Richards Paul Law of Contract 2017

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foundations series
Thirteenth Edition
Paul Richards
Edinburgh Gate
hirteenth edition published 2017
© Longman Group UK Limited 1992 (print)

British Library Cataloguing-in-Publication Data
Description: Thirteenth edition. | New York : Pearson, 2017.
Subjects: LCSH: Contracts—England.

Table of cases

Table of statutes

ntention to create legal relations


uress, undue influence and inequality of bargaining power


ischarge by performance and breach

ischarge by agreement

ischarge by frustration

ssignment of contractual rights


Table of cases
Table of statutes
1 The evolution and definition of the modern contract
Further reading
2 The fact of agreement
The fact of acceptance
The termination of offers
Certainty of terms
Further reading
3 Consideration
The definition of consideration
Consideration may be executed or executory but not past
Consideration must move from the promisee though not necessarily to the promisor 73
Consideration must be sufficient though not necessarily adequate
Further reading
4 Intention to create legal relations
Social and domestic arrangements
Commercial agreements
Further reading
5 Capacity
The scope of this chapter
The capacity of natural persons
The capacity of corporations
Further reading
6 Formalities
Contracts required to be made by deed
Contracts required to be in writing
Contracts required to be evidenced in writing
Further reading
The contents of the contract
7 The terms of the contract
Express terms
Principle 1 An Objective Test
Principle 2 The matrix of fact
Principle 3 The exclusionary rule
8 Exemption clauses
Incorporation of the exclusion clause into the contract
Construing exemption clauses
Other factors limiting the effectiveness of exemption clauses
Consumer Rights Act 2015 Part 2 – Unfair Terms in Consumer Contracts (B2C) 256
Further reading
Factors that vitiate a contract
9 Misrepresentation
The nature of the inducement
The fact of the inducement
The nature of the misrepresentation
Consumer Insurance (Disclosure and Representations) Act 2012
The remedies available for misrepresentation
Exclusion of liability for misrepresentation
Further reading
10 Mistake
Mistake at common law
Mistake in equity
Mistake as to the nature of the document signed
Further reading
11 Duress, undue influence and inequality of bargaining power
The common law doctrine of duress
The equitable doctrine of undue influence
Inequality of bargaining power
Further reading
12 Illegality
The classification of illegality
Acts illegal by statute
Acts illegal at common law
The effects of illegality
The Law Commission and the reform of the illegality defence
Contracts in restraint of trade
Further reading
Discharge of contracts
13 Discharge by performance and breach
Further reading
14 Discharge by agreement
Bilateral discharge
Unilateral discharge
Further reading
15 Discharge by frustration
The development of the modern doctrine
Applications of the doctrine of frustration
Factors affecting the operation of the doctrine
The legal effects of the doctrine of frustration
Further reading
Remedies for breach of contract
16 The common law remedy of damages
Assessment of the basis on which damages are awarded
Limitations on the availability of damages
Factors influencing the quantum of damages
Further reading
17 Equitable remedies and limitation of actions
Equitable remedies
Limitation of actions
Further reading
18 Quasi-contract and the law of restitution
Actions to recover moneys paid
Actions for payments made under a mistake of law
Claims in
Further reading
The rights and liabilities of third parties to the contract
19 Privity of contract
The general rule
The effect of the doctrine of privity of contract
Avoiding the doctrine of privity of contract
Exceptions to the doctrine of privity of contract
Reform of the doctrine of privity of contract
Further reading



Voluntary assignment at common law

Voluntary assignment in equity

Statutory assignment of contractual rights

Other factors affecting all types of assignment

Assignment of liabilities


Further reading

been introduced into Parliament and began what appeared to be a painfully slow path
ing a more transparent code for consumer rights. One other dimension to the Act is that
extend to Scotland or Northern Ireland. Similarly the provisions regarding the complaints
been subject to the inuence of European Directives and Regulations for some 40-odd
dum on the membership of the United Kingdom in the European Union, that tide may
In this edition, I have considered a large number of cases but pre-eminent among these
[2015] UKSC 67 on unfair terms;
Versloot Dredging BV v HI Gerling
Salt v Stratstone
[2015] EWCA Civ 745 on recission;
Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; Patel v Mirza [2016] UKSC 42 on the illegality defence; Bunge
Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 the reasonable foreseeability test in damages; Fulton
Travelplan SAU) of Spain,
[2015] EWCA Civ 1299 mitigation in damages; the conjoined appeals of
ParkingEye Ltd
oured to rewrite some quite large areas of text, particularly with regard to Chapter7 on
tives behind the writing of this book remain the same – that of presenting the law in a
As in previous years I thank my sons Phillip and William for their love, support and com
panionship as they move on in life through dicult and what can be hard and challenging
times. I thought that I had got rid of them but this seems to be a generation that keeps
ness of time William will nd his place. The truth of course is that I love them both dearly
and the home is never quite the same when they are not there. Such are the times we live in
We are grateful to the following for permission to reproduce copyright material:
[1974] 1 WLR 1403; Extract on page 10 from
Attorney-General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988; Extract on page 10 from Rainy Sky SA and others v Kookmin Bank [2011] 1 WLR 2900;
Extract on page 12 from
H.P. Bulmer Ltd
and Another
[1974] Ch. 401; Extracts on page
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256;
Brinkibon Ltd v Stahag
Errington v Err-ington and Woods [1952] 1 KB 290; Extract on page 75 from Chappell & Co. Ltd v Nestlé Co. Ltd [1960] AC
Bell v Lever Bros [1932] AC 161; Extract on page
368 from
(1871) LR 6 QB 597; Extract on page 369 from
Scriven Bros & Co.
Hindley & Co.
Solle v Butcher [1950] 1 KB 671; Extracts on page
382, page 385 from
(1867) LR 2 HL 149; Extract on page 383 from
Hudderseld Banking
Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450; Extract on pages 390–1 from Thomas Bates Ltd v Wyndham’s
Barton v Armstrong [1976] AC 104; Extract on
Thorne v. Motor Trade Association [1937] AC 797
[1987] Ch 378; Extract on page 427 from
(1886) 34 ChD 582; Extract on page
–Vita Food
St John
Enderby Town FC Ltd v The Football Association Ltd
[1971] Ch 591; Extract on page 443 from
Trendtex Trading Corporation
()Tinsley v Milligan [1993] 3 WLR 126;
[1990] 1 AC 109, 286; Extract
Saudi Economic and Development Co.
(SEDCO) Real Estate Ltd [2013] EWHC 1414 (Ch);
[2013] All ER (D) 43
AB Marintrans
Comet Shipping Co. Ltd [1985] 3 All
ER 442
ACG Acquisition XX LLC
Olympic Airlines SA (in
liquidation) [2013] EWCA Civ 369; affirming
[2012] EWHC 1070
Achilleas, The,
Transfield Shipping Inc
The Achilleas
Actionstrength Ltd
International Glass Engineering
[2003] UKHL 17; [2003] 2 AC 541
Adam Opel GmbH
Mitras Automotive (UK) Ltd
[2007] EWHC 3205 (QB)
Lindsell [1818] 1 B & Ald 681
Gramophone Co. Ltd [1909] AC 488
Dickson [1955] 1 QB 158; [1954] 3 All ER 397
AEG (UK) Ltd
Logic Resource Ltd [1996] CLC 265
Afovos Shipping Co. SA
Pagnan and Lli (
The Afovos
[1983] 1 All ER 449; [1983] 1 WLR 195
Agnew (The ‘Aegeon’) [2002] EWCA Civ
Agathon, The
[1982] 2 Lloyd’s Rep 211
Ageas (UK) Ltd
Kwik-Fit (GB) Ltd [2014] 2178 (QB)
Navigazione Alta Italia SpA [1984] 1
Lloyd’s Rep 353
Testing Services (UK) Ltd (
The Kriti Palm
[2006] EWCA Civ 1601; [2007] 1 All ER (Comm)
Ailsa Craig Fishing Co. Ltd
Malvern Fishing Co. Ltd
[1983] 1 All ER 101; [1983] 1 WLR 964
Air Studios (Lyndhurst) Limited T/A Air
Entertainment Group
Lombard North Central
PLC [2012] EWHC 3162
R T Briscoe (Nigeria) Ltd [1964] 1 WLR 1326;
[1964] 3 All ER 556
Alaskan Trader, The,
Clea Shipping Corporation
Bulk Oil International Ltd (
The Alaskan Trader
(No. 2)
Albacruz (Cargo Owners)
Albazero (Owners),
[1977] AC 744
Albright & Wilson UK Ltd
Biachem Ltd [2001]
EWCA Civ 301
Hendon Laundry Ltd [1945] 1 KB 189
Alec Lobb (Garages) Ltd
Total Oil Great Britain Ltd
[1983] 1 WLR 87; [1983] 1 All ER 944
A Leslie Ltd
Sheill [1914] 3 KB 607
Rayson [1936] 1 KB 169
Rolls-Royce Motor Cars [1996] RTR 95;
The Times,
4 May (CA)
Alfred McAlpine Construction Ltd
Panatown Ltd
[1998] 88 BLR 67; [1998]
The Times,
11 February
Skinner [1887] 36 ChD 145
Rescous [1677] 2 Lev 174
Alliance and Leicester Building Society
Edgestop Ltd
[1994] 2 All ER 38; [1993] 1 WLR 1462
Allied Maples Group Ltd
firm) [1995] 1 WLR 1602; [1995] 4 All ER 907
Allied Marine Transport Ltd
Vale Do Rio Doce
Navegaçao SA (
The Leonidas D
) [1985] 1 WLR 925;
[1985] 2 All ER 796
Alpenstow Ltd
Regalian Properties plc [1985] 2 All
ER 545; [1985] 1 WLR 721
Aluminium Industrie Vaassen BV
Aluminium Ltd [1976] 1 WLR 676
Amalgamated Investment and Property Co. Ltd
Walker and Sons Ltd [1976] 3 All ER 509; [1976] 120
Amalgamated Investment and Property Co. Ltd
Texas Commerce International Bank Ltd [1981] 3
All ER 577; [1982] QB 84
Wilson [1936] 176 Miss 645
Amoco Australia Pty Ltd
Rocca Bros Motor
Engineering Co. Pty Ltd [1975] AC 561; [1975] 2
WLR 779
Ampurius Nu Homes Holdings Ltd
Telford Homes
(Creekside) Ltd [2013] EWCA Civ 577; [2013] 4 All
ER 377
Anangel Atlas Compania Naviera
IHI Co. Ltd (No. 2)
[1990] 2 Lloyd’s Rep 526
Anderson Ltd
Daniel [1924] 1 KB 138
André et Cie SA


Bank of Montreal
Stuart [1911] AC 120
White [1861] 10 CBNS 844
Banque Bruxelles Lambert SA
Australia National
Industries [1989] 21 NSWLR 502
Banque Bruxelles Lambert SA
Eagle Star
Insurance Co. Ltd (
South Australia Asset
Management Corporation
York Montague Ltd)
[1997] AC 191
Banque Financière de la Cité
Parc (Battersea) Ltd
[1999] 1 AC 221; [1998] 2 WLR 475; [1998] 1 All ER
Barclays Bank plc
Boulter [1997] 2 All ER 1002;
[1997] 2 FLR 157
Barclays Bank plc
Fairclough Building Ltd [1995] 1
All ER 289; [1994] 3 WLR 1057, (CA)
Barclays Bank plc
O’Brien [1993] 4 All ER 417; [1993]
3 WLR 786
Barclays Bank plc
Thomson [1997] 4 All ER 816;
[1997] 1 FLR 156
Heathcote Ball & Co. (Commercial Auctions)
Ltd [2000]
The Times,
31 August (CA)
Sidney Marcus Ltd [1965] 1 WLR 1013;
[1965] 2 All ER 753
Armstrong [1976] AC 104; [1975] 2 WLR
1050; [1975] 2 All ER 465
County NatWest Limited [1999] Lloyd’s Rep
Basildon District Council
J E Lesser (Properties) Ltd
[1985] 1 All ER 20; [1984] 3 WLR 812
Reed Corrugated Cases Ltd [1956] 2 All ER
652; [1956] 1 WLR 807
Taylor [1967] 1 WLR 1193; [1967] 3 All ER 253
Hallwood Estates Ltd [1960] 1 WLR 549;
[1960] 2 All ER 314
Shaftesbury Hotels Ltd [1991] 2 All ER 477;
[1991] 2 WLR 1251 (CA)
Lever Bros [1931] 1 KB 577; [1932] AC 161
Bence Graphics International Ltd
Fasson UK Ltd
[1997] 3 WLR 205; [1996]
The Times,
24 October
Sawiris [2013] UKSC 50; [2013] 3 WLR 351
Bennett [1952] 1 KB 249; [1952] 1 All ER 413
Baxter [1886] 12 App Cas 167
Nettleford [1850] 3 Mac & G 94
Royal Insurance Co. Ltd [1937] 2 KB 197
Pamsons Motors (Golders Green) Ltd
[1987] 2 All ER 220; [1987] RTR 384
Beswick [1968] AC 58; [1968] 3 WLR 932
Gye [1876] 1 QBD 183
BICC plc
Bundy Corporation [1985] 1 All ER 417;
[1985] 2 WLR 132
Boyd Gibbons Ltd [1971] 2 All ER 183; [1971] 1
WLR 913
Bousted [1951] 1 All ER 92
Bilta (UK) Ltd
Nazir (No 2) [2015] UKSC 23
Paramount Estates Ltd [1956] 16 EG 396
Darnell [1704] 1 Salk 27
Wilkinson [1927] AC 177
Blackburn Bobbin Co. Ltd
Allen and Sons Ltd [1918]
2 KB 467
Blackpool and Fylde Aero Club Ltd
Borough Council [1990] 3 All ER 25; [1990] 1 WLR
Blankenstein, The,
Damon Cia Naviera SA
Lloyd International SA
South East Thames Regional Health Authority
[1985] IRLR 308; [1987] ICR 700
Williams [1824] 3 B & C 232
Phipps [1967] 2 AC 46; [1966] 3 WLR
Ting [2010] UKPC 21
Jones [1957] 2 H & N 564
Bovis Construction (Scotland) Ltd
Construction Ltd [1995] NPC 153; [1995]
19 October (HL)
Association of British Travel Agents Ltd
[1996] CLC 451; [1995]
The Times,
24 November
Bowmakers Ltd
Barnet Instrument Ltd [1945] KB 65
BP Exploration Co. (Libya) Ltd
Hunt (No. 2) [1979] 1
WLR 783; affirmed [1983] 2 AC 352 (HL)
BP Exploration Operating Co Ltd
Chevron Shipping
Co [2003] 1 AC 197
BP Refinery (Westernport) Pty Ltd
Shire of Hastings
[1977] 180 CLR 266
Calder [1895] 2 QB 253
Morgan [1862] 1 H & C 249
Cobarro [1947] KB 854; [1947] 2 All ER 101
Bolt Burdan [2004] EWCA Civ 1017
Woolley [1954] AC 333; [1954] 2 WLR 832
ex parte
[1859] 28 LJ Ch 50
Brikom Investments Ltd
Carr [1979] QB 467; [1979] 2
All ER 753
Brimnes, The
[1975] QB 929; [1974] 3 WLR 613
Brinkibon Ltd
Stahag Stahl und
Stahlwarenhandelsgesellschaft GmbH [1983] 2 AC
34; [1982] 2 WLR 264
British and Commonwealth Holdings plc
Holdings Inc. [1989] 3 All ER 492; [1989] 3 WLR
723 (CA)
British Columbia Saw Mill Co.
Nettleship [1868] LR
3 CP 499; 18 LT Rep NS 604
British Crane Hire Corporation Ltd
Ipswich Plant
Hire Ltd [1975] QB 303; [1974] 2 WLR 856
British Reinforced Concrete Engineering Co. Ltd
Schelff [1921] 2 Ch 563
British Russian Gazette Ltd
Associated Newspapers
Ltd [1933] 2 KB 616
British Steel Corporation
Cleveland Bridge and
Engineering Co. Ltd [1984] 1 All ER 504; [1983]
Build LR 94
British Transport Commission
Gourley [1956] AC
185; [1956] 2 WLR 41
British Westinghouse Electric and Manufacturing Co.
Underground Electric Railways Co. of London
Ltd [1912] AC 673
Royal Insurance Co. [1866] 4 F & F 905
Britvic Soft Drinks
Messer UK Ltd [2002] EWCA Civ
548, [2002] 2 All ER (Comm) 321
Metropolitan Railway Co. [1877] 2 App Cas
KMR Services Ltd [1995] 4 All ER 598
Bryen and Langley Ltd
Boston [2005] EWCA Civ 973
Bunge Corporation
Tradax Export SA [1981] 2 All ER
Bunge SA
Kyla Shipping Co. Ltd (
The Kyla
) [2012]
EWHC 3522 (Comm); [2013] 1 Lloyd’s Rep 565
Bunge SA
Nidera BV [2015] UKSC 43
Haggis [1863] 14 CBNS 45
Butler Machine Tool Co. Ltd
Ex-Cell-O Corporation
(England) Ltd [1979] 1 All ER 965; [1979] 1 WLR
Kingsway Motors Ltd [1954] 1 WLR
1286; [1954] 2 All ER 694
Byrne & Co
Leon Van Tienhoven [1880] 5 CPD 344
Cadogan Petroleum Holdings Ltd
Global Process
Systems LLC [2013] EWHC 214 (Comm); [2013] 1
CLC 721
Campbell Discount Ltd
Bridge [1962] AC 600
Caparo Industries plc
Dickman [1990]1 All ER 568;
[1990] 2 WLR 358
Capes (Hatherden)Ltd
Western Arable Services Ltd
[2010] 1 Lloyd’s Rep 477
Car and Universal Finance Co. Ltd
Caldwell [1964] 1
All ER 290; [1964] 2 WLR 600
Carillion Construction Ltd
Felix (UK) Ltd [2001] BLR
Carbolic Smoke Ball Co. [1893] 1 QB 256
Casey’s Patents,
[1892] 1 Ch 104
Cavendish Square Holding BV
Talal El Makdessi
CCC Films (London) Ltd
Impact Quadrant Films Ltd
[1985] QB 16; [1984] 3 All ER 298
Cehave NV
Bremer Handelsgesellschaft GmbH (
Hansa Nord
) [1975] 3 All ER 739; [1975] 3 WLR 447
Cellulose Acetate Silk Co. Ltd
Widnes Foundry
[1925] Ltd [1933] AC 20
Central London Property Trust Ltd
High Trees House
Ltd [1947] KB 130; [1956] 1 All ER 256
Webster [1904] 1 KB 493
Barry UDC [1940] 1 KB 532
Hicks [1911] 2 KB 786
Leslie Frewin (Publishers) Ltd [1966] Ch 71;
[1966] 2 WLR 40
Chappell & Co. Ltd
Nestlé Co. Ltd [1960] AC 87;
[1959] 3 WLR 168
Charles Rickards Ltd
Oppenheim [1950] 1 KB 616;
[1950] 1 All ER 420
Chartbrook Ltd
Persimmon Homes Ltd [2009]
UKHL 38; [2009] AC 1101
Sullivan [1957] 2 QB 117; [1957] 2 WLR 528
Thomas [1994] 1 WLR 129; [1994] 1 FLR 118
Cherrilow Ltd
Richard Butler-Creagh [2011] EWHC
Chettiar [1962] AC 294
Cobb [1866] 14 LT 433
auer Membran und Zeltbau GmbH (for
merly Koch Hightex GmbH)
New Millennium
Experience Co. Ltd (formerly Millennium Central
Ltd) (No. 2) [2001]
The Times,
16 January


Esche [1924] 1 Ch 97
ChipsAway International Ltd
Errol Kerr [2009]
EWCA Civ 320; [2009] All ER (D) 180 (Apr)
Chwee Kin Keong
Digilandmall. com Pte Ltd [2004]
SLR (R) 594
CIBC Mortgages plc
Pitt [1993] 4 All ER 433; [1993] 3
WLR 802
Cine Bes Filmcilik VE Yapimcilik
International Pictures [2003] EWCA Civ 1669; 147
Sol Jo LB 1396; [2003] All ER (D) 312 (Nov)
Circle Freight International Ltd
Medeast Gulf
Exports Ltd [1988] 2 Lloyd’s Rep 427
Citibank NA
Brown Shipley & Co. Ltd; Midland
Brown Shipley & Co. Ltd [1991] 2 All ER
690; [1991] 1 Lloyd’s Rep 576
City and Westminster Properties [1934] Ltd
[1958] 2 All ER 733; [1958] 3 WLR 312
Clarion Ltd
National Provident Institution [2000] 2
Clea Shipping Corporation
Bulk Oil International
Ltd (
The Alaskan Trader
) (No. 2) [1984] 1 All ER 129;
[1983] 2 Lloyd’s Rep 645
Ollie Andersson (t/a Nordic Marine) [2003] 2
Lloyd’s Rep 32 (CA)
London and North Western Railway Co.
[1894] 2 QB 482
Cleveland Petroleum Co. Ltd
Dartstone Ltd [1969] 1
All ER 201; [1969] 1 WLR 116
Palumbo [1944] 2 All ER 497
Clydebank Engineering and Shipbuilding Co.
Jose Ramos Yzquierdo y Castaneda [1905] AC 6
Naviera Aznar SA [1960] 2 Lloyd’s Rep450
Cebrian (UK) Ltd [2003] EWCA Civ 1676;
[2004] ICR 568
P & M J Wright (Holdings) Ltd [2007] EWCA
Civ 1329, [2008] 1 WLR 643
Godefroy [1831] 1 B & Ad 950
Combe [1951] 2 KB 215; [1951] 1 All ER 767
Commonwealth of Australia
Vermayen [1990] 170
CLR 394
Compagnie Noga d’Importation et d’Exportation SA
Abacha [2003] EWCA Civ 1100; [2003] 2 All ER
(Comm) 915
The Barron Knights Ltd [1966] 1 WLR 87;
[1966] 110 SJ 71
Continental Tyre & Rubber Co Ltd
Trunk Trailer Ltd
[1987] S.L.T. 58
Co-operative Insurance Society Ltd
Argyll Stores
(Holdings) Ltd [1997] 2 WLR 898 (HL); [1996] 3
WLR 27 (CA)
Phibbs [1867] LR 2 HL 149
Willis [1906] 22 TLR 582
Rowlands [1836] 2 M & W 149
Hill [1947] KB 554; [1947] 1 All ER 103
County Personnel (Employment Agency) Ltd
Pulver & Co. [1987] 1 WLR 916; [1987] 1 All ER 289
Hastie [1856] HL Cas 673
Milbourn [1867] LR 2 Ex 230
Phillips Industries Ltd [1976] 3 All ER 161; [1976]
1 WLR 638
C & P Haulage
Middleton [1983] 3 All ER 94; [1983]
1 WLR 1461
Cramaso LLP
Ogilvie-Grant [2014] UKSC 9; [2014] 2
WLR 317
Hegeman-Harris Co. [1939] 1 All ER 662;
[1939] 4 All ER 68
Cannons Ltd [1936] 2 KB 403
Crédit Lyonnais Bank Nederland NV
Burch [1997] 1
All ER 144; [1997] 74 P & CR 384 (CA)
Cremdean Properties Ltd
Nash [1977] EG 63
Crest Nicholson (Londinium) Ltd
Investments Ltd [2010] EWCA Civ 1331
Cricklewood Property and Investment Trust Ltd
Leighton’s Investment Trust Ltd [1945] AC 221
Faithful & Gould Holdings Ltd [2004]
EWCA Civ 293; [2004] 4 All ER 447
CTI Group Incorporated
Transclear SA (
The Mary
) [2008] EWCA Civ 856, [2009] 2 All ER
CTN Cash and Carry Ltd
Gallaher Ltd [1994] 4 All
ER 714
British ‘Rema’ Manufacturing Co. Ltd
[1954] 1 QB 292; [1953] 3 WLR 923
Lindsay [1878] 3 App Cas 459
Misa [1875] LR 10 Ex 153
Chemical Cleaning and Dyeing Co. Ltd [1951]
1 KB 805; [1951] 1 All ER 631
Powell [1756] 6 Term R 320
Dadourian Group International Inc.
Simms [2009]
EWCA Civ 169
Damon Cia Naviera SA
Hapag-Lloyd International
SA (
The Blankenstein
) [1985] 1 All ER 475; [1985] 1
Dany Lions Ltd
Bristol Cars Ltd [2013] EWHC 2997
(QB); [2014] 1 Lloyd’s Rep 281
Darlington Borough Council
Wiltshier Northern Ltd
[1995] 1 WLR 68; [1995] 3 All ER 895
Four Millbank Nominees Ltd [1978] 2 All ER
557; [1978] 2 WLR 621
Daventry District Council
Daventry and District
Housing Ltd [2010] EWHC 1935
Presbyterian Church of Wales [1986] 1 WLR
Davis Contractors Ltd
Fareham UDC [1956] 2 All ER
145; [1956] 3 WLR 37
Dawsons Ltd
Bonnin [1922] 2 AC 413
D & C Builders Ltd
Rees [1966] 2 QB 617; [1966] 2
Hall [1828] 3 Russ 1
Jackson [2013] EWCA Civ 89
Decro-Wall International SA
Practitioners in
Marketing Ltd [1971] 2 All ER 216; [1970] 115 SJ 171
ICI [1999] 1 Lloyd’s Rep 387
De Francesco
Barnum [1890] 45 Ch D 430
De Mattos
Gibson [1843–60] All ER 803
Denny, Mott and Dickson Ltd
James B Fraser and
Co. Ltd [1944] AC 265; [1944] 1 All ER 678
Peek [1889] 14 App Cas 337
Deutsche Morgan Grenfell Group plc
Revenue Commissioners [2006] UKHL 49
D & F Estates Ltd
Church Commissioners for
England [1989] AC 177; [1988] 2 EGLR 213
Crasnianski [2001] EWHC 926 (Comm)
Dick Bentley Productions Ltd
Harold Smith (Motors)
Ltd [1965] 2 All ER 65; [1965] 1 WLR 623
Dodds [1876] 2 Ch D 463
British and International Mining and Finance
Corporation [1939] 1 KB 724
Hallett [1866] LR 2 Ch App 21
Dimskal Shipping Co. SA
International Transport
Workers Federation (
The Evia Luck
) [1992] 2 AC
152; [1991] 3 WLR 875
Director General of Fair Trading
First National Bank
plc [2001] UKHL 52; [2002] 1 AC 481; [2001] 3 WLR
Domsalla (t/a Domsalla Building Services)
[2007] All ER 255
Stevenson [1932] AC 562
Chappell [1996] 3 All ER 344; [1997] 1 WLR
426 (CA)
Olby (Ironmongers) Ltd [1969] 2 QB 158;
[1969] 2 WLR 673
White City Stadium [1935] 1 KB 110
Dresdner Kleinwort Ltd
Atrill [2013] EWCA Civ 394
DSND Subsea Ltd (formerly DSND Oceantech Ltd)
Petroleum Geo Services ASA [2000] BLR 530 QBD
Nadeem [1997] 2 All ER 253; [1998]
3 All ER 876 (CA)
Dungate [1965] 3 All ER 818; [1965] 1 WLR
Dunlop Pneumatic Tyre Co. Ltd
New Garage and
Motor Co. Ltd [1915] AC 79
Dunlop Pneumatic Tyre Co. Ltd
Selfridge & Co. Ltd
[1915] AC 847
Lambert [1839] 6 Cl & F 600
Durham Brothers
Robertson [1898] 1 QB 765
EA Grimstead & Son Ltd
McGarrigan (27 October
1999) (unreported)
East Ham Borough Council
Bernard Sunley Ltd
[1965] 3 All ER 619; [1965] 3 WLR 1096 (HL)
Maurer [1991] 2 All ER 733; [1991] 1 WLR 461
Pantiles (Plant Hire) Ltd [1981] 263 EG 61
Kenyon [1840] 11 A & E 438
Edgar [1980] 1 WLR 1410
Fitzmaurice [1885] 29 ChD 459
Lawson [2000] QB 501; [2000] 2 WLR 1091
Edmund Murray Ltd
BSP International Foundations
Ltd [1992] 33 Con LR 1
Carter [1893] AC 360
Skyways Ltd [1964] 1 All ER 494; [1964] 1
WLR 349
Edwinton Commercial Corporation
Russ (Worldwide Salvage and Towage) Ltd (
Sea Angel
) [2007] EWCA Civ 547; [2007] 2 All ER
(Comm) 634
Monkland Iron & Coal Co. [1886] 11
Enderby Town FC Ltd
The Football Association Ltd
[1971] Ch 591; [1970] 3 WLR 1021
Davidson [1840] 11 Ad and El 856
Miles Far East Corporation [1955] 2 QB 327;
[1955] 3 WLR 48


Equitable Life Assurance Society
Hyman [2002] 1 AC
408; [2000] 3 WLR 529
New Sombrero Phosphate Co. [1878] 3 App
Cas 1218
Errington and Woods [1952] 1 KB 290;
[1952] 1 All ER 149
Esso Petroleum Co. Ltd
Harper’s Garage (Stourport)
Ltd [1968] AC 269; [1967] 1 All ER 699
Esso Petroleum Co. Ltd
Mardon [1976] 2 All ER 5;
[1976] 2 WLR 583
Esso Petroleum Co. Ltd
Niad [2001] All ER 324
Manchester City Council [1979] 1 All ER 972;
[1979] 1 WLR 194, reversing [1978] 1 WLR 520
Gillespie Bros & Co.
Cheney, Eggar and Co. [1896] 2
QB 59
Glassbrook Bros
Glamorgan County Council [1925]
AC 270
Bromley [1912] 3 KB 474
Glencore Grain Rotterdam BV
Organisation for International Commerce [1997] 4
All ER 514; [1997] 2 Lloyd’s Rep 386
Global Tankers Inc
Amercoat Europa NV [1975] 1
Lloyd’s Rep 666
Glory Wealth Shipping Pte Ltd
Korea Line Corp (
) [2011] EWHC 1819 (Comm)
Margetson [1893] AC 351
Perry [1960] 1 WLR 9; [1960] 1 All ER 36
Golden Bear, The
[1987] 1 Lloyd’s Rep 330; [1987] 1
Golden Strait Corporation
Nippon Yusen Kubishka
Kaisha (
The Golden Victory
) [2007] UKHL 12; [2007]
2 AC 353
Goldman [1915] 1 Ch 292
Brickell [1987] 1 All ER 853; [1987] 2
WLR 133; [1987] Ch 378
Van Der Lann [1967] 2 QB 31; [1967] 2 WLR
Royal Insurance Co. [1858] 1 F & F 276
G Percy Trentham Ltd
Archital Luxfer [1993] 1
Lloyd’s Rep 25; 63 BLR 44
Grainger and Son
Gough [1896] AC 325
Gran Gelato Ltd
Richcliff (Group) Ltd [1992] 1 All ER
865; [1992] 2 WLR 867
Quinn [2013] EWCA Civ 24; [2013] 2 EGLR
Granville Oil and Chemicals Ltd
Davies Turner
and Co. Ltd [2003] EWCA Civ 570; [2003] 1 All ER
(Comm) 819
Graves [2007] EWCA Civ 660
Thames Trains [2009] UKHL 33; [2009] 4 All ER
Great Northern Railway Co.
Witham [1873] LR 9 CP
Great Peace Shipping Ltd
Tsavliris Salvage
(International) Ltd [2002] EWCA Civ 1407; [2002] 4
National Westminster Bank plc [2014]
EWHC (Ch) 1156
Tower Publishing Co. Ltd [1897] 1 Ch 21
Bailey [1966] 2 All ER 875; [1966] 3 WLR 618
Gulf International Ltd
Groupe Chimique Tunisien
[2009] EWHC 1684 (Comm); [2009] All ER (D) 164
GW Atkins Ltd
Scott [1980] 7 Const LJ 215
G W Plowman & Son Ltd
Ash [1964] 1 WLR 568;
[1964] 2 All ER 10
Baxendale [1854] 9 Exch 341
Halifax Mortgage Services Ltd
Stepsky [1996] 2 All
ER 277; [1996] 2 WLR 230
Hebert [1993] 2 SCR 159
Halpern [2007] EWCA Civ 291
Brizell [1957] Ch 169; [1957] 2 WLR 123
Hamsard 3147 Ltd (t/a Mini Mode Childrenswear)
Boots UK Ltd [2013] EWHC 3251 (Pat)
Hannah Blumenthal, The
[1983] 1 AC 854; [1982] 3
WLR 1149
Hanover Insurance Brokers Ltd and Christchurch
Insurance Brokers Ltd
Schapiro [1994] IRLR 82
Hansa Nord, The,
Cehave NV
Handelgesellschaft GmbH
Harbutt’s ‘Plasticine’ Ltd
Wayne Tank and Pump Co.
Ltd [1970] 1 QB 447; [1970] 2 WLR 198
Hardwick Game Farm
Suffolk Agricultural
Association [1969] 2 AC 31; [1968] 3 WLR 110
Harlingdon & Leinster Enterprises Ltd
Hull Fine Art Ltd [1990] 1 All ER 737; [1990] 3 WLR
Harmony Shipping Co. SA
Davis [1979] 3 All ER 177
Nickerson [1873] LR 8 QB 286
Sheffield United Football Club Ltd [1987] 2
All ER 838; [1987] 3 WLR 305
Watson [1791] Peake 102
Wyre Forest District Council [1990] 1 AC 831;
[1989] 2 WLR 790
Harsten Developments Ltd
Bleaken [2012] EWHC
2704 (Ch)
Ponsonby [1857] 7 E & B 872
Colin and Shields [1939] 3 All ER 566
Harvela Investments Ltd
Royal Trust Co. of Canada
(CI) Ltd [1986] AC 207; [1985] 3 WLR 276
Facey [1893] AC 552
VentilatorenFabrik Oelde GmbH [1988] Tr
LR 138


Zenab [1960] AC 316; [1960] 2 WLR 374
James and Charles Dodd (a fi rm) [1990] 2 All
ER 815
Zurich Insurance Co plc [2016] UKSC 48
Hammersmith and Fulham London Borough
Council [1992] 2 AC 1; [1991] 2 WLR 372
Lyons [1988] 58 P & CR 156
Hedley Byrne & Co. Ltd
Heller & Partners Ltd [1964]
AC 465; [1963] 3 WLR 101
Buckleton [1913] AC 30
Pape [1870] LR 6 Ex 7
Fraser [1892] 2 Ch 27
Herbert Morris Ltd
Saxelby [1916] AC 688
Herne Bay Steamboat Co.
Hutton [1903] 2 KB 683
Heron II, The,
Czarnikow Ltd
Raymond & Reid [1893] AC 22; 9 TLR 141
HIH Casualty and General Insurance Ltd
Hampshire Insurance Co. [2001] EWCA Civ 735;
[2001] 2 All ER (Comm) 39
Chase Manhattan Bank [2003] UKHL
6; [2003] 1 All ER (Comm) 349; [2003] 2 Lloyds Rep
Hillas & Co. Ltd
Arcos Ltd [1932] 38 Com Cas 23
H (Minors), In re [1996] AC 563
Hirachand Punamchand
Temple [1911] 2 KB 330
Hirji Mulji
Cheong Yue Steamship Co. [1926] AC 497
De La Tour [1853] 2 E & B 678
Isaacs [1952] 2 All ER 176; [1952] 1 TLR 1360
Rambler Motors (AMC) Ltd [1972] QB 71;
[1972] 2 WLR 401
Johnson [1775] 1 Cowp 341
Heatherfi eld Trust Ltd [1942] 2 KB 1
Holwell Securities Ltd
Hughes [1974] 1 WLR 155;
[1974] 1 All ER 161
Home Counties Dairies Ltd
Skilton [1970] 1 All ER
1227; [1970] 1 WLR 526
Hong Kong Fir Shipping Co. Ltd
Kawasaki Kisen
Kaisha Ltd [1962] 1 All ER 474; [1962] 2 WLR 474
Oates [2013] EWCA Civ 91; 3 All ER 211
Neuberger Products Ltd [1957] 1 QB 247;
[1956] 3 All ER 970
Allen [2014] UKSC 47
Hounslow Borough Council
Twickenham Garden
Developments Ltd [1971] Ch 233
Household Fire and Carriage Accident Insurance Co
Grant [1879] 4 Ex D 216
Tate [2011] EWCA Civ 1330; [2012] 2
Shirlstar Container Transport Ltd [1990] 3
All ER 366; [1990] 1 WLR 1292
Bishop [1909] 2 KB 390
Smith [1884] 27 ChD 89
H Parsons (Livestock) Ltd
Uttley Ingham [1978] 1 All
ER 525; [1977] 3 WLR 990
H (Minors),
[1996] AC 563; [1996] 1 All ER 1
Huddersfield Banking Co. Ltd
Henry Lister and Son
Ltd [1895] 2 Ch 273
Asset Managers plc [1995] 3 All ER 669 (CA)
Liverpool Victoria Legal Friendly Society
[1916] 2 KB 482
Metropolitan Railway Co. Ltd [1877] 2 App
Pendragon Sabre Ltd (t/a Porsche Centre
Bolton) [2016] EWCA Civ 18
Pump House Hotel Co. [1902] 2 KB 190
Hunt and Winterbotham (West of England) Ltd
(Parcels) Ltd [1962] 1 All ER 111; [1962] 2 WLR 162
Silk [1804] 5 East 449
Horne-Payne [1879] 4 App Cas 311; 43 JP 814
Warren [1836] 1 M & W 466
Huyton SA
Peter Cremer GmbH & Co. [1999] 1
Lloyd’s Rep 620
Wrench [1840] 3 Beav 334
Hyman [1929] AC 601
Hyundai Heavy Industries Co. Ltd
[1980] 2 All ER 29; [1980] 1 WLR 1129
Goldman Sachs International [2006]
EWHC 2887 (Comm); [2007] 1 Lloyd’s Rep 264
Imageview Management Ltd
Jack [2009] EWCA Civ
Impala Warehousng and Logistics (Shanghai) Co Ltd
Wanxiang Resources (Singapore) Pte Ltd [2015]
EWHC 811
Inche Noriah
Shaik Allie Bin Omar [1929] AC 127
Inclusive Technology
Williamson [2009] EWCA Civ
Ros Roca SA [2011] EWCA Civ 353;
[2012] 1 WLR 472
Little [1960] 3 All ER 332; [1960] 3 WLR 504
Inntrepreneur Pub Co.
East Crown Ltd [2000] 2
Lloyd’s Rep 611
Interfoto Picture Library Ltd
Stiletto Visual
Programmes Ltd [1988] 1 All ER 348; [1988] 2 WLR
P & CR 615
International Sales and Agencies Ltd
Marcus [1982]
3 All ER 551; [1982] 2 CMLR 46


