theprominence of the petrol station which would have an adverse affect on thesales rate. Esso made no amendments to the estimate. The rent under the

tenancy was also based on the erroneous estimate. Consequently it becameimpossible for Mr Mardon to run the petrol station profitably. In fact, despite

Oscar Chess Ltd v Williams [1957] 1 WLR 370 Court of AppealIn deciding whether a statement amounts to a term or representation the

courts look at four factors:1.The parole evidence rule

Where the contract has been put into writing only the terms included in thewritten document are terms any verbal statements will be representations.

2.Relative expertise of the partiesRelative expertise:

Mrs Williams purchased a second hand Morris car on the basis that it was a1948 model. The registration document stated it was first registered in 1948.The following year her son used the car as a trade in for a brand new HillmanMinx which he was purchasing from Oscar Chess. The son stated the car was

a 1948 model and on that basis the Oscar Chess offered 290 off thepurchase price of the Hillman. Without this discount Williams would not havebeen able to go through with the purchase. 8 months later Oscar Chess ltdfound out that the car was in fact a 1939 model and worth much less than

Dick Bentley Productions v Harold Smith Motors[1965] 1 WLR 623 Court of Appeal

Contractual term or representation

Relative expertise:If the representor has the greater knowledge, it is

Dick Bentley knew the defendant, who was a car trader specialising in theprestige market, for some time. He had asked him to look out for a well vetted

Bentley car. The defendant obtained a Bentley and recommended it to theclaimant. He told him that the car had been owned by a German Baron andhad been fitted with a replacement engine and gearbox and had only done20,000 miles since the replacement. Mr Bentley Purchased the car but it

developed faults. The defendant had done some work under the warranty butthen more faults developed. It transpired that the car had done nearer 100,000

Bannerman v White (1861) 10CBNS 844

Contractual term or representation

The claimant agreed by contract to purchase some hops to be used formaking beer. He asked the seller if the hops had been treated with sulphur

and told him if they had he wouldn't buy them as he would not be able to usethem for making beer if they had. The seller assured him that the hops had not

been treated with sulphur. In fact they had been treated with sulphur.

Held:

Routledge v Mackay [1954] 1 WLR615 Court of Appeal

Contractual term or representationTiming

The claimant acquired a Douglas BSA motorcycle and sidecar by exchanginganother motorcycle and paying 30. The registration documents stated that it

was a 1942 model and this is what the defendant stated the year of themotorcycle to be when the claimant cam to look at it. The motorcycle was in

fact a 1936 model but had been modified and re-registered by a previousowner. The purchaser went away to think about it and then returned a fewdays later a written agreement was produced to the effect of the exchangewhich ended with the words "It is understood that when the 30 is paid over

Poussard v Spiers (1876) 1 QBD 410Conditions

A condition is a major term of the

contract which goes to the root of the

Madame Poussard entered a contract to perform as an opera singer for threemonths. She became ill five days before the opening night and was not able to

perform the first four nights. Spiers then replaced her with another operasinger.

Held:

Madame Poussard was in breach of condition and Spiers were entitled to end

Bettini v Gye (1876) QBD 183

WarrantiesWarranties are minor terms of a

contract which are not central to the

Bettini agreed by contract to perform as an opera singer for a three monthperiod. He became ill and missed 6 days of rehearsals. The employer sacked

him and replaced him with another opera singer.

Held:

Bettini was in breach of warranty and therefore the employer was not entitledto end the contract. Missing the rehearsals did not go to the root of the

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Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 Court ofAppeal

Innominate termsThe innominate term approach was established in the case of Hong Kong Fir

Shipping. Rather than classifying the terms themselves as conditions orwarranties, the innominate term approach looks to the effect of the breach and

questions whether the innocent party to the breach was deprived ofsubstantially the whole benefit of the contract. Only where the innocent party

A ship was chartered to the defendants for a 2 year period. The agreementincluded a term that the ship would be seaworthy throughout the period of

hire. The problems developed with the engine of the ship and the engine crewwere incompetent. Consequently the ship was out of service for a 5 weekperiod and then a further 15 week period. The defendants treated this as a

breach of condition and ended the contract. The claimants brought an action

for wrongful repudiation arguing the term relating to seaworthiness was not acondition of the contract.

Schuler v Wickman Tools [1974] AC235 House of Lords

Even where the parties havethemselves classified the term as a

Schuler were manufacturers of certain tools and Wickman were a salescompany granted the sole right to sell certain tools manufactured by Schuler.A term of the contract between the parties was described in the contract asbeing a condition and provided that Wickman would send a sales person to

each named company once a week to solicit sales. This imposed an obligationto make 1,400 visits in total. Wickman failed to make some of the visits and

Schuler terminated the contract for breach of condition.

