english contract law

• a contract is a legal fact with human intervention and legal intended effect
• a contract is a legally binding agreement, that is an agreement enforceable in a court of law
• a contract's life cycle

  1. formation
  2. contents
  3. vitiating factors
  4. end of contract
• formation of a contract need not have a specific form: it can be created by word of mouth, by action, in writing
• exceptions apply to the formation of a contract:

  1. a contract must be BY DEED with regard to: sale of land or lease of property for more than three years
  2. a contract must be in WRITING with regard to: consumer credit agreements
• elements of a binding contract:

  1. offer
  2. acceptance
  3. consideration
  4. intention to create legal relations (presumed with the exception of domestic agreements, eg. between child and parents)
  5. absence of vitiating factors
• offer

  offeror - makes offer

  offeree - one to whom the offer is made

  it is NOT:

  • statement of intention (I wish you inherit this from me)
  • supply of information (Q: what is the lowest price? A: this is)
  • invitation to treat (display in a window shop)
• acceptance

  • can be expressed or implied
  • must be communicated to the offeror = meeting of the minds established through
  • subjective test: meeting of wills, what parties had in mind
  • objective test: what others can conclude from what parties had in mind
  • always good to have witnesses, docs, proof
• consideration


  'act or forbearance (something you will not do) or the promise thereof (of an act/forbearance); it is the price for which the promise of the other is bought'
• example of a consideration would be: "if A makes promise to B, B must do something will benefit A or be detrimental to B"
• why is there a consideration?

  in giving consideration, B makes clear that A's promise is taken seriously; a promise upon which no consideration is given (that the other party does not take seriously) cannot be enforced in court
• forms of consideration:

  1. executory: promise as to future action - A makes a promise to B, in return B makes a promise to A and thus gives executory consideration
  2. executed (in case of unilateral contract) - A promises something to B; B acts upon the promise and thus gives executed consideration

  'past' consideration cannot be enforced in the Courts: if B has already acted before A makes the promise, then this does not constitute a type of consideration
• can the performance of an already existing duty amount to consideration?

  No.

  Eg: Stilk v. Myrick: sailors on a ship were promised extra

  salary for what they were already obliged to do (otherwise the ship

  would not move at all): an unenforceable promise
• contents of a contract: contractual terms

  1. condition
  2. warranty
  3. innominate term
• a condition is a statement fundamental to the agreement; aggrieved

  party has the right to terminate the contract and refuse to perform its part or to go through with the contract and to sue for damages
• a warranty is a statement statement not fundamental to the agreement; aggrieved party can claim only damages
• innominate term: whether it is fundamental or not depends upon

  (f)actual circumstances:

  • if a party is derived from the benefit of of the whole contract, then the term will be a CONDITION
  • if only partly, then the term is a WARRANTY
• what are some vitiating factors?

  1. misrepresentation
  2. mistake
  3. duress (threat, violence)
  4. undue influence
• effect of the presence of vitiating factors on a contract include:

  • contract is VOID: no contract exists --> it cannot be enforced
  • contract is VOIDABLE: a contract has come into existence, but contract can be rescinded --> it can be enforced, unless it is revoked
• if contract between party A and party B is void, whereas the goods are already sold on to C, then A can recover the goods from C
• if contract between A and B is voidable only, whereas the goods are already sold on to C, then A cannot recover from C, but only claim damages from B
• non-contractual term?


  representation: a statement that is NOT part of the contract, but

  induces the other party into a contract (if the statement is incorrect,

  the term misrepresentation is used)
• if a vitiating factor occurs with misrepresentation (fraud)?


  contract is VOIDABLE (why? meeting of the minds but under influence of fraud)
• if a vitiating factor occurs with mistake?


  contract is VOID (why? no meeting of the minds!)
• if a vitiating factor occurs with duress?

  contract is VOIDABLE
• if a vitiating factor occurs with undue influence?

  contract is VOIDABLE (unless party waits too long in invoking)
• misrepresentation is a false statement of fact which induces the other party to enter into a contract
• a FRAUDULENT misrepresentation is 'deceit' (guilty mind needs to be proven): statement is knowingly false

  • VOIDABLE
  • remedy: rescission (return to the situation before the contract) + damages
• a NEGLIGENT misrepsentation is a statement made in the belief that it is true but without reasonable grounds

  • VOIDABLE
  • remedy: rescission + damages (damages possible since 1967, based upon Statute: Misrepresentation Act 1967)
• an INNOCENT misrepresentation is made in the belief that it is true but with reasonable grounds

  • VOIDABLE
  • remedy: rescission only
• unilateral mistake


  one of the parties is mistaken with regard to the identity of the other party

  • if so, VOID
  • if by a rogue, then NOT MISTAKE but MISREPRESENTATION: VOIDABLE
• (identical) common mistake


  both parties make the same, fundamental mistake as to the circumstances surrounding the transaction. VOID if:

  1. res extincta: parties think that the subject matter of the contract still exist, but it does not (cargo on a ship that has sunk)
  2. res sua: parties do not realise that one of the them already owns what it is contracting to receive from the other
• Mistake is not about quality, as not considered to be fundamental
• duress

  physical or economical force used to override other party's freedom to enter into contract or not --> VOIDABLE
• undue influence based upon inequality of bargaining power, which brings about a situation where there is no free consent due to the

  influence of one mind over the other --> VOIDABLE
• Undue influence developed in equity < outside the strict rules of

  common law
• there are four ways of ending a contract:

  1. agreement
  2. performances
  3. frustration
  4. breach
• agreement to end a contract is when parties agree to terminate a contract
• performance to end a contract: parties perform completely according to what they agreed: e.g. sale: pay price, to deliver what was agreed
• frustrations: impossibility of performance after the formation of the contract

  • when subject matter is destroyed (theatre burns down so the singer cannot perform)
  • when a particular event fails to take place but that was the sole purpose for the contract → VOIDABLE
  • where the commercial purpose of the contract is defeated (eg. transport w a ship that suddenly needs repairing)