Network Rail Infrastructure Ltd [2007]
Bus LR 1336
Henry [1903] 2 KB 740
Kyle Bay Ltd (t/a Astons Nightclub)
Subscribing under Policy No. 019057/08/01 [2007]
EWCA Civ 57; [2007] Lloyd’s Rep IR 460
Co-operative Insurance Society Ltd [1975] 2
Lloyd’s Rep 485
Braithwait [1615] Hob 105
O’Brien Homes Ltd [2004] EWHC 303
Lansing Linde Ltd
Kerr [1991] 1 All ER 418; [1991] 1
WLR 251
Economy Grocery Stores 65 NE 305 [1946]
Law Debenture Trust Corporation plc
Ural Caspian
Oil Corporation Ltd [1993] 2 All ER 355; [1993] 1
WLR 138
Lawrence David Ltd
Ashton [1991] 1 All ER 385;
[1989] IRLR 22
Jones [1974] Ch 112; [1973] 2 WLR 994
Lazard Bros and Co. Ltd
Fairfi eld Properties
(Mayfair) Ltd [1977] 121 SJ 793
Lazenby Garages Ltd
Wright [1976] 1 WLR 459;
[1976] 2 All ER 770
International Galleries [1950] 2 KB 86; [1950] 1
Stevens [2005] EWCA Civ 50; [2005] All ER
(D) 40 (Jan)
Leeds United Football Club
Chief Constable of West
Yorkshire Police [2012] EWHC 2113 (QB)
Leng & Co. Ltd
Andrews [1909] 1 Ch 763
Leonidas D, The,
Allied Marine Transport Ltd
Do Rio Doce Navegaçao SA
Les Affréteurs Réunis SA
Leopold Walford (London)
Ltd [1919] AC 801
Les Laboritoires Servier
Apotex Inc [2012] EWCA Civ
593; [2013] Bus LR 80; [2014] UKSC 55
Graucob [1934] 2 KB 394
Patent Steam Carpet Cleaning Co. Ltd
[1977] 3 WLR 90; [1977] 3 All ER 498
Baillie [1831] 7
Averay [1971] 3 All ER 907; [1971] 3 WLR 603
Liberty Mercian Ltd
Cuddy Civil Engineering Ltd
[2013] EWHC 2688; [2014] Build LR 179
Linden Gardens Trust Ltd
Lenesta Sludge Disposals
Littlewoods Organisation Ltd
Harris [1977] 1 WLR
1472; [1978] 1 All ER 1026
Liverpool City Council
Irwin [1977] AC 239; [1976]
2 WLR 562; [1976] 2 All ER 39
Lloyds Bank Ltd
Bundy [1975] QB 326; [1974] 3 WLR
Lloyds Bank plc
Waterhouse [1991] Fam Law 23;
[1993] 2 FLR 97
London and Northern Bank,
[1900] 1 Ch 220
London Borough of Newham
Khatan [2004] EWCA
Lloyd [1958] 1 WLR 753; [1958] 2 All ER 402
Lord Elphinstone
Monkland Iron and Coal Co.
Lord Strathcona Steamship Co.
Ltd [1926] AC 108; 95 LJPC 71; [1925] All ER Rep 87
Lordsvale Finance plc
Bank of Zambia [1996] QB 752
Love and Stewart
S Instone & Co. Ltd [1917] 33 TLR
Lovell and Christmas Ltd
Wall [1911] 104 LT 85
Lovell Projects Ltd
Legg and Carver [2003] 1 BLR 452
Lombank Ltd [1960] 1 WLR 196; [1960] 1 All
ER 611
Wagner [1852] 1 De GM & G 604
Lunn Poly Ltd
Liverpool and Lancashire Properties
Ltd [2006] EWCA Civ 430; [2006] 2 EGLR 29
Lupofresh Limited
Sapporo Breweries Limited (A
company incorporated under the laws of Japan)
[2013] EWCA Civ 948
Luxor (Eastbourne) Ltd
Cooper [1941] AC 108
MacLeod [2008] UKPC 64; [2010] 1 AC 298
Macmahon [1913] 1 IR 428
Pennine Insurance Co. Ltd [1969] 2 All ER
891; [1969] 2 WLR 1278
Mahkutai, The
[1996] 2 Lloyd’s Rep 1
[1921] 2 KB 716
Cavendish Square Holdings BV [2013]
EWCA Civ 1539; [2014] 3 All ER (Comm) 125
Bank of Credit and Commerce International
SA [1977] 3 All ER 1
Manchester Diocesan Council for Education
Commercial and General Investments Ltd [1969] 3
All ER 159; [1970] 1 WLR 241
Manifest Shipping Co. Ltd
Uni-Polaris Shipping Co.
Ltd [2001] UKHL 1, [2003] 1 AC 469; [2001] 2 WLR
Mannai Investment Co. Ltd
Eagle Star Life
Asssurance Co. Ltd [1997] AC 749; [1997] 3 All ER
Maple Flock Co. Ltd
Universal Furniture Producers
(Wembley) Ltd [1934] 1 KB 148
Maple Leaf Macro Volatility Mast Fund
[2009] 1 Lloyd’s Rep 475
Maredelanto Compania Naviera SA
The Mihalis Angelos
) [1970] 3 All ER 25;
[1970] 3 WLR 601; [1971] 1 QB 164
Maritime National Fish Ltd
Ocean Trawlers Ltd
[1935] AC 524
Marks and Spencer plc
BNP Baribas Securities
Services Trust Co (Jersey) Ltd [2015] UKSC 72
Marley Tile Co. Ltd
Johnson [1982] IRLR 75
Consett Iron Co. Ltd [1955] Ch 363; [1955] 2
WLR 463
Horner [1915] 3 KB 106
Provident Clothing and Supply Co. [1913]
AC 724
Midland Bank plc [1995] 1 All ER 929; [1995]
27 HLR 227
May & Butcher
R [1934] 2 KB 17n
McAlpine Capital Projects Ltd
Tilebox Ltd [2005]
BLR 271
McArdle, Re [1951] Ch 669; [1951] 1 All ER 905
Lane Fox and Partners Ltd [1995] EGCS
195; [1995]
The Times,
22 December (CA)
David MacBrayne Ltd [1964] 1 All ER
430; [1964] 1 WLR 125
Fortescue [1907] 2 KB 1
Commonwealth Disposals Commission
[1951] 84 CLR 377
Mediterranean Salvage and Towage Ltd
Trading and Commerce Inc (
The Reborn
) [2009]
EWCA Civ 531; [2010] 1 All ER (Comm) 1
Holbud Ltd [2013] EWHC 1506
Merritt [1970] 1 WLR 1121; [1970] 2 All ER
Mersey Steel & Iron Co.
Naylor Benzon and Co.
[1884] 9 App Cas 434
MFM Restaurants Pte Ltd
Fish & Co. Restaurants Pte
Ltd [2011] 1 SLR 150; [2010] SGCA 36
Mid Essex Hospital Service NHS Trust
Group UK and Ireland Ltd (t/a Medirest) [2013]
EWCA Civ 200; [2013] BLR 265
Shephard [1988] 3 All ER 17
Midland Bank Trust Co. Ltd
Green [1981] AC 513;
[1980] 125 SJ 33
Mihalis Angelos, The,
Maredelanto Compania
Naviera SA
Miller Paving Ltd
B Gottardo Construction Ltd
[2007] ONCA 422
Lord [1862] 4 De GF & J 264
M & J Polymers Ltd
Imerys Minerals Ltd [2008] 1
Lloyd’s Rep 541
Caixa d’Estalvis de Catalunya,
Tarragona i Manresa (Catalunyacaixa) (Case
C-415/11) [2013] 3 CMLR 89
Alaga & Co. (a firm) [1999] 3 All ER 699;
[2000] 1 WLR 1815
Monarch Airlines Ltd
London Luton Airport Ltd
[1997] CLC 698
Mondial Shipping and Chartering BV
Shipping Ltd [1995] CLC 1011
Moorcock, The
[1889] 14 PD 64
Moore & Co.
[1921] 2 KB 519
Piretta PTA Ltd [1999] 1 All ER 174; [1998]
5 May
Baron & Co. [1918] AC 1
Lep Air Services Ltd [1973] AC 331; [1972] 2
WLR 1175
Macferlan [1760] 2 Burr 1005
Motours Ltd
Euroball (West Kent) Ltd [2003] EWHC
614 (QB)
Lakeman [1871] LR 7 QB 196
M & S Drapers (A Firm)
Reynolds [1957] 1 WLR 9;
[1956] 3 All ER 814
Royal Bank of Scotland plc [2003] EWCA
Civ 1112; [2003] All ER (D) 439 (Jul)
Beasley [2006] EWCA Civ 370; [2006] All ER
Brentwood District Council [1991] 1 AC
398; [1990] 3 WLR 414
Leisureplay plc [2005] EWCA Civ
Museprime Properties Ltd
Adhill Properties Ltd
[1990] 36 EG 114; [1990] EGLR 196
Mutual Life and Citizen’s Insurance Co. Ltd
[1971] AC 793; [1971] 2 WLR 23


National Business Agency Ltd [1951] 2 All ER
264; [1951] 95 SJ 528
Inman [1908] 2 KB 1
National Carriers Ltd
Panalpina (Northern) Ltd
[1981] AC 675; [1981] 1 All ER 161
National Westminster Bank plc
Morgan [1985] 1 All
ER 821; [1985] 2 WLR 588
National Westminster Bank plc
Finance Co [2001] EWCA Civ 658
O’Callaghan [1990] 3 All ER 191
Adam [1886] 34 ChD 582
Newfoundland Government
Newfoundland Railway
Co. [1888] 13 App Cas 199
New Zealand Shipping Co. Ltd
A M Satterthwaite
& Co. Ltd (
The Eurymedon
) [1975] AC 154; [1974] 2
WLR 865; [1974] 1 Lloyd’s Rep 534
Nichols Advanced Vehicle Systems Inc.
De Angelis
(21 December 1979) (unreported)
Habton Farms [2003] 1 All ER 1136 (CA)
Nissan UK Ltd
Nissan Motor Manufacturing (UK)
Ltd [1994]
, 26 October
Maxim Nordenfelt Guns and
Ammunition Co. [1894] AC 535
North Ocean Shipping Co. Ltd
Construction Co. Ltd (
The Atlantic Baron
) [1979]
QB 705; [1979] 3 WLR 419; [1978] 3 All ER 1170
Reilly [1764] 2 Eden 286
Nurdin and Peacock plc
D B Ramsden and Co. Ltd
(No 2) [1999] 1 All ER 941; [1999] 1 WLR 1249
Occidental Worldwide Investment Corporation
Skibs A/S Avanti (
The Sibeon and The Sibotre
) [1976]
1 Lloyd’s Rep 293
Oceanbulk Shipping and Trading SA
TMT Asia Ltd
[2010] UKSC 44
Ocean Chemical transport Inc
Exnor Craggs Ltd
[2000] 1 All ER (Comm) 519
Ocean Marine Navigation Ltd
Koch Carbon Inc (
) [2003] 2 Lloyd’s Rep 693
Odenfeld, The,
Gator Shipping Corp
Oil SA (
The Odenfeld
Office of Fair Trading
Abbey National plc [2009]
UKSC 6; [2010] 1 All ER 667
Office of Fair Trading
Ashbourne Management
Services Ltd [2011] EWHC 1237
Office of Fair Trading
Foxtons Ltd [2009] EWCA Civ
288; [2009] 3 All ER 697
Davies [1862] 12 CBNS 748
Marlborough Court Ltd [1949] 1 KB 532;
[1949] 1 All ER 127
Omak Maritime Ltd
Mamola Challenger Shipping
Co. [2010] EWHC 2026 (Comm); [2011] Bus LR 212;
[2011] 2 All ER (Comm) 155
OMV Petrom SA
Glencore International AG [2016]
EWCA Civ 778
Oscar Chess Ltd
Williams [1957] 1 All ER 325; [1957]
1 WLR 370
Management and Music Ltd [1985] QB
428; [1984] 3 WLR 448
Overbrooke Estates Ltd
Glencombe Properties Ltd
[1974] 1 WLR 1335; [1974] 3 All ER 511
Overland Shoes Ltd
Schenkers Ltd [1998] 1 Lloyd’s
Rep 498
Overseas Medical Supplies Ltd
Orient Transport
Services Ltd [1999] CLC 1243
Paypal (Europe) Ltd [2012] EWHC 2659 (QB)
Page One Records Ltd
Britton [1968] 1 WLR 157;
[1968] 111 SJ 944
Pagnan SpA
Feed Products Ltd [1987] 2 Lloyd’s Rep
Pan Atlantic Insurance Co. Ltd
Pine Top Insurance
Co. Ltd [1995] 1 AC 501
Panatown Ltd
Alfred McAlpine Construction Ltd
[2000] 4 All ER 97
Sony Music International (UK) Ltd
[1994] 1 All ER 755; [1994] 2 WLR 241
Panchaud Frères SA
Établissements General Grain
Co. [1970] 1 Lloyd’s Rep 53
Hackney LBC [2002] EWHC 2441
Pao On
Lau Yiu Long [1979] 3 All ER 65; [1979] 3
WLR 435; [1980] AC 614
Papera Traders Co. Ltd
Hyundai Merchant Marine
Co. Ltd [2002] 2 All ER (Comm) 1083
Jane [1647] Aleyn 26
South Eastern Railway Co. [1877] 2 CPD 416
Taswell [1858] 2 De G & J 559
ParkingEye Ltd
Beavis [2015] EWCA Civ 402; [2015]
Parkingeye Ltd
Somerfield Stores Ltd [2012] EWCA
Civ 1338; [2013] QB 840
Crittenden [1968] 2 All ER 421; [1968] 1
WLR 1204
Ali [1984] Ch 283; [1984] 2 WLR 960
Mirza [2014] EWCA Civ 1047; [2016] UKSC 42
Russo-British Grain Export Co. [1927] 2 KB
Cave [1789] 3 Term Rep 148
Payzu Ltd
Saunders [1919] 2 KB 581
Brooks [1866] LR 1 Ex 213
Peekay Intermark Ltd
ANZ Banking Group Ltd
[2006] EWCA Civ 386; [2006] 2 Lloyd’s Rep 511
Pell Frischmann Engineering Ltd
Bow Valley Iran
Ltd [2009] UKPC 45; [2010] 4 LRC 200
Lord Baltimore [1750] 1 Ves Sen 444
Church of Scotland Board of National Mission
[2005] UKHL 73; [2006] 4 All ER 1345
Peregrine Systems Ltd
Steria Ltd [2005] EWCA Civ
Sidney Phillips & Son (a fi rm) [1982] 3 All ER
705; [1982] 1 WLR 1297
Peter Symmons & Co.
Cook [1981] 131 NLJ 758
Pettit [1970] AC 777; [1969] 2 WLR 966
Lanjani [1985] Ch 457
Pharmaceutical Society of Great Britain
Chemists (Southern) Ltd [1952] 2 All ER 456; [1953]
Philips Hong Kong Ltd
Attorney-General of Hong
Kong [1993] 9 Const LJ 202; [1993] 61 BLR 41
Phillips Products Ltd
Hyland [1987] 2 All ER 620;
[1987] 1 WLR 659 (CA)
Brooks Ltd [1919] 2 KB 243
Photo Production Ltd
Securicor Transport Ltd [1980]
AC 827; [1980] 2 WLR 283
Cuniberti [2002] EWHC 2923 (TCC); [2003]
BLR 487
Pickfords Ltd
Celestica Ltd [2003] EWCA Civ 1741;
[2003] All ER (D) 265 (Nov)
Picton Jones and Co.
Arcadia Developments [1989] 3
EG 85
IRC [1964] AC 612; [1962] 3 All ER 622
Wood [1953] 2 Ch 770; [1953] 3 WLR 522
Pindell Ltd
Air Asia Bhd [2010] EWHC 2516 (Comm);
[2011] 2 All ER (Comm) 396
Pink Floyd Music Ltd
AMI Records Ltd [2010] EWCA
Civ 1429; [2011] 1 WLR 770
Pinnel’s case [1602] 5 Co. Rep 117a
Pioneer Shipping Ltd
BTP Tioxide Ltd (
The Nema
[1981] 2 All ER 1030; [1981] 3 WLR 292
Colburn [1831] 8 Bing 14
Port Jackson Stevedoring Pty Ltd
Spraggon Pty (Australia) Ltd (
The New York Star
[1980] 3 All ER 257; [1981] 1 WLR 138
Port Line Ltd
Ben Line Steamers Ltd [1958] 2 QB 146;
[1958] 2 WLR 551
Spiers and Pond [1876] 1 QBD 410
Lee [1908] 99 LT 284
Powell [1900] 1 Ch 243
Simmonds [1971] 3 All ER 237; [1971] 1 WLR
President of the Methodist Conference
Parfitt [1984]
Pretty Pictures
Quixote Films Ltd [2003] EWHC 311
Easton [1833] 4 B & Ad 433
Strange [1978] Ch 337; [1977] 3 WLR 943
Printing and Numerical Registering Co
[1875] LR 19 Eq 462
Briggs [1980] Ch 338; [1979] 3 WLR 868
Proactive Sports Management Ltd
Rooney [2011]
EWCA Civ 1444; [2012] IRLR 241
Proctor & Gamble Co
Svenska Cellulosa
Aktiebolaget SCA [2012] EWCA Civ 1413
Proform Sports Management Ltd
Proactive Sports
Management Ltd [2006] EWHC 2903 (Ch); [2007]
1 All ER 542
Progress Bulk Carriers Ltd
Tube City IMS LLC (
Cenk Kaptanoglu
) [2012] EWHC 273 (Comm);
[2012] 2 All ER (Comm) 855
Prudential Assurance Co. Ltd
Ayres [2007] EWHC
775 (Ch); [2007] 3 All ER 946
[1917] 1 ChD 9
Puerto Buitrago, The,
Attica Sea Carriers
Ferrostaal Poseidon Bulk Reederei
The Puerto Buitrago
P [1957] NZLR 854
Campbell [1856] 6 E & B 370
Cole [1883] 32 WR 185
Burch Bros (Builders) Ltd [1966] 2 QB 370;
[1966] 2 WLR 1017
Q [2008] EWHC 1874 (Fam); [2009] 1 FLR 935
Granatino [2010] UKSC 42; [2011] 1 All
ER 373


Wichelhaus [1864] 2 H&C 906
Raiffeisen Zentralbank Osterreich AG
Royal Bank of
Scotland [2010] EWHC 1392; [2010] All ER (D) 111
Miles [1981] AC 1050; [1980] 2 WLR 847
Rainy Sky SA
Kookmin Bank [2011] UKSC 50; [2012]
Ramsgate Victoria Hotel Co. Ltd
Montefiore [1866]
LR 1 Ex 109
Rank Enterprises
Gerard [2000] 1 All ER (Comm)
R & B Customs Brokers Co. Ltd
United Dominions
Trust Ltd (Saunders Abbott [1980] Ltd, third party)
[1988] 1 All ER 847; [1988] 1 WLR 321
Reading Festival Ltd
West Yorkshire Police Authority
[2006] EWCA Civ 524; [2006] 1 WLR 2005
Reardon Smith Line Ltd
Yngvar Hansen-Tangen
[1976] 1 WLR 989; [1976] 3 All ER 570
Hurd [1881] 20 ChD 1
Regalian Properties plc
London Dockland
Development Corporation [1995] 1 WLR 212;
[1995] 1 All ER 1005
Regus (UK) Ltd
Epcot Solutions Ltd [2008] EWCA
Civ 361; [2009] 1 All ER (Comm) 586
Beveridge [2006] EWCA Civ 1659; [2007]
Bus LR 412
Union Manufacturing Co (Ramsbottom) Ltd
[1918] 1 KB 592
Republic of India
India Steamship Co. [1998] AC
878; [1997] 4 All ER 380
Mellish [1924] 2 Bing 229
Riverplate Properties Ltd
Paul [1975] Ch 133
Gray [1913] 1 KB 520
[1884] 27 ChD 160
Harman [1848] 1 Ex 855
Robophone Facilities Ltd
Blank [1966] 1 WLR 1428;
[1966] 3 All ER 128
Rock Refrigeration Ltd
Jones [1997] 1 All ER 1; [1996]
IRLR 675
Parish (Scarborough) Ltd [1987] 2 All ER 232;
[1987] 2 WLR 353
Rolled Steel Products (Holdings) Ltd
British Steel
Corporation [1985] 3 All ER 1016; [1985] 2 WLR
Rolls-Royce Power Engineering plc
Consulting Engineers Ltd [2003] EWHC 2871
(TCC); [2004] 2 All ER (Comm) 129
Worsley [1969] 1 AC 191; [1967] 3 WLR 1666
Thomas [1842] 3 QB 234
Rose and Frank Co.
J R Crompton and Bros [1925]
AC 445
Grant [1828] 4 Bing 653
McKay [1954] 1 All ER 855; [1954] 1 WLR
Rover International Ltd
Cannon Film Sales Ltd (No.
3) [1989] 3 All ER 423; [1989] 1 WLR 912
Rowallan Group Ltd
Edgehill Portfolio No. 1 Ltd
[2007] EWHC 32 (Ch); [2007] All ER (D) 106 (Jan)
Turner Hopkins & Partners [1980] 2 N.Z.L.R.
Divall [1923] 2 KB 500
Cox [1881] 17 ChD 520
Royal Bank of Scotland
Satef-Huttenes Albertus Spa
Paloma Tercera
Shipping Co. SA (
The Pegase
) [1981] Lloyd’s Rep 175
Anglia Building Society,
Lee [1971] AC 1004; [1970] 3 All ER 961
Edwards [1987] 2 All ER 651; [1987] 1 WLR
Southern Health and Social Services Board
[1992] 1 AC 294; [1991] 4 All ER 563
Scammell and Nephew Ltd
Ouston [1941] AC 251
Scandinavian Trading Tanker Co. AB
Flota Petrolera
Ecuatoriana (
The Scaptrade
) [1983] 2 All ER 763;
[1983] 2 AC 694
Read [1913] 2 IR 81
; Official Receiver
Superintendents (London) Ltd and Schebsman
[1944] Ch 83
Schroeder Music Publishing Co. Ltd
Macaulay [1974]
1 WLR 1308; [1974] 3 All ER 616
Schuler AG
Wickman Machine Tool Sales Ltd [1974]
AC 235; [1973] 2 WLR 683
Pegg [1861] 6 H & N 295
Avery [1856] 5 HL Cas 811
Scriven Bros and Co.
Hindley and Co. [1913] 3 KB
Scruttons Ltd
Midland Silicones Ltd [1962] 1 All ER
1; [1962] 2 WLR 186; [1962] AC 446
Sealace Shipping Co. Ltd
Oceanvoice Ltd (
The Alecos
) [1991] 1 Lloyds Rep 120
Selectmove Ltd,
[1995] 2 All ER 531; [1995] 1 WLR
University of West Indies [1983] 1
WLR 585; [1983] 1 All ER 824
Shadwell [1860] 9 CBNS 159
Robinson & Co. 1920 SC (HL) 103
Shanklin Pier Ltd
Detel Products Ltd [1951] 2 KB
854; [1951] 2 All ER 471
Sharland [2015] 3 WLR 10
Sharneyford Supplies Ltd
Edge [1985] 1 All ER 976;
[1985] 3 WLR 1
Groom [1970] 2 QB 504; [1970] 2 WLR 299
Shearson Lehman Hutton Inc.
Maclaine Watson &
Co. Ltd (No. 2) [1990] 3 All ER 723; [1990] 1 Lloyd’s
Rep 441
Giant Food Inc 318 A 2d 894 [1974]
Shell (UK) Ltd
Lostock Garages Ltd [1976] 1 WLR
1187; [1976] 120 SJ 523
General Guarantee Corporation [1988] 1 All
ER 911; [1988] TLR 88
Southern Foundries [1926] Ltd [1939] 2 KB
Shogun Finance Ltd
Hudson [2001]
The Times,
4 July
(CA); [2003] UKHL 62; [2004] 1 AC 919; [2004] 1
All ER 215
Shoreline Housing Partnership Limited
Limited [2013] EWCA Civ 639; [2013] BLR 393
Downs Surgical plc [1984] 1 All ER 7; [1984]
128 SJ 221
US 92 US 73 [1875]
Simona, The
Fercometal SARL
Shipping Co. SA
Pays [1955] 3 All ER 10; [1955] 1 WLR 975
London and North Western Railway
Company (1875-76) LR 1 QBD 274
Norfolk and Norwich University Hospital
Trust [2011] EWCA Civ 1149; [2012] QB 640
Beale [1840] 11 A & E 983
Slade’s case [1602] 4 Co. Rep 92a
Lea and Kemsley [2011] EWCA Civ 1325
Smith New Court Securities Ltd
Scrimgeour Vickers
(Asset Management) Ltd [1996] 4 All ER 769; [1996]
3 WLR 1051
Eric S Bush (A Firm) [1990] 1 AC 831; [1989] 2
Hughes [1871] LR 6 QB 597
Kay [1859] 7 HLC 750; [1859] VII HLC 749
Land and House Property Corporation [1884]
SNCB Holding
UBS AG [2012] EWHC 2044 (Comm)
John Snelling Ltd [1973] QB 87; [1972] 2
Société Italo-Belge pour le Commerce et l’Industrie SA
Palm and Vegetable Oils (Malaysia) Sdn Bhd (
Post Chaser
) [1982] 1 All ER 19; [1981] 2 Lloyd’s Rep
Butcher [1950] 1 KB 671; [1949] 2 All ER 1107
South Caribbean Trading Ltd
Trafi gura Beheer
[2005] 1 Lloyd’s Rep 128
Southern Water Authority
Carey [1985] 2 All ER
Spencer’s case [1583] 5 Co. Rep 16a
Harding [1870] LR 5 CP 561


Spice Girls Ltd
Aprilia World Service BV [2002]
EWCA Civ 15
Glencrown Properties Ltd [1991] 1 All ER 600;
[1991] 2 WLR 931
Sport International Bussum BS
Inter-Footwear Ltd
[1984] 2 All ER 321; [1984] 1 WLR 776
National Amalgamated Stevedores and
Dockers Society [1956] 2 All ER 221; [1956] 1 WLR
Springwell Navigation Corporation
J P Morgan
Chase Bank [2010] EWCA Civ 1221; [2010] All ER
(D) 08 (Nov)
Bradshaw [1956] 2 All ER 121; [1956] 1 WLR
Stag Line Ltd
Tyne Ship Repair Group Ltd [1984] 2
Lloyd’s Rep 211
St Albans City and District Council
Computers Ltd [1996] 4 All ER 481; [1996]
14 August (CA)
Standard Chartered Bank
Pakistan National
Shipping Corporation [2003] 1 AC 959
Bowring [1885] 31 ChD 282
Troman [1948] 2 KB 48; [1948] 1 All ER 599
Starside Properties Ltd
Mustapha [1974] 2 All ER 567;
[1974] 1 WLR 816
Macdonald [1843] 6 Man & G 593
Scala [1923] 2 Ch 452
Steria Ltd
Sigma Wireless Communications Ltd
[2008] BLR 79
Sterling Hydraulics Ltd
Dichtomatik Ltd [2007] 1
Lloyd’s Rep 8; [2006] EWHC 2004 (QB)
Stevenson, Jacques & Co
McLean [1880] 5 QBD 346
Rogers [1999] 1 All ER 613; [1999] 2 WLR
Stewart Gill Ltd
Horatio Myer & Co. Ltd [1992] 2 All
ER 257; [1992] 2 WLR 721
Myrick [1809] 2 Camp 317
St John Shipping Corporation
Joseph Rank Ltd
[1957] 1 QB 267; [1956] 3 All ER 683; [1956] 3 WLR
St Martin’s Case,
Linden Gardens Trust Ltd
Lenesta Sludge Disposals Ltd; St Martin’s Property
Corporation Ltd
Sir Robert McAlpine Ltd
St Martin’s Property Corporation Ltd
Sir Robert
McAlpine Ltd (formerly Sir Robert McAlpine and
Sons Ltd) [1994] 1 AC 85; [1993] 3 All ER 417; [1993]
Johnson [1954] 1 All ER 630; [1954] 2
Wilson [1913] 2 KB 235
Stocznia Gdanska SA
Latvian Shipping Co. [2002]
EWCA Civ 889; [2001] 1 Lloyd’s Rep 537
Stocznia Gdanska SA
Latvian Shipping Co. [1998]
1 WLR 574; [1998]
The Times,
27 February (HL)
Stocznia Gdynia SA
Gearbulk Holdings Ltd [2009]
EWCA Civ 75; [2010] QB 27
Union Trust [1912] 1 KB 181
Stone & Rolls
Moore Stephens [2009] UKHL 39;
[2009] 4 All ER 431
Manchester City Council [1974] 3 All ER 864;
[1974] 1 WLR 1403
Derbyshire Unemployed Workers’ Centre
[2004] EWCA Civ 964; [2004] 4 All ER 839; [2005]
ICR 97
Strongman [1945] Ltd
Sincock [1955] 2 QB 525;
[1955] 3 WLR 360
Sudbrook Trading Estate Ltd
Eggleton [1983] 1 AC
444; [1982] 3 WLR 315
Suisse Atlantique Société D’Armement Maritime SA
NV Rotterdamsche Kolen Centrale [1966] 2 All ER
61; [1966] 2 WLR 944; [1967] 1 AC 361, 406
Hedges [1898] 1 QB 673
Sumukan Ltd
Commonwealth Secretariat [2007]
EWCA Civ 243; [2007] 3 All ER 342
Supershield Ltd
Siemens Building Technologies FE
Ltd [2010] EWCA Civ 7; [2010] 2 All ER (Comm)
Surrey County Council
Bredero Homes Ltd [1993] 3
All ER 705; [1993] 1 WLR 1361 (CA)
Swainland Builders Ltd
Freehold Properties Ltd
[2002] EWCA Civ 560; [2002] 2 WLR 71
Swiss Bank Corporation
Lloyds Bank Ltd [1979] Ch
548; [1979] 3 WLR 201
Sylvia Shipping Co. Ltd
Progress Bulk Carriers Ltd
[2010] EWHC 542 (Comm); [2010] 2 Lloyd’s Rep 81
Taberna Europe CDO II Plc
Selskabet (Formerly
Roskilde Bank A/S) (In Bankruptcy) [2015] EWHC
871 (Comm)
Allon [1966] 1 QB 304; [1965] 2 WLR 598
Bowers [1876] 1 Q.B.D. 291
Caldwell [1863] 3 B & S 826
Chester [1945] KB 65; [1944] 2 All ER 579
Laird [1856] 1 H & N 266, 25 LJ Ex 329
Webb [1937] 2 KB 283
Techno Land Improvements
British Leyland (UK)
Ltd [1979] 2 EGLR 27; [1979] 252 EG 805
Tekdata Interconnections Ltd
Amphenol Ltd [2009]
EWCA Civ 1209; [2010] 1 Lloyd’s Rep 357
Tele2 International Card Co. SA
Kub 2 Technology
Ltd (formerly C3 Calling Card Co. (Ireland) Ltd),
Tele2 International Card Co. SA
Post Offi ce
Barclays Bank plc [1986] 1 All ER 676
Thomas Bates Ltd
Wyndham’s (Lingerie) Ltd [1981]
1 All ER 1077; [1981] 1 WLR 505
BPE Solicitors [2010] EWHC 306 (Ch)
Harris [1947] 1 All ER 444
Thomas Witter Ltd
TBP Industries Ltd [1996] 2 All ER
573 (ChD)
Thompson Ltd
Robinson (Gunmakers) Ltd [1955]
Ch 177; [1955] 2 WLR 185
L M & S Railway Company [1930] 1 KB
Motor Trade Association [1937] AC 797;
[1937] 3 All ER 157
Shoe Lane Parking Ltd [1971] QB 163;
[1971] 1 All ER 686
Thoroughgood’s case [1584] 2 Co. Rep 9a
Ticket2final OU
Wigan Athletic AFC Ltd [2015]
EWHC 61b (Ch)
White Cross Insurance Association Ltd
[1921] 3 KB 327
Hoffman and Co. [1873] 29 LT 271
Milligan [1993] 3 WLR 126; [1993] 2 All ER
Waddell (No. 2) [1977] 3 All ER 129; [1977] 2
Tiverton Estates Ltd
Wearwell Ltd [1975] Ch 146;
[1974] 2 WLR 176
Associated Portland Cement Manufacturers
[1900] Ltd [1903] AC 414
Tool Metal Manufacturing Co. Ltd
Tungsten Electric
Co. Ltd [1955] 2 All ER 657; [1955] 1 WLR 761
Torre Asset Funding Ltd
Royal Bank of Scotland plc
[2013] EWHC 2670; [2013] WLR (D) 343
Transfield Shipping Inc
Mercator Shipping Inc (
) [2008] UKHL 48; [2009] AC 161; [2008]
3 WLR 345
Trebor Bassett Holdings Ltd
ADT Fire and Security
plc [2011] EWHC 1936
Trendtex Trading Corporation
Crédit Suisse [1982]
AC 679; [1981] 3 WLR 766
Trepca Mines Ltd (Application of Radomir Nicola
Pachitch (Pasic)),
[1962] 3 All ER 351
Tribe [1995] 4 All ER 236
Trident Turboprop (Dublin) Ltd
First Flight Couriers
Ltd [2008] EWHC 1686 (Comm)
Trollope and Colls Ltd
Atomic Power Constructions
Ltd [1962] 3 All ER 1035; [1963] 1 WLR 333
Trump International Golf Club Scotland Ltd
Scottish Ministers [2015] UKSC 74
Tsakiroglou and Co. Ltd
Noblee Thorl GmbH [1962]
AC 93; [1961] 2 WLR 633
TSB Bank plc
Camfi eld [1995] 1 All ER 951; [1995] 1
WLR 430 (CA)
TSG Building Services Plc
South Anglia Housing Ltd
[2013] EWHC 1151 (TCC); [2013] BLR 484
Moxhay [1848] 2 Ph 774
Atkinson [1861] 1 B & S 393
Union Eagle Ltd
Golden Achievement Ltd [1997] 2
All ER 215; [1997] 2 WLR 341
United International Pictures
Cine Bes Filmcilik ve
Yapimcilik AS,
Cine Bes Filmcilik ve Yapimcilik
United International Pictures
United Scientific Holdings Ltd
Burnley Borough
Council [1978] AC 904; [1977] 2 WLR 806
Universe Sentinel, The,
Universe Tankships Inc.
of Monrovia
International Transport Workers’
Universe Tankships Inc. of Monrovia
Transport Workers’ Federation (
The Universe
) [1983] 1 AC 366; [1982] 2 WLR 803
University of Plymouth
European Language Centre
[2009] EWCA Civ 784
Upton-on-Severn RDC
Powell [1942] 1 All ER 220
Urban I (Blonk Street) Ltd
Ayres [2013] EWCA Civ
816; [2014] 1 WLR 756
Vacwell Engineering Co. Ltd
BDH Chemicals Ltd
[1971] 1 QB 111; [1970] 3 WLR 67