Lombard North Central v Butterworth[1987] QB 527

Even where the parties havethemselves classified the term as a

The defendant leased a computer from the claimant. The claimant was to pay584 by 20 instalments every 3 months. A term of the lease agreement

provided that punctual payment was required and breach of this term wouldentitle the lessor to terminate the agreement. The defendant got into arrearswith the instalments and the claimant took possession of the computer and

sold it on for 175. The claimant sued the defendant claiming arrears and allfuture payments amounting to 6,869 in total.

The Mihalis Angelos [1970] 3 WLR

601

The need for certainty in

The owners of the ship, The Mihalis Angelos, chartered the ship to thedefendant to use for the carriage of some cargo. A clause in the agreement

stated the ship was expected ready to load on 1st July. In fact the owners hadno grounds for believing the ship would be ready to load on that date as it wasin Hong Kong at the time and would not be ready until at least the 14th of Julyand in fact it was not ready at that date. The defendant cancelled the contracton 17th of July. The cargo that they expected to be carrying had not arrived

due to the bombing of a railway in Vietnam. The ship owners brought an

Bunge Corporation v Tradax[1981] 1 WLR 711 House of Lords

The need for certainty in

A contract for the sale 5,000 tons of soya beans required the buyers to givethe sellers 15 days notice of readiness of loading. This term was stated as a

condition. The buyers gave a shorter notice period and the sellers treated thisas terminating the contract and claimed damages. The price of soya beans

had dropped by over $60 per ton. The initial hearing was decide by arbitrationwhere it was held that the sellers were entitled to end the contract and

awarded $317.500 representing the decrease in value of the soya beans. Thebuyers appealed to the High court who reversed this decision applying the

Hutton v Warren [1836] EWHC Exch J61Terms implied by common law

The courts are reluctant to imply terms in to a contract at common law. It is theparties' role to agree the terms of their particular agreement. It is generally not

considered to be the role of the courts to rewrite a contract for the parties.Freedom of contract prevails. There are limited circumstances where the

courts will imply a term into a contract at common law:Terms implied through custom

The claimant was a farmer who had a tenancy on the defendant's fields. Theclaimant had planted corn and Barley on the fields and worked the fields toensure the crops would grow. Before the field was due to be harvested the

tenancy was terminated. The claimant then submitted a bill to the defendantfor the work and cost of seed spent on the field as was customary in farming

tenancies. The defendant refused to pay stating there was nothing in thetenancy agreement stating that such compensation was payable.

The Moorcock (1889) 14 PD 64Terms implied by common law



courts will imply a term into a contract at common law:Terms implied in fact

The business efficacy test:

This asks whether the term was necessary to give the contract businessefficacy ie would the contract make business sense without it? - The courts

will only imply a term where it is necessary to do so.

The claimant moored his ship at the defendant's wharf on the river Thames.The river Thames is a tidal river and at times when the tide went out the ship

Shirlaw v Southern Foundries [1939] 2 KB 206 Court of AppealTerms implied in fact

Terms implied as fact are based on the imputed intention of the parties. Twotests have developed:

The officious bystander test:Had an officious bystander been present at the time the contract was madeand had suggested that such a term should be included, it must be obvious

that both parties would have agreed to it.

The officious bystander test:

Had an officious bystander been present at the time the contract was madeand had suggested that such a term should be included, it must be obvious

that both parties would have agreed to it.

The claimant had been employed as a managing director of SouthernFoundries the office of employment was to last for 10 years. Federated

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Liverpool City Council v Irwin [1977] AC 239 House of LordsTerms implied by common law



courts will imply a term into a contract at common law:Terms implied in law

Liverpool city council owned a block of flats in which the defendant was atenant. The common parts of the flats, the lifts, stair cases, rubbish chutes etc,had fallen into disrepair. A rent strike was implemented by many of the tenants

including the defendant. The council sought to evict the defendant for nonpayment of rent and she counter claimed for breach of an obligation to repair.However, the tenancy agreement did not mention any obligation to repair. In

fact the tenancy agreement only imposed obligations on the tenant with nomention of the obligations of the landlord. The defendant asked the court to

Wilson v Best Travel [1993] 1 All ER353

Terms implied in lawIn addition to being a contract of a

The claimant was injured when he fell through some glass patio doors whilston holiday in Greece. The glass conformed to Greek safety standards but did

not conform to British safety standards. The claimant brought an actionagainst the travel agent asking for a term to be implied as a matter of law, thatall accommodation offered by the defendant should conform to British safety

standards.

Held:

Rowland v Divall [1923] 2 KB 500S. 12 implied terms as to title

S. 12 applies to all contracts for sale of goods so it will cover private sales inaddition to where goods have been purchased from a shop or other business.