Vantage Navigation Corporation
Bahawn Building Materials LLC (
The Alev
) [1989] 1
Lloyd’s Rep 138
Whipp [1900] 1 QB 513
Italian Motor Cars Ltd [1996] 1 WLR 270;
[1996] RTR 115 (PC)
V Berg & Son Ltd
Vanden Avenne-Izegem PVBA
[1977] 1 Lloyd’s Rep 499
Versloot Dredging BV and Another
HDI Gerling
Industrie Versicherung AG [2016] UKSC 45
Victoria Laundry (Windsor) Ltd
Newman Industries
Ltd [1949] 2 KB 528; [1949] 1 All ER 997
Vita Food Products Inc.
Unus Shipping Co. [1939]
AC 277; [1939] 1 All ER 513
Vitol SA
Norelf Ltd (
The Santa Clara
) [1996] 3 All ER
193; [1996] 3 WLR 105
Hughes [1854] 2 SM & G 18
Wadham 1977 1 WLR 199
Miles [1992] 2 AC 128; [1992] 2 WLR 174
[AU: Please provide further dea
Lonsdale [1882] 21 ChD 9
Waltons Stores Interstate Ltd
Maher [1988] 163 CLR
Byham [1956] 2 All ER 318; [1956] 1 WLR 496
Harrison [1859] 1 E & E 309
Warner Bros Inc.
Nelson [1937] 1 KB 209
Watford Electronics Ltd
Sanderson CFL Ltd [2001]
EWCA Civ 317; [2001] 1 All ER (Comm) 696; [2000]
2 All ER (Comm) 984
Morrow [1991] 1 WLR 1421; [1991] 4 All ER
Spence [1976] Ch 165; [1975] 2 WLR 1039
Banham [1832] 5 C & P 228
Cecil [1861] 30 Beav 62
Higgin [1948] 2 All ER 127; [1948] 92 SJ 454
Drake [1825] 1 C & P 557
Stephens [1920] AC 956
Wellesley Partners LLP
Withers LLP [2015] EWCA
Civ 1146
Foster [1841] 8 M & W 149; [1835–42] All ER
Rep 549
Wenjiang, The
(No. 2) [1983] 1 Lloyd’s Rep 400
Chicoutimi Pulp Co. Ltd [1911] AC 301
Westdeutsche Landesbank Girozentrale
London Borough Council [1996] AC 669; [1996] 2
WLR 802
Western Electric Ltd
Welsh Development Agency
[1983] 2 All ER 629; [1983] 2 WLR 897
Western Fish Products Ltd
Penwith DC [1981] 2 All
ER 204
Western Web Offset Printers Ltd
Ltd [1995]
The Times,
10 October
Westminster Building Co. Ltd
Beckingham [2004]
EWHC 138 (TCC); [2004] BLR 163
Hughes [1871] LR 6 CP 78
White and Carter (Councils) Ltd
McGregor [1962]
AC 413; [1962] 2 WLR 17 (HC)
Blackmore [1972] 2 QB 651; [1972] 3 All E£R
Bluett [1853] 23 LJ Ex 36
John Warwick & Co. Ltd [1953] 2 All ER 1021;
[1953] 1 WLR 1285
Jones [1995] 2 AC 207; [1995] 2 WLR 187
Seale-Hayne [1900] 82 LT 49
Whittle Movers Ltd
Hollywood Express Ltd [2009]
EWCA Civ 1189; [2009] All ER (D) 128 (Nov)
London Passenger Transport Board [1947] 1
All ER 258; [1947] 63 TLR 115
William Brandt’s Sons & Co.
Dunlop Rubber Co.
[1905] AC 454
William Sindall plc
Cambridgeshire County Council
[1994] 1 WLR 1016 (CA)
Bayley [1866] LR 1 HL 200; [1861–73] All ER
Rep 227
Reynolds [1865] 6 B & S 495
Roffey Bros & Nicholls (Contractors) Ltd
[1991] 1 QB 1; [1990] 1 All ER 512; [1990] 2 WLR
1153 (CA)
Williams [1957] 1 All ER 305; [1957] 1 WLR
Rickett Cockerell & Co. Ltd [1954] 1 QB 598;
[1954] 2 WLR 629
O’Flanagan [1936] Ch 575
WJ Alan & Co. Ltd
El Nasr Export and Import Co.
[1972] 2 QB 189; [1972] 2 WLR 800
Wong Mee Wan
Kwan Kin Travel Services Ltd [1995]
4 All ER 745; [1995] 139 SJLB 246 (PC)
Woodar Investment Development Ltd
Construction (UK) Ltd [1980] 1 All ER 571; [1980] 1
WLR 277
Woodhouse Israel Cocoa Ltd
Nigerian Produce
Marketing Co. Ltd [1972] AC 741; [1972] 2 WLR
Photo Trade Processing Ltd [1981] 131
Carter [1903] 1 Ch 27
Wrotham Park Estate Co. Ltd
Parkside Homes Ltd
[1974] 1 WLR 798
Tyler [1974] Ch 30; [1973] 2 WLR 405
Wuhan Ocean Economic and Technical Cooperation
Co. Ltd
Schiffahrts-Gesellschaft Hansa Murcia
mbH & Co. KG [2012] EWHC 3104; [2013] 1 All ER
(Comm) 1277
Essex County Council [1998] 3 All ER 111; [1999]
Fam 90
WWF World Wide Fund for Nature
World Wrestling
Federation Entertainment [2006] EWHC 184;
[2007] EWCA Civ 286; [2008] 1 All ER 74 (CA)
Kreglinger and Fernau [1933] 1 KB 793
Yam Seng Pte Ltd
International Trade Corp Ltd
[2013] EWHC 111 (QB); [2013] 1 All ER (Comm)
Jones [1939] 63 CLR 649
Edwin Evans and Sons [1982] QB 438; [1981]
3 WLR 843
Purdy [1995]
The Times,
7 November
Yuanda (UK) Co Ltd
WW Gear Construction Ltd
[2010] EWHC 720
Hyman [1961] 3 All ER 933
British Aerospace (Lancaster House) Ltd
The Times,
23 March
Zodiac Maritime Agencies Ltd
Fortescue Metals
Group Ltd [2010] EWCH 903 (Comm); [2011] 2
Lloyd’s Rep 360
Access to Justice Act 1999
Administration of Justice Act 1969
s. 12
Apportionment Act 1870
Arbitration Act 1996
s. 70(2)
Betting and Gaming Act 1960
Betting and Loans (Infants) Act
Bills of Exchange Act 1882
s. 27 72,
Chancery Amendment Act 1858
(Lord Cairns Act)
Children Act 1989
Church of Scotland Act 1921
Common Law Procedure Act 1852,
Companies Act 1985
s. 14
Companies Act 1989
s. 108
s. 108(1)
s. 110
s. 142
Companies Act 2006
s. 31(1)
s. 39 120, 123
s. 171
Competition Act 1998
Chapter I
Chapter II
Consumer Credit Act 1974
s. 17
s. 100
s. 130A
s. 140A
s. 140B
Consumer Credit Act 2006
s. 17
s. 19
s. 20
Consumer Insurance (Disclosure
and Representations) Act 2012
s. 10
Sch. 1
Consumer Rights Act 2014
Consumer Rights Act 2015
Part 1
Part 2
Part 3
s. 10
s. 11
s. 12
s. 12(1)(b)
s. 13
s. 14
s. 15
s. 16
s. 17
s. 17(2)
s. 17(3)
s. 18
s. 20
s. 31
s. 34
s. 34(3)
s. 34(3)(a)
s. 34(3)(b)
s. 34(3)(c)
s. 34(3)(d)
s. 37
s. 41
s. 47
s. 51
s. 53
s. 57
s. 61
s. 61(2)
s. 61(4)
s. 61(5)
s. 61(6)
s. 61(8)
s. 61–76
s. 63
s. 63(1)
s. 64
s. 64(1)
s. 64(1)(a)
s. 64(1)(b)
s. 64(2)
s. 64(3)
s. 64(4)
s. 64(5)
s. 67
s. 70
s. 71
s. 73
s. 73(1)(a)
s. 73(1)(b)
s. 74
s. 171
Sch. 2
Sch. 2, Part 1
Sch. 3
Sch. 5
Contracts (Rights of Third Parties)
Act 1999
Copyright Act 1956
Courts and Legal Services Act 1990
Criminal Law Act 1967
s. 13
s. 14
s. 14(2)
Electronic Communications Act
Enterprise Act 2002
Employers’ Liability Act 1880
Equality Act 2010
s. 199
European Communities Act 1972
Exchange Control Act 1947

Fair Trading Act 1973
s. 17
Family Law Reform Act 1969
Financial Services and Markets Act
Fraud Act 2006
Guardianship Act 1973
Hire Purchase Act 1964
s. 27
Income and Corporation Taxes Act
s. 148
Infants Relief Act 1874
Insurance Act 2015
s. 12
s. 14 (1)
Sch. 1
Judicature Act 1873
Judicature Act 1875
Land Charges Act 1972
Landlord and Tenant Act 1954
Landlord and Tenant Act 1975,
Landlord and Tenant Act 1985
s. 17
Law of Property Act 1925
s. 41
s. 53(1)(c)
s. 54(2)
s. 73
Law of Property (Miscellaneous
Provisions) Act 1989
Law Reform (Contributory
Negligence) Act 1945
Law Reform (Enforcement of
Contracts) Act 1954
Law Reform (Frustrated Contracts)
Act 1943
Law Reform (Miscellaneous
Provisions) Act 1970
Limitation Act 1980
s. 11
s. 27(5) 71, 72, 96
Lord Cairns Act,
Amendment Act 1858
Marine Insurance Act 1906
s. 17
s. 18
Married Women’s Property Act
s. 11
Matrimonial Causes Act 1973
Part II
s. 34
Matrimonial Homes Act 1967
Matrimonial Homes Act 1983
Mental Health Act 1983
Part VII
Merchant Shipping Act 1932
Minors’ Contracts Act 1987
Misrepresentation Act 1967
Monopolies and Restrictive
Practices (Inquiry and Control)
Act 1948
National Assistance Act 1948
Official Secrets Act 1911
Occupiers’ Liability Act 1957
Pharmacy and Poisons Act 1933
s. 17
Police Act 1996
Prevention of Fraud (Investments)
Act 1958
Protection of Birds Act 1954
Public Passenger Vehicles Act 1981
Rent Acts 1968–77
Rent Act 1977
s. 125
Restriction of Offensive Weapons
Act 1961
Road Traffic Act 1960
s. 151
Road Traffic Act 1988
s. 148(7)
Sale and Supply of Goods Act 1994
Sale of Goods Act 1893
s. 51
Sale of Goods Act 1979
s. 10
s. 11(4)
s. 12
s. 12(1)
s. 12(2)
s. 13
s. 13(1A)
s. 14
s. 14(1)
s. 14(2)
s. 14(3)
s. 14(3)(a)
s. 14(3)(b)
s. 14(3)(c)
s. 14(3)(d)
s. 14(3)(e)
s. 14(4)(a)
s. 14(4)(a)
s. 14(4)(a)
s. 14(6)
s. 15
s. 15(1)(b)
s. 15A
s. 15A(1)
s. 15A(1)(a)
s. 15A(2)
s. 15A(3)
s. 16
s. 21(1)
s. 44–46
s. 51(3)
s. 53(2)
s. 53(3)
s. 53(4)
s. 57(2)
Senior Courts Act 1981 (formerly
Supreme Court Act 1981)
Sex Discrimination Act 1975
Statute of Frauds 1677
Supply of Goods (Implied Terms)
Act 1973
s. 10
s. 11
Supply of Goods and Services Act
Part I
s. 2–15
s. 13
s. 14
s. 15
s. 16
Supply of Goods and Services Act
Supreme Court Act 1981,
Courts Act 1981
Theft Act 1968
Third Parties (Rights against
Insurers) Act 2010

Trade Descriptions Act 1968
Trade Union and Labour Relations
Act 1974
s. 13
Trade Union and Labour Relations
(Consolidation) Act 1992
s. 179
Trustee Act 2000
Part IV
Unfair Contract Terms Act 1977
s. 10
s. 11
s. 11(1)
s. 11(2)
s. 11(3)
s. 11(4)
s. 11(4)(a)
s. 11(4)(b)
s. 11(5)
s. 12
s. 12(1)(b)
s. 13
s. 13(1)
s. 13(1)(a)
s. 13(1)(b)
s. 13(1)(c)
s. 13(2)
s. 14
s. 20
s. 21
s. 27
s. 27(2)
s. 27(2)(a)
s. 27(2)(b)
Sch. 1
Sch. 2
Unsolicited Goods and Services
Act 1971
Commercial Agents (Council
Directive) Regulations 1993 (SI
1993 No 3053)
reg. 17
reg. 20(1)
reg. 20(2)
reg. 20(3)
Consumer Contracts (Information,
Cancellation and Additional
Charges) Regulations 2013 (SI
2013 No 3134)
reg. 9
reg. 10
reg. 11
reg. 13
Sch. 1
Sch. 2
Consumer Protection (Distance
Selling) Regulations 2000 (SI
2000 No 2334)
Electronic Commerce (EC
Directive) Regulations 2002
(SI 2002 No 2013)
reg. 11(1)
reg. 11(1)(a)
reg. 11(2)
reg. 11(2)(a)
reg. 11(3)
reg. 12
Package Travel, Package Holidays
and Package Tours
Regulations 1992 (SI 1992 No
reg. 2(1)
Sale and Supply of Goods to
Consumer Regulations 2002
Seeds, Oils and Fats Order 1919
Solicitors Practice Rules 1990
Unfair Terms in Consumer
Contract Regulations 1994 (SI
1994 No 3159)
reg. 3
reg. 3(2)
reg. 3(2)(b)
reg. 3(2)b
reg. 4
reg. 4(1)
reg. 4(3)
reg. 6
reg. 8
Sch. 2
Unfair Terms in Consumer
Contract Regulations 1999 (SI
1999 No 2083)
reg. 3(2)b
reg. 4(1)
reg. 5
reg. 5(1)
reg. 5(2)
reg. 6
reg. 6(1)
reg. 6(2)
reg. 6(2)(a)
reg. 6(2)(b)
reg. 6(2)(d)
reg. 6(2)(e)
reg. 6(2)(f)
reg. 6(2)(l)
reg. 6(2)b
reg. 7
reg. 7(1)
reg. 7(2)
reg. 8
reg. 8(2)
reg. 10
Sch. 1
Sch. 2
EEC Treaty (Treaty of Rome)
Art. 81
Art. 82
Directive 93/17 (AU: Please provide
further details)
Art. 7
European Directive on Distance
Selling (97/7/EC)
European Directive on Electronic
Signatures (1999/93/EC)
European Directive on Unfair
Commercial Practices (2005/29/
Art. 7(2)
European Directive on Unfair
Terms in Consumer Contracts
(European Council Directive
Art. 7
Art. 7(1)
Art. 7(2)
Sch. 2
European Union’s Consumer
Rights Directive (CRD) 2011/83/





The evolution and definition of
After reading this chapter you should be able to:
1. Understand how the law of contract evolved historically.
2. Understand how the law of contract has evolved in modern times and explain the nature
of contracts of adhesion.
3. Define a contract.
4. Recognise when a contract arises in legal terms.
The law of contract in England has a long history which dates back to the thirteenth and
fourteenth centuries. Its early development was connected closely with the growth and
expansion of the jurisdiction of the common law courts over the myriad courts that
evolved before and after the Norman Conquest. Some local courts in the Middle Ages
exercised a limited jurisdiction based on custom that was very similar to that of the law of
contract. This jurisdiction was termed the ‘law merchant’ and was often administered at
tracts. Under ‘covenant’ some agreements were regarded as so important that they were
formalised in writing. In addition to this, and no doubt because of widespread illiteracy, the
parties were required to acknowledge the written document by sealing it. Initially, the action
compurgation or wager of law, whereby a defendant could evade liability by producing a
number of oath-swearers (usually 12) to swear their innocence in respect to the money or
property alleged to be held by them. An action could be lost merely by the incorrect enun
ciation of the oath by one of the oath-swearers. Other rules made these actions inappropriate
and often unjust, and it was at this time that the jurisdiction of the courts of chancery began
to intervene to correct the inadequacies of the common law and evolve their own particular
assumpsit as improper, with the result that it would not allow a claimant to recover a
specific sum of money by way of an action in assumpsit. It required such a claim to be

seventeenth century a principle had emerged that it was necessary not only to show a
promise, but also some motivating reason for the existence of the promise. Put another
way, a promise may be regarded as a statement of will but for that statement to have legal
effect, it had to be supported by a motive for the exercise of that will or consideration. The
establishment of the need to show consideration produced a broad form on which the
modern law is now based and one which was not to be subject to radical reformulation
the intention of the individuals themselves, despite the fact that some judges at this time
(total agreement) was an essential feature of the
existence of an enforceable contract.
A further misconception of the notion of freedom of contract is the idea that it pro-
vides the parties with freedom of choice as to the terms on which the agreement is
entered into. Such an idea holds good where there is equality of bargaining power but
is plainly false where this is not the case. Indeed, it is the fact of the powerful imposing
terms on the weak that led to the notions of collectivisation, the growth of the trade
union movement, the intervention of government and the weakening of the notion of
freedom of contract, with its laissez-faire basis, as the underlying principle on which
the modern law of contract is based.
The classical theory of contract, as we have seen, played an important part in the early
economic and social development of the country, when modern economic theory and

manufacturer and the distributors of their goods. Freedom of contract in the classical
theory could be seen as being at the centre of the exploitation of the most vulnerable
requires the seller to place the
goods, at their own expense, on a ship nominated by the buyer. The price quoted on such
a contract does not include the price of the freight or insurance, both of which must be
In contracts you do not look into the actual intent in a man’s mind. You look at what he said
and did. A contract is formed when there is, to all outward appearances, a contract. A man

says to a neighbour, ‘If you give me a lift to work, I will cut your lawns’ and the neighbour agrees
to this, there is prima facie no binding contract despite the clear existence of a bargain. The reason
for this is that such a social arrangement is not one which a reasonable person would consider as
that it is responsive to the needs and changing nature of commercial life. For many
years, the decisions of the English courts stood aloof from decisions in former
Commonwealth countries but this is clearly no longer the case and indeed has not been
for some time. The way the English courts have referred to decisions of other jurisdic
tions has meant that English law has continued to evolve and maintain its relevance
internationally. This relevance has been maintained despite other codes being available
to parties such as United Nations Convention on Contracts for the International Sale of
Goods (the ‘Vienna Convention’), the UNIDROIT Principles of International Commer
cial Contracts and the Principles of European Contract Law. It is an interesting fact that
as of May 2016, while the Vienna Convention has been ratified by 85 states, the United
Kingdom, recognised as a leading jurisdiction for the choice of law in international
commercial contracts, is not a signatory. Apparently the grounds on which the United
Kingdom has resiled from becoming a signatory is that, according to the UN, ‘the gov
ernment not viewing its ratification as a legislative priority, a lack of interest from busi
ness in supporting ratification, opposition from a number of large and influential
organisations, a lack of public service resources, and a danger that London would lose
its edge in international arbitration and litigation’.
Of course the greatest international influence on English law of contract is the Euro
pean Union. This influence has been maintained since the UK acceded to the European
Community Treaty by way of the European Communities Act 1972. It is well to remember
the well-known retort of Lord Denning to this influence in the case of
Bulmer Ltd
and Another
Bollinger S
. [1974] Ch. 401 when he stated:
The first and fundamental point is that the Treaty concerns only those matters
which have a European element, that is to say, matters which affect people or prop
erty in the nine countries of the common market besides ourselves. The Treaty does
not touch any of the matters which concern solely England and the people in it.
These are still governed by English law. They are not affected by the Treaty. But when
we come to matters with a European element, the Treaty is like an incoming tide. It
flows into the estuaries and up the rivers. It cannot be held back, Parliament has
decreed that the Treaty is henceforward to be part of our law. It is equal in force to
any statute.
Of course things have moved on a great deal since Lord Denning first uttered these words
and English law has now been subject to a huge influence in this field by way of a myriad
of Directives and Regulations, much of it concerned with consumer protection. Much of
this is to be welcomed, however, there is no getting away from the fact that English law
is conceptually very different from many of the codes and legislative regimes that exist
within the 27 member states of the EU. In some areas, concepts have been introduced
that do not sit well within the UK, for instance, the notion of good faith as originally
framed within the Consumer Rights Directive (CRD) 2011/83/EU and which, via the
Unfair Contract Terms in Consumer Contract Regulations 1994 and 1999, is now
embodied within the Consumer Rights Act 2015. This concept and its place in English
law were considered at length by Leggatt J in
Yam Seng Pte Ltd
International Trade
Corp Ltd
. In that case, he accepted that the existence of a contractual duty of good faith
and fair dealing had been recognised in the United States and Australia and was cau
tiously gaining ground in Canada, though not in New Zealand. Leggatt J did not consider,
however, that a duty of good faith had reached the point in English law that such a duty
could be implied as a matter of law into contracts, though it does arise in some specific
areas, such as insurance and the law of trusts.

The question arises then as to whether European law could eventually completely
reform how English law operates. There is undoubtedly a powerful view that the law of
contract should be subject to a harmonisation process across the European Union so that
the principles will end up in a codified form. In one respect this would be useful, in that
it would operate across all national boundaries and thereby facilitate commercial and
business transactions. The wider question is whether this is necessary since parties negoti
ate a choice of law clauses within their contracts in any event and, as we have seen already,
on a worldwide standing, English law of contract is by far the law of choice in commercial
transactions. Such a move within the European Union should therefore be resisted and in
any event it seems likely that with the Brexit referendum and the UK’s withdrawal from
the European Union, this threat to English law of contract will diminish.
ou think that there should be a European law of contract?

w of contract remain aloof from such an initiative?

hat continued influences do think the European Union will have on the English
law of contract post Brexit? Will it be reduced to simply being part of the wider
notion of private international law?
This chapter deals with the evolution of the law of contract and its definition.
merchant’ and the early forms of action based on covenant, debt and assumpsit.





ment, and that this intention is usually established by some outward objective indication
tions of the parties. On a practical level, however, the question arises as to what evidence
ought to:look at the correspondence as a whole and at the conduct of the parties and see therefrom
The facts of the case were that the plaintiffs (Trentham) were engaged by Municipal Mutual Insur
ance as main contractors to design and build industrial units in two phases. Trentham employed
Archital to design, supply and install the doors and window frames for the development. This work
the damages that it had to pay out, Trentham began proceedings against several subcontractors,
including Archital, alleging defects in the window works in both of the phases. In their defence
G Percy Trentham Ltd
Archital Luxfer
[1993] 1 Lloyd’s Rep 25

Does this decision suggest an abandonment of offer and acceptance as central pillars in
the formation of contracts? The answer to the question is clearly in the negative, since Steyn
himself states that ‘the coincidence of offer and acceptance will, in the vast majority of cases,
opportunity to find for a contract by examining the ‘commercial reality’ of the situation
coupled with evidence of the parties’ intentions and to this extent a level of uncertainty may
have been created as to when a contract has actually been formed.
was able to find for a contract on the basis of offer and acceptance, that is by adopting the
acceptance will be the means of deciding the matter of contract formation, ‘it is not necessarily so in
the case of a contract alleged to have come into existence during and as a result of performance’,
While one must always bear in mind Lord Denning’s approach, the classical analysis is
An offer is an expression of a willingness to contract on certain terms made with the intention that
The task of a claimant seeking to enforce a contract is to prove the existence of an offer.
An offer may be made either orally or in writing, or implied by the conduct of the person
making the offer, namely, the offeror. Furthermore, the offer may be made to a specific

Carbolic Smoke Ball Co
., it was argued that it was not possible to make an offer to the
world at large.
In this case, the plaintiff bought a medical preparation called ‘The Carbolic Smoke Ball’ on the
basis that the defendants advertised that they would pay £100 to any person who contracted
influenza after using the smoke ball in the prescribed manner and for a specified period. Further,
the defendants stated that ‘to show their sincerity’ they had deposited £1,000 with the Alliance
Bank. The plaintiff bought one of the smoke balls and used it in the manner prescribed and
promptly caught influenza! She sued for the £100. The defendants contended that there was no
. [1893] 1 QB 256
The defendants also contended that the plaintiff had not accepted their offer and therefore there
was no consensus ad idem and thus no agreement. This defence, which was rejected, exposes the
fact that offers may arise in two forms, either bilateral or unilateral. A bilateral offer arises where one

A unilateral offer occurs where one party, the offeror, promises to pay for the act of
another, that is, a conditional promise. The acceptance of the offer takes place when the
offeree performs the act in question. The offer here is said to be unilateral because only
case provide an obvious example
case amounted to an offer,

The general rule as regards goods displayed in shop windows is well illustrated in the case
a shop window. The seller was prosecuted under the now repealed Restriction of Offensive Weapons Act 1961, which made it an offence to offer to sell such items, and was acquitted.
A shopkeeper could refuse to sell the goods to a customer even if they offered certain goods for sale
and wrote the words ‘Special Offer’ across the windows. The words ‘Special Offer’ import no specific
legal meaning here and do not necessarily mean an offer at law. Such a conclusion may be somewhat
unfair, however, if those words had induced a person to wait outside the shop all night, only to be
told the next morning that their offer to buy had been rejected. Nevertheless, even if the goods
subject to the ‘Special Offer’ were regarded as an offer at law, an offeror in any event is free to with
draw that offer at any time up to acceptance.
The status of goods on the shelves of a self-service shop was called into question. The facts of the
case were that the defendants were being prosecuted under the Pharmacy and Poisons Act 1933,
s 17, in that they had allowed the sale of a listed poison to be effected without the supervision of a
registered pharmacist. The arrangement in the shop was that a customer on entering was given a
cash desk, though the customer could cancel his acceptance before payment if he wished.
Contradiction also exists in English law though, since in
[1984] AC 320 it was
held that the taking of goods from a shelf and changing the price tags amounted to an
tion to treat, the bids themselves amounting to offers which the auctioneer is free to accept
or reject as they wish. This situation is given implied authority in the Sale of Goods Act 1979,

Tenders may take two possible forms. They may be specific tenders or standing-offer
such a tender may be where a company invites tenders for the supply of stationery as and
when, or if and when, required. Here acceptance of the tender (i.e. the offer) does not create
In this case, the Council owned and managed an airport, raising money by granting a concession to an
operator to run pleasure flights from the airport. Shortly before the concession was about to expire in
1983 the Council invited tenders for the right to run the concession, invitations being sent to the
plaintiffs and six other interested parties. The terms of submission of bids were that they were to be
submitted in an envelope provided, which was to bear no mark which could identify the sender. Fur
thermore, the tender had to be submitted no later than 12 noon on 17 March 1983. The plaintiffs’
Blackpool and Fylde Aero Club Ltd
Blackpool Borough Council
[1990] 3 All
The status of referential bids was considered in the following case.
X offers to pay £100,000 for a concession or £10,000 more than any other offer. The latter part of
this bid is a referential bid.
An invitation was made to two persons to submit ‘offers’ for the purchase of a quantity of shares. The
first defendants, who were disposing of the shares, also agreed to accept the highest offer received
Royal Trust Co
In this case, the Court of Appeal considered that a sign by some deckchairs for hire constituted an offer,

[1971] 1 All ER 686
Most people have heard of the possibility of buying goods via the Internet, even if they have
not actually had experience of this commercial phenomenon. But what is the status of a
supplier’s website – does it represent an offer or an invitation to treat? Many of the electronic
an acceptance. Such a transaction would clearly not be in the interests of Argos in these
the website constituted an offer. In the Argos scenario some customers had actually had
their orders accepted and confirmed by Argos before the mistake was discovered. Presum
The appellants sent a telegram to the respondent which read, ‘Will you sell us Bumper Hall Pen? Tele
graph lowest cash price’; the respondent replied, ‘Lowest price for Bumper Hall Pen, £900.’ The appel-
lants then telegraphed, ‘We agree to buy Bumper Hall Pen for £900 asked by you. Please send us your
negotiating the purchase of a large estate owned by the plaintiff who wrote, ‘I am prepared
to offer for £600,000...I also agree that a reasonable and sufficient

If A walks up to B and says, ‘How much do you want for your car?’ and B replies, ‘£3,500’, is this not a
contract? Surely the situation is likely to be that if B does not wish to sell he will reply, ‘£3,500, but it
is not for sale’ or simply, ‘The car is not for sale.’
In this case, negotiations were taking place for the sale of some freehold property belonging to the
plaintiffs. The plaintiffs wrote to the defendants, stating: ‘As you are aware that I paid £25,000 for this
property, your offer of £20,000 would appear to be at least a little optimistic. For a quick sale I would
accept £26,000.’ The defendants replied: ‘I accept your offer’ and asked the plaintiffs to contact the
[1971] 2 All ER 183
employed to command a steamer ‘for an exploring and trading voyage up the river
a rate of £50 per month’. The plaintiff took this ship as far as Dagbo, but refused to go further
and resigned his command. He later helped to work the ship home and he claimed his wages
for this work. It was held that the owners of the vessel were entitled to refuse payment as the
plaintiff’s offer to help to bring the ship back to its home port was not communicated to
them. In other words, they were given no opportunity to either accept or reject his offer.
Treitel defines
as ‘a final unqualified expression of assent to all the terms of an
offer’. The objective test, which was examined above in regard to offers, applies in the same
manner to acceptance. In other words, evidence must be produced from which the courts
can adduce an intention by the offeree to accept the offer communicated to them. Two

above, be in response to the offer and match the terms of the offer precisely. The acceptance,
therefore, must be unequivocal and unconditional. Second, mere acknowledgement of the
offer is insufficient: there must be a communication of the acceptance to the offeror.
These two factors can, however, lead to peculiar results in certain types of case, in par-
ticular where cross-offers materialise. The problem here occurs when two identical offers
cross in the post.
X offers to buy Y’s car from him for £5,000, while at the same time Y offers to sell his car to X for
£5,000. This is an example of a cross-offer.

undoubtedly be in subjective agreement, there must be an objective outward indication of
telegraph clerk made a mistake and the telegram read, ‘Send...the rifles’, whereupon the
plaintiff sent 50. It was held that the plaintiff could not recover the price of the extra 47. The
, even though
Brogden had supplied the respondent railway company with coal for a number of years and then sug
gested that a formal contract should be entered into. A draft contract was submitted to Brogden who
One final point must be made in relation to acceptance by conduct and that is that it is
found most commonly in
unilateral contracts
. It has already been seen in

. that Mrs Carlill accepted the company’s offer merely by using the
will be some sort of communication of the fact that acceptance has been performed in order,
as in Mrs Carlill’s case, to claim the reward, but this is only notification of the fact that
acceptance has taken place. It does not amount to acceptance itself. The act of acceptance
The defendant offered to sell his farm for £1,000. The plaintiff at first made a counter-offer of £950,
but two days later agreed to pay £1,000 and attempted to accept the original offer. The defendant
(1840) 3 Beav 334
fact that acceptance needs to be unqualified does not by the same token mean that it needs
The result of these circumstances is that any agreement is usually arrived at ‘subject to
sion of future intention to enter into a contract provided the offeree is satisfied as to any
courts found for a legally binding contract despite the use of the expression, though it
ment is merely tentative and not meant to be final. The task facing the court here is to
A vendor agreed to sell the lease and goodwill of his mushroom farm. The parties signed a document
which contained the terms of their agreement. The document concluded, ‘This is a provisional agree
ment until a fully legalised agreement drawn up by a solicitor and embodying all the conditions here
This latter point can be seen in the earlier case of
[1924] 1
Ch 97, where the plaintiffs agreed to purchase the defendant’s nursery for £4,800

‘subject to a proper contract to be prepared by the vendor’s solicitors’. The purchasers
then refused to sign a contract prepared by the solicitors and executed by the vendor and
Arcos Ltd
A further refinement of this problem can occur where a person in accepting the offer
ance ‘adds new provision by way of indulgence to the offeror’, then the acceptance will still
be valid. In other words, the acceptance should still be valid provided any new term intro
duced is by way of benefit or concession to the offeror. He further indicates that should the
’envisage the courts enabling the offeree to accept an offer once a counter-offer had been
made. Clearly on a classical analysis the introduction of the new term must invariably
In this case, the defendant offered to sell iron to the plaintiffs at 40s per ton. The plaintiffs sent a
Company X offers to, say, sell certain goods to company Y on company X’s standard terms and condi
tions. Company Y replies, accepting company X’s offer, but on company Y’s terms and conditions –
which could be materially different from company X’s. The conflict now arises as to whose terms and
conditions the contract is based on.

If the conflict is to be resolved by reference to the classical theory, then it is clear, as
forms’ is the person who last submits the counter-offer which is accepted by the other party.
The facts of the case were that on 23 May 1969, in response to an enquiry by the buyers, the sellers
made a quotation offering to sell a machine tool to the buyers for £75,535, delivery to be made in ten
months’ time. The terms and conditions given in the quotation contained a price variation clause. The
terms and conditions were also stated to ‘prevail over any terms and conditions in the buyers’ order’.
On 27 May, the buyers replied by placing an order for the machine. This order was subject to terms and
conditions that were materially different from those of the sellers, and in particular there was no price
variation clause. At the end of the buyers’ order there was a tear-off acknowledgement of the receipt
of the order stating, ‘We accept your order on the terms and conditions stated thereon’. On 5 June, the
Butler Machine Tool Co
Ex-Cell-O Corporation (England) Ltd
1 All ER 965
The decision is clearly correct when analysed on the lines of the classical approach, given

reservations of one party do not prevent the formation of a binding contract. Further, it is
perfectly possible for the parties to conclude a binding contract, even though it is understood
commenced, and, in mid-March, a first draft contract was produced by the appellant.
Clauses 8 to 48 of that draft reflected the MF/1 terms, although significant amendments
were made as negotiations continued. Clause 48 of the MF/1 conditions provided that a
contract would only come into existence if a written agreement was entered into and
signed by the parties – the so-called subject to contract clause. The LOI contract expired
on 22 March 2005, but the parties agreed to extend it from time to time until 27 May 2005
to allow for execution of the full contract. By 26 May, the contract was substantially agreed
and the respondent, who had begun work on the project, continued to work after expiry
of the LOI contract. The contract was agreed as at 5 July, but was never signed. The parties
agreed variations to the arrangements in August and subsequently the respondent issued
invoices in relation to the work that it had done, and those invoices were paid for by the

to contract’ to become legally binding where the parties later agreed to waive that condition,
The court also held that, since the parties had reached a final draft of the contractual
terms and conditions which contained the general MF/1 terms as amended in their written

, 26 October, where the Court of Appeal stated that if one of two
inferred that any subsequent conduct by that other party that was referable to the existence
conditions prevail over the other party’s. A typical ‘prevail clause’ may be as follows:
These conditions form part of this contract entered into to the exclusion of all other terms and

The need for communication of acceptance has raised several problems in this area of the
law, to the extent that one really wonders why English law insists on such a requirement.
One does not have to go very far to find compelling reasons for its need. First, substantial
hardship would result for the offeror if they were to be held to be bound by the terms of their
munication of acceptance to the offeror’s agent would be sufficient, provided that the agent
has the authority to receive the acceptance, even though the offeror was unaware of that
The case is rather unusual since it was based not on an action in contract but on an action in tort. The
facts of the case were that the defendant was an auctioneer who had been instructed to sell the farm
ing stock of John Felthouse. John’s uncle was interested in one of the horses that was being sold and
Vale Do Rio Doce
stated:In the absence of special circumstances, silence and inaction by a party to a reference [to arbi-tration] are, objectively considered, just as consistent with his having inadvertently forgotten about the matter; or with his simply hoping that the matter will die a natural death...If so,
there should, on ordinary principles, be no basis for the inference of an offer. Exactly the same
offer, still less of the communication of that acceptance of the is difficult to imag
It is an over-simplification to say that silence can never amount to acceptance since, as Goff
LJ indicates, there may well be ‘special circumstances’ that will render silence as constituting
acceptance of the offer. Treitel also discusses certain exceptions to the rule, arguing that:
if an offer has been solicited by the offeree, the argument that he should not be put to the
horse from the auction. By mistake the horse was put up for sale and sold. The uncle began an action
against the defendant for the tort of conversion and failed. The court held that the uncle had no
property in the horse as the silence of his nephew could not amount to acceptance of the uncle’s offer.
Fifoot and Furmston

manner and subsequently catching influenza. The company had impliedly waived the need
for communication of acceptance. In this regard, Bowen LJ stated: ‘... as notification of
acceptance is required for the benefit of the person who makes the offer, the person who
makes the offer may dispense with notice to himself’. Thus the mode of acceptance was held
by implication to be actually performing the conditions attached to the offer. Bowen LJ
provided an example concerning a lost dog. If one offers £100 to anyone who finds a certain
lost dog, everyone who reads the advertisement does not have to write to the owner and
accept the offer. The owner has impliedly waived the need for such communication and
(1879) 4 Ex D 216 where the defendant applied for shares in the plaintiff’s company.
(2012) put forward theories to justify
the existence of the rule but do not fully and conclusively provide an answer. One theory is
that the rule prevents an offeree from accepting by post and then nullifying acceptance by
In this case, the defendants wrote to the plaintiffs on 2 September offering to sell them some wool on

tion if this would result in ‘manifest inconvenience and absurdity’.
offeror, either expressly or impliedly, indicates that postal acceptance is sufficient, then they
should bear the consequences of the postal rule. This proposition leads us on to a discussion
The plaintiffs were a company based in London who were dealing with the defendants, an American
company, with agents in Amsterdam. Both parties possessed telex equipment. The plaintiffs offered to
buy goods from the defendants’ agents using the equipment. The agents accepted the offer also by
where the facts were very similar, except that the offer was made by telex in Vienna and
two cases, both the telex messages were sent during ordinary office hours but what would
happen if the acceptance had been sent out of office hours? Would the acceptance take place
on an answering machine, would the acceptance take place when received or when the
recording was next played back? What would happen if the recording was accidentally
during office hours, but not seen by the office staff until the next Monday, was effective
negligence on the part of the office staff. Such a solution may be appropriate where the eras
Mondial Shipping and Chartering
[1995] CLC 1011. The case revolved around the issue as to when
a telex notice of an intention to withdraw a ship from a charter for non-payment of the
hire, sent by the shipowners to the charterers, was effective. The telex was sent at 23.41
hours on Friday 2 December 1994, and received instantaneously. Was it effective at that
time or from the commencement of business the next working day, Monday 5 December?
This was crucial since the charterers were entitled to tender payment at any time before
midnight on Friday 2 December. If this notice took effect immediately at 23.41, it would
have been invalid since the charterers were not in default of the terms of the charterparty
at that time. If, however, the notice did not take effect until the start of business on Monday
5 December, it would have been valid and the shipowners would have been entitled to
cated on the next working day and the owners were thus entitled to withdraw the ship.
What matters is not when the notice is given/sent/despatched/issued by the owners but when
This statement gives further clarification where a communication is sent outside normal
munication systems. These problems were discussed by Lord Wilberforce in the
Since 1955 the use of telex communications has been greatly expanded, and there are many
tract. They may be servants or agents with limited authority. The message may not reach, or be
intended to reach, the designated recipient immediately: messages may be sent out of office
hours, or at night, with the intention, or on the assumption, that they will be read at a later
time. There may be some error or fault at the recipient’s end which prevents receipt at the time
contemplated and believed in by the sender. The message may have been sent and/or received
versal rule can cover all such cases; they must be resolved by reference to the intentions of the
parties, by sound business practice and in some cases by a judgement where the risks should lie.
Pte Ltd
[2004] SLR (R) 594. The reasoning behind this decision lies in the fact
communication by email is of a very different nature from communication via the post. It
[2014] EWHC (Ch) 1156 Andrews J stated: ‘An email is not subject to the postal
acceptance rule. It is a form of near-instantaneous communication...If the sender had to
prove the actual receipt of a fax by someone with authority to act on behalf of the recipient,
that suggests that the parties were concerned that there should be proof that the notice
actually came to the attention of [the offeror]...If that is true for a fax message, the same
reasoning should apply to an email.’ Thus an email would only be effective once it is actually
that case it was clear that the acceptance had to be received but this position could be altered
is actually meant by ‘received’ – received on the server or appears in the recipient’s email
Directive) Regulations 2002 do not help in deciding the status of the website as an invitation
to treat or an offer, as seen earlier, neither does it define what constitutes an acceptance.
... where the recipient of the service [the purchaser] places his order through technological
– (a) acknowledge receipt of the order to the recipient of the service without undue delay and
by electronic means ...
Regulation 11(2), importantly, then states:
(a) the order and the acknowledgement of receipt will be deemed to be received when the
parties to whom they are addressed are able to access them ...
Thus the provision seems to imply that acceptance only takes place when the acknowledge-
rules regarding instantaneous communication in that the acceptance is only valid when
, above.
So far it has been seen that, for a legally binding agreement to arise, an unconditional accept-
ance must be communicated and there must be the intention of being legally bound. It
follows, therefore, that if the offer has ceased to exist, there can be no such acceptance. In
this section relating to the fact of the agreement, we examine the ways in which an offer
communicated to the offeree. It should be noted that the postal rule as seen in the context
Van Tienhoven
The facts of the case were that Celestica Ltd (‘Celestica’) was an information technology company
which carried on business in Stoke-on-Trent. It wished to move its place of business to Telford and
approached Pickfords Ltd (‘Pickfords’) to carry out the removal process. Pickfords sent a fax on
Pickfords Ltd
This rule relating to communication of revocation clearly flies in the face of the earlier
thinking of judges since here a contract has come into existence when the parties are patently
not in agreement. The rule, nevertheless, is correct, as otherwise no one would be able to rely
on any offer since it might have been revoked before it had been received by the offeree, a
There are two principal exceptions to the rule that revocation must be communicated to
the offeree. First, the rule may be overturned where the revocation would have been received
ing to inform the offeror of a change of address. This exception also raises the spectre of
when communication takes place, that is, when received or when actually read by the

dence of the withdrawal of the first offer was the sending of the second offer. He considered
office equipment needed moving and that this would require 96 pantechnicon vehicle loads. The
On 10 June, the defendant offered to sell his house to the plaintiff for £800 adding, ‘This offer to be
left over until Friday 12th June, 9 am.’ On Thursday 11 June the defendant sold the house to someone
else and that evening the plaintiff was informed of that sale to another individual named Berry. That
A makes an offer stating that they will pay £1,000 to anyone who walks from Manchester Town Hall

however, was not so definite in its judgement, preferring to decide that
it would not be proper to infer an undertaking on the part of the owner not to
taking could be implied in a particular case the court would find such an implication justifi
the House of Lords would not imply such an undertaking, on the basis that the reward was
very substantial for comparatively little effort on the part of the agent and therefore the
House of Lords might have been prepared to imply such an undertaking.
An owner of a piece of land promised to pay an estate agent £10,000 commission if he introduced
someone who was willing to purchase the property. The agent did in fact introduce someone and a
sale was agreed subject to contract. While the third party was always ready and willing to purchase
the property, the owner decided not to proceed with the sale. The result of the decision was that
A father purchased a house in his own name and then allowed his son and daughter-in-law to live in
the house provided they paid the mortgage instalments. He told them that the house would be theirs
when the mortgage was paid off. The couple lived in the house and paid the instalments. They were
not contractually obliged to do this, though if they did, the house would be theirs. The father eventually
died and his widow claimed possession of the house. It was held that the agreement amounted to a
contract which could not be revoked, provided the couple continued to pay the instalments.
Errington and Woods
, the
basis of the decisions in all three cases is conceptually elusive. Not surprisingly Lord Denning,
, tends to rely on this

was held that the company could not accept the defendant’s offer to purchase the shares
fore the action for breach of contract for failure to accept and pay for the shares failed.
Apart from an offer only being effective for a stated or reasonable period of time, as discussed
above, the offer may only be effective while certain conditions exist. An offer may expressly
The defendant, having seen a car at the premises of the dealer, decided to buy it on
hire purchase
signed a form supplied by the dealer which stated that the hire purchase agreement became binding
only when signed by the plaintiffs, the finance company. The defendant paid a first instalment of £70
[1962] 3 All ER 386
The effect of death on an offer is, unlike death itself, not quite so certain, at least where it
offeror, then death will automatically terminate the offer. Thus, an offer by a film star to
open a gala will clearly lapse on the death of the film star. Where, however, the contract
does not require the personal services of the offeror, then it may be the case that the personal
result, the death of the offeree terminates the offer.
Despite the fact that one can find a valid offer and acceptance leading to an agreement, the
It is the loosely drafted contract that creates the problem and here the courts are faced

will have more information on which to resolve the uncertainty within the contract once
some performance has been rendered. Nevertheless, the reluctance of the courts to unravel
, the facts of which have already been considered, the court
having been performed was a major factor in the Court of Appeal’s decision.
lowing case.
The claimant had been a principal supplier of garments to the defendant for some 30 years. In October
1999, the defendant terminated all supply arrangements with the claimant from the end of the then
current production season without warning. The claimant contended that the defendant was precluded
from terminating the arrangements without reasonable notice based on the fact that there was an
implied contract to acquire garments from it in such quantities and at such process prices which in all
Baird Textiles Holdings Ltd
uncertainty is the provision for arbitration or some other means of resolving disputes within
case and was another factor taken into
account by the Court of Appeal in coming to its decision. Such a provision is always prudent
A contract was entered into concerning a major construction project; work on the project started
before all the terms had been agreed, though negotiations proceeded in the expectation that a full
and final agreement would eventually be forthcoming. At the heart of the negotiations were matters
relating to delivery, price and certain other terms. Eventually a dispute broke out whereby BSC
claimed a reasonable price for the items delivered so far, whereas CBE counter-claimed for damages
for non-delivery of certain items. BSC’s claim was based on a claim in
quantum meruit
and since it
All ER 504

In executory contracts there is more likely to be a finding of uncertainty particularly
where, as in the
case, the parties are still negotiating the terms of the contract
when they start trading. It is because of this trading position that some lawyers are often
[2009] EWCA Civ 1189, in which Hollywood, the
respondent, was a subsidiary of a cinema group for which it undertook distribution and
lywood invited tenders for a new subcontract and sought indicative prices for one-, three-
and five-year contracts. Whittle tendered for the contract and was successful. The invitation
to tender from Hollywood was expressed to be ‘subject to contract’ and, as such, clearly
contemplated that a formal written contract would be executed. Further negotiations took
Should the postal rule be abolished?
The postal rule has been subject to criticism not least that is an anachronism that has its
origins in the nineteenth century and that it is an anomaly in the twenty-first century
when the vast majority of contracts are entered into via many other different modes of
instantaneous communication and in which the postal rule does not apply. Arguably it
has been claimed that having one rule as regards communication of acceptance and
indeed all forms of communication would be to provide a more coherent set of principles
for the formation of an agreement. The antiquity of the rule means that it is highly
unlikely that it will be overturned judicially and instead exceptions to the rule will con
tinue to develop, as in
Holwell Securities Ltd
. It should also be noted that in
many jurisdictions the rule does not operate.
The justification for the rule is somewhat elusive. As we have seen, one theory is that
the rule prevents the offeree accepting by post and then withdrawing his acceptance by
a later, quicker mode of communication so that the letter of acceptance once received
by the offeror is ineffective. The converse to this is that without the rule, the offeree
would not know if he has entered into a contract of not. The truth of the matter in these
circumstances is that the law has adopted an approach that fulfils a commercial expedi
ency and really, whichever approach is adopted, one or other of the parties is bound to
suffer a disadvantage. The law has therefore developed a principle that the offeror wish
ing to enter into the contract should bear the risk of the letter of acceptance becoming
lost and, in any event having made the offer and not having received a reply, the offeror
would be put on notice to chase up the matter with the offeree. In any event, the offeror
is free to place conditions on the terms of his offer, for instance, ‘your acceptance will
only be valid when it is received by me’ as in
Household Fire and Carriage Accident
Insurance Co
Grant and Holwell Securities Ltd
. This point was also consid
ered directly in
Manchester Diocesan Council for Education
Commercial and General
Investments Ltd
. The position is then that if an offeror makes a stipulation that only a
particular mode of acceptance is sufficient, the offeree must comply with that
Another justification for the rule is that the Post Office acts as an agent for both the
parties so that communication to the agent completes the transaction. Thus the Post
Office is the agent of the offeror for delivering the offer and is also the agent for the pur
poses of delivering the acceptance. This is clearly incorrect as the Post Office is not an
agent for those purposes and, if anything is merely an agent for the purposes of delivering
the letter of acceptance and not to receive it on behalf of the offeror.
The truth of the matter is that the rule is an arbitrary one and none of the explanations
really provide a satisfactory answer, though it is probably safe to say that the function of
the rule in limiting the offeree’s power to change his mind once he has accepted the offer
provides a useful function. It can be seen that without such a principle hardship may
arise. For instance, if X offers to sell Y a coat. X places no conditions on the requirement
of acceptance and therefore impliedly adopts the postal rule. Y, then posts his acceptance
of the offer to Y but then changes his mind and then sends a text message to X telling
him to ignore his acceptance. X then sells the coat to Z on receiving the text. Could Y
then change his mind again and hold X to the contract? There are several ways of looking

at such a situation. Firstly, it could be that Y is in breach of contract in that he has accepted
the offer and there is now a contract so his text message amounts to a breach. In such a
situation it could be argued that X has accepted this breach and therefore he is now free
from his obligations under the contract. Such a solution leaves X with the option to sue
Y for breach if X’s sale to Z is on less advantageous terms. Another way of looking at such
a situation is that the contract has ended by mutual agreement.
One way of looking at the postal rule is that it provides a baseline. This baseline can
then be subject to amendment by the offeror placing conditions on the mode of accep
tance and setting out when the acceptance will take place. This avoids the rule and deals
with such problems that might arise out of the letter being lost or misdirected. It should
also be borne in mind that the courts themselves have provided an exception so that the
rule does not apply where its application results in ‘manifest inconvenience and absur
dity’ as stated in
Holwell Securities Ltd
In 1993, the Scottish Law Commission (Scot Law Com No. 144) produced a report.
‘Report of Formation of Contract: Scottish Law and the United Nations Convention on
Contracts for the International Sale of Goods’, in which it expressed concern over the
operation of the postal rule and considered its application was inconsistent with the
expectations of non-lawyers who would not expect to be bound by a contract until the
acceptance of the offer had been received by them. The Scottish Law Commission advo
cated adoption of the Article 18 (2) and (3) of the United Nations Convention on Con
tracts for the International Sale of Goods (the ‘Vienna Convention’):
Article 18 (2) An acceptance of an offer becomes effective at the moment the indica
tion of assent reaches the offeror. An acceptance is not effective if the indication of
assent does not reach the offeror within the time he has fixed or, if no time is fixed,
within a reasonable time, due account being taken of the circumstances of the transac
tion, including the rapidity of the means of communication employed by the offeror.
An oral offer must be accepted immediately unless the circumstances indicate
Article 18 (3) However, if, by virtue of the offer or as a result of practices which the
parties have established between themselves or of usage, the offeree may indicate
assent by performing an act, such as one relating to the dispatch of the goods or pay
ment of the price, without notice to the offeror, the acceptance is effective at the
moment the act is performed, provided that the act is performed within the period of
time laid down in the preceding paragraph.
Article 18(2) therefore provides that acceptance only becomes effective when it reaches
the offeror, although it should be noted that Article 18(3) preserves the postal rule if the
parties wish to adopt the rule. The provision in Article 18(2) is however tempered by
Article 16(1) which provides that ‘Until a contract is concluded an offer may be revoked
if the revocation reaches the offeree before he has dispatched an acceptance’, thus once
the acceptance is sent, the offeror is unable to revoke his offer until such time as the letter
of acceptance is received provided it arrives before the date fixed by the offeror.
As of May 2016, the Vienna Convention has been ratified by 85 states, however, the
United Kingdom, recognised as a leading jurisdiction for the choice of law in interna
tional commercial contracts, is not a signatory on the grounds ‘the government not view
ing its ratification as a legislative priority, a lack of interest from business in supporting
ratification, opposition from a number of large and influential organisations, a lack of
public service resources, and a danger that London would lose its edge in international
arbitration and litigation’.
Similar principles to the Vienna Convention are also found within UNIDROIT Prin
ciples of International Commercial Contracts (Art 2.1.6) and the Principles of European
Contract Law (Art 2.202(1)).
hat do you consider to be the advantage or disadvantages of the existing postal
rule? Are the criticisms of the rule valid?

e the exceptions to the postal rule now so extensive that the postal rule is now
only useful as a baseline rule that the courts apply in default of the parties making
their own arrangements?

ales adopt such the principles set out in the international
Definition of an offer: an offer is an expression of willingness to contract on certain
terms made with the intention that a binding agreement will exist once the offer is
Adverts: most advertisements are an invitation to treat (

In some circumstance, the words ‘I would accept ...’ can amount to an offer (
Exceptions to the general rule

lished that acceptance by silence was possible.
Carbolic Smoke Ball

Luxor (Eastbourne)
Morgan, ‘Battle of the Forms: Restating the Orthodox’, (2010) 69
Cambridge Law Review
Platt, ‘Win the War but Don’t Lose the Battle’ (2011)
Construction Law
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
(Oxford University Press, 2006)
Stone, ‘The Postal Rule in the Electronic Age’ [1992] 12
Student Law Review
Stone, ‘Forming a Contract without Offer and Acceptance’ [1994] 15
Student Law Review
Peel, Treitel
Law of Contract




Consideration is one of the principal ingredients of an enforceable simple contract in
English law. It was not always such a requirement and it is largely regarded as having
originated in the sixteenth century, though the technical reasons for its evolution are not
clear. One theory is that it evolved as a means of restricting the development of assumpsit,
in that only promises supported by consideration could be enforced; gratuitous promises
were, therefore, not enforceable. The law thus evolved in simple contracts in such a way
separately from assumpsit at a time when the law was very much more formulary in its
approach. In this situation an agreement made under seal could be enforced despite the
Consideration is the price for which the promise of the other is bought. It must be ‘some-
promises to buy a car from
for £2,000 and
for their part promises to sell the car to
for £2,000
there is clearly a binding contract which can be enforced, should one of the parties decide not to
, where he defined consideration as:
An act or forbearance of one party, or the promise thereof, is the price for which the promise
of the other is bought, and the promise thus given for value is enforceable.
This definition was approved by the House of Lords in
Dunlop Pneumatic Tyre Co

[1915] AC 847 and is regarded as being more representative of the
It should be noted carefully that past consideration means past in relation to the promise
£50 if
painted his house, then
can only claim the £50 once
has carried out their part
of the bargain, that is, their consideration is executed in that it has been carried out in
In this case, the plaintiff had negotiated the purchase of a particular horse from the defendant for a
certain price. Subsequent to the agreement the defendant promised the plaintiff that ‘the said horse
was sound and free from vice’. In fact the horse proved to be particularly vicious and the plaintiff sued
for breach of the promise. It was held that his action would fail since the consideration provided by the
plaintiff was already past when the promise of the defendant that the horse was sound and free from
vice was made. In truth, the warranty as regards the horse was not induced by the payment made for
the horse and was, as such, purely gratuitous.
By virtue of a father’s will, his children were to be left his house on the death of their mother. While
the mother was alive, one of the children and his wife lived in the house with her. The wife, during this
period, made substantial alterations and improvements to the property. In gratitude, the children later
signed a document which stated ‘in consideration of your carrying out certain alterations and improve
ments to the property, we hereby agree that the executors shall repay to you from the estate, when
Re McArdle
The facts of this case were that Braithwait had killed another man and asked Lampleigh to secure a
pardon from the king. Lampleigh went to considerable effort and expense to secure the pardon for
Braithwait who subsequently promised to pay Lampleigh £100 for his trouble. Braithwait then failed to
pay the £100 and was sued on his promise by Lampleigh. Clearly on the basis of the rule relating to past
consideration, the efforts of Lampleigh were in the past in relation to the promise to pay by Braithwait
and therefore he should have failed in his action. The court, however, held that the original request by
Braithwait in fact contained an implied promise that he would reward and reimburse Lampleigh for his
efforts. Thus, the previous request and the subsequent promise were part of the same transaction and
as such were enforceable against Braithwait by Lampleigh once he had secured the pardon for him.

dered at the defendant’s request and that it was implicit that both parties must have
understood that the claimant’s services would have to be paid for. Further, the implication
pose of calculating the commencement of the limitation period, from the date of the
acknowledgement and not before. The acknowledgement need not necessarily be a promise
debt and is thus in the past. See
[1965] 3 All ER 818 for an application
promises to give
£5000 and
promises to give a car to
can enforce the contract against
fails to deliver the car to
The rule that consideration must move from the promisee means that a person can only
enforce a promise made to them if they can show that they have provided consideration

(1833) 4 B &
Ad 433 where Price owed the plaintiff £13 and agreed to work for the defendant who
promised to pay Price’s wages to the plaintiff, but in the event failed to do so. It was held
that the plaintiff could not recover the £13 from the defendant as no consideration had
moved from the plaintiff.
An exchange of promises, however, can amount to consideration.

A modern application of the rule can be seen in the case of

[1981] AC 513 where a father, to avoid an option granted to his son, sold a farm to
The plaintiffs owned the copyright to a piece of music entitled ‘Rockin’ Shoes’.
made records of
the tune which they sold to Nestlé, the defendants, for 4d each, who then offered them to the public
for 1s 6d each plus three wrappers from Nestlé 6d chocolate bars. The wrappers were thrown away
on receipt. The main object of Nestlé Ltd was to promote and sell their chocolate, though a profit
was also made on the sale of the records. The plaintiffs sued the defendants for breach of copyright,
relying on s 8 of the Copyright Act 1956 which provided that a person can make a record of a musical
[1960] AC 87
Very often certain persons, by their official status, or because of obligations imposed on
by the law is not recognised by the law when it is used to support a simple contract. The
leading case in this field is
(1831) 1 B & Ad 950, where the plaintiff
Afterwards the defendant promised to pay him a fee of six guineas. It was held that the
the promise because he was already legally obliged to attend the trial. His consideration, in
other words, was insufficient to support the promise of the defendant.
The issue of existing public duties has proved a particular problem in respect to public
In this case, a colliery manager applied for police protection for his mine during a strike. He insisted
Glassbrook Bros
Glamorgan County Council
(1840) 11 Ad and El 856, where the defendant offered a reward to anyone who
gave information that would lead to the conviction of a certain felon. The plaintiff, a
police constable, supplied the information and claimed the reward. The defendant
refused to pay and alleged in his defence that the plaintiff had done no more than the
public duty imposed on him by the law to supply such information. The defendant also
stated that such a contract was contrary to public policy. The basis for this is that to allow
officials such as police officers to claim in circumstances where they were already under
an existing public duty to act would be to risk the promotion of corruption and extortion.
Both these defences were rejected by the court, the first on the ground that there were
certain services a police officer was not required to render and clearly these services can
amount to sufficient consideration in the proper circumstances. The second defence was
rejected on the basis that to hold a contract void as being contrary to public policy
requires very clear grounds for doing so and the courts do not readily accede to such a
finding, particularly in cases of reward since the effect here is to encourage and promote

The principles and decisions in the above two cases have also been seen in the
Police officers were required to be on duty within the grounds of the club when matches were being
played there. The club was required to pay for ‘special police services’ when these were provided at the
request of the club. The club refused to pay for these services on the basis that the police were merely
carrying out their normal public duties in ensuring the maintenance of law and order and thus provided
insufficient consideration for the promise of the club to pay for those services. The court held that the
police provided more than their public duty required of them and therefore they were entitled to
charge and claim for the moneys owed to them in respect of the ‘special police services’.
Sheffield United Football Club Ltd
[1987] 2 All ER 838
In this case, Leeds United Football Club challenged the lawfulness of charges made for the provision
Chief Constable of West Yorkshire Police
on police resources as a whole, reduced the ability of the police to carry out their regular
policing activities and could not be considered to be ‘normal’ policing activity. Previously,
for special police services on a club’s own land and the police would bear the cost of policing
more pressures on the use of public funds, attempts were made to try to recoup the costs
case. This exception is now embedded in the

special police services at any premises or in any locality in the police area for which the
a similar decision would also be reached on sufficiency of consideration grounds.
eration to support the promisor’s promise. In some circumstances, however, the finding of
good consideration on a matter of policy is not possible and, in these circumstances, the
courts can go to extraordinary lengths to find for the existence of sufficient consideration.
[1956] 2 All ER 318

Denning LJ significantly went further than this and stated that the defendant would be
‘is contrary to the public interest’.2. Where the claimant is bound by the provisions of an existing contractual obligation owed to the defendantA claimant provides insufficient consideration to support a promise made by the defendant
if the claimant merely performs, or promises to perform, an obligation already owed by the
that she would be well looked after and happy’. The child decided that she did want to live with her
mother and the defendant relinquished her to the mother for some seven months, paying the agreed
£1 per week maintenance. The plaintiff then married another man and the defendant promptly ceased
to make any further payments. The plaintiff sued for breach of contract and the defendant pleaded s
42 of the National Assistance Act 1948. The provision stated that the mother of an illegitimate child was
bound to maintain that child. The defendant alleged that the mother had done no more than fulfil a
The plaintiff entered into a contract to sail a ship from London to the Baltic and back. During the
oyage, two crew members jumped ship and subsequently the captain promised to divide the wages
(1791) Peake 102. The facts of this case were very similar to
. In other
that the rule was founded on the ground of public policy, while in
Lord Ellenborough
The decision in
might have been different if the claimant could have
In this case, where the facts were similar to those in
, the plaintiff was successful in his
claim. The court, however, found that so many of the crew had deserted the ship in this case that the
nature of the voyage had changed. The ship had become so short-handed that it had now become
hazardous to proceed. The remaining crew had not contracted for such a voyage, and therefore they
were held to be discharged from their existing contractual duties and free to make a new contract.
The facts were that the defendant building contractors entered into a contract to refurbish a block of
27 flats. They subcontracted the joinery work to the plaintiff for a price of £20,000. It was an implied
Roffey Bros & Nicholls (Contractors) Ltd
[1990] 1 All ER 512

In the Court of Appeal, Glidewell LJ expressed the law in the following terms:
, then (vi) the
’s promise, so that the promise will be
, above, and which appeared to be tacitly approved of in Glidewell’s
judgement. Further, the proposition would also support and explain the existence of the
exception to the rule in
where a promise to perform, or the performance of,
can be valid consideration, as expressed
(see below).It should be noted that promissory estoppel could not be pleaded by the claimant in
the case since this cannot be used as a means of bringing an action. Clearly the case could
give rise to a great deal of discussion, not least an argument that the stance taken by the
Court of Appeal is a move towards an adoption of a law of obligations, which is not based
on the doctrine of consideration. Indeed, the role played by promissory estoppel itself,
as we shall see later, takes us somewhat nearer this result. In any event, the emergence of
consideration. It may well be the case that the subcontractor had put in too low a price in his bid for
the work, but it is not for the court to rewrite the contract simply because the plaintiff had made a bad
bargain. It is always possible for the parties to abandon the contract by agreement and enter into a new
On appeal to the Court of Appeal, the defendants indicated that they hoped to obtain three principal
amounts to consideration for their promise to pay the extra moneys to Williams, the
consideration does not move from the promisee, i.e. Williams, as required in the classical
rules of consideration and contract. The decision as it stands is therefore in conflict with
two very well-established principles of the doctrine of consideration and it is because of
has come under increasing judicial criticism.
[2005] 1 Lloyd’s Rep 128,
, Glidewell LJ had relied
case which involved a tripartite agreement in which a pre-existing
If there is a promise by
to perform a contractual obligation that
already owes to
, this could
amount to consideration as against
. This is correct since here for the additional promise by
consideration has moved away from
since he has made an additional promise to perform the obliga
tion he owes to
. This does not occur in a bilateral contract since
is only promising to
what he is
already bound to perform under the contract. Colman J pointed out that Glidewell LJ had effectively
substituted a different rule ‘that the promisor must by his promise have conferred a benefit on the
other party’ from that of the rule that consideration must move from the promisee.
One has to be guarded in going as far as this though. The members of the Court of Appeal
change the rule of consideration as regards the initial formation of the contract, and its
application was confined to the alteration of obligations within existing contracts. This

The plaintiffs contracted with a third party,
, to deliver coal to
, or to the order of
then sold the
coal to the defendant and directed the plaintiffs to deliver it to the defendant. The defendant entered
into an agreement with the plaintiffs whereby, ‘in consideration that the plaintiffs, at the request of
the defendant, would deliver [the coal] to the defendant’, the defendant promised to unload the coal
All three cases which tend to establish the principle have question marks hanging over
marks, however, are largely academic today and any doubts as to the probity of the principle
have to be put on one side following the decision of the Privy Council in the following case.
It is of further significance that the decision in
was also supported in

Part-payment of debt
1. The common law rule
We now need to consider the second area where the law considers the consideration to be
insufficient. It should be said immediately that some authors treat this as part of the rules
relating to existing contractual duties owed to the promisor. There is nothing wrong with
this approach since here the debtor is attempting to show consideration by performing
only part of what they are already contractually bound to do. It is, however, possible to
The facts of the case put simply were that the plaintiff made an offer to the defendant that if the
defendant unloaded the plaintiff’s goods, which the defendant was already obliged to do by virtue
of a contract with a third party, the plaintiff would not hold the defendant liable for any damage to
benefit of a direct obligation which he can enforce. This proposition is illustrated and supported by

...which their Lordships consider to be good law.
[1975] AC 154
at a fixed rate per day. The defendant failed to keep to his promise and, when sued for breach of con-
tract, pleaded lack of sufficient consideration to support his promise. It was held that the defendant
was liable and that the performance of an existing contractual duty could be consideration for a
promise given by a third party. While the decision in the case would probably be correct today, it is
deficient in that there is no definite statement as to where the consideration lies.

The rule enunciated above is known as the rule in
in which it was stated:
of payment, or a different time, or some change in the nature of the consideration offered
ever, subject to one qualification: the new element must be introduced at the request of the
attempts to use some financial weakness of the creditor for his own purposes, or who
attempts to use the threat of potential litigation on the part of the creditor as a means of
The plaintiffs had done building work for the defendant for which they were owed £482. The plaintiffs
pressed for payment for some six months and in fact were in dire financial straits. The defendant’s wife,
ment would no doubt be void anyway. Given the development of economic duress, it is
Mrs Beer had obtained judgement against Dr Foakes for £2,090 and some time later he asked for time
to pay. The parties then entered a written agreement where Dr Foakes would pay £500 immediately
and the balance by instalments. Mrs Beer agreed also that she would not ‘take any proceedings what
ever on the judgement’. The parties failed to take into account that a judgement debt carries interest
from the date of the judgement. Some five years later Dr Foakes had paid the whole of the judgement
How can the case of
be reconciled with
D & C Builders Ltd
The ques
, though the effects are
, it has been stated that the common law rule produces a harsh
was never formulated on the basis of
the creditor acting in an unfair manner, but on the basis of an impecunious debtor attempt
ing to wring an advantage out of the precarious financial position of the creditor by saying,
The facts of the case were that Mr Collier (‘C’) was in partnership with a Mr Broadfoot (‘B’) and a Mr Flute
(‘F’) and all were judgement debtors of Wright (Holdings) Ltd (‘W’). C came to an arrangement with W
whereby he agreed to pay one-third of the debt instalments over five years and this in fact he did. C’s
understanding was that the arrangement meant that he would not be liable for the remaining two-thirds
of the debt and that W would pursue the other debtors separately for the outstanding amount. B and F
were subsequently declared bankrupt and therefore W served a statutory demand on C for the outstand
binding contract for good consideration so that C’s liability for the rest of the debt was discharged. While
it is true that any benefits from partial payment could be regarded in the same way as the ‘horse, a hawk
and a robe’ argument discussed earlier, the Court of Appeal rejected this argument. Undoubtedly C would
benefit from the agreement in the sense he would not be liable for any further contributions to the debt
owed by B and F, but also he would lose certain benefits that he would have if he remained a joint debtor
since if W decided to release B and F from the debt (because they had become bankrupt), then the effect
of this would be also to discharge C automatically. He also gave up the possibility that if he predeceased
B and F his liability would pass to B and F. Lady Arden considered that none of these factors could amount
to good consideration since no benefit had moved to W. It follows from this that if a creditor agrees with
a joint debtor to accept payment from him alone for his proportionate share, this does not result in a
binding contract and thus no further exception to
Pinnel’s case
arises from this position.
P & M J Wright (Holdings) Ltd
debt; Mrs Beer claimed £360 for the interest on the debt. Dr Foakes refused to pay, relying on the
agreement and the undertaking by Mrs Beer as a defence. It was held by the House of Lords that
Mrs Beer could claim the £360, the court relying on the rule in
Pinnel’s case
. Although the decision no
doubt was correct in law, it has been subject to criticism, in particular from Lord Blackburn, who only
reluctantly accepted the decision when confronted with powerful authorities in support of the rule in
Pinnel’s case
, and commented:
all men of every day recognise and act on the ground that prompt payment of a part of
their demand may be more beneficial to them than it would be to insist on their rights and enforce
payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this is often so.