S.12(1) implies a term that the seller has the right to sell the goods. Thiscovers situations where the seller is selling stolen goods (whether the actualthief or a subsequent sale in the chain). This term is a condition in all sales.A buyer who treats the contract as repudiated is entitled to return of the full

The claimant, a car dealer, bought a car from the defendant for 334. Hepainted the car and put it in his showroom and sold it to a customer for 400.Two months later the car was impounded by the police as it had been stolen.It was then returned to the original owner. Both the claimant and defendant

were unaware that the car had been stolen. The claimant returned the 400 tothe customer and brought a claim against the defendant under the Sale of

Goods Act.

Niblett v Confectioners' Material [1921]

3 KB 387 Court of AppealIn addition to applying to stolen goods

s.12(1) also applies where the seller

The claimant purchased 1,000 tins of condensed milk from the defendant. Thetins were labelled 'Nissly'. Nestle told the claimant that if they attempted to sell

these on, they would apply for an injunction to prevent the sale as the labelwas very similar to Nestle's labels for their condensed milk. The claimants

agreed not to sell them and brought an action against the sellers.

Held:

Microbeads v Vinhurst Road Markings

[1975] 1 WLRS.12 (2)(b) implies a term that the

purchaser will enjoy quiet possession

The claimant purchased some road marking machines from the defendant.After the purchase a third party was granted a patent right in the machines.This meant the claimant could not use the machines unless they were granteda licence to do so. There was no breach of s.12(1) as at the time of the sale

the seller had the right to sell the goods. However, there was a breach ofs.12(2) in that the buyer could not enjoy quiet possession of the goods.

Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564S.13 sale by description

s.13(1) provides that where there is a contract for the sale of goods bydescription, there is an implied term that the goods will correspond with the

description.This section applies where the sale is solely by description. If the buyer sees

the actual goods before the sale then s.13 can not be relied upon:

The claimant purchased a painting from the defendant for 6,000. Thepainting was described in an auction catalogue as being by German

impressionist artist Gabrielle Munter. Both the buyers and the sellers wereLondon art dealers. The sellers were not experts on German paintings whilst

the buyers specialised in German paintings. The purchasers sent their expertsto inspect the painting before agreeing to purchase. After the sale the buyers

discovered that the painting was a fake and worth less than 100. Theybrought an action based on s.13 Sale of Goods Act in that the painting was

Arcos v Ranaason [1933] AC 470House of Lords

S.13 sale by description

s.13(1) provides that where there is a

A contract for the sale of a quantity of wooden staves for making barrelsdescribed the staves as being 1/2 an inch thick. Some of the staves deliveredwere not 1/2 an inch thick but very slightly out. There was nothing wrong withthe quality of the wood and they could still be used for the intended purpose ofmaking barrels. The buyer rejected the goods as the price of wood had fallen

and he could purchase them cheaper elsewhere.

Held:

Re Moore & Landauer [1921] 2 KB 519

Court of AppealS.13 sale by description

s.13(1) provides that where there is a

A contract for the sale of 3,100 tins of peaches described the tins as beingpacked in cases of 30. When they arrived the tins were packed in cases of 24

although the agreed overall number of tins was supplied.

Held:

The purchaser was entitled to reject the goods as they were not as described.

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Stevenson v Rogers [1999] 1 All ER 613 Court of

AppealS. 14 Implied term as to quality

S.14 only applies where the seller sells goods in the

course of a business. It therefore does not apply to

The defendant was a fisherman. He sold his fishing boat to the claimant. Theclaimant brought an action against the defendant based on breach of S.14 ofthe Sale of Goods Act as the boat was not of satisfactory quality. S.14 onlyapplies to the sale of goods sold in the course of a business. The defendantargued that the sale of the boat was not in the course of his business. Hisbusiness was catching fish and selling them, he was not in the business of

buying and selling fishing boats.

Shine v General Guarantee Corp [1988] 1 All ER 911Liability under s.14 is strict and not dependant of proof of fault on the part of

the seller.The relevant parts of s.14 are as follows:

(2) Where the seller sells goods in the course of a business, there is animplied term that the goods supplied under the contract are of satisfactory

quality.(2A) For the purposes of this Act, goods are of satisfactory quality if they meet

The Acceptability Test Applies to consumer transactionsThe acceptability test looks at whether a reasonable purchaser would have

accepted the goods at the same price had they known of the defect:

The claimant purchased a second hand sports car from a car dealer. The cargave him constant problems and he then discovered that the car had

previously been in an accident and had been totally submerged in water. Theclaimant brought an action under s.14(2).