, and with the concept of
economic duress replacing this rule in cases like
D & C Builders Ltd
, a number of
exceptions to the rule have developed. The most important of these can be found in the



, now usually referred to as promissory estoppel in this context. The modern
In fact, the plaintiffs were only testing their claim by suing for the last two quarters of
1945 and what they intended to do was to attempt to claim the arrears of the rent owed for
was applied to this
problem, the plaintiffs’ claim would succeed. The plaintiffs during discussion had promised
above, did not apply. Denning concluded,
obiter dicta
, that the plaintiffs would fail in such
In September 1939, the plaintiffs leased a block of flats to the defendants at a ground rent of £2,500
per annum. In January 1940, many of the flats became vacant because of the prevailing war conditions
and the plaintiffs reduced the ground rent to £1,250 in recognition of these factors. No time limit was
fixed for the arrangement and the defendants continued to pay the reduced rent until 1945. In 1945,
the flats were again full and in 1946 the receiver of the plaintiff company sought to recover the back
rent for the last two quarters of 1945 and for future years. It was held by Denning J (as he then was)
that the arrangement as to the reduced rent was only intended to apply while war conditions affected
Central London Property Trust Ltd
High Trees House Ltd
case, Denning stated: ‘I prefer to apply the principle that a
[1951] 2 KB 215, however, Denning J
stated the doctrine of promissory estoppel in more accurate terms as:
where one party has, by his words or conduct, made to the other a promise or assurance which



amounted to a promise that while they were going on, no action would be taken to enforce the notice.
The tenant had done nothing to the premises because of his reliance on this promise, and thus the six
months’ notice ran from the date of the failure of the negotiations and not from the original date of
the service of the notice. The tenant was entitled to have relief from the action to forfeit his lease. Lord
Cairns stated the principle of equitable estoppel in the following terms:
nite and distinct terms involving certain legal results – certain penalties or legal forfeiture – afterwards
enforced or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced
those rights will not be allowed to enforce them where it would be inequitable having regard to the

for maintenance to the divorce court. Nearly seven years after being awarded the decree
absolute, the ex-wife brought an action for £675 representing arrears for six years nine
months’ maintenance. She alleged that her husband had made an unequivocal promise,
the husband should therefore be estopped from going back on that promise. At first instance,
the court upheld her claim but this decision was reversed in the Court of Appeal which held
Amalgamated Investment and Property Co. Ltd v Texas Commerce
Western Fish Products Ltd v Penwith DC [1981] 2 All ER 204 – all rejected the notion of estoppel in such situations. In the cases of Combe v Combe and Texas Commerce, it was stated that estoppel cannot create a cause of action; in
Western Fish Products
The appellants were the owners of a British patent and in April 1938 they contracted to give the
respondents a licence to manufacture and sell certain alloys subject to the patent. The contract stipu
lated that if the respondent sold more than a certain quantity of the alloys, ‘compensation’ would be
payable to the appellants. At the outbreak of the war the appellants agreed to suspend their compen
sation rights pending the negotiation of a new contract. The negotiations for the contract began in
1944 but soon afterwards broke down. In 1945, the respondents sued the appellants for breach of
contract and they counter-claimed for the compensation payable as from 1 June 1945. The respond
ents’ action was dismissed. In the Court of Appeal, the counter-claim by the appellants also failed since
it was held that the agreement reached in 1939 operated to prevent the appellants claiming compen
sation until they had given reasonable notice to the respondents of their intention to revert to the
terms of the original contract and that they had not given such notice to the respondents.
reasonable notice of their intention to claim compensation. The claim was upheld at first instance,
had been extinguished and that rights to future compensation had only been suspended until such
Generally the view of promissory estoppel is that it is only suspensory in operation,
except in cases where ‘the promisee cannot resume his position’, as stated by the Privy
[1964] 3 All ER 556. This

, then the fact that Mrs Beer’s right to the interest is merely suspended would be clearly
offensive to equitable principles given her original undertaking. In order to reconcile this
the representation, it will be inequitable for the representor to enforce his rights for the nature
tion of the whole of the original debts. It is clear from the rule in
Pinnel’s case
that such an
arrangement should not be binding on the parties to it, yet such arrangements are neverthe
less upheld. The basis of their binding nature is somewhat elusive.
theory is fundamentally flawed, however, since it is clear that the debtor would not be
part of this contract because the debtor has provided no consideration for the creditors’
A second approach has been to justify composition arrangements on the basis that creditors
will not be allowed to go behind the agreement and sue for the balance owed to them since
lems, it has tended to be adopted on the basis that it is consistent with the position as regards
the debtor for the balance, on the basis that otherwise the creditor would be committing a
fraud against the third party. The fraud arises here since the creditor is inducing a payment
from the third party on the basis that they agree to discharge the debtor from the whole
amount. This was the finding of the court in
(1825) 1 C & P 557, which finding

facts of which were examined earlier. In that case it was considered that where a debtor
offered to pay only part of the amount he owed and the evidence suggested that the creditor
had accepted that offer voluntarily and, relying on that acceptance, the debtor paid that
part of the amount he owed in full, the creditor would be bound to accept the part-payment
draw from his promise. Longmore LJ doubted, however, that the raising of estoppel in such
more LJ and Arden LJ considered that, while the matter before them was merely an appeal
(Contractors) Ltd
seems to withdraw from the authority laid down in
that the
In relation to part-payment of debt the authority for this principle is found in
extortion or economic duress of the type seen in
D & C Builders Ltd
. It is for this
is owed £500 by
. The Court of Appeal rejected the defence of Roffey Bros based
of that benefit could amount to consideration for their own promise to pay the extra moneys
the development of economic duress, this raises the question of the extent to which the
Roffey Bros
could be applied to cases of part-payment of debt. Accept
ance of part-payment of debt, in the absence of economic duress or fraud, may be a perfectly
reasonable transaction for the creditor to enter into. The reasoning bears a close analogy to
since, whilst the creditor only receives a proportion of their moneys
(or as in
only receives them by instalments instead of in one lump sum), they
also receive the benefit of avoiding having to take legal action to claim the full amount, with
of the moneys, which may be less than the amount offered by the debtor. The benefit
The application of the decision in
to debt situations was attempted
The company entered into negotiations with the Inland Revenue concerning the payment of taxes
owed. During the negotiations the company offered to pay its tax debts by instalments, the Collector
of Taxes stating that he would come back to the company if the arrangement was found to be unsat-
isfactory. As a result, the company commenced paying the taxes owed by instalments but was then
contacted by the Inland Revenue, which insisted that all the arrears of taxes should be paid immedi
ately, otherwise it would commence winding-up proceedings against the company.
It was held in the Court of Appeal that the agreement to accept payment of the debt by instalments
was not binding on the Inland Revenue. Their Lordships distinguished the case from that of
Roffey Bros
[1995] 2 All ER 531


mercial life. Indeed, in the case itself, Lord Blackburn criticised the rule, stating that part-
A further aspect to the decision is that it is surprising that the Court of Appeal did not
the company, i.e. the
should make the approach to the debtor, in order to avoid the possibility of economic duress
, the approach was made by
was no indication that the Inland Revenue had accepted the arrangement. The fact that the
creditor was the Inland Revenue may also have had some influence on the decision.
A valuable consideration in the sense of the law, may consist either in some right, inter
The claimant can only enforce the defendant’s promise if they can demonstrate their
Where the claimant is bound by the provisions of an existing contractual obligation owed
If the debtor places the creditor under economic duress to accept a lesser sum then the

The claimant may recover the interest on a debt while making an undertaking not to

by Denning J in
Central London Property Trust Ltd
High Trees




Atiyah, ‘Consideration: A Restatement’,
Essays on Contract
(Oxford University Press, 1990)
Beatson, Burrows and Cartwright,
Anson’s Law of Contract
, 30th edn (Oxford University Press, 2016)
Brinkworth and Powell, ‘Contract and Consideration: A New Commercial Reality?’ (1991) 12
Business Law
Coote, ‘Consideration and Variations: A Different Solution’ (2004) 120
Law Quarterly Review
Coote, ‘Variations sans consideration’ (2011) 27
Journal of Contract Law
Denning, ‘Recent Developments in the Doctrine of Consideration’ (1952) 15
Modern Law Review
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
Hird and Blair, ‘Minding Your Own Business –
Revisited: Consideration Reconsidered’
Journal of Business Law
Hooley, ‘Consideration and Existing Duty’ [1991]
Journal of Business Law
Jackson, ‘How Many Kinds of Estoppel?’ [1982]
The Conveyancer and Property Lawyer
Noble, ‘For Your Consideration’ (1991) 141
New Law Journal
Peel, ‘Part Payment of Debt Is No Consideration’ (1994) 110
Law Quarterly Review
Principles of Contract
, 13th edn (Stevens, 1950)
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)
Peel, Treitel
Law of Contract


ticipants, and if they do not consent to the creation of a legal relationship, then no contract
that is legally enforceable will emanate from the relationship of the parties. As Atkin LJ
‘each house is a domain into which the King’s writ does not seek to run’.
On the face of things, then, the rule appears very simple and straightforward but, as every
student of the law of contract should now be starting to realise, this is rarely the case in this
cluded and legally binding agreement.
The courts have thus assumed a more restrictive and pragmatic approach to this problem
based on the presumed intentions of the parties. In commercial matters, the courts presume
that the parties intend to create a legal relationship, while in agreements of a social or
domestic nature no such presumption is made. In either case, however, the presumption
presumption is very high indeed, one is not just attempting to overturn a straightforward
legal rule, but a legal rule with judicial policy at its foundation, the policy being that the law
should not interfere in respect of such transactions.
Most social and domestic arrangements do not amount to binding contracts since they are
not intended to be such. To agree to take a friend out for a meal or a drink is clearly not
out one’s commitment. Cases that amount to social/domestic arrangements tend to fall into
Family arrangements
This case forms a leading authority in this area. In the case, a husband, who was a civil servant based
[1919] 2 KB 571
[1970] 1 WLR 1121
It should be noted that agreements between husband and wife can, from time to time,
produce legally binding consequences.
A mother agreed with her daughter that if the latter gave up her job in the USA and read for the Bar
in England, the mother would pay her an allowance of $200 a month. On this basis the daughter came
to England and began her legal studies in November 1962. In 1964, the mother bought a house for
£6,000, whereupon the earlier agreement was now varied so that the daughter, instead of receiving
Questions such as those discussed above may also occur in agreements other than those
The defendant owned a house in which she lived with her granddaughter and the plaintiff, a paying
[1955] 3 All ER 10
While the case gives effect to the intentions of the parties as expressed in the written
memorandum and no doubt produces a fair result as regards the orders already received, the
were raised at first instance. First, how can the clause bind the parties if there is no binding

[1996] CLC 451, it was stated that one would need expressly to exclude the pre-

[2009] EWCA Civ 784, it was held that it was necessary to
consider the background of the parties to determine if a legal relationship had been entered
into. In that case there had been a degree of trust arising over seven years with regard to
In this case, an English company agreed to sell certain carbon copy materials in the USA through a
New York-based firm. The transaction, which was made in writing, gave the plaintiffs the sole rights
. v
J R Crompton and Bros
[1925] AC 445
parcel of a standard-form contract imposed on an unwary or weaker party. Second, the
clause would appear to be void in any event as being contrary to public policy in that it
where the contract was intended to be legally binding in the first place. As Atiyah points out
Despite these reservations it must always be clear that the parties are free to define their

term or terms have been agreed; see
Love and Stewart
, where the par
ties failed to agree the intended strike clause, and
, where Lord

terms still to be agreed or some further formality to be fulfilled (see

on such further terms renders the

Similarly Andrew Smith J in
Maple Leaf Macro Volatility Master Fund
Lloyd’s Rep 475 commented in this context:However, there are circumstances in which the parties to what would objectively be held to be
contractual are not legally bound by it under English law. If the other parties actually and
reasonably believed that the defendants intended to make a contract, there would be a con
was not the defendants’ intention and not, in my judgement, if the other parties had simply
for the guaranteed employment bonus pool was unenforceable as there was no intention to
The plaintiff was employed as an airline pilot when the defendants, his employers, informed him that
they were making him redundant and gave him three months’ notice. By virtue of his contract, the
plaintiff was a member of the defendants’ contributory pension fund which entitled him to one of
two options on leaving their service. He could either take his contributions out of the fund or receive
a paid-up pension which would take effect when he was 50 years of age. The plaintiff’s professional
association, negotiating on his behalf, agreed with the defendants that if the plaintiff chose the first
option the defendants would make him an ex gratia payment equal to the defendants’ contribution
to the fund. The plaintiff accepted the agreement and chose to withdraw his contributions. The
defendants then paid him his total contributions but refused to make the ex gratia payment. The
plaintiff sued for breach of contract and won. The judge stated that the words ex gratia did not give
rise to a negative contract agreement but simply meant that the employers did not admit to any pre-
existing legal liability on their part. They failed to discharge the burden of overturning the presump
tion that there was an intention to create a legal relationship and were thus liable to make the
[1964] 1 All ER 494

Banque Bruxelles Lambert SA
There should be no room in the proper flow of commerce for some purgatory where statements
mercial agreements lies in the case of advertisements. In order to protect advertisers who
make flamboyant claims regarding the products advertised, the law assumes that there is no
thereby induce consumers to purchase it. Very often such claims are gross exaggerations and
temporary examples are very often visual and would appear to hope, for instance, to per
suade the public to buy a certain brand of coffee to experience some unlikely romantic
[1989] 1 All ER 785
liaison for which a beer that reaches the parts the others cannot reach would also be required
at some stage of the evening. In the past, slogans were very much the forte of the advertising
agency, for example: ‘Daz washes whiter than white!’ Probably the more exaggerated the
claim, the safer the advertiser is, since if the claim appears to have some semblance of cred
ibility, the more likely it is to have a contractual effect that is legally enforceable. The case
case.The existence of an intention to create a legal relationship may also denied by statute
-larly by virtue of the Trade Union and Labour Relations (Consolidation) Act 1992, s 179

[2005] UKHL 73. The House of Lords
held in this case that a minister’s claim against the Church for sex discrimination under the Sex
Discrimination Act 1975, s 82(1) was not a spiritual matter under the Church of Scotland Act
1921, s 3 and as such the Church did not have exclusive jurisdiction to deal with the claim.
Notwithstanding the religious nature of the services Percy was engaged to provide, she was
employed by the Church under a contract personally to execute work within the meaning in
s82(1) of the 1975 Act. Lord Nicholls stated that: ‘It is time to recognise that employment
After reading this chapter you should be able to:
1. Explain the capacity of natural persons in various circumstances, particularly minors.
2. Understand when minors’ contracts are regarded as binding.
3. Understand the circumstances in which minors’ contracts are held to be voidable.
4. Understand the remedy of restitution in minors’ contracts.
5. Explain the rules relating to the capacity of corporations in the law of contract.
Prima facie the law assumes that all parties to a contract have the power to enter into that
contract. However, the law places restrictions on the ability of a number of groups of persons
the underlying reasoning behind the notion of capacity to contract since the aim of the law
The traditional role model of the natural person entering into contractual relations is that
of the sane, sober and adult male individual. Deviation from this model immediately raises
questions as to the ability of the individual to negotiate the responsibilities thrust upon
him or her. Thankfully the incapacity of females, in particular, married women, to enter
into contracts has disappeared in law despite the persistence of social prejudice, though
protection is still imposed on drunks or those suffering from mental impairment or
disability due to age.
action they have entered into and the other party is aware of their level of intoxication,
be so drunk as not to know what they are doing without this factor being obvious to the
below for the meaning of this term) and in any event will be
s.2(1) a person lacks capacity if “he is unable to make a decision for himself in relation to



o communicate his decision (whether by talking, using sign language or any other
sary” means suitable to a person’s condition in life and to his actual requirements at the time
then the contract is valid and the other party is not limited in his action to recovering a
The Family Law Reform Act 1969, s 1, provides that any person below the age of 18 is
classed as a minor (very often referred to as an ‘infant’ in older cases). As already stated,
but also protecting adults in their dealings with minors, provided they act in a fair and
able, depending on the circumstances.
Contracts regarded as binding on minors
1. Contracts for necessaries
From the earliest times of the common law, minors have been obliged to pay for goods or
services necessary to maintain them in their particular station of life. It is important to note
that necessary goods are not the same as necessities. A silk blouse may be necessary for the
daughter of a millionaire, but this is hardly a necessity since one made of a cheaper material
would do equally as well, as of course it must for the daughter of a process worker, for instance.
The rules relating to necessary goods are contained in s 3(3) of the Sale of Goods Act 1979,
defined as goods ‘suitable to the condition in life of the minor and to his actual requirements
1 that the goods are capable of being necessaries;
2 that the minor has not already been adequately supplied with such items at the time of
their delivery;
3 the supplier must show that the goods have been sold and delivered.
The rules here again have their foundations in the common law and are essentially the same
as for goods, though here executory contracts may be enforceable.
A beneficial contract of service, such as a contract of apprenticeship, education or
be expected in service agreements to a certain extent. The question to be considered is
In this case, a minor hired a car in order to transport some luggage; prima facie the contract of hire
was a necessary but nevertheless it was held to be void since it was considered that a term rendering
In this case, the minor joined the railway as a porter and agreed to join the company’s own insurance
scheme, which meant that he relinquished his rights to sue under the Employers’ Liability Act 1880
should he ever suffer personal injury while so employed. The insurance scheme was more favourable
than the Act in that it provided for compensation for more types of accidents, though the level of
compensation was lower than was provided in the Act. It was held that the agreement was, on balance,
of benefit to the infant and therefore valid and binding.
On the other hand, in this case, a 14-year-old girl was apprenticed to the plaintiff for seven years in order
to be taught stage dancing. The deed signed stated that she was to be at the total disposal of the plain
tiff; she would not be paid unless he employed her, which he was not bound to do, nor was he bound to
maintain her. It was agreed that she would be paid 9d per evening performance and 6d per matinee for
the first three years, after which her pay rose to 1s 0d per evening performance and 6d per matinee. It
was further agreed that she could not accept any professional engagement without his consent, and
that she was also required to obtain his consent if she wished to marry. Not least, the plaintiff could
terminate her contract without notice when he wished. It should come as no surprise that the court
held that the contract was unduly harsh and onerous and as a result was unenforceable.
A progressively wider notion of a beneficial contract of service has emerged in recent
times. Thus in
White City Stadium
[1935] 1 KB 110, it was held that a contract
strictly speaking a contract of employment. A further widening of the types of contracts

[1893] AC 360, it was
held that a minor who purported to repudiate an agreement to pay £1,500 to trustees under
tracted in infancy, was itself void. This provision is now repealed by s 1 of the 1987 Act, with
the result that any new agreement to repay a loan advanced during minority is now effective
It is possible for a tortious act to be at the same time a breach of contract. For instance, a
person may induce another to enter a contract with them by making a fraudulent statement
of fact, i.e. the tort of deceit. The law therefore seeks to prevent an adult from evading a
action in tort will only be barred if the wrongful act committed by the infant is of a type that
The point is illustrated in the following cases. In

(1799) 8 Term Rep

(1863) 14 CBNS 45, a minor who
was specifically barred from jumping his hired horse was held to be liable for injuries caused
when he ignored the restriction. A more modern application of the rule can be seen in
tion will be ordered in such cases.
2 The minor has obtained goods by fraud but has sold or exchanged them. The position
Apart from, and in addition to, the equitable remedy of restitution it is possible for relief to
For more on
There are two broad categories of corporations:
Chartered corporations
Such corporations, which are a creature of the common law, can only be created by royal
as the BBC and the Bank of England. Generally they have the same capacity as a private
by virtue of its charter, the charter itself may be revoked. Any unauthorised contract will
remain valid.
Statutory corporations
Most corporations today are created either by statute or under the authority of a statute. Of
these the vast majority are commercial corporations created by incorporation under the
private companies, limited by shares or by guarantee.
The doctrine of
limits the capacity of a company to enter into certain contracts
in that if a company enters into a contract which it is beyond the company’s power to enter,
then that contract is deemed to be void. If the corporation is created by statute, then the

corporation is created under the Companies Act 1985, then the limitations on the compa
totally unrealistic to expect a person to obtain from the Registrar of Companies the memo
the shareholders, nor could such an act be enforced by a third party even if they could prove
that they were unaware of the
nature of the company’s transaction. The point is
In this case, the company was formed with the object of carrying on business as mechanical engineers
and to make and sell all kinds of railway plant and rolling stock. The directors contracted to assign a
concession they had bought for the construction of a railway in Belgium to a Belgian company. The
company, however, was not formed for the purpose of constructing railways by virtue of the objects
clause and thus the contract was void on the grounds that the contract was
ultra vires
the company.
Furthermore, the situation could not even be saved by the majority of members passing a resolution
ratifying the contract. Thus the action by the Belgian company for breach of contract failed since it
was deemed to have constructive notice of the objects of the company and, as a result, should have
known that the company was not entitled to be involved in such a transaction.
objects and nothing more. In
Introductions Ltd
National Provincial Bank Ltd
Ch 199, the company was formed to provide entertainment and accommodation during
the Festival of Britain. The company then decided to go into pig breeding and obtained a
could be an object of the company was rejected by the Court of Appeal. The court stated that
Rolled Steel
that the borrowing of money in such circumstances was intra vires the company but ultra vires the powers of the directors, who could then be rendered liable to the company for bor-rowing money for an improper purpose. If the Introductions case was decided on this basis, the bank would have been able to recover the money from the company (that is, the loan would have been intra vires the company), though the company would have been entitled to claim an indemnity from the directors for any losses sustained. It should be noted that the decision in the Rolled Steel case has been the subject of serious criticism. However, fur-ther consideration of the case is beyond the scope of this work.The doctrine of
ultra vires
is now largely irrelevant since the Companies Act 2006, s 31(1)
provides that unless a company’s articles specifically restrict the objects of the company, its
effect in that it stultifies the ability of companies to expand their operations into areas which


to enter into, and the power of the directors to bind the company shall be deemed to be

The above provision was replaced by a new s 35 enacted by s 108 of the Companies Act 1989
Nevertheless it is of interest to see how it applied, since this gives some insight into the
important. Had this provision been in force at the time of the decision in
Re Jon Beauforte,
its effect would have been to allow the coke supplier to recover the sums owed to him.
contracts. The
suggested that a person, acting reasonably and honestly, who knew the contents of the
objects clause but had failed to realise that it had the effect of prohibiting the company from
making the contract, could nevertheless be regarded as acting in good faith.
single director who had been given actual authority by their co-directors to act.
The 1989 Act made substantial changes to the scope of the lawful actions of a company, the
report of the Cohen Committee in 1945 and the report of the Jenkins Committee in 1962,
both of which called for the abolition of the
ultra vires
rule, the Act failed to go quite as far
as that. For all intents and purposes, however, this was the effect of the Act except in certain
pany. The result is that a company could no longer be limited by the contents of its
and could enforce such transactions against the company. While the company
restrain a company from entering into an
ultra vires
contract by way of an injunction (s
35(2)). By virtue of s 35(3) it still remained the duty of the directors to comply with any
actions by the directors which, but for the operation of s 35(1) above, would be
the company can now be ratified by the members by way of a special resolution.
The 2006 Act goes a great deal further than this and in s 39(1) it provides:
was considered that the fact that companies may now have unrestricted objects and the fact


110 of the 1989 Act provided that it was possible for a company’s objects clause to state
objects to incorporate such a general objects clause, though a special resolution was still
the alteration could not take effect without the confirmation of the court.
Whilst the provisions contained in s 35A (inserted by the Companies Act 1989, s 108(1)) are
largely outside the ambit of this text in that they relate to the powers of the directors to bind
protection contained in the old s 35 as enacted by the 1985 Act. The effect is that a third
party’s position will not be prejudiced by knowing that the directors are acting beyond their

imprecise here since there is no definition of bad faith, though it is thought that it amounted
to a fraudulent act or possibly assisting the directors in the abuse of their powers. The 2006
Act provides no help at all and the existing provision is simply restated in s 40(2)(b)(iii).
Shareholders will still be able to restrain directors from committing any act which is
beyond their powers, though it will not be possible to take such proceedings where the
By virtue of s 40(2)(b)(i) (replacing s 35B of the Companies Act 1985) a party to a transaction
directors to bind the company or authorise others to do so’. Originally s 35B also provided
drunkenness prevents an individual from understanding the transaction he has



Examples of a beneficial contract of service: apprenticeship, education and
of their
A child may be liable for committing a tortious act at the same time as a breach of contract

Companies formed (incorporated) in accordance with the Companies Act 1985 (now
Companies Act 2006, ss 39 and 40, which deal with these aspects of
Shareholders will still be able to restrain directors from committing any act which is
Third parties no longer have to enquire as to any limitation on the power of the directors
Beatson, Burrows and Cartwright,
Anson’s Law of Contract,
30th edn (Oxford University Press, 2016)
Cheshire, Fifoot and Furmston’s Law of Contract,
16th edn (Oxford University Press, 2012)
Hudson, ‘Mental Incapacity Revisited’ [1986]
The Conveyancer and Property Lawyer
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract,
6th edn (Oxford University Press, 2006)
Peel, Treitel
Law of Contract
After reading this chapter you should be able to:
1. Know the different formalities required in different types of contracts.
2. Know the circumstances in which a contract is required to be made by deed.
3. Know the circumstances in which a contract is required to be in writing.
4. Know the circumstances in which a contract is required to be evidenced in writing.
The general requirements for a simple contract have now been assessed. One of the popular
misconceptions of the layperson is that for there to be a legally binding contract, there must
or, if they were lucky enough to have one, a seal ring. Nothing is, of course, further from the
Nowadays the dramatic, almost ceremonial procedure of sealing a document with molten
ing of a self-adhesive wafer of red paper. The requirement that a certain transaction must be
the deed, by virtue of s 73 of the Law of Property Act 1925. More recently, this provision was
which provided that, ‘Any rule of law which...requires a seal for the valid execution of an
instrument as a deed by an abolished.’ Given the abolition of the need for
on an order of the court. No such order can be made if the agreement has not been signed
The Law of Property (Miscellaneous Provisions) Act 1989 now presents probably the most
(1) No action may be brought upon any contract for the sale or other disposition of any inter-
person thereunto by him lawfully authorised.

A contract for the sale or other disposition of an interest in land can only be made in writing
able unless it was in writing – now it would be void for non-compliance. Further, there is no
longer the possibility of the agreement being saved by the doctrine of part-performance
since the whole of s 40, which includes that doctrine, is repealed.
s 2(1). The possible effects of such a conclusion could be extensive when analysed in the
contract to grant a lease, though here a sufficient act of part-performance was required. Such
s 40(2) has been repealed, it is clear that there must be a s 2 contract in order to establish an
The effect of the provision is that a grant of a lease for not more than three years would take

of the legal effects of the granting and exercise of options, it is wrong in principle when read
cise the right of option is an equitable interest in the land, and while the exercise of this right
is not a contract of sale, it does fall within the ambit of the expression ‘other disposition’ for
(1987), in which the Law Commission indicated that, while non-compliance with s 2 would
render the ‘contract of sale or other disposition’ void, the parties would not be without a
remedy; it saw no cause to fear that the repeal of s 40 and its replacement by s 2 should
In this case, it was held that while the grant of an option depended on contractual agreement and
required compliance with s 2, the exercise of the power was a unilateral act and did not require such
compliance. An option was described as ‘a conditional contract...which the grantee is entitled to
convert into a concluded contract of purchase’. Since the
of the option did comply with s 2, it
was held that there was no need for the
of the option to comply since ‘it would destroy the
very purpose of the option if the purchaser had to obtain the vendor’s countersignature to the notice
by which it was exercised’. It was also stated that ‘the purpose of s 2 was to prescribe the formalities
for recording the parties’ consent. It followed that the grant of the option was the only “contract for
the sale...of an interest or other disposition of an interest in land”.’
Glencrown Properties Ltd and Another
[1991] 1 All ER 600
One problem with rectification, as identified by the Law Commission, was the fact that
With the repeal of s 40 of the Law of Property Act 1925, the only types of contracts now
Contracts of guarantee are governed by s 4 of the Statute of Frauds 1677, an Act that
tended to promote fraud rather than prevent it because it was so badly drafted. Indeed,
of the agreement.
The formal requirements of contracts of guarantee falling within s 4 are very similar to
those formerly required by s 40(1) of the Law of Property Act 1925, in that they must be
evidenced by some note or memorandum in writing and signed by the party to be charged,
must contain all the material terms, that is, identify the parties and describe the subject

matter and the nature of the consideration, and any other terms deemed material by the
comply with the requirements of s 4 renders the contract unenforceable.
particular, guarantees arising out of a pre-existing debt, since it was considered that the
Some further difficulties that can arise in relation to guarantees and s 4 can be seen in
[2003] UKHL 17. In this
case the second defendant, Saint-Gobain Glass, wanted to build a new glass factory in
Yorkshire with Inglen, the first defendant, being the main construction contractor. The
claimant Actionstrength entered into a contract with Inglen to provide construction
workers for the site. The arrangement was that Actionstrength would pay the workers and
then be reimbursed by Inglen. Inglen fell behind with these payments and Actionstrength
Gobain obtaining summary judgement against Inglen which then went into liquidation.
This left Actionstrength with an action against Saint-Gobain on the guarantee; however,
antee had been made orally and was not enforceable since it was not evidenced in writing
was not a guarantee and therefore there was no need for compliance with s 4. This argument
accepting that the promise was not a guarantee but arguing that Saint-Gobain were estopped
scionable in all the circumstances for Saint-Gobain to rely on s 4. This argument was rejected
In this case, the scope of guarantees required to be evidenced in writing was extended to cover tortious
liability. In the case the defendant’s son rode the plaintiff’s horse, with his permission, so aggressively
that he killed the horse. As a result of this action he was liable in tort to the plaintiff, who then threat
ened to sue him. At this point the defendant promised the plaintiff that he would compensate the
plaintiff if he promised not to pursue the claim against his son. This was accepted by the plaintiff, but
in fact the defendant failed to pay. The defendant pleaded the Statute of Frauds as a defence, stating
that his promise, to be binding, had to be evidenced in writing as required by the Act. The plaintiff
argued that the Act did not apply to guarantees regarding tortious liability, that it applied only to pre-
existing debts, and these were not required to be evidenced in writing. It was held that the statute was
not confined to cases of contract since the father had promised ‘to answer for the
another’ (emphasis added). For the father to be liable on his promise, the guarantee had to be evi
denced in writing and, as it was not, the defendant escaped liability. The court considered that the term
[1982] QB 84 where a party was



that the second question was fatal to Actionstrength’s claim. He stated:
in seeking to show inducement or encouragement Actionstrength can rely on nothing beyond
the oral agreement of Saint-Gobain which, in the absence of writing, is rendered unenforceable
by s 4. There was no representation by Saint-Gobain that it would honour the agreement
despite the absence of writing, or that it was not a contract of guarantee, or that it would con
firm the agreement in writing. Nor did Saint-Gobain make any payment direct to Action
strength which could arguably be relied on as affirming the oral agreement or inducing
It can be seen clearly that if Actionstrength’s claim had been allowed, then any oral guaran
the third-party debtor. The promise of the guarantor must be made to the creditor, as stated
guarantee is not to pay the debts of the debtor in any event, but only where the debtor fails

The defendant was chairman of the Brixham Local Board of Health. A surveyor to the Board proposed
Board had not contracted for the work, there was no debt of another person to answer for. As a result,
the defendant was the only debtor. His promise amounted to an assumption of primary liability which
fell outside the statute and he was thus liable on the debt.
1677, s 4. P appealed, submitting that M’s liability was not contingent or secondary and that
such a provision was absent from the letter agreement. The court therefore held that the judge

A further exception has been developed in cases where a defendant offers a guarantee in
approach the third party and negotiate the release of the goods to themselves, provided they
outside the reach of the Statute of Frauds and will be binding despite the lack of evidence in
Law of Property (Miscellaneous Provisions) Act 1989, s 1(1)(b) abolishes the need to have



attest the signature; and

LP(MP)A, s 2 repeals the Law of Property Act 1925, s 40 which required such contracts to


Beatson, Burrows and Cartwright,
Anson’s Law of Contract,
30th edn (Oxford University Press, 2016)
Cheshire and Burn’s Modern Law of Real Property,
15th edn (Butterworths, 1994)
Dumbill, ‘Spiro: The Easy Option’ (1991) 141
New Law Journal
Cheshire, Fifoot and Furmston’s Law of Contract,
16th edn (Oxford University Press, 2012)
Howell, ‘Informal Conveyances and Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989’
The Conveyancer and Property Lawyer
Law Commission,







what the parties have actually agreed to undertake in the contract. In commercial contracts,
most of the public a mere oral agreement is sufficient. The terms in these contracts have
then been expressly agreed by the parties, but this is not the whole story since the law, either
by statute or by trade usage, may imply further terms into such contracts. In addition, a
have been included in the contract but for an oversight on the part of the parties to it.
In addition to the contents of a contract one has also to assess what effect a breach of a
particular term will have on the ability of the parties to terminate the contract or to claim
damages. The effect of the breach largely revolves around the importance attached to a
particular term, since it is clear that not all terms are of equal importance.
The final consideration in this aspect of the law of contract concerns the ability of the
parties to limit or exclude their liability for breach of contract.
A contract may be agreed upon either orally or in writing, or both. If a dispute arises out of
an oral contract, the role of the judge is to discern what the parties have agreed upon from
the evidence put before the court. The finding of the judge here is clearly one of fact.
Where the contract has been reduced to writing, the actual contents of the contract pre-

of the trader, provided the information supplied is taken into account by the consumer
In this case, the parties negotiated for the sale of hops. Prior to the negotiations the defendants had
indicated that they did not wish to purchase hops which had been treated with sulphur. When the
A more modern application of the principle can be seen in the following case.
A motorcycle was first registered in 1930 but when a new registration book was issued the date of the
original registration was given as 9 September 1941. In 1949, the seller, who was not responsible for
the incorrect entry, stated, in response to a question by the buyer, that it was a late 1941 or early 1942
model. One week later the buyer and seller entered into a contract of sale. The note of the contract
made no mention of the date of the motorcycle. The buyer claimed damages for breach of warranty.
[1954] 1 All ER 855
It may be that there has been an oral agreement but that this is later reduced into a written
Here the defendants sold a car to the plaintiffs, who were motor dealers, for £290. They described the
car as a 1948 Morris 10, which they honestly believed to be the case since this fact was also confirmed
by the registration book. Some six months later the plaintiffs discovered that the car was in fact a 1939
model and therefore sued for damages on the basis of a breach of warranty. It was held that their action
should fail since the court, after considering all the facts, came to the conclusion and found that the
defendants had no intention of binding themselves by way of a contractual obligation as to the veracity
of the date of registration of the vehicle. The defendants, the court decided, had made an innocent
misrepresentation as to the date when the vehicle was first registered.
[1957] 1 All ER 325

The court is more willing to regard a statement as amounting to a term of the contract where
a representor has some special knowledge or skill that places them in a stronger position of
(above), where the defendants were regarded as holding out to the plaintiffs that they
had particular knowledge to the extent that the plaintiff considered that there was no need to
make a check on the information supplied by the defendants. A further example can be seen
[1913] 2 IR 81 in which the plaintiff, who was seeking a stallion for stud
purposes, examined a horse which was potentially suitable. Soon after the plaintiff com
menced the examination, the defendant interrupted, saying, ‘You need not look for anything:
the horse is perfectly sound’, whereupon the plaintiff stopped his examination. A few days
A motor dealer made an untrue statement to a private purchaser that a car had done only 20,000 miles
since being fitted with a new engine and gearbox. In fact the car had done nearly 100,000 miles. The
purchaser eventually found the car to be unsuitable and the mileage untrue. The purchaser sued for
breach of contract. The Court of Appeal held that the statement was a term of the contract since the
Dick Bentley Productions Ltd
Harold Smith (Motors) Ltd
[1965] 2 All ER 65
ning was of the opinion in
the number of miles since they were in a position to know the true position or at least to
not present as to the truth of the statement, but also the defendant seller, not being involved
ever, naive to reduce the comparison to the presence or absence of negligence, and in any

contract, the effect will be to introduce uncertainty in the agreement and into the law itself,
as we have already seen in Chapter6, certain types of contract in relation to land had to be
fact that it did not apply to partly written and partly oral contracts and the fact that it began
to be regarded as a presumption rather than a strict rule of law. Thus in
Gillespie Bros & Co
Although when the parties arrive at a definite written contract the implication or presumption
is very strong that such a contract is intended to contain all the terms of their bargain, it is a
presumption only, and it is open to either of the parties to allege that there was, in addition to
what appears in the written agreement, an antecedent express stipulation not intended by the
As a result of this change of attitude, the number of exceptions to the rule continued to grow,
154, stated that legislation was no longer necessary since the rule no longer existed. Despite
Before examining the exceptions it should be noted that the parol evidence or exclusion
ary rule has been the subject of extensive discussion in the courts when it comes to the
construction of contracts since once written terms are incorporated into a contract it
The parol evidence rule does not forbid the adducing of evidence that calls into question the
The plaintiffs were in business shipping machinery from Italy, using the defendant carriers for this
purpose, conducting the business on the standard conditions used by the forwarding trade. Prior to
1967, the machinery was shipped on trailers and because of the risk of corrosion it was agreed that
both the machinery and the trailers would always be carried below deck. In 1967, the defendants
changed over to containers and, during discussions, they assured the plaintiffs that their goods would
continue to be stowed below deck. On this basis the plaintiffs continued to use the defendants as their
carriers on the written standard conditions, but these standard conditions permitted the defendants
to have the goods stowed on deck. Some time later a container with goods belonging to the plaintiffs
was washed overboard in heavy seas after being stowed on deck. In an action for breach of contract,
the Court of Appeal held that the defendants could not rely solely on the written standard conditions
and permitted the plaintiffs to raise evidence as regards the oral discussions and subsequent assur
ance. It was clear that the parties did not intend that the written standard conditions would form the
Andrea Merzario Ltd
[1976] 2 All ER 930
The actual reasons behind this decision in the Court of Appeal are interesting in that two
of the parol evidence rule. Lord Denning, however, considered that the oral agreement
amounted to a second contract, a collateral contract. With respect to the arguments of Lord
Denning supporting the collateral contract approach, Roskill LJ stated:
That phrase is normally only applicable where the original promise was external to the main
contract, the main contract being a contract in writing, so that usually parol evidence cannot
be given to contradict the terms of the written contract...But the doctrine, as it seems to me,
has little or no application where one is not concerned with a contract in writing (with respect
I cannot accept counsel for the defendants’ argument that there was here a contract in writing)
In such a case, the Court does not require to have recourse to lawyers’ devices such as collateral

The two approaches made no difference to the result, but the fact that Lord Denning’s
approach produces two contracts rather than a single partly written and partly oral one, as in
Roskill and Lane LJJ’s reasoning, may be significant in other cases. In contracts for the sale of
land which, under the Law of Property (Miscellaneous Provisions) Act 1989, s 2, are required
to be in writing, the oral collateral contract of Lord Denning could not be included in the sale.
It is, however, important to note that this Act specifically preserves the equitable remedy of
rectification, which could be used to incorporate terms from an oral contract. It should also
be noted that the contract could also contain a merger clause, the effect of which would be to
provide that the written contract was intended to contain the entire terms of the agreement
an agreement that the full contractual terms to which the parties agree to bind themselves
are to be found in the Agreement and nowhere else and that what might otherwise constitute
a side agreement or collateral warranty shall be void of legal effect. That can be the only
purpose of the provision.
Once written terms have been incorporated into a contract (see below), they have to be

mercial contract it is certainly right that the court should know the commercial purpose of the

would have affected the way in which the language of the document would have been
and their declarations of subjective intent. They are admissible only in an action for
rectification. The law makes this distinction for reasons of practical policy and, in this
is not the same thing as the meaning of its words. The meaning of words is a matter of dic
tionaries and grammars; the meaning of the document is what the parties using those words
against the relevant background would reasonably have been understood to mean. The
mistakes, particularly in formal documents. On the other hand, if one would nevertheless

Lord Hoffman therefore with reference to
Reardon Smith Line
commercial matters generally, when the parties are not of unequal bargaining power, and
when risks are normally borne by insurance, not only is the case for judicial intervention
Lord Hoffman considered that such judicial intervention amounted to judicial creativity of
fore concluded that there was much to be said for applying the ordinary rules of construction
The problem here is that there are a number of rules applicable to exemption clauses that
are deeply rooted here. Is it Lord Hoffman’s intention that his re-statement will effectively
overrule these decisions? It seems so but there is a level of uncertainty here, though it is true
to say that the principles in his re-statement have been applied in the construction of
’in this way there are limits to its application. Thus, for example, Lord Neuberger in the
Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, business common sense, and the reasonable reader or reasonable
parties, are also taken into account on an issue of implication. However, that does not mean

Investors Compensation Scheme Ltd v West Bromwich Building
ment that it should have been reasonably available to the parties’, this is an objective posi
and has been subject
to the criticism that the concept is particularly wide and could give rise to problems in
which could not have made a reasonable person think that the parties must have departed
In this third principle, Lord Hoffman provided a limitation on the type of background
declarations of subjective intent. Clearly therefore he resiled from including ‘absolutely
()agreement with the respondent (C) under which P was to develop C’s land. Under the agree-ment P was to obtain planning permission, construct a development on the site and then
sell the properties. The price payable by P under the agreement included an ‘Additional

The House of Lords, however, considered that it was not necessarily inconsistent to admit
evidence of previous negotiations in some situations. Thus Lord Hoffmann stated:
I do, however, accept that it would not be inconsistent with the English objective theory of
considered that if they departed from this principle the result
priate cases where there was clear mistake on the face of the instrument and it was clear what
matter of construction and in this regard the court is not confined to reading the document
order to discern what the parties themselves meant in the contract, which would be essential
when she stated: ‘The
courts...are able to achieve step by step changes which can distinguish cases in which
evidence is “helpful” from cases in which it is not.’ It is, however, possible to discern certain
situations in which extrinsic evidence may be referred to, for instance, in some situations it
ation the court is entitled to use evidence of previous negotiations in order to discern the

these remedies lay outside of the exclusionary rule since, ‘ a matter of construction,
the agreement does not have the meaning for which the party seeking rectification or raising
words should be given their ‘natural and ordinary meaning’ since in formal legal documents
it is commonsense that the courts should not easily accept that people have made linguistic
commercial context the approach should be to hold businessmen to their bargain. Lord

wrong and that the definition of the ARP clause in the contract was ambiguous and obvi

pre-delivery instalments. The bank argued that the expression ‘such sums’ referred back to
event. The claimants, however, considered that the expression ‘such sums’ referred to para
At first instance the judge rejected the arguments put forward by the bank but in the
Court of Appeal that decision was overturned by a majority of the Court of Appeal. The
claimants appealed to the Supreme Court which allowed the appeal, with Lord Clarke giving
the leading judgement with Lords Phillips, Mance, Kerr and Wilson concurring. Lord Clarke
considered that the language used by the parties to a contract often had more than one
meaning. He considered that the exercise of construction of a contract was essentially one
unitary process in which a court had to consider the language used and ascertain what a
reasonable person, being a person who had all the background knowledge which would
reasonably have been available to the parties in the situation in which they were at the time
of the contract would have understood the parties to have meant. The court had to have
ness common sense and then reject the other. Lord Clarke considered that paragraph 3 had
two possible constructions but that he preferred the views of the claimants since that was
that the written document has done this inaccurately. Clearly this is more of a problem
The criteria necessary to establish estoppel by convention were considered by the Court of

[2011] EWCA Civ 353 where Carnwath LJ, with Rix
LJ and Stanley Burton LJ concurring, decided the issue of construction of the contract in
its own error within its own terms, as understood in context’. He thought that more often
provide for a particular eventuality so that it may not be possible for the courts to find a
solution within the ‘four walls’ of the contract itself. In this context he considered there was

being taken as providing an ‘open sesame for the reconstructing the parties’
contract but an opportunity to remedy by construction a clear error of language which could
not have been intended.’ On the other hand, he considered that:
...the doctrine of estoppel is a flexible doctrine which can take account of...the honest and
responsible interaction of business parties to a contract. Where there is room for disagreement as
to the meaning or effect of a contract but the parties have clearly chosen (or purported to choose)
their own understanding of it and have dealt with one another on the basis of that understand-

So far we have considered the case where the courts have implied terms into the contract,
but one must not ignore the fact that Parliament itself, by means of a statute, imposes terms
sumer certain rights within the contract which would otherwise no doubt be omitted by

Prima facie that which in any contract is left to be implied and need not be expressed is some-thing so obvious that it goes without saying; so that if, while the parties were making their
bargain an officious bystander were to suggest some express provision for it in their agreement,
On the face of things the test appears to be a subjective one in that the test appears to be
contextualised by reference to how the parties respond to the question posed; however, this
The defendants and the union had agreed in 1939 on certain rules which governed the transfer of
members from one union to another. This agreement had become known as the ‘Bridlington Agree
ment’. In 1955, the defendants admitted the plaintiff to their union in breach of the agreement,
, that the term would not be implied because it was vague and uncertain and
that Shell would never have agreed to the term, was simply another way of stating that
a reasonable man would not have understood that to be what the instrument meant.
Lord Hoffman considered that the means by which a term is implied into a contract as
a matter of fact is an objective process and was not ‘dependent on proof of an actual
drop as part of the construction of the contract. Lord Hoffmann was therefore restating
the process of implying terms as a matter of fact to a rule of construction that should
apply an objective process as opposed to the subjective one, however, this approach,
Marks and
[2015] UKSC 72,
It should be noted that if the parties have divergent views about a proposed term, this
will also cause the officious bystander test to fail since it is clear that a reasonable person
could not conclude that the parties would have agreed to such a term in the face of those
a situation. Here an estate agent was employed by the defendant to sell some property,
could not be satisfied that the defendant would have agreed to the inclusion of such a term.
Viscount Simon considered this accorded with the objective nature of the test since on a
In this second test, the courts may attempt to imply a term that renders the business contract
necessary to give the transaction such business efficacy as the parties must have intended’.
An implied in all cases founded upon the presumed intention of the parties,
The defendant owners of a wharf contracted to allow the plaintiff owner of a ship,
The Moorcock
, to
The Moorcock

and preventing such a failure of consideration as cannot have been within the contemplation
to the agreement, and thus only those the absence of which would render the contract
Investors Compensation Scheme
West Bromwich
[1998] 1 WLR 896 in order to re-base ‘the
The facts of
The Reborn
are remarkably similar to those in
The Moorcock
above. The dispute arose out
Mediterranean Salvage and Towage Ltd
Seamar Trading and Commerce Inc
The Court of Appeal found that the arguments of the owners to be inconsistent with clause
20 of the charter. By that clause the owners had guaranteed and warranted that upon arrival
at the loading port the vessel would comply with all restrictions of the port, including its
berths and approaches, and that they had satisfied themselves to their full satisfaction with
and about Chekka’s specifications and restrictions before entering into the charterparty. The
owners were therefore accepting that the charterers had a right to elect a berth of their choice.
It was, accordingly, not necessary to imply the suggested term in order to make the contract
work. The charterers had not agreed to accept the risk of the berth being unsafe because of
hidden dangers. The decision of the Court of Appeal affirmed the single broad (‘expansive’)
approach of Lord Hoffmann who had emphasised that the principle of implying terms into

proposed implied term must spell out what the contract actually means. He went on to say:...that the implied term must be ‘reasonable and equitable’ or ‘necessary to give business
nothing to the central idea that the proposed implied term must spell out what the contract
BNP Baribas Securities
BNP Baribas Securities Services Trust Co (Jersey) Ltd

implied, if a reasonable reader of the contract, knowing the background of the contract,
would understand the need for the term to be implied, provided the reasonable reader is
surrounding circumstances at the time when the contract is made. He observed (at para 42):
I would not encourage advocates or courts to adopt too rigid or sequential an approach to the
processes of consideration of the express terms and of consideration of the possibility of an
particular provisions of a contract may, I think, give rise to a necessary implication, which,
of the contract.
Lord Mance concluded his judgement that, broadly speaking, the processes of considering
process of objectively construing the contract as a whole. Whilst Lord Mance therefore takes
[1976] 2 All ER 39
In order to imply a term as a matter of law the courts will have regard to duties which

[1992] 1 AC 294 that the test of impli-
fact as seen above. There the term is implied as necessary to give business efficacy to the
contract, whilst here the term is implied as being necessary to a particular and definable type
of contractual relationship. For instance, terms implied by law commonly arise in contracts
ees’ wages and treat the employees with the respect necessary to maintain the trust and

[1997] 3 All ER 1. Here the term is not implied as necessary to give business
efficacy to this particular contract but was implied as it was a necessary aspect in any con-

[2004] 4 All ER 447, the Court of Appeal
by the Sale and Supply of Goods Act 1994. Originally these Acts applied to most contracts
for the sale of goods and services, though their application was more limited in relation to

useful at this juncture to remind ourselves that in relation to (B2C) contracts the CRA will
apply. It is therefore vital that a contract is correctly identified from the start since this
The main restriction within s 2(3) is that it only applies to individuals, i.e. natural persons,
who ‘are acting for purposes wholly or mainly outside the individuals’ trade, business craft or
profession’. The effect therefore is that if a person buys a car that is primarily for private use
outside of the purchaser’s business, then the fact that he uses it for some business purposes
will not preclude that purchaser from being a consumer. On the other hand, if the purchaser
buys a computer for use in his business but nevertheless uses it for some private purposes, then
this will not fall within a purchase by a consumer. This situation encompasses the problem
associated with cases such
R&B Customs Brokers Co Ltd
United Dominions Trust Ltd
-tion Paper No 166 Unfair Terms in Contracts considered that a person who makes a contract
to obtain goods or services ‘related to’ even though not ‘in the course of’ his business should
be treated as dealing as a business and not as a consumer. This approach seems to tie in more

As we will see for other types of contracts, such as business to business (‘B2B’) and consumer
be a sharp divergence with respect to implied terms in consumer and business contracts.




5–8. Certain types of
contracts are, however, specifically excluded in s 3(3), thus Chapter2 (Goods) does not

reference to currency should be noted here since it means that coins, for instance, sup
under a legal authority to satisfy a debt (e.g. an official authorised to sell off property of

tion imported by the deed. Thus a contract lacking consideration will only be enforceable

acquires goods for a specific purpose and has made this purpose known to the trader
beforehand, the goods must be fit for that purpose unless the consumer does not rely
– or it would be unreasonable for the consumer to rely – on the skill or judgement of the

by description, the goods must be as described. Goods can be supplied by description
even if they are available for the consumer to see and select, for example, on the shelves

oes not relate to main characteristics of the goods so does not fall under Section 11,
contract for goods on the basis of a sample, the final goods delivered must match the
sample in terms of quality and appearance. This differs from Section 14 below (Goods to
match a model seen or examined) in that a sample is usually only a representative part
of the whole goods in question. It will apply, for instance, if a consumer is purchasing
some new custom-made curtains and relies on a swatch of different designs, materials,

the consumer’s attention before the contract is made would not breach this protec
tion. So, for instance, if the consumer sees a washing machine on display on the shop
goods are both supplied and installed by a trader (or the installation is done under that
same trader’s responsibility), if the installation service is done incorrectly, then the goods

disclosed to the consumer before the entry into the contract. The consumer is therefore

ers must be of satisfactory quality according to the expectations of a reasonable person.



which makes the quality of the digital content unsatisfactory. Thus, for instance, there
will be no breach if the trader specifically draws the attention of the consumer to matters
the digital content or a trial version so that any defects rendering the digital content
unsatisfactory would have been apparent on a reasonable examination. Digital content
digital content that makes it unsatisfactory before the contract was concluded because it
was specifically drawn to the consumer’s attention or would have been apparent from
inspection of the digital content or a trial version. These provisions therefore correspond

relating to goods in s 10. The section provides that the consumer must make it known to
described is similar to the right for goods (s 10). This right is important in the digital
content context since consumers may not be able to view the digital content before
buying the full version. Even when the digital content matches a trial version, if it does
sion of that information is now to be treated as a term of the contract.

and the CRA s 18.

sion applies where in order to access digital content, it is transmitted to the consumer (for
ection 40: Quality, fitness and description of content supplied subject to modifications.
ticularly important as regards the intellectual property rights to the digital content.
Clearly there is a difference here from implied terms regarding goods since often the
trader does not pass on the intellectual property rights, unlike the rights of ownership in
goods. For instance, if one purchases music from the internet, the supplier cannot sell
the intellectual property rights in the music. The result is that the consumer only

at all, the consumer will be entitled to a refund (Section 45) such a scenario may arise with
Essentially this chapter deals with contracts where a trader provides a consumer with a ser
ously, the Supply of Goods and Services Act gave some protection for persons in receipt of
sponds to s 13 of the Supply of Goods and Services Act 1982 but, as with all the provisions
provided a service with reasonable care and skill, they will be in breach of this right,

tional Charges) Regulations 2013 in regs. 9,10 or 11 requires certain information,
such as the main characteristics of the goods or services, the identity of the trader
(such as the trader’s trading name), the geographical address at which the trader is
rounding the consumer’s garden. The consumer then chooses that trader to erect the

of the Supply of Goods and Services Act 1982 but updates the language in line with the

performance of the service has not been agreed, this provision gives the consumer the
right to have the service provided within a reasonable time after the contract is agreed.
counterpart in the Supply of Goods and Services Act 1982, in this case, s 16. The basis
behind this provision is that some contracts for services are regulated by certain
sector-specific legislation, such as in financial services. The effect of this provision
The provision preserves any existing enactments or rules of law which impose stricter duties
than those imposed by ss 49 and 50. ‘Rules of law’ means a rule of the common law. Further,

any charge or encumbrance not disclosed or known to the buyer before the contract is
B2B Contracts
Consumer Rights Act 2015 Part 1
Sale of Goods Act 1979
Supply of Goods (Implied Terms) Act 1973

s.39 – Supply by transmission – fitness and quality

s.41 – Trader to have the right to supply digital content
Supply of Goods and Services Act 1982

care and skill
s.50 –

s.51 – A reasonable price to be paid for the service

specific legislation to sit alongside this Chapter.
Supply of Services

and skill
s.14 – To be carried out within a reasonable time

uctioneer on behalf of third party) does not wholly exonerate both from the
the goods will correspond with the description. By s13(1A) this implied term is designated
[1967] 1 WLR 1193, a private motorist advertised his car for sale as a
‘Herald convertible, white, 1961, twin carbs’. The buyer, another private motorist, later

It was held that even though the buyer had inspected the car, he had nevertheless at least
partly relied on the description, so that it was a sale by description and that the seller was
Before a breach of s 13 can arise in order for a sale to be by description, the description has
to be of some influence in the sale in order for the description to be a contractual term so that
[1992] 1 QB 564, there was a sale
of a painting by Gabriele Münter. Both the seller and the purchaser were specialist art dealers
who had inspected the painting prior to the sale. The purchaser paid £6000 for the painting
which turned out to be a fake worth no more than £100. The Court of Appeal found that the
purchaser had not relied on the description within the sale catalogue but rather had relied
on their own judgement as regards the attribution attached to the painting and as such there
and the following (among others) are in appropriate cases aspects of the quality of
goods –




ity of goods unsatisfactory –


reasonable examination of the sample.

By s 14(6) the terms implied by in subsection (2) above are conditions. The provision
imposes an objective test and reforms the law previously contained in the Sale of Goods Act
there is an implied condition that the goods supplied under the contract are of
they are as fit for the purpose or purposes for which goods of that kind are commonly bought
as it is reasonable to expect having regard to any description applied to them, the price (if
The problem with the expression ‘satisfactory quality’ in the amended Sale of Goods Act
s 14(2) was that it provide little guidance as to how the satisfactory nature of the goods was
be used to provide guidance as to the new ‘satisfactory quality’ law.
Secondly, apart from the description and price, the consequences of a defect could also be a
opting for the latter. After driving 300 miles the purchaser had to replace the clutch at a

quality since the car was not unfit for its purpose merely because the defect proved to be
more serious than was originally thought. Lord Denning considered that the car was
else supplied with the goods, as illustrated in the case of

the condition is excluded if a reasonable sample of the sample should have revealed any
buyer either expressly or impliedly makes known to the seller any particular purpose for
which the goods are being bought by s 14(6), there is an implied condition that the goods
reasonable examination was to be construed by reference to the commonsense standards of
everyday life and one was not expected to put the item in question under some bizarre tests.
eral sense the terms implied here are very similar to those found in the Sale of Goods Act
1979 amended to take into account the hire purchase nature of the transaction. Thus in
will have a right to sell the goods at the time when the property is to pass; and that the goods
encumbrance not disclosed or known to the hirer. Furthermore, there is an implied term

There is also an implied term that the supplier acting in the course of a business will carry
Before leaving our consideration of express and implied terms it is important to consider
the issue of good faith in the law of contract. On the face of things it might seem obvious
effect then the law must a priori require imply such conduct on the part of the parties.

stated that a duty to negotiate in good faith is ‘inherently repugnant to the adversarial posi-tion of the parties when involved in negotiations’ and ‘unworkable in practice’. That case was concerned, however, with the position of negotiating parties and not with the duties
of parties who have entered into a contract and thereby undertaken obligations to each the absence of words which expressly refer to dishonesty, it goes without saying that
short of a lie, such as deliberately avoiding giving an answer, or being evasive. Traditionally,

of good faith is heavily dependent on context and is established through
basis of the duty of good faith is the presumed intention of the parties and the mean
ing of their contract, and that its recognition is not an illegitimate restriction on the

tion is that it is open to the parties to modify the scope of the duty by the express terms

saw no objection to describing the duty as one of good faith and ‘fair dealing’. What
constitutes fair dealing is defined by the contract and by those standards of conduct to
need to state them. He considered that the advantage of including reference to fair
guishes the relevant concept of good faith from other senses in which the expression

sive uncertainty is unjustified. He did not consider that there was anything unduly vague

()been considered in two further cases, namely, Hamsard 3147 Ltd (t/a Mini Mode Childrens-wear) v Boots UK Ltd [2013] EWHC 3251 (Pat) and TSG Building Services Plc v South Anglia
()In Hamsard, the company had contracted to provide Boots with its own brand of child-renswear. Boots terminated the contract and Hamsard sued alleging that Boots had breached

[2013] EWHC 1151 (TCC),
It will have been seen in our analysis of terms implied by statute in B2B contracts that terms
may be divided into two types, warranties and conditions, which have differing degrees of

is regarded as a major term of the contract, i.e. one
which goes to the very root of the contract. If a party to a contract breaks a condition the
consequence is serious since it entitles the other party not only to sue for damages but also to
terminate the contract. The injured party, however, does have the option of affirming the
is regarded as a minor term
of a contract, i.e. one which imposes a term that is merely ancillary to the main thrust of the
Until the Insurance Act 2015, rather confusingly, a warranty in a contract of insurance

does not deal as consumer, the breach is not to be treated as a breach of condition
Section 15A(2) provides that s 15A(1) will apply unless a contrary intention appears in, or
is implied from, the contract. Section 15A(3) further provides that the burden of proof is on
the seller to show that the breach falls within subsection (1)(b).
contract and sue for damages; if not, they can claim damages only: see also
Wuhan Ocean
The defendants had chartered a ship from the plaintiffs for two years. The charterparty contained a
term which required the plaintiffs to provide a ship which was ‘in every way fitted for ordinary cargo
of the breach of such an undertaking, unless provided for expressly in the contract, depend on the nature
Hong Kong Fir Shipping Co
Kawasaki Kisen Kaisha Ltd
[1962] 1 All ER 474

Schiffahrts-Gesellschaft Hansa Murcia mbH
Hong Kong Fir Shipping
A charterparty was entered into on 25 May 1965 providing that the ship in question would be ‘expected
to be ready to load under this charter about 1 July 1965 at Haiphong’. The charter also provided that
should the ship ‘not be ready to load on or before 20 July 1965’ the charterers would be able to cancel
the contract. In fact the ship was unable to be at Haiphong at this date and it transpired that the
Maredelanto Compania Naviers SA
Bergbau-Handel GmbH (The Mihalis
[1970] 3 All ER 125
One of the important elements of the law is predictability. At any rate in commercial law there
owners knew the ship would not be available on this date when they entered into the charter. The
charterers purported to terminate the contract and the owners sued for breach of contract. Although
the court was pressed to adopt the approach taken in the
Hong Kong Fir
case it declined to do so. The
opinion was formed that the classic approach of labelling a term as a condition or warranty was still
valid and, in fact, desirable in order to establish a level of certainty in such cases. It is clearly undesirable
on a matter of commercial exigency to expect a charterer of a ship to have to delay the transportation
of a cargo because the owners have failed to comply with the date of expected readiness to load,
especially when the owners knew full well on the signing of the charter that that date could not realisti

cargo, even though there was nothing wrong with the pellets themselves. In fact the
rejected cargo, when eventually sold by the Rotterdam Court, was ultimately bought by
the original buyers at a greatly reduced price, and this probably reflects the true reason for
rejecting the cargo in the first place. The buyers attempted to persuade the court that the
approach was inappropriate since the Sale of Goods Act 1979 by implication
envisaged that all terms in such contracts should be classified as conditions or warranties.
test, stating that the
consequences of the breach were not so serious as to allow the buyer to reject the whole
var Hansen-Tangen
[1976] 3 All ER 570 by the House of Lords. There is, however, still a level
performing [his] undertakings’, the test propounded by Diplock LJ in
Hong Kong Fir Ship
ping Co Ltd
Kawasaki Kisen Kaisha Ltd
[1962] 2 QB 26. The problem, however, was deter
To constitute repudiation, the threatened breach must be such as to deprive the injured
party of a substantial part of the benefit to which he is entitled under the contract .... Will
the consequences of the breach be such that it would be unfair to the injured party to hold
him to the contract and leave him to his remedy in damages ...?’ (
Decro-Wall International

and the relationship it creates, the nature of the term, the kind and degree of the breach and
Ampurius Nu Homes Holdings Ltd
Telford Homes (Creekside) Ltd
). Both Floyd LJ and
Having examined the relative importance of contractual terms and the different approaches
used to assess an innocent party’s rights where a breach of contract arises, we shall now take
an overview of the choices and possibilities that might confront that individual.
First, the parties can always expressly state what the effects of a breach of a particular term
Second, if the contract does not expressly provide a right to terminate the contract it may
‘-tion’ would tend to indicate a right of the innocent party to terminate the contract, whilst
the use of the expression ‘warranty’ would tend to indicate only a right to recover
Third, if the right to terminate is not implied from the description ascribed to a term then
also arise from judicial impression, as in the case
The Mihalis Angelos
, which established
the courts as conditions, thus achieving considerable certainty as to the position of the
Lastly, where the status of a term is not ascribed from the operation of some rule of law
then one must ask the
Hong Kong Fir
question, namely: ‘Has the innocent party been
may only claim damages and has no right to terminate. The question as to whether the
innocent party has been substantially deprived of the benefit it was intended he would
Ampurius Nu Homes
How prominent is the business common sense criteria

business common sense simply form one dimension of the matrix of fact that provides
the background that a reasonable person is able to ascertain what a reasonable person
would have understood the parties to the contract to have meant? Where the natural
meaning of the words are unambiguous, then Lord Hoffman appears to prefer the latter
approach; however, he also contemplated that the matrix of fact background could also
be used where there is a ‘semantic’ or ‘syntactical’ error in the words and it is this that
has given rise to the plethora of cases and arguments that seem to point towards business
common sense becoming predominant in the construction of contracts. It is this pre
dominance that latterly has given rise to some concern with the result there has been a
shift towards an attitude that it is the natural meaning of the words that should have
primacy over the business common sense principle. Thus in
Proctor & Gamble Co
ness common sense is a good deal less precise and uncertain. There are, however, cases
which suggest that rather than this incremental approach the correct approach is an
iterative process so that any provision is considered in the light of various meanings that
may be attributed to the words and then against the other provisions within the overall
document and examining the commercial consequences. By this process the court is
then able to discover whether there is any problem with the language or whether any
ambiguity exists. The effect therefore is that the initial interpretation of the language is
not assessed within the natural meaning of the words as required by
Such an approach was advocated in
Napier Park European Credit Opportunities Fund
Harbourmaster Pre-rata CLO 2 BV
[2014] EWCA Civ 984 where Lewison LJ stated:
‘The approach to the interpretation of a tradable financial instrument of this kind was
authoritatively considered by the Supreme Court in
Re Sigma Finance Corp
UKSC 2; [2010] 1 All ER 571. In that case Lord Mance, approving Lord Neuberger’s dis
senting judgement in the Court of Appeal, said at [12]: ‘Lord Neuberger was right to
observe that the resolution of an issue of interpretation in a case like the present is an
iterative process, involving ‘checking each of the rival meanings against other provi
sions of the document and investigating its commercial consequences.’
The iterative process thus described is not confined to textual analysis and compari
son. It extends also to placing the rival interpretations within their commercial setting
ely part of the matrix of facts or is business common
sense only to be invoked if the natural meaning of word produces an interpretation
that cannot be sustained?

tary or stepped approach correct?

Generally, evidence will not be admitted which seeks to add, vary or contradict the terms







Davies, ‘The Meaning of Commercial Contracts’ in Davies and Pila (eds),
The Jurisprudence of Lord Hoffman
(Hart Publishing, 2015)
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
After reading this chapter you should be able to:
are those which seek to enable one of the parties to a contract to exclude
, although governed by the same principles, seek to restrict
arose from the development of the standard-form contract during the Industrial Revolution.
Therein lies the great problem with exemption clauses in modern times since, while they
developed during the golden age of the development of the law of contract when laissez-
the twentieth and twenty-first centuries was upon the need to protect the consumer and the
realisation that equality of bargaining power is, to a large degree, a myth.
protect the party relying on it, has to be constructed in such a way that it actually deals with
tion clauses in certain circumstances.
A party to a contract who seeks to rely on the protection of an exemption clause has to be
able to show that it has become incorporated into the contract. There are three ways in
Should a party sign a contractual document they will be prima facie bound by the terms of
that contract, even if they have failed to read that document, unless they have been induced

[1934] 2 KB 394, where the plaintiff
very clear understanding of the precise nature of the investment, if P had read the final terms
and conditions P would have been alerted to the fact that the documents related to an

position relating to the terms of the contract appeared on the face of the documents and
that by signing the contract P was not entitled to say it did not understand the nature of the
2000 s 7, implementing elements of the Electronic Signatures Directive 1999/93/EC, elec
tronic signatures have the same function and effect as written signatures.
is brought to the party’s attention, despite the fact that the contractual document has not
been signed. What is reasonable here depends on a number of factors.
The exemption clauses contained in an unsigned document will fail to form part of a con
In this case, a bag was left at a left luggage office. The plaintiff paid the fee, for which he was given a
case nevertheless has to be applied within the
it could not be found. He attempted to claim the value of the bag and contents which exceeded the

The position no doubt would have been different if the company had been aware of the
claimant’s disability since simply handing over the ticket to a person who the company knew
could not read would clearly not have been reasonable notice of the clause. Treitel suggests
that this would also be the case if the party relying on the clause knew that the other did not
’’of the claimant purchaser stated, ‘Delivery based on our General Terms of Sale’ on the bot-tom of a blank page that contained no terms and conditions. The defendant then claimed
The facts of the case were that the claimant purchased a Sunday newspaper that contained a ‘scratch
since the court found that the terms had not been incorporated into the contract and as
defendant’s terms and conditions on this or any previous occasion except when orders were
delivered. Furthermore, the court pointed out that the defendant’s faxed acknowledgements
that purported to incorporate the terms did not refer to terms ‘on the reverse’ or ‘overleaf’,

given prominence within the document with bold or red type, or indeed by having a special
The question then arises as to when is a term regarded as harsh or onerous? This is always
a question of fact to be decided in each case. One of the arguments of the claimant in
‘-ners into losers’ and as such was a harsh and onerous term that as a result should have been
gence. As Hale LJ indicated, all that Rule 5 did was to deprive the claimant from a windfall
effect of the particular clause in the particular case is relevant. That, of course, was the division
of opinion in the AEG case...I would prefer to put the matter more broadly and to say that
A husband and wife booked into a hotel and paid for one week’s stay in advance. They went to the room
Marlborough Court Ltd
[1949] 1 All ER 127

such links. The consequences of this arising may mean that a contracting party will not be
[1964] 1 All ER 430
It can be seen in the above case that a long consistent course of dealings did not apply
because the usual steps taken to incorporate the conditions into the contract had not
[2006] EWHC 2004 (QB) where it was stated that where it was alleged
that a previous course of dealing existed, it had to be demonstrated that the dealings
had to be consistent and unequivocal as regards the terms and conditions to be
Terms and conditions may nevertheless be incorporated into a contract if the parties were
that case a similar contract had been entered into three or four times a month before the
not carried out, but the court held it was sufficient to show that the parties knew and
Circle Freight International Ltd
Medeast Gulf Exports Ltd
[1988] 2 Lloyd’s
Rep 427, there was a course of dealing that consisted of eleven contracts in the previous
six months. On each occasion the contract had been made orally by telephone but the
invoice for the carriage charges, which were sent at a later date, stated that all business was
ers, a copy of which was available on request. A copy was never requested. The consignor’s
managing director accepted that he knew that carriers by road often dealt on standard
terms which addressed questions of risk of loss or damage, but said that he had not noticed
the reference to the IFF conditions in the invoices sent after each of the contracts had been
The Court of Appeal held that the IFF conditions were incorporated into the contract.
The consignor’s managing director knew that some terms applied and that forwarding
agents might impose terms which would frequently deal with risk, but never asked for a
... I consider that reasonable notice of the terms was given by the plaintiffs. Putting it another
way, I consider that the defendant’s conduct in continuing the course of business after at least
the plaintiffs reasonably to believe the defendants accepted their terms. In those circumstances
’Whatever a court’s view regarding the need for consistency, it is certain that there has to be
each other on a few occasions over a lengthy period of time. This is a matter for the court to
[2010] 1 Lloyd’s Rep 477,
Havelock-Allan QC considered a course of dealing that consisted of four contracts in one

however, stated that in the case before him, the parties were both in the trade and were
of equal bargaining power. Each was a firm of plant hirers who hired out plant. The
tions in regard to the hiring of plant: and that their conditions were on much the same
tiff’s claim should be allowed and that the plaintiff’s condition of hire applied. Lord
Denning stated:
From that evidence it is clear that both parties knew quite well that conditions were habitu-
ally imposed by the supplier of these machines: and both parties knew the substance of those
conditions. In particular that if the crane sank in soft ground, it was the hirer’s job to recover
it: and that there was an indemnity clause. In these circumstances, I think the conditions on
the form should be regarded as incorporated into the contract. I would not put it so much
on the course of dealing, but rather on the common understanding which is to be derived
tiffs’ usual conditions.
As stated at the start of this chapter, one of the tasks confronting the courts over the past
150 years has been the need to balance the principle of the equality of bargaining power
with the notion of consumer protection. One of the means by which this task has been
accomplished may be seen in the way the courts have construed exemption clauses coming
before them. The courts have approached this problem in three ways.
The rule here is that exemption clauses are construed against the party relying on them. The

[1925] 1 KB 260 provides an example of
this process where the defendant car dealers were asked to supply a car ‘suitable for touring
required use. The plaintiff rejected the car and claimed to recover the price. The contract
held that the stipulation as to the suitability of the car was a condition, not a guarantee or
a warranty, and as such was not covered by the exemption clause.
The attitude of the court in the above case was clearly to construe the clause against the

. [1934] 1 KB 17 where there was a contract to purchase ‘new
Singer cars’. The contract contained a clause which excluded ‘all conditions, warranties
and liabilities implied by statute, common law or otherwise’. One of the cars delivered by
tion clause. The Court of Appeal held that the term regarding ‘new Singer cars’ was an
express term and thus the exemption clause, which only excluded liability for implied
terms, did not protect the dealer.
It should be noted that the application of the

is not restricted to
exemption clauses.
price based on their price list at the date of delivery, whatever had occurred. They could only
to which they had become subjected by the circumstances specified in the red printed
Act 2015 (CRA) which repealed the Unfair Terms in Consumer Contracts Regulations 1999.
in that it causes a significant imbalance in the parties’ rights and obligations under the
In this case, the sellers agreed to sell a Ferrari car to the buyer for £179,500. The car had to be specially
ordered and a deposit of £44,875, representing 25 per cent of the purchase price, had to be paid with
the order, which would be forfeited if the buyer did not go through with the sale. The contract provided
that the price could be altered by the sellers in certain circumstances: for example, where the exact
model ordered was unavailable, because of changes in import duties and fluctuations in currency
The processes analysed here are really only particular applications of the
The defendant, having inspected a second-hand car and found it to be in good order, decided to buy
it on hire purchase terms. The hire purchase agreement contained a clause which stated that ‘no condi-
tion or warranty that the vehicle is roadworthy or as to its condition or fitness for any purpose is given
by the owner or implied therein’. The car was eventually delivered one night and, while it appeared to
be the car the defendant had inspected, daylight revealed the car to be a mere shell. The cylinder head
and pistons were broken, valves were burnt out; in short, it was incapable of propulsion. Not surprisingly
the defendant refused to accept the car or pay the hire purchase instalments and, when eventually
sued, pointed to the condition of the car. The plaintiffs in turn attempted to rely on the clause. The
Karsales (Harrow) Ltd

[1956] 1 WLR 936
The position of the court may be seen in the statement of Lord Wilberforce in the later

[1966] 2 All ER 61:
Since the contracting parties could hardly have been supposed to contemplate such a misper-
formance or to have provided against it without destroying the whole contractual substratum,
there is no difficulty here in holding exception clauses to be inapplicable.
This approach by the courts is very common in relation to the carriage of goods by sea
where the route to be taken by a ship is usually regarded as fundamental. The result is that
any deviation from the route will have the effect of preventing the shipowner from relying
on the benefit of an exemption clause contained in the contract. An example of such a

The second approach of the courts to fundamental breaches of contract has been the

by the House of Lords in
George Mitchell (Chesterhall) Ltd
Finney Lock Seeds
[1983] 2 AC
The requirement for the clause to be explicit in the face of ambiguity is also important
even if liability could not arise in any way but negligence.
So far we have seen how exemption clauses may be limited in their effectiveness because of
For more on
refer to Chapter 9 .
The plaintiff hired a bicycle from the defendant but, while he was riding it, the seat tipped forward thereby
injuring him. The hire contract stated, ‘nothing in this agreement shall render the owners liable for any
personal injury’. It was held that while the clause was sufficient to exclude liability in contract for the
defendant supplying a defective bicycle, it was not sufficient to exclude liability in negligence. The plaintiff
thus succeeded in his claim in tort.
See also


Hendon Laundry Ltd
[1945] 1 KB 189 (CA).

John Warwick & Co
[1953] 2 All ER 1021
The plaintiff agreed to have his car towed to the defendants’ garage for repairs. The car was subse-
quently totally destroyed by a fire that broke out at the garage as a result of the defendants’ negligence.
The contract contained a term which stated that ‘the company is not responsible for damage caused
by fire to customers’ cars on the premises’. The Court of Appeal concluded that the defendants would
only be liable for fire if it was caused by their negligence, though it was possible for the exemption
clause to be read as a warning that the defendants were not liable for loss caused by fire which was
due to their negligence. The court concluded that there was a sufficient degree of ambiguity to
disallow the defendants from relying on the clause.