Aswan Engineering v Lupdine [1987] 1 All ER 135 Court of AppealLiability under s.14 is strict and not dependant of proof of fault on the part of

the seller.The relevant parts of s.14 are as follows:

(2) Where the seller sells goods in the course of a business, there is animplied term that the goods supplied under the contract are of satisfactory

quality.(2A) For the purposes of this Act, goods are of satisfactory quality if they meet

The Usability Test Applies to business to business transactions

The usability test is less generous than the acceptability test. This testrequires the court to consider if a reasonable purchaser could have used the

goods for purposes for which the goods were commonly supplied:

The claimants purchased some liquid waterproofing from the defendant whichwas contained in some heavy duty plastic pails. The pails were described as

Bartlett v Sidney Marcus ltd [1965] 1 WLR 1013 Court of AppealS.14 (2C) provides certain limitations to the application of s.14(2) as follows:(2C) The term implied by subsection (2) above does not extend to any matter

making the quality of goods unsatisfactory(a) which is specifically drawn to the buyer's attention before the contract is

made:

The claimant purchased a second hand Jaguar car from the defendant cardealer. The defendant told the claimant that the clutch was defective and thatthis was a minor repair costing around 2-3. He gave the claimant the choiceof either taking the car as it was and knocking 25 off the stated price or hewould repair it and charge the full price. The buyer chose to take it with thefault and get the discount. It then transpired that the fault would cost 84 to

repair. The buyer sought to bring a claim based on s.14.

Olley v Marlborough Court [1949] 1 KB 532Protection at common law

Protection at common law comes in two forms. Firstly, the courts will considerif the term has been incorporated into the contract. Secondly, the courts will

consider if the clause covers the loss in question.Incorporation of unfair terms

The general rule is that the term must be brought to the attention of thecontracting party before or at the time the contract was made. If the term was

The claimant booked into a hotel. In the hotel room on the back of the door a

notice sought to exclude liability of the hotel proprietors for any lost, stolen ordamaged property. The claimant had her fur coat stolen.

Held:

The notice was ineffective. The contract had already been made by the timethe claimant had seen the notice. It did not therefore form part of the contract.

Thornton v Shoe Lane Parking [1971] 2 WLR 585 Court of AppealProtection at common law




The claimant was injured in a car park partly due to the defendant'snegligence. The claimant was given a ticket on entering the car park after

putting money into a machine. The ticket stated the contract of parking wassubject to terms and conditions which were displayed on the inside of the carpark. One of the terms excluded liability for personal injuries arising through

negligence. The question for the court was whether the term was incorporatedinto the contract ie had the defendant brought it to the attention of the claimant

before or at the time the contract was made. This question depended upon

L'Estange v Graucob [1934] 2 KB 394 Court of AppealProtection at common lawProtection at common law


consider if the clause covers the loss in question.1. Incorporation of unfair terms

The general rule is that the term must be brought to the attention of the

The claimant purchased a cigarette vending machine for use in her cafe. Shesigned an order form which stated in small print 'Any express or implied,

condition, statement of warranty, statutory or otherwise is expressly excluded'.The vending machine did not work and the claimant sought to reject it under

the Sale of Goods Act for not being of merchantable quality.

Held:

Curtis v Chemical Cleaning [1951] 1 KB 805 Court of AppealProtection at common law




The claimant took her wedding dress to the cleaners. She was asked to sign aform. She asked the assistant what she was signing and the assistant told her

that it excluded liability for any damage to the beads. The form in factcontained a clause excluding all liability for any damage howsoever caused.

The dress was returned badly stained.

Held:

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Thompson v London, Midland and Scotland Railway Co [1930] 1 KB 41 Courtof Appeal

Reasonable notice of unfair terms

A party seeking to rely on an unfair term must demonstrate that they gavereasonable notice. ie they took reasonable steps to bring the term to the

The claimant was injured whilst stepping off a train. The railway companydisplayed prominent notices on the platforms excluding liability personal injuryand damage to property due to negligence. The tickets also stated they weresubject to terms and conditions displayed on the platform. The claimant wasilliterate and could not read the signs. She argued that the exclusion clause

was not incorporated into the contract as the railway company had not brought

the clause to her attention at the time the contract was made.

Interfoto Picture Library v Stilletto [1989] QB 433Reasonable notice of unfair terms

A party seeking to rely on an unfair term must demonstrate that they gavereasonable notice. ie they took reasonable steps to bring the term to the

attention of a reasonable person:

The claimants ran a photo library the defendant was in advertising. Theclaimants advanced some transparencies to the defendant for his perusal and

he was to get back to them as to which photos he would like to use. Thepackage of the photos contained a document stating that if any transparencieswere kept longer than 14 days a 5 +VAT holding fee would be charged perphoto per day. The defendant had not read this document and then forgot

about the transparencies and failed to return them for 6 weeks. The claimantsbrought an action claiming a holding fee of 23,783 as specified in the

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