[1972] QB 71
The plaintiff took a dress to the defendants for cleaning. She was given a receipt to sign and she asked
what it was for. She was told that it was to exempt the defendants from certain types of damage, in
particular damage to beads and sequins. On this basis she signed the receipt. In fact the clause was a
general exemption in that it excluded liability for ‘any damage, howsoever arising’. When the dress was

[1951] 1 KB 805

parties to the contract. At common law any third parties to the contract cannot rely on the
application of the doctrine in this context can be seen in the following case.
Midland Silicones
[1954] 3 All ER 397
In this case, a drum containing chemicals was shipped to New York on a ship owned by United States
Lines to the order of the plaintiffs. The bill of lading contained a limitation clause which restricted the
carriers’, the shipowners’, liability to US$500. The defendants were stevedores contracted to United
States Lines in London on terms which purported to include the benefit of the limitation clause. The
[1962] 1 All ER 1
of contract. An elaborate attempt at achieving this can be found in the Privy Council case
154, where it was held that the benefit of an exemption clause can be claimed by a stevedore
provided the contract of carriage was explicit as to the fact that the stevedore was intended
to be protected by the contract and that the shipowner/carrier made it clear that he was
The effects of the Contracts (Rights of Third Parties) Act 1999, s 6(5), should not be ignored
here since this provides that third parties may now take advantage of a term excluding or
limiting their liabilities where this contract is one for the carriage of goods by sea, road, rail or
air. This provision therefore allows carriers to exclude or limit the liabilities of their servants,
agents and independent contractors employed in the loading or unloading of ships. Thus the
Collateral contractsSuch contracts may prevent a party seeking to rely on an exemption clause from doing so.
[1948] 2 All ER 127
operation of exemption clauses. For example, s 151 of the Road Traffic Act 1960, now
embodied in s 29 of the Public Passenger Vehicles Act 1981, makes it void to negate or
In the Misrepresentation Act 1967, s 3, any provision in an agreement to exclude or
restrict liability for a misrepresentation is effective only if the court considers the exemption
It can be seen that the different Acts have taken two broadly different approaches to
exemption clauses, either to make them totally ineffective or to subject them to a test of
reasonableness. The Unfair Contract Terms Act 1977 (UCTA) adopts both approaches and
s 55 no longer applies to consumer contracts, which are now governed by Part 2 of the CRA.
Unfair Contract Terms Act 1977 – Exemption Clauses in Non-Consumer
This Act is of the utmost importance in relation to the control of exemption and limitation
sidered towards the end of this section dealing with the contents of contracts. The reason
for its somewhat ignominious position is that its provisions have to be read in conjunction
Clearly the Act cuts a deep furrow right across the doctrine of freedom of contract, but some
s 2–7 of the Act do not apply where, in an international contract, the parties agree to
(The last two provisions were brought in to preserve mercantile legal practice.)
This is defined by s 1(3) as: ‘liability for breach of obligations or duties arising – (a) from
by virtue of s 2. ‘Negligence’ is, however, defined by s 1(1) as a breach:

able care or exercise reasonable skill in the performance of the contract;


Section 2(1) provides that a person cannot by virtue of a contractual term or notice
to particular persons exclude or restrict his liability for death or personal injury resulting from
It is of particular importance that this section does not apply to a term or a notice in con
sumer contracts by s 2(4), which is consistent with the fact that that UCTA no longer applies
to a consumer contracts which now fall squarely within the CRA 2015.

terms that attempt to restrict liability in relation to implied statutory obligations in relation

s 6 applies to all liability and is not merely concerned with liability incurred in the
course of a business, as defined by s1(3), but includes liabilities arising under any contract
of sale of goods or hire-purchase agreement by way of s 6(4) and thus would extend to
C2C contracts but not B2C contracts since these now fall within the Consumer Rights
Act 2015. The way UCTA handles excluding restricting liability in relation to implied
statutory terms is to render some as incapable of being excluded or restricted, whilst oth
Services Act 1982 s 2, where the possession or ownership of goods passes under or in
pursuance of a contract not governed by the law of sale of goods or hire-purchase, for
title, cannot also be excluded or restricted by reference to any such term – UCTA s 7(3A).
15 (relating to description, quality and sample) and the corresponding provisions relating
not be excluded or restricted by reference to a contract term or notice, except in so far as
the term satisfies the requirement of reasonableness contained within s 11 – UCTA 6(1A).
ity with respect to the goods’ correspondence with description or sample, or their quality
or fitness for any particular purpose (i.e. ss 2–15) , cannot be excluded or restricted by

respect of the breach; or


except in so far as (in any of the cases mentioned above in this subsection) the contract term
Paragraph (a) above is relatively straightforward, however, paragraph (b) is a little more
problematic in the sense that it appears to apply where there has been no breach of con

()Despite the absence of any definition of the expression ‘written standard terms of busi
resiled from providing a more precise definition stating that ‘For all its faults, the phrase
‘deals on the other party’s written standard terms of business’ is as good as any that can be
tract was made; or b) any remedy available to another party to the contract by reason of such
a misrepresentation, that term shall be of no effect except insofar as it satisfies the requirement
what the requirement is but lays down guidelines for the application of the requirement.
Section 11 provides what the requirement of reasonableness is in various situations. It

to a contract term, the requirement of reasonableness for the purposes of this
Part of this Act, Section 3 of the Misrepresentation Act 1967... is that the term shall have


While it can be seen that s 11 itself provides some guidelines as to the application of the
requirement of reasonableness, particularly s 11(4) (although this relates to limitation
In examining how the courts assess what is reasonable or not it should be first of all
noticed that they may only take into account ‘circumstances which were, or ought reason
when the contract was

when he discussed the
is reasonable when it merely attempted to limit liability rather than to exclude it

The facts were that there was a contract on standard written terms for the sale of seed potatoes from
the potato merchants to the farmers. A clause in the contract purported to exclude liability if the buyers
failed to give notice of any defects within three days of the delivery of the potatoes. Yet another clause
purported to restrict the liability of the merchants to that of the contract price in respect of conse
quential loss. The potatoes were planted and when they had come through were found to be infected
with a virus.
R W Green Ltd
Cade Bros Farm
[1978] 1 Lloyd’s Rep 602
The plaintiff farmers ordered 30
cabbage seed from the sellers. The seed arrived with invoices
amounting to £201.60 containing a limitation clause restricting the liability of the sellers to either
replacing the seed or repaying the contract price. The farmers planted the seed which produced a
useless crop when it grew, thereby causing the farmers to suffer losses amounting to some £61,000.
The sellers sought to rely on the limitation clause. The House of Lords found that the clause was unrea
sonable, relying substantially on the fact that the suppliers very often made ex gratia payments in cases
they regarded as justified, rather than rely on the clause. This conduct was regarded as indicative of
the fact that the suppliers themselves did not consider their own terms to be reasonable. Second, the
House of Lords considered that it was unreasonable to allow the suppliers to rely on the clause when
the breach was a result of their own negligence. Third, their Lordships considered that the seller could
have insured against claims resulting from the supply of defective seed and that this would not have
significantly increased the contract price. Thus the plaintiffs could claim damages for their losses and
were not restricted by the defendants’ limitation clause.
George Mitchell (Chesterhall) Ltd
Wyre Forest District Council

circumvented simply by constructing an exemption clause in such a way as to prevent a
and that both the exemption clauses were subject to the requirement of reasonableness
attention to the four matters which should always be considered when determining the


defendants, eventually purchasing the property for £18,000 after accepting an advance of £3,500 from
not do so, preferring to rely on the report supplied to the local authority. Some three years later
it transpired that the property was subject to subsidence and that repairs costing more than the
purchase price were required. The plaintiff sued the local authority and the firm of surveyors in
negligence, claiming that even if the exemption clause was sufficiently wide to cover such liabil
ness under s 2(2) of the Unfair Contract Terms Act 1977. At first instance the judge decided in
favour of the plaintiff. The defendants appealed to the Court of Appeal which reversed the first
instance decision. The Court decided that the right to claim under the principles contained in
[1964] AC 465 whereby a person may be liable
for a negligent misstatement, applied only where the person making the statement had assumed
responsibility for that statement. The Court of Appeal considered the effect of the exemption
clause in the present case was to prevent responsibility from arising in the first instance and
that since s 2(2) applied only where a duty of care already existed, the exemption clause was
drew attention to the fact that such consideration could be of great importance to the
house and the resources available to the purchaser increase proportionately.

ferent if they had been subject to a burden in excess of that particular duty.
What are the practical consequences of the decision on the question of reasonableness’?
The purchasers in the two cases were exposed to potentially very substantial losses which
they would be unlikely to insure against. The surveyors on the other hand could easily
The facts of the case were that a local authority suffered serious financial losses to the extent of
£1,314,846 as a result of an error in a computer program purchased from the defendants. The com
pany’s standard terms and conditions in its contract contained a limitation clause that limited its liability
to £100,000 unless the 1977 Act applied. The court found that, by the Unfair Contract Terms Act 1977,
s 3, a party who was in breach of contract could not rely on a term restricting liability in respect of that
breach except where the term satisfied the requirement of reasonableness. In order to fall within s 3
the plaintiffs had to show that they had contracted on the defendants’ ‘written standard terms of
business’, which on the facts they were able to do. The court also found that either s 6 or s 7 applied.
The court did not think that it mattered which of these two sections applied, since it considered that
the relevant provisions were identical for all practical purposes. In relation to these provisions the court
(1996) The
Times, 14 August (CA)
Taking all these factors into account, the court decided that the determining factors were:
first, the parties were of unequal bargaining power; second, the defendants had not justified
relation to the potential risk and the loss actually sustained; third, the defendants were

way of reduced council services or by increased local taxation. He considered that it was not
cal consequences favoured the local authority and that these factors outweighed the fact
them by the Act of proving that the limitation clause was a reasonable one.
The defendants appealed. However, the Court of Appeal affirmed the first instance
decision that the requirement of reasonableness had not been satisfied in relation to the
experienced businesspersons and therefore deemed to be of equal bargaining power is a
’standard terms and conditions exempting liability for indirect and consequential losses,

fact that the appellants had not informed the respondents that there was no insurance cover
amounted to a breach of duty and this breach of duty was an ongoing breach. Thus the time
limit for claiming for breach of a failure to insure would, under clause 30B, only begin to
therefore considered the time limit in relation to this claim was fair and reasonable. Echoing
tract and, with the full knowledge of all the relevant circumstances, willingly accepts the terms
of the contract which provides for the apportionment of the financial risks of that transaction,
the effects of draconian contract terms. But I am less enthusiastic about its intrusion into
because it left Epcot with no remedy for the lack of air conditioning. The loss suffered by
Epcot could be measured by assessing how much less valuable the same services would have
The facts of the case were that Regus Ltd provided serviced office accommodation in a building near
to Heathrow in which Epcot had taken space. Regus subsequently closed the building and relocated
Epcot to another building it owned at Stockley Park. This relocation process gave rise to a claim for
relocation expenses. Epcot complained that the air conditioning system at the new location was inad
equate and therefore withheld fees due to Regus. This gave rise to Regus’ action against Epcot for its

and that this was a logical way of proceeding since it was impossible for Regus to assess
the type and level of losses that could be sustained by its various customers. Furthermore,
it was more economical for their customers to arrange their own insurance and in any
event if Regus did take out such insurance the cost would be passed on to their customers
Schenkers Ltd were worldwide freight carriers and had entered into a contract to transport a consign
ment of shoes that Overland Shoes Ltd (‘Overland’) were importing from China. The contract was based
on the standard terms and conditions of the British International Freight Association and included a
[1998] 1 Lloyd’s Rep 498

The Act has four anti-evasion provisions within it designed to prevent the Act from being
circumvented. The first – unreasonable indemnity clauses falling under s 4 – has already
been considered above. The others are secondary contracts, choice of law clauses and varie
A person is not bound by any contract term prejudicing or taking away rights of his which arise
under, or in connection with the performance of, another contract, so far as those rights
While the terminology seems somewhat obscure, the provision appears to apply where two
respect of rights which a person could have enforced directly in the first contract.

this Act; or

then habitually resident in the United Kingdom, and the essential steps necessary

it also prevents –


uch right or remedy;


ng any liability.

B2B Contracts
Consumer Rights Act 2015
Terms/Notices R
y I
f fective
Terms Notices s
ject to t
irement of
Sale of g
ds/Hire Purchase – s 6(1)
Sale of g
ds/Hire p
chase – s 6(1A)
tracts for transfer of goods/hire– s 7(3A)
tracts for transfer of goods/hire – s 7(1A)
tracts for transfer of goods/hire – s 7(1A)
sing in contract – s 3
As betw
n the contracting parties where one of
deals on the other’s written standard terms of
siness then against that party, the other cannot by
e to any c
tract term —
(a) when himself in breach of contract, exclude or
restrict any li
ility of his in respect of the breach; or
(b) claim to be entitled —
(i) to re
er a contractual
erformance s
if ferent from that which was reasonably
expected o
him, or
) in respect of the whole or any part of hi
bligation, to render no performance at all,
Except in so far as (in any of the cases mentioned
above in this s
section) the contract term satises
the re
of reasonableness.
No denition of “st
ard terms of
t see
Yuanda (UK) Co Ltd v
Gear Constructi
Salvage Associati
v CAP Financial Services Ltd
esentation – s 8
Negligence – s 2(1)
Negligence – s 2(2)
Liability for death or bodily injury caused b
negligence ca
be excluded or restricted by an
contractual term or notice.
The implied terms as to title (SOGA 1979 s 12); SG(IT)A 1973 s
8) cannot
e excluded or restricted by any c
tractual term or
SSGA 1982 s2 implied term as to title where th
ownership of g
ds passes u
r in
rsuance of a
tract not go
rned by the law relating to the sale of goods
or hire purchase, for example transfer
f goods or hire,
e excluded or restricted by reference to any c
for loss or damage, other than death or bodily injury
e excluded or restricted by any contractual term or
notice except in so far as the term or notice satises the
irment of reasonableness.
Liability for breach of the obliga
ns arising from SGA 1979
ss13, 14 or 15 of the 1979 Act (impl
d terms as t
r sample, or the SG(IT) 1973 ss 9, 10 or 11 of the 1973
Act (the co
ing terms hire
rchase), cannot be
or restricted by referenc
to a contract term except
in so far as the
rm satises the re
irement of reasonable-
Implied terms as to decription, quality and sample
er the
SSGA 1982 ss 2-15 cannot be excluded or restricted by
reference to such a term except in so far as the term satis
the r
irement of reasonablen
Implied terms as to decription, quality and sampl
er the
SSGA 1982 ss 2—15 cannot be excluded or restricted by
reference to such a term except in so far as the term satis
the re
irement of reasonablen
This s
stitutes the Misrepresentation Act 1967 s 3 s
that any
term or notice that seeks to exclude liabiloity for misrepresenta-
tion or any remedy by reason of an
contractual term or notice
has no eect except in so far that it satises the re
nt of
On the face of things it seems strange that Parliament in producing an Act that seeks to
within the Act. The undoubted reason for this and the consequent drafting of s 13 is to

[1987] 2 All ER 620 (CA), as discussed earlier, it was seen how an exemption clause

[1990] 1
not provide a defence for a breach of the surveyor’s duty of care but prevented the duty of
The first inroad into the regulation of unfair terms in consumer contract arose out of the
European Directive 93/13 on unfair terms in consumer contracts adopted by the Council of
provisions for the preservation of protection given by UCTA in business contracts, and
extended protection against unfair terms to small businesses and not just consumers.
The recommendations of the Law Commission were largely accepted by the government;
however, any progress towards reform was postponed pending the European Union’s Con-
ments to the law in this area, nevertheless the Department of Business, Innovation and Skills
asked the Law Commission to review its previous recommendations contained in its 2005
report in the light of the CRD. The Law Commission subsequently published an Issues Paper
sumer Contracts Advice to the Department for Business, Innovation and Skills (March
introduced to the House of Commons and subsequently the Consumer Rights Act 2015 was
The intention of the Act is therefore to reform and consolidate the vast majority of UK
consumer law, including provisions relating to the supply of goods, the supply of services,
ing to supply of goods, digital content and services are contained within Part 1 of the Act
which we discussed in Chapter 7 . As regards exemption clauses and unfair terms the Act drew





the circumstances existing when the term was agreed and to all of
the other terms of the contract or of any other contract on which it depends.






extent to which the seller or supplier has dealt fairly and equitably with the


The first case to consider unfairness in the context of good faith and significant
This case was brought under the 1994 Regulations which, as already noted, have now been superseded
by the 1999 Regulations and subsequently by the CRA. The case itself concerned the First National
interest at the contract rate on the loan would continue to run until the debt had been paid in full.
Regulation 8 of the 1994 Regulations (which became reg 10 of the 1999 Regulations now CRA 2015
Director General of Fair Trading

Shoe Lane Parking Ltd
Library Ltd
be that this case will lead to a change in the County Court Rules to allow such interest to be
paid on judgement debts. Lord Bingham also drew attention to the fact that the Consumer
Credit Act 1974, which was developed for the purpose of protecting consumers in credit
transactions, did not attempt to legislate against post-judgement interest. He stated that
sary or desirable form of protection’. He therefore concluded that the term could not ‘be
stigmatised as unfair on the ground that it violates or undermines a statutory regime enacted
This position has now been rectified by the Consumer Credit Act 2006, s 17 which inserts
s 130A into the Consumer Credit Act 1974. This regulates the situation where a creditor
wants to recover post-judgement interest from a debtor (including hirers) in connection
notice to the debtor of his intention to recover such interest and must give the debtor further
prominence should be given to terms which might operate disadvantageously to the customer.

or partial non-performance or inadequate performance by the trader of any of the
against any claim which the consumer may have against the trader.
term which has the object or effect of making an agreement binding on the con

or perform the contract, the consumer must pay the trader a dispro
portionately high sum in compensation or for services which have not been

under the contract to pay a disproportionately high sum in
ect of authorising the trader to dissolve the contract

term which has the object or effect of automatically extending a contract of fixed

ith which the consumer has had no real opportunity of becoming acquainted before

ubject to paragraphs 22 (financial services), 23 (contracts which last indefinitely) and

term which has the object or effect of enabling the trader to alter unilaterally with
out a valid reason any characteristics of the goods, digital content or services to be

was concluded. This is subject to paragraphs 24 (sale of securities, foreign currency,

commitments undertaken by the trader’s agents or making the trader’s commitments

sumer’s obligations where the trader does not perform the trader’s obligations.

rights and obligations under the contract, where this may reduce the guarantees for

term which has the object or effect of excluding or hindering the consumer’s right
to take legal action or exercise any other legal remedy, in particular by –

the consumer to take disputes exclusively to arbitration not covered by


that equate with such exempting or limiting terms that are already controlled by the Unfair
The defendant purchased two flats with the intention of converting them into one. He invited the
claimant builders to tender for the work, the tender documents envisaging that the contract would be
entered into on the Joint Contracts Tribunal (JCT) standard form. The defendant’s quantity surveyor
Westminster Building Co
EWHC 138, TCC. The facts were very similar in that a consumer had engaged builders to
renovate his property and the terms of the contract had been decided upon by Beckingham’s

The defendant’s house had burnt down and his insurers accepted liability to rebuild and reinstate the
property. The insurers appointed a firm to act as contract administrator and loss adjuster. The defend
ant signed a contract as ‘agent’ on the advice of that firm with the building contractor, the claimant.
The defendant signed a form authorising the firm to instruct the claimant directly and a second form
agreeing to the insurers paying the claimant directly. Disputes arose about defects and delays in the
building works with the result that the defendant withheld part of the contract price. The claimant
referred the matter to JCT adjudication. The defendant claimed that the requirement under the con
tract was to issue withholding notices before deducting sums for defects and delays and the adjudica
tion provisions were unfair within the meaning of the 1999 Regulations and thus were not binding on
him by virtue of reg 8. The adjudicator rejected these contentions and awarded the claimant its claims
[2007] All ER 255
The Supreme Court held that the charge was not an unfair term within the UTCCR 1999.
ers would have refused the risk of having to pay £85 for overstaying. Lord Toulson dissented

amount of money given it was payable even if a customer overstayed by as little as one
minute. The majority, however, considered that even if the amount payable was higher than
could be obtained in an action for trespass, it was not disproportionately high and justifiable
Before moving on to discuss terms or notices that are excluded from the test of unfairness
liability: goods contracts); s47 (exclusion of liability: digital content contracts); s 57 (exclu
sion of liability: services contracts); or s 65 (exclusion of negligence liability). Thus if one
considers s 31, this provides that any term which seeks to exclude a trader’s liability for
ation if a trader does indeed seek to exclude such liability and contends that the term is fair
within the ambit of s 62(4), then s 62(8) prevents him from making such a contention.
being assessed under the fairness test and the conditions under which that exemption


is of the appropriateness of the price payable under the contract by
comparison with the goods, digital content or services supplied under it.

ent and prominent.

language and (in the case of a written term) is legible.
rm is prominent for the purposes of this section if it is brought to the consumer’s
attention in such a way that an average consumer would be aware of the term.

observant and circumspect.

hus s 64 provides that a term may NOT be assessed for fairness if it: relates to the ‘main
chased) (s 64(1)a); or the ‘assessment is of the appropriateness (usually the level) of the price
ment for unfairness under s 62, but this is then qualified by s 64(2) so that to qualify for
and prominent (e.g. if it is in the ‘small print’), it is assessable for fairness. If the term is
must be in ‘plain intelligible language’. It will be noted, however, that the ‘plain intelligible
here it applies as an aspect of transparency. The expression ‘prominent’ means that the term
is ‘reasonably well-informed, observant and circumspect’ would be aware of the term; s 64(4)
It follows from this that if a term is a core provision within s 64(1)a because it specifies
the main subject matter of the contract and is transparent, is expressed in plain intelligible
language, and is brought to the attention of the consumer in such a way that an ‘average
consumer would be aware of the term’, then the term is cannot be subject to the test of
[2003] EWHC 380
QB provides a good example as to how this operates. In this case South, who was going
on holiday to Cyprus, purchased holiday insurance to cover the trip. The policy contained
ing your ownership or possession of any...motorized waterborne craft’. Subsequently
against a debtor, the lender will obtain interest on the debt pursuant to statute. Thus the
loan agreement in effect becomes merged into the judgement and the debtor pays interest
at the statutory rate of interest, not the contract rate. However, a qualification has to be
the lender. In effect, the debtor now has an interest-free loan on the debt! This is particularly
important in this context because a court has the power to require the judgement debt to
ment. Debtors therefore could see a significant advantage disappearing here and it is this
provision that the Director General of Fair Trading objected to and considered to be an
General of Fair Trading who brought the case and where in the Court of Appeal it was found
that Clause 8 was indeed unfair. The implications of the decision in the Court of Appeal
alarmed lenders, which prompted the appeal to the House of Lords.

The nature of the bank’s appeal was that Clause 8 fell within reg 3(2) and, in particular, reg
3(2)b UTCCR 1994, in that it concerned the adequacy of the price or remuneration, as against
ness of the term. This argument was rejected by the House of Lords. Lord Steyn in particular
stated that Clause 8 was essentially a default provision that only came into operation on the
default of the consumer prescribing the remedies of the bank on such an occurrence. Clause
8 therefore was a subsidiary term and as such fell outside reg 3(2)a which related to the main
subject of the contract. This avenue of defence was therefore closed to the bank. Lord Steyn
The banks appealed to the Supreme Court, which allowed the appeal finding that the

bers for gym and health and fitness clubs, providing standard form contracts for their use
and collecting payments from members under those contracts. AMS advised gym clubs to
adopt agreements with specified minimum membership that ranged from periods of 12
cellation without incurring liability. Members who wanted to terminate their agreements
before the end of the minimum periods were described as ‘defaulters’. These members were
dealt with by registering or threatening to register their default of their breach of contract
with a credit reference agency. Following complaints from consumers, the OFT investigated
larations to that effect and also injunctions restraining AMS from using its standard form
The OFT contended,
inter alia
, that the terms in AMS’s agreements providing for a mini
mum membership period were unfair within the meaning of the UTCCR Reg 5(1) in that a
contractual term ‘which has not been individually negotiated shall be regarded as unfair if,
consumer using gym clubs and the agreements contained a trap into which the average
to the definition of the main subject matter of the contract but to the consequences of early
on the scope of s 64(1)b of the CRA? It appears that whilst the language
has changed from ‘adequate’ in reg 6(2)b to ‘appropriate’ in s 64(1)b, this has had little
Abbey National
at [para 94] considered the two expressions to be synonymous stating that
‘adequacy’ means ‘appropriateness or reasonableness’. The main change arises in s 64(2)
which states that s 64(1) only excludes a term from an assessment under s 62 only if it is
ble language’ more exacting requirement than reg 6(2). Reflecting the case law then, the
effect of s 64(1) is that if a term concerns other aspects of the price (not the amount), such
as the time of the payment, then the term may be assessed for fairness under s 62. On the
notice, exclude or limit liability for death or personal injury resulting from negligence. It
should be noted that in some circumstances a person is aware of a risk but chooses to ignore
it and as such is deemed to have consented to the risk, however, s 65(2) provides that a per
negligence. This is an important change from the UTCCR 1999 since terms or notices that
cally barred but subject to the fairness test in s 62. It follows from this that for terms or
It should be noted that there are some exceptions to the operation of s 65 contained
within s 66. Thus s 65 does not apply to contracts of insurance, any contract so far as it relates
loss or damage because of the dangerous state of the premises, for instance.
If a consumer enters into a contract for a hotel room at £200 per night, a court cannot look at

term to be unfair and thus render it not binding on the consumer, it may not be in the
The fact that this is only possible ‘as far as practicable’ reflects the fact that if a term is so
fundamental to the contract, then the consequence may be that the contract as a whole will
sible grammatically and where it is appropriate on public policy issues.
Whilst it can be seen that the Act focuses on providing that a contract term must be fair, and
and banks also appeared to be potential targets of the new Directive. Article 7, as imple
mented by reg 8 in the 1994 Regulations, immediately doused the expectations of consumer
found in s 70 which simply provides that the regulation and enforcement of the law on

regard to reg 6(1), which states that in an individual challenge the court assesses the
unfairness of a term by looking ‘at the time of the conclusion of the contract, to all the
circumstances attending the conclusion of the contract and to all the other terms of the
contract...’. The judge considered it was not possible to have regard to these matters in
The OFT appealed against the judge’s decision and it was held in the Court of Appeal that
and thus an issue on a general challenge could be the fairness of a term in a current contract.
It would be quite inadequate protection to consumers if a court on a general challenge, having
seller from continuing to enforce that term in current contracts. As the European Court of
Justice, and indeed Lord Steyn in
Director General of Fair Trading
First National Bank plc
‘effective way of preventing the continuing use of unfair terms...than
actions’...It is
to a standard term in current contracts and did not intend the courts of member states to have
Under para 3(6) ,a regulator is entitled to apply for an injunction in relation to a term or
Consumer Rights Act 2015 Part 2
Any unfair term or notice is not binding on a consumer; however, a consumer can rely on the term if he/she
S 62(4) & (6)
A term or notice is unfair if contrary to good faith it causes a significant imbalance in the parties rights and


“Transparent” – expressed in plain inteligible language – s 64(3), AND
ParkingEye Ltd v Beavis
Section 65 – Negligence

If the unsigned document is to be regarded as being an integral part of the contract, reason
able notice of the exemption clause must be brought to the attention of the other party.
Wanxiang Resources (Singapore)
Suisse Atlantique Société d’Armement Maritime SA
NV Rotterdamsche Kolen

Liability arising both in contract and in tort, and exemption and limitation clauses con
international supply contracts where the adoption of English law as ‘the proper law of
The Act only applies to actions in contract and tort arising in relation to ‘business
able care or exercise reasonable skill in the performance of the contract;

any stricter duty);

In relation to attempts to exclude liability in contract UCTA applies on two ways:

relation to the sale of supply of goods (UCTA ss 6 and 7);


contemplation of the parties when the contract was made’.

George Mitchell (Chesterhall) Ltd

Finney Lock Seeds Ltd
lines for assessing reasonableness).

uch advice?


Consumer Rights Act 2015 Part 2 – Unfair Terms in Consumer Contracts (B2C)

Lawson, ‘Limits to the Unfair Contract Terms Act’ (2006) 27
Business Law Review
Exclusion Clauses and Unfair Contract Terms



After reading this chapter you should be able to:
1. Define what comprises a misrepresentation.
Prior to the making of a contract, the parties often make statements to each other with the
remain as ‘mere representations’, that is, statements of fact which are intended only to
important to establish a breach of a term rather than a misrepresentation since, with the
generous. This is no longer the case since the passing of the Misrepresentation Act 1967.
Of itself a breach of a mere representation is not actionable and it may amount to nothing
law of tort for misrepresentation, the effect of which is to render the contract voidable, giv-
ing the injured party a possibility of either rescinding the contract or claiming damages, or
both. The Misrepresentation Act 1967 s 1 provides that where a person, the representee, has
sentation has either become a term of the contract and/or the contract has been performed,
tion has become a term and/or the contract has been performed. More will be said about
A misrepresentation may be defined then as a false statement of fact that induces another
evant, although this may influence what type of misrepresentation is claimed by the

As our definition indicates, the false statement must be a statement of fact. It is extremely
For more on
refer to Chapter 10 .

()-tion for some commercial property which was partly occupied by a car park operated by NCP
contract to purchase the property as a result of a misrepresentation in the auction catalogue.
was a business tenant and therefore protected under the Landlord and Tenant Act 1954. The
obtain vacant possession of the whole premises. The defendants claimed that the misrepre
I have concluded that the ‘misrepresentation of law’ rule has not survived the decision in
Kleinwort Benson Ltd
Lincoln City Council
...[its] historical origin is an offshoot of the
‘mistake of law’ rule, created by analogy with it, and the two are logically interdependent. Both
whose dubious utility would have been enhanced had it gone on to explain who was not
Such representations have traditionally been actionable anyway and this appears to cast
Essentially the misrepresentation here is one as to private rights as opposed to law. A similar
position to the
case can be seen in mistake in
[1950] 1 KB 671
The vendor of a farm in New Zealand, when asked about the number of sheep the farm could sustain,
declared that in his judgement it would support 2,000 sheep. In fact the farm had never held sheep
and thus it was held that the statement could amount to nothing more than an honest statement of
opinion and not a statement of fact. The action for misrepresentation thus failed.
such a circumstance the statement will be regarded as one of fact rather than one of opinion.
[2011] EWHC 2525 (QB) in which Cherrilow Ltd (‘C’) claimed that it was
pher Wren by way of dishonest representations made by Richard Butler-Creagh (‘B’). The
property was owned by a religious group known as the Marian Fathers and B had successfully
the group whereby he was required to proceed with the purchase ‘as soon as reasonably
practicable’. He agreed that if he was not able to proceed with the purchase he should inform

redeveloped into a hotel with residential units within 26 months and this development
The directors of a company issued a prospectus inviting subscriptions for debentures. The money raised
from the loan capital arising from the sale of the debentures was, according to the prospectus, to be
there was found to be a misrepresentation of fact. The company directors had not simply made a
promise as to the future use of the money which they may or may not have fulfilled, but consciously
told an untruth in order to induce members of the public to subscribe to the debentures. Bowen LJ
justified the decision as follows:
The state of a man’s mind is as much a fact as the state of his digestion. It is true that it is very difficult to
prove what the state of a man’s mind at a particular time is, but if it can be ascertained it is as much a fact
As a general rule silence cannot amount to a misrepresentation since there is no duty to
disclose facts which may influence a person not to enter into a contract. This rule has its
origins in the classical theory of contract where the notion of freedom to contract and
Where a statement is made which is true at the time but subsequently becomes untrue to
tion. This is qualified, however, in that if the context makes it clear to a reasonable
representee that the representor accepts no responsibility either for the statement or for
reviewing the statement, then no misrepresentation will arise. Thus where a representor
A doctor was negotiating the sale of his practice and made certain representations regarding the
income that could be earned from it. At the time the misrepresentation was made the figures were
true. Subsequently the doctor fell ill so that the income earned from the practice decreased substan
tially. The reduction was not made known to the purchaser, who purchased the practice on the basis
of the original earnings. When the purchaser discovered the true state of affairs he sought to rescind
the contract. It was held that the purchaser should succeed in his action for rescission on the grounds
of misrepresentation, as the doctor should have declared the change of circumstances.
1977 1 WLR 199 where during proceedings for a
divorce the husband entered into an agreement to pay his wife £17000 provided she agreed
not to pursue proceedings for maintenance. During the proceedings the wife repeatedly
stated that she would not re-marry; however, by the time of the agreement the wife had
changed her mind but did not disclose her change of intention to her former husband. On
discovering his former wife’s change of intention, he brought proceedings for the agreement

refurbishment could not be carried out whilst the tenant remained in occupation of the
stances were right’. The landlord did not inform the tenant of his change of intentions. The
tenant, believing he had to quit the premises, arranged a lease on some alternative premises.
At first instance the judge found that the landlord’s original representation did not amount
to a representation that the landlord would not change his mind and, secondly, the landlord

induces the insurer to enter the contract, the insurer will have a remedy. By s 1, a ‘consumer’
the future. Also by s 1, a ‘consumer insurance contract’ means a contract of insurance



Our definition of a misrepresentation indicates that the statement of fact must have induced
the innocent party to enter the contract. In order to prove the inducement we must take
The misrepresentation, to be actionable, must be important enough to influence a reason-

further enquiries may be required for the purpose of revealing the material circumstances,
materiality being circumstances which would ‘influence the judgement of a prudent insurer
The plaintiffs decided to launch a takeover of a company for the purpose of obtaining the services of
two directors. The plaintiffs inspected the accounts of the company but these were inaccurate because
of the negligence of the defendant firm of accountants. While the accounts were regarded as a mate
rial misrepresentation the plaintiffs’ action failed as they had not relied on the accounts. This conclu
sion was reached since the principal objective of the plaintiffs was not to acquire the company for
commercial reasons but to secure the services of the two directors in question. The case therefore
. [1983] 1 All ER 583
Nevertheless, the requirement of materiality has more recently been called into ques
tion in the case of
Museprime Properties Ltd
Adhill Properties Ltd
[1990] 36 EG 114
tations were made to the effect that a rent review was outstanding and that it was still
possible for the purchaser to negotiate higher rents. In fact, new rents had already been
fixed for the next review period. The plaintiffs sued to have the contract rescinded on the
, that they could not do so
because the misrepresentation was not material since no reasonable bidder would have
allowed such a misrepresentation to affect his bid. The court held that the materiality was
[1996] 3 All ER 344, the Court of Appeal confirmed that a misrep
resentation is material when its tendency, or its natural and probable result, is to induce the
fact acted. The test remains an objective one – would the reasonable person have been
test and it is shown that the misrepresentee has been induced into the contract as a matter
of fact, the misrepresentee does not have to prove causation since this has been done by
claimant would have entered into the contract had they been told the truth since, of course,
Even if the representee can show that they were actually influenced by the statement, it
may be that a court would not award them rescission but only nominal damages in such a
vides for this. Contracts of insurance, for instance, commonly provide that statements made
the statement in that it induced them to enter the contract. Inducement is a question of fact,


HDI Gerling Industrie Versi
cherung AG
is offered a car for £2,500 and is told by
that the car has done only 20,000 miles but in fact it has
done 40,000 miles. Here there is a clear misrepresentation, but one which is actionable only if
been induced into the contract by the statement as to the mileage of the car. If
is not bothered
about the mileage or in fact chooses the car because of its colour, age or model, then they will have
no action for misrepresentation.
The appellant negotiated the sale of certain mines and works to the respondents. The respondents
asked questions regarding the capacity of the mine and subsequently had the appellant’s answers
confirmed by the reports of their own mining engineers. Some six months after the sale the respond
ents discovered that the answers supplied by the appellant were inaccurate and claimed to rescind the
contract for misrepresentation. It was held that their action would fail since the respondents had not
relied on the statements made by the appellant but on the reports of their own mining engineers.
A person is not precluded from claiming in misrepresentation merely because they relied
on other factors as well as the false statement. As we have already seen in the case of
, above, the plaintiff there relied not only on the false statements
made in the prospectus but also on his own, wrong assumption that subscribing to the
debenture would give him a charge over the company’s property. He was nevertheless held
Australia and New Zealand Banking Group
[2006] EWCA Civ 386, the facts of which have already been stated in Chapter8, it was
sation could not amount to an inducement as the claimant was an experienced investor. He
had been induced to sign the contract not by anything the bank has told him orally but as a
result of his own assumptions. Whatever information the investor was given in the telephone
conversations, even if it was a misrepresentation, was dispelled by the fact that he must have
’)()the misrepresenta-tion does not have to be the sole inducement for the representee to be able to rely on it: it is enough if the misrepresentation plays a real and substantial part, albeit not a decisive part, in inducing the
that the misrepresentation did not play a real and substantial part in the representee’s decision
to enter into the transaction; the representor does not have to go so far as to show that the
This test was also approved of in
Taberna Europe CDO II Plc
A solicitor was induced to buy a practice on the basis of an innocent misrepresentation as to the value
of the practice and the property attached to it. The solicitor had the accounts made available to him
though he did not examine them. It was held that he was able to rescind the contract despite the fact
that the accounts would have revealed the untruth of the statements made to him.

relied on a negligently prepared survey carried out by the surveyors engaged by their lender.
They would have discovered the truth about the property if they had engaged their own
house was of a substantial value or comprised commercial property, the House of Lords
indicated that the position would have been different and failure to take the opportunity to
discover the truth of a state of affairs would have prevented them from taking action. It is,
The facts of the case were that the respondent injured his back as a result of an accident at work. The
effect of this was that his ability to work was seriously impaired and he suffered from continuous back
pain. He sued his employer and Zurich Insurance then conducted the defence on behalf of the
employer. Part of the evidence in the defence was a video showing the respondent undertaking heavy
work at home and as a result it was alleged that he had exaggerated the extent and seriousness of his
In relation to the matter of reliance the judge (at para 2.5) stated:
on the representations
ciple arises. In the ordinary case, sale of goods, for example, reliance by the purchaser is
of the statement; if he believes the goods are as
represented, he will be relying on the representation (and acting on it by his purchase) and
if not, not. In the litigation context the position is different. In such a situation, the party to
whom the representation is made is by no means likely to believe it to be true at the pre-trial
stage. At the very least, statements made in the course of litigation will be viewed with
healthy scepticism and weighed against the other material available. Often the other party
simply walk away. For these reasons, it appears to me that the many dicta relied on by [the
respondent], to the effect that liability requires that the representation must be believed by
the other party, are not applicable to a case like the present. The formulation adopted by the

intention to induce a contract by means of fraud. If it had to be shown that the representee
actually believed in the misrepresentation, then there would be no need to have such a
sary to prove that the misrepresentation played ‘no part at all’ in the entering of the contract
the shooting planned for later that year. In that regard, they produced information about the
estimated number of grouse on the moor. However, the counts that were carried out were not
representative of the moor as a whole, as they were taken from parts of the moor which were
tion, as stated in the email, was well in excess of the actual population. X then decided not to
pursue with the transaction. Mr Erskine was then contacted and invited to pursue an interest
in the moor. After taking part in a shoot Mr Erskine also expressed his concern about the grouse
population on the moors. The owners’ agent then sent Mr Erskine the information contained
in the email to X on 4 August. In October, Mr Erskine decided to proceed with the transaction
which was to be concluded in the name of Cramaso LLP, which would take the lease. The lease
tive of the moor as a whole, that the grouse population was smaller than he had been led to
believe and that the population would take longer to recover. He considered that he had been
Their Lordships heard the case as an appeal from the Inner House of the Court of Session.
Whilst the case is a Scottish case, the law is essentially the same as in England and Wales.
owners’ representative had acted honestly but negligently as he had been aware of
tions he had made and had not checked the facts. Their Lordships concurred with the Lord
The Inner House had found that Mr Erskine was the directing mind of Cramaso LLP and had
entered into the contract in reliance of the negligent misrepresentation contained in the
email prior to Cramaso LLP’s formation, however, the Lord Ordinary held that Cramaso LLP
could not recover damages as it did not exist when the email was sent. The Inner House held
The issue that arose was whether the representation remained of a continuing nature after
the identity of the contracting party had changed, in this case Cramaso Ltd, so that the
in the email. This was a novel point for which no authority was cited to the court. The
Supreme Court considered that, in the circumstances drawn from the conduct of the parties,
in that it had not been formed at the date of the email to Mr Erskine. Again Lord Reed stated:
Where the inference to be drawn is that a representation continued to be made until the con-
tract was concluded, it may also be inferred that the risk of harm being suffered as a result of
cumstances, the representor may be taken to have assumed responsibility for the accuracy of
the representation towards the contracting party who relied upon it, even though that person
was not the original representee.
Thus the change in identity of the prospective contracting party did not affect the continu-

[1954] AC 333 . It
be the vehicle for Mr Erskine’s investment so that it continued to be foreseeable that the
representation would induce Cramaso LLP to enter into the contract and that they had
failed in their duty of care to Cramaso LLP.

The remedies available for misrepresentation vary according to the nature of the misrep-
resentation alleged. In this section, therefore, we will look at the nature of the various
types of misrepresentation and the particular remedies available for each, and in the next
section we will look at the various factors which may affect the remedies themselves or
their availability.
Originally at common law only two types of misrepresentation were recognised: fraudu-
lent and innocent. However, we have seen over the years the development of negligent

[1964] AC 465 and in statute by virtue of the Misrepresentation Act 1967, s 2(1).

With regard to (a), it is necessary for the claimant to identify the representation made
resentation was false in a sense which the representor did not understand or intend it to

ITS Testing Services (UK) Ltd
Citibank NA
Scrimgeour Vickers
The authority for the rule at common law can also be found in the case of

was fabricated and also where the claim was justified but dishonestly exaggerated and in
In this case, a ship’s engine room flooded, causing the engine to be damaged beyond repair, leading to
the shipowner claiming under the policy. Initially the cause of the flood was unclear, however, the
shipowner stated that whilst the bilge alarm had sounded, the crew was unable to control the flood
because of the rolling of the ship in heavy seas. This statement was untrue and in fact the true cause
was that; first, the crew had negligently failed to close a sea valve on an emergency fire pump; second,
earlier contractors had failed to make sure that the engine room bulkheads were properly sealed; and
third, there were defects in the engine room pumping system.
Versloot Dredging BV
HI Gerling Industrie Versicherung AG [2016] UKSC 45
realm of insurance ever since the failure two centuries ago of Lord Mansfield’s attempt to
the risk than with the punishment of misconduct. The extension of the fraudulent claims rule
I agree...that the lie told in the latter case may be ‘material’ to the insured’s conduct, in that
same sense as a lie which goes to the existence or amount of the insured’s entitlement. It is
aptly described as collateral, or irrelevant to the existence and amount of the insurer’s liability.
as regards the alarm sounding, the statement was made when the director was frustrated
that the insurers were not paying up immediately and were intended to reassure the insurers
not altered by the operation of the bilge alarm. As such the statements by the director
With regards to the operation of the Marine Insurance Act 1906 s 17, it must be now
borne in mind that consumer insurance contracts are now dealt with by the Consumer
Insurance (Disclosure and Representations) Act 2012 and, in the case of both consumer and
claims. The Insurance Act 2015 s 12 now deals with fraudulent claims and preserves the rule
that a fraudulent claimant will recover nothing, including any unexaggerated element. It
open the scope of the fraudulent claims rule, and in particular leave open the issue as to

has its limitations both in terms of application and in terms of where the burden of proof
lies, so that most actions for negligent misrepresentation today are brought within the terms
of the Misrepresentation Act 1967 which has significant procedural advantages.
fundamentally changed the
The facts of the case were that the plaintiffs had been asked for credit by a particular company and
decided to ask for advice as to the financial standing of the company from the company’s own bankers,
the defendants. The defendants, who were aware of the purpose behind the plaintiffs’ request, stated
carelessly that the company was financially sound. The House of Lords decided that while the defend
ants owed the plaintiffs a duty to take care, they were not liable because of a disclaimer enclosed with
the credit reference which stated that the advice was given ‘without responsibility’.
ship’ between the parties. Unfortunately the House of Lords was not very specific as to what
amount to a statement of fact?’
Formerly statements of law could not amount to
Awareness of the untruth?
Ormrod LJ pointed out, however, that liability would not have arisen in a case where a rep-
It is more difficult to bring a claim for negligent misrepresentation at common law than
of proof lies on the representee who must prove not only the existence of the so-called
special relationship but also the existence of a duty of care and its breach, coupled with
not limited to actions in respect of misrepresentations that induce a contract.
Section 2(1) provides:
Where a person has entered into a contract after a misrepresentation has been made to him by

The Law Commission and the Scottish Law Commission’s 2009 joint report
(Law Com No. 319; Scot Law
Com No 219), in proposing their draft Bill in developing this Act, made it clear that the


nicated the importance of answering those questions (or the possible consequences of

specific question was of relevance to the insurer. The effect of these presumptions is to
strate that they did not know the answer or did not understand the question.
Mrs A is going on holiday and takes out holiday insurance. One of the questions asks if she had ever
suffered asthma. She replies that she has not, although three years ago she suffered from asthma
related to a bout of severe hay fever and had been diagnosed and treated by her doctor for the condi
tion. During her holiday she does in fact suffer from an asthmatic attack and the insurance company
seeks to avoid the contract on the basis for her pre-existing medical condition. The question is a clear
and specific one and thus the insurance company is relieved of the burden of proving that Mrs A
acted deliberately or recklessly since most reasonable people would know that they had suffered
from asthma. The burden is now with Mrs A to show that she did not know she had suffered from
asthma or did not understand the question. For instance, in Mrs A’s case she might have confused
her previous attack with hay fever unless she can prove that she did not understand the question.
The different types of misrepresentation are an important feature of the Act since the Act

contracts so that consumers are placed in a worse position as regards disclosures and
misrepresentations made by the consumer to the insurer before the contract is entered
into or varied. Similarly it is not possible for insurers to introduce terms into a contract
resentations. It should be noted that s 10 has no application with regard to terms that
require consumers to give insurers information during the course of the contract, since
such terms are caught by the Unfair Terms in Consumer Contracts Regulations 1999 and
The Act also intervenes to prevent terms known as ‘basis of the contract’ clauses. In these
clauses, the insurer adds a declaration to a proposal form or policy stating that the consumer
warrants the accuracy of all the answers given, or that such answers ‘form the basis of the
contract’. This has the legal effect of turning representations into warranties. As we have
already seen in Chapter7, a ‘warranty’ in a contract of insurance has a special status and is
sidiary term. Furthermore, in the Marine Insurance Act 1906, s 33(3) it is stated that a

The general rule is that the effect of misrepresentation is to render the contract voidable,
void, and thus the contract is still valid and subsisting until the representee decides to
A car was sold and delivered to a rogue whose cheque was dishonoured the next day, by which time
the rogue and the car had disappeared. In order to attempt to recover the car the owner informed the
police and the Automobile Association. The rogue then sold the car to a garage which knew that the
rogue had a defective title to the vehicle. The garage subsequently sold the car to a buyer who pur-
chased the car in good faith. It was held that the owner, by informing the police and the Automobile
Association, had made it clear that he sought to rescind the contract, with the result that the rogue
no longer had title to the goods so that no title could pass to the garage or to the innocent buyer, and

[1964] 1 All ER 290

contract induced as a result of the misrepresentation. It is important that an indemnity is
In this case, the plaintiffs were lessees of premises which they used for breeding poultry. They alleged
that they were induced to take up the lease because of representations made by the defendant’s agents
that the premises were in a sanitary condition and in a good state of repair. They further alleged that
as a consequence of the premises being in an insanitary condition their farm manager and his family
became seriously ill and that much of the poultry either died or became valueless for breeding pur
poses. The local authority also condemned the premises as being unfit for human habitation because
of defective drainage. The plaintiffs claimed that they were entitled to an indemnity as regards the
losses in respect of the stock and the medical expenses of the farm manager and his family since these
were incurred as a consequence of entering into the contract. It was held that the claim would fail as
it really amounted to a claim for damages, which could not be awarded for an innocent misrepresenta
tion. The plaintiffs were, however, entitled to those expenses which were incurred as a requirement of
entering into the lease, such as rent, rates and repairs. The contract did not require the plaintiffs to
appoint a manager so the expenses claimed in respect of his medical condition were not an expense
necessarily incurred by the contract. Similarly the contract did not require the farm to be used as a
poultry farm and therefore these expenses also were not necessarily incurred by the contract.
(1900) 82 LT 49
The vendor of a lorry falsely stated that it was in good condition and the vehicle was subsequently
purchased by the plaintiff. After the first journey some defects were found, but when they were pointed
A person may be barred from exercising the remedy of rescission in four circumstances.
We have already seen that when a person elects to affirm the contract that election cannot

Rescission is not barred by lapse of time where the misrepresentation is fraudulent; it simply
provides evidence of affirmation of the contract. In this type of misrepresentation, time only
the misrepresentation has been discovered, any time spent negotiating a solution to the
The plaintiff bought a painting after accepting it to be a genuine Constable on the basis of misrepre
sentation made by the defendants. Five years after the sale the plaintiff discovered that the painting
was not by Constable and sought to rescind the contract on the grounds of innocent misrepresentation.
It was held that his right to rescind was barred. Even though there was no evidence that the plaintiff
had affirmed the contract the lapse of time nevertheless debarred him from his remedy.
[1950] 1 All ER 693
In 2007, the appellant sold a luxury sports car to the respondent (Salt) for £21,895 describing it as
‘brand new’. In fact, the car was not brand new since, whilst it had not been registered at the time of
purchase, the car had been delivered to the appellant two years previously and in that period had had
various repairs carried out upon it. Various defects emerged after the respondent took delivery of the
car and, whilst the appellant repaired some of them, the respondent eventually rejected the car in
September 2008, asking for his money back, claiming the car was not of merchantable quality. The
able time since the Court of Appeal considered that delay would not always be a bar to seek-ing rescission as it had been in Leaf v International Galleries.The district judge found that the respondent would not have bought the car without the
he could not make an order for rescission as there had been a considerable lapse of time since
the date of the original sale, and that the respondent’s remedy was limited to damages in
The respondent appealed to the High Court which allowed his appeal, with the judge
documents in the case revealed that the car was not new. Longmore LJ considered that lapse
of time on its own could not be a bar to rescission and pointed out that the respondent only
became aware of the misrepresentation following the disclosure of documents and that most

always been the case that a court of equity, contemplating rescission, could order an account

sider the importance of the representation in relation to the subject matter of the transac
... in the context of a £5m sale of land, a misrepresentation which would have cost £18,000
if the contract were upheld’. In other words, the court must have regard to the effects
on the misrepresentee if it were not allowed to rescind the contract. Lord Hoffmann
stated that the section speaks in terms of loss suffered rather than damages recoverable
but clearly contemplates that if the contract is upheld; such loss will be compensated
ages in circumstances in which no damages would previously have been recoverable.
resentation and raised the matter as to how those damages should be measured. He stated
that this is a matter for inquiry by the court, however, the court in the exercise of its

thought that hardship may be caused to the misrepresentor if that person was deprived

rescission was available to the developer despite the fact that it had re-applied for the plan

’In contract, the damages are limited to what may reasonably be supposed to have been in the
contemplation of the parties. In fraud, they are not so limited. The defendant is bound to make
at all but for your representation. Owing to your fraud, I have not only lost all the money I paid
this or that extra damages.’ All such damages can be recovered: and it does not lie in the mouth
(aka Smith New Court Securities Ltd v Scrimgeour Vickers
or where the claimant had become locked into the property as a result of fraud. The House
of Lords held that consequential losses could also be recovered, although in such a situation
a claimant would be obliged to do whatever was reasonable to mitigate the loss once they
that they would have been in had misrepresentation not occurred.
The result is that the court will award damages for all losses including consequential

inevitable result. In East v Maurer [1991] 2 All ER 733, the Court of Appeal stated that the ‘reparation for all actual damage’ as indicated by Lord Denning would include loss of profits.
that the assessment of damages for loss of profits caused by a fraudulent misrepresentation
tion not been made, rather than on the basis of a contractual warranty. The effect of such
an approach may well result in the amount of damages to be awarded for loss of profits being
There are some limitations on the ability of a claimant to recover all loss that flows from
the breach; for instance, one cannot simply incur expenditure and express this as a loss
, it is necessary to demonstrate that the expenditure was necessary or
reasonable in order to mitigate one’s losses. In any event, Eady J held that Cherrilow Ltd was
The facts of the case were that in September 1981 the plaintiffs bought a thoroughbred yearling for
[1990] 3 All ER 191
Damages are not recoverable for innocent misrepresentation unless the court decides to

this proposition. First, s 2(3) tends to suggest that a lower measure be adopted. Section 2(3)





the said subsection (2) shall be taken into account in assessing his liability under the said

1945 Act applied to a case where there was a claim for damages for negligence at common law,
court held that it would be incorrect for a person to make a false statement and then escape
liability by stating that the representee could have discovered the truth. It should be noted,
however, that in relation to s 2(1) Lord Hoffman appeared to approve of Nicholls VC’s

that, in principle, a defence of contributory negligence should
be available for a claim for damages under s 2(1).i.
On the face of things, therefore, it appears that if a claim is framed under s 2(1) alone,
then a claimant may avoid the apportionment, despite the claimant possibly having a valid

. This point arose in

While exemption clauses have already been discussed with regard to the incorporation of
contractual liability; however, it is possible to frame an exemption clause in such a way as
to exclude liability for statements that induce a party to enter into a contract. Here the
ing or limiting the remedies for misrepresentation which might include damages or the
control of such exemption clauses may arise not just by statute as in the Unfair Contract
way of common law controls imposed by the courts.
See Chapter 8 for

films proved successful and generated any profits, then Chase would expect to recoup its
then Chase would seek to recover its outlay from an insurance policy and without such
term that seeks to exclude or restrict liability for misrepresentation will be subject to the
requirement of reasonableness under the Unfair Contract Terms Act 1977, s 11(1).
As we have already seen, in order to make a claim in misrepresentation, the person to whom
the misrepresentation has been made must show that the statement influenced them in
liability by providing that the other party has not relied on any representations made to
That is one level at which a non-reliance clause operates. However, it can also be explained
In my view an acknowledgement of capable of operating as an evidential
subsequent litigation against the party to whom it has been given that it is not true. That seems
to me to be a proper use of an acknowledgement of this nature, which, as Mr Justice Jacob
pointed out in the
Thomas Witter
case [
Thomas Witter Ltd
TBP Industries Ltd
], has become


the representee intended that the representor should act upon the statements as
regards non-reliance or at least so conduct himself so that a reasonable man in the

, Chadwick LJ recognised that attempting to prove such requirements may pre
sent insuperable difficulties since they often arise in the representor’s standard form con

The difficulties in establishing a contractual estoppel were acknowledged in the case of
where Moore-Bick LJ considered that there
was no reason in principle why parties to a contract should not agree that a certain state of


ness as stated in section 11(1) of the Unfair Contract Terms Act 1977; and it is for those

a term in a consumer contract within the meaning of Part
2 of the Consumer Rights Act 2015 (but see the provision made about such contracts in
The first thing to notice about s 3 is that it no longer applies in relation to consumer
liability or limit liability for misrepresentation is assessed by the fairness test in s 62, that is,
a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance

obligations to convey as beneficial owner and give vacant possession and therefore qualify any
First Flight
representee would, but for the clause, have rights in respect of representations and was
, however, is much broader and tends to look behind
the clause at what the clause is attempting to do in substance and not just its form so that if

because the qualifying words could not fairly be regarded as an attempt to exclude liability
it has had only one owner and the clock
’. He is not fraudulent but mistaken, carelessly confusing one car for another,
in relation to which the statement is true. Relying on his statement the buyer purchases the car.
many paragraphs on the back of the form which the buyer does not read and to which his
resentations have been made to, or relied on by, the purchaser. In that example there has been
Versloot Dredging
– The dissenting judgement of Lord Mance
In many respects the fact that Lord Mance provided the dissenting judgement in
is somewhat surprising given that in
Agnew (The ‘Aegeon’)
EWCA Civ 247 he gave a considered opinion as to whether ‘as a matter of policy, the
underlying rationale of the fraudulent claim principle should extend to invalidate not
merely the whole of a claim where part proves otherwise good, but the whole of a claim
where the whole proves good’.
In that judgement Mance LJ commenced by setting out the accepted principle in the
older common law cases (particularly,
Baillie (1831)
7 Bing. 349 ,
Royal Insurance Co
. (1858) 1 F & F 276 and
Royal Insurance Co
. (1866) 4 F & F
905) stood for a rule of law to the effect that an insured who has made a fraudulent claim
forfeits any lesser claim which he could properly have made.
The Aegeon
, as in the case
, was concerned with the scope and effects of the post-contractual duty of good
He concluded that the use of a fraudulent device did give rise to a defence to the insurer
with respect to a claim; however, he stated:
In the context of use of a fraudulent device or means, one can contemplate the pos
sibility of an obviously irrelevant lie – one which, whatever the insured may have
thought, could not sensibly have had any significant impact on any insurer or judge.
Tentatively, I would suggest that the courts should only apply the fraudulent claim
rule to the use of fraudulent devices or means which would, if believed, have tended,
objectively but prior to any final determination at trial of the parties’ rights, to yield
a not insignificant improvement in the insured’s prospects – whether they be pros
pects of obtaining a settlement, or a better settlement, or of winning at trial.
Versloot Dredging
, however, he considered that insurance is about assessing risk and
the settlement of claims with both processes relying on good faith. He considered that
to ‘suggest that a lie which the insured felt necessary to promote settlement of a claim is
immaterial or “collateral” if years later it can be shown that it was after all unnecessary
to tell it mistakes the nature of the business and the relationship’. He considered that
materiality is an essential component since the collateral lie is told to influence an under
writer’s decision to settle the claim and therefore it must act as an inducement to that
regard. He considered that to suggest that a lie that is told to promote a claim is immate
rial to the respective rights and obligations of the parties just because the lie was unneces
sary is a ‘charter for the untruth’. He thought that such a situation overlooks the need for
integrity on both sides and that in any event a lie is told for one purpose and that is to
obtain an advantage based on a false premise.
In Lord Mance’s opinion, he considered that the approach taken by the majority would
distort the claims process in two ways: Firstly, if the fraudulent device is undiscovered,
then that could lead to the recovery of a bad or exaggerated claim, and; secondly, if the
fraudulent device is discovered, the claims process will have been distorted by reason of
the time and cost involved in unveiling the fraud and ascertaining its implications. He
considered that it made little sense to adopt a stance adopting a principle in which that
‘the lie is dishonest, but the claim is not’ and allowing the claim. He considered that

The untrue statement must be one of fact that induced the other party to enter the
Lincoln City





uberrimae fidei


If the representee is unaware of the misrepresentation they cannot take action on the

ment is accurate.



able grounds to believe and did believe up to the time the contract was made that the
A representee may affirm the contract by expressing their intention to do so or by
The representee may rescind the contract by making clear to the representor that they no
A person may be barred from exercising the remedy of rescission in four circumstances:

Damages are available at common law for fraudulent misrepresentation, the measure


Sanderson CFL Ltd
Lowe v Lombank Ltd
Peekay Intermark Ltd
ANZ Banking Group
Trident Turboprop (Dublin) Ltd
First Flight Couriers Ltd
Raiffeisen Zentralbank
Misrepresentation Act 1967, s 3 as substituted by Unfair Contract Terms Act 1977, s 8 and
Beale, ‘Damages in Lieu of Rescission for Misrepresentation’ (1995) 111
Law Quarterly Review
Beale, ‘Points on Misrepresentation’ (1995) 111
Law Quarterly Review
Beatson, Burrows and Cartwright,
Anson’s Law of Contract
, 30th edn (Oxford University Press, 2016)
Bigwood, ‘Pre-Contractual Misrepresentation and the Limits of the Principle in
Cambridge Law Review
Brinkworth and Powell, ‘Fraudulent Misrepresentation: Dead or Simply Resting?’ (1992) 13
Business Law
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
Handley, Hon KR, ‘Causation in Misrepresentation’ (2015)
Law Quarterly Review
Mitchell, ‘Loss of a Chance in Deceit’ (2009) 125
Law Quarterly Review
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)
Spencer, Bower and Turner,
The Law of Actionable Misrepresentation
, 3rd edn (Butterworths, 1974)
Peel, Treitel
Law of Contract
After reading this chapter you should be able to:
1. Understand the nature of mistake as a vitiating factor, how an ‘operative’ mistake arises
2. Recognise the different types of mistake at common law, the incidence of mistake of law
and how the effect of this differs from a mistake of fact.
3. Recognise and understand the nature of common initial mistakes, how these arise and the
effects both on the parties to the contract and third parties.
4. Recognise and understand the nature of consensus mistakes (i.e. mutual mistakes and
contract and third parties.
5. Appreciate the nature of mistake in equity and how this differs from mistake at common
6. Know and understand mistake as to the nature of the document signed or
tracts in such a way as to account for factors that might only come to light after the
A further aspect that promoted the change of attitude was the effect on third parties of
the finding of mistake at common law. At common law where a mistake was found to exist,
to an individual under a contract which was void for mistake then no title to the goods
A contract was entered into for the purchase of a warehouse which the purchasers wished to redevelop
and for which redevelopment both parties knew that planning consent would be required. In the pre-
consent substantially more difficult. The vendors answered in the negative, a statement which was true
on 14 August 1973. In fact later, unknown to both parties, the Department of the Environment decided
to give the building such a designation as from 25 September 1973. The parties actually signed their
contracts on that date and the purchasers were informed by the Department of the Environment of
the change of designation on 26 September 1973. The purchasers claimed that the contract should
be rescinded for mistake. The Court of Appeal refused the application on the basis that on the date of
the contract both parties believed the property to have no such designation and that since that was
in fact the case at that time, there had been no mistake.
Amalgamated Investment and Property Co
John Walker and Sons Ltd
[1976] 3 All ER 509
Given the two divergent approaches of the common law and equity to mistake it is logical
and convenient to divide our study of mistake into these two areas.

The courts at common law have become reluctant to grant relief for mistake for the reasons
if satisfied
that the mistake was one which was fundamental to the contract. Such a fundamental mis-
First, a mistake may arise where the parties have entered into a contract on an assumption
that a certain state of affairs exists but which it is subsequently discovered does not exist. In
A agrees to charter a ship from B but at the time of the charter neither A nor B were aware that the
ship had already sunk during a storm. Here there is a common initial mistake as to a fundamental fact
on which the agreement had been made, that is, the ship existed and was able to take cargo.
A offers to sell a Ford Galaxy GL to B. B accepts believing he is buying a Ford Galaxy GLX. Here both
the parties are at cross-purposes as to what they are buying and selling.
One word of warning needs to be made at this point in that the terms common, mutual
and unilateral mistake are used interchangeably by different authors, particularly the first
two terms. No confusion should arise, however, if one bears in mind the circumstances in
which each arises rather than simply relying on the label given to each type by the different
One last point that should be noted is that in all types of mistake, however labelled or
described, the mistake must be a fundamental mistake of either fact or law.
While it is firmly established that mistakes of fact can render a contract void, for many
years it was considered that mistakes of law did not have the same effect, a principle
AC 669. This is no longer the case, however, following the landmark case of
[1999] 2 AC 349 where the House of Lords held that money
paid under a mistake of law could now be recoverable. The result of this is that money paid
under a mistake of law is now to be treated on the same basis as money paid under a mis
[2004] EWCA Civ 1017, it was held by the Court of Appeal that

To reiterate, this type of mistake arises commonly where the parties make a mistake that a
certain state of affairs – on which the agreement is based – exists, but which it is subsequently
discovered does not exist. Clearly if, unknown to both parties, a fact which is fundamental
It is important to emphasise that the state of affairs must cease to exist prior to the entering
into of the contract. Should the state of affairs actually exist at the time the contract is entered
into, but then subsequently cease to exist, the contract will be binding, though it may be
. The doctrine of
For more on the
The plaintiff merchants sold a cargo of Indian corn to the defendant. Unbeknown to either party, a few days
before the contract was made, the cargo, which was on board a ship, had overheated and started to fer-

(1856) HL Cas 673
The Commission, the defendants, invited tenders for the sale of a wreck of an oil tanker which was said
to be lying on the Jourmand Reef. The plaintiff, the successful bidder, was unable to find the reef on
the marine charts and therefore asked for the ship’s position, and this he was duly given. The plaintiff
then spent a considerable sum of money equipping a salvage operation but, on arriving at the position
given, found there was no tanker, nor had there ever been such a tanker. The plaintiff sued for breach
of contract and this was resisted by the defendants who claimed the contract was void for
res extincta
on the basis of
The plea of the defendants was accepted by the court at first instance but rejected on appeal to
provided authority for the
. They stated that the case did not concern itself with the validity of the
contract, being based on the existence of a total failure of consideration, but the court did consider
the situation where the validity of the contract could be called into question. It was stated that this
might arise if the purchaser had brought the action for non-delivery in
. In this context,
The actual basis of
remains open and several theories have been
expounded by as many commentators as to what this basis is. As was shown above, the
decision could amount to authority either as to the existence of a common mistake as
to the existence of the subject matter; or a case providing an example of a total failure of
consideration; or a case involving an implied condition precedent as to the existence of the
subject matter. Whatever that basis is, it would seem extreme to suggest that the analysis of

itself as a legal
the Court of Exchequer Chamber and Cranworth LJ in the House of Lords talk in terms of
the judgement turning ‘entirely on the reading of the contract’.
The true position is probably as stated by Beatson (2010) when he comments:
When properly construed, the contract may indicate that the seller assumed responsibility for
to have guaranteed the existence of the tanker. Or it may indicate that the buyer took the risk
that the subject matter might not exist and undertook to pay in any event. This was the point
An example of this type of mistake may be seen in the following case.
An individual agreed to lease a fishery from another. Unbeknown to either party the purchaser already
owned the fishery. In fact the case was not decided on common law principles at all, the court granting
rescission of the contract, though Lord Atkin considered the contract to be void for
res sua
discussed the case in
Lever Bros
The appellant was employed on a fixed-term contract as chairman of a subsidiary company of the
respondents. The respondents decided to amalgamate the subsidiary with another company so that
the appellant’s services were no longer required, despite the fact that there was a substantial period
of time of his contract to run. The respondents paid the appellant compensation amounting to £50,000
for the early termination of his contract. It later transpired that the appellant had been involved in
certain speculative deals which would have entitled the respondents to dismiss the appellant summar
ily without compensation. Neither party had considered this as a possibility when the contract termi
nating his employment was entered into. The respondents, on discovering the truth, sought to have
Lever Bros
The principle so far seems very straightforward, but one must be careful not to jump to con-clusions and immediately think in terms of invoking the principle. In many contracts the
seller often warrants that they do have title, in which case the proper action is to sue for
breach of contract. In contracts for the sale of goods, in particular, s 12(1) of the Sale of Goods
Act 1979 implies a condition that in such contracts the seller has the right to sell or that in
Mistake as to quality only arises where there is neither an implied condition nor a
warranty as to title. At the same time title must be regarded as an integral part of the contract

He thought it was irrelevant that they could have arrived at a similar conclusion by some other means
and discussed the circumstances in which common mistake might arise. They considered that for an
parties considered to be the basis of the agreement. As Lord
Thankerton stated, mistake as to the subject matter of the contract ‘can only properly relate to some
of the subject matter’. He considered that this test was not satisfied in the case since there was noth
contract – only Lever Bros considered this to be ‘essential and integral’ and therefore there was no
of the new facts destroy the identity of the subject-matter as it was in the original state of facts’?
thinks that they are buying a painting from
and that was what they got, a painting, therefore there is no mistake. Treitel, however,
considers this to be erroneous. He also quotes an example of where
purchases a painting
It will be recalled that in this case the parties contracted for the sale and purchase of a picture which
both mistakenly believed to be by Constable. The plaintiff based his claim in misrepresentation, but
what would the result have been if the plaintiff had claimed as to common mistake as to the quality of
the thing contracted for? This case would seem to fall squarely within Lord Atkin’s test, that is, ‘it is the
mistake of both parties, and is as to the existence of some quality which makes the thing without the
quality essentially different from the thing as it was believed to be’. The Court of Appeal did not consider
the facts to amount to a mistake within the definition. Almost certainly Lord Atkin would have come
to a similar conclusion since in
Lever Bros
[1950] 1 All ER 693
Crédit du Nord SA
3 All ER 902

Lever Bros
reasonably believed to be’. He then concluded that ‘for both parties the guarantee of obligations under
a lease with non-existent machines was essentially different from a guarantee of a lease with four
machines which both parties at the time of the contract believed to exist’.
The facts of the case were that a ship, the
Cape Providence
, suffered severe structural damage whilst
in the South Indian Ocean and was in danger of sinking. The ship owners engaged the defendants to
salvage the vessel; however, a tug they engaged to carry out the salvage was four to five days from the
sinking vessel. Fearing the ship would sink with the loss of the crew, the defendants asked its brokers
to locate a ship near to the stricken vessel which would assist, if necessary, with the evacuation of the
crew. The brokers consulted a reputable organisation, Ocean Routes, which provided weather forecast
ing information to the shipping industry and received reports of vessels at sea, for the location of
vessels in the vicinity of the
Cape Providence
. The names of four vessels were provided and the broker
was informed that the nearest ship was the
Great Peace
, a vessel owned by the claimants. It was esti
mated that the
Great Peace
was within 12 hours’ sailing of the
Cape Providence
. However, this position
was wrong. On the basis of the position of the ship given to them, the defendants entered into a
contract with the claimants to hire the
Great Peace
for a minimum of five days. It later transpired that
Great Peace
was several hundred miles from the
Cape Providence
. The defendants therefore can
celled the contract and refused to pay for any hire. The claimants therefore sued, claiming five days’
Great Peace Shipping Ltd
Tsavliris Salvage (International) Ltd
4 All ER 689
hire. The defendants argued, first, that the contract was void at common law for a fundamental mistake,
or, second, that the contract was voidable in equity for common mistake. This second issue will be dealt
with in ‘Mistake in equity’, below.

one hand, entertained by him without any reasonable ground, and, on the other hand, delib
then the Commission cannot in this case rely on any mistake as avoiding the contract, because
any mistake was induced by the serious fault of their own servants, who asserted the existence
Lord Phillips considered this to be the correct approach and that the doctrine of mistake fills
a gap where the parties enter into a contract that proves impossible to perform without the
and obligations within the contract themselves. This also concurs with the approach of
was considered to be different from that of a mistake since a person who pays when in doubt
possible for a compromise agreement to be void for a mistake of law, though it could not
test which reflected that in
Great Peace
was required, that is, had the parties, when negotiat
is, is there ‘a common assumption (in that case one of fact) which renders the service that
The facts of the case were that Kyle Bay Ltd (‘K Ltd’) had operated a nightclub and had taken out insur
ance cover from the defendant. A fire ensued and, on claiming, K Ltd found that the cover was different
from that requested by them. They were advised to enter into a compromise agreement for £205,000,
which was about one-third less than the amount they would have been able to claim had the cover
they had envisaged actually been entered into. Later on it transpired that the type of policy and cover
they had originally requested had actually been in place and K Ltd could have claimed the full amount.
Kyle Bay Ltd (t/a Astons Nightclub)
Underwriters Subscribing under Policy

a term in the contract that warranted the existence of the tanker on the Jourmand Reef. This
The facts of
were that the parties had been married for five years when they got
able. Thus the basis of the agreement was that Mr Graves would provide a house and his wife
Dany Lions Ltd (‘D’) owned a very rare vintage car. D had been in email communication with Bristol Cars
Was there a common assumption as to the existence of a state of affairs such as to give
. In applying these principles Seymour J thought there was no mistake since B had
assumed a contractual obligation to supply and fit an automatic gearbox. As regards the
second requirement – ‘there must be no warranty by either party that that state of affairs
exists’ – Seymour J found that B had warranted that it could supply and fit an automatic
gearbox to the car in question on the terms of the contract. Seymour J did not think it neces-
As regards the fourth element: ‘The non-existence of the state of affairs must render the
contract impossible’, Seymour J considered this element to be important since that element
automatic gearbox in the car amounted to a state of affairs, and even assuming that there
formance of the car did not render performance of the contract impossible. The greater part
matic gearbox. B’s case was not that it would be impossible to fit an automatic gearbox but that in fitting
it the car’s functionality would have been impaired. Whilst that might have been the case, it did not relieve
B of its obligation to satisfy its contractual liability. On a proper construction of B’s email, which amounted
to the offer to do the works, it had warranted that it would be possible to fit an automatic gearbox.
An example of the above principles can be seen in the following case.
The defendants had agreed to purchase ‘125 bales of Surat arrive ex
from Bom
bay’. From the agreement it appeared that the defendants thought they were purchasing a cargo of
cotton from the SS
The defendants wanted to purchase a quantity of hemp being sold at auction by the plaintiffs. Two lots
were put up for sale from the same ship; however, one lot consisted of hemp and one of tow, though the
identification marks on the bales were precisely the same. Closer examination would have revealed the
distinction, but the defendants, having inspected the first lot and found it to contain hemp, immediately
mistakenly considered that the other lot also contained hemp. The auction catalogue itself did not reveal
the distinction and as a result the defendant paid a high price for a lot thought to contain hemp but in
fact containing tow, which would normally have attracted a far lower price. The auctioneer at the time of
Scriven Bros & Co
In this case, the defendant, a racehorse owner, wished to purchase a quantity of oats. A sample of the
oats was inspected and the defendant agreed to purchase the whole amount. When the oats were
delivered, it was discovered they were ‘green’, that is, that season’s oats. The defendant refused to pay
In order to establish a mutual mistake one has to show that there is such a degree of

possible to discern a line of authority that appears to present evidence of an underlying
gence of one of the protagonists to the contract. Thus in the
I take the true rule to be, that where a specific article is offered for sale, without express war
ranty, or without circumstances from which the law will imply a warranty...and the buyer
applies...The buyer persuaded himself they were old
In both cases, carelessness precludes the rights of a party from arising and must therefore be
for them, saying he thought he was buying ‘old’, or the last season’s oats. When sued for the price, the
defendant argued that the contract was void for mistake. The court held that on an objective test basis
there was a valid contract. On a finding of fact the seller had not misrepresented the oats as being old,
nor was there any suggestion that there was a term of the contract to this effect. The purchaser could
not establish mistake on the basis of the fact that he had been careless and as a result misled himself
as to the nature of the oats.
[1939] 3 All ER 566 where the
The typical situation that arises occurs where
accepts an offer to sell goods to

and this renders
the contract voidable. In these circumstances, timing becomes crucial, since here
The facts of the case were that a rogue visited a car dealer and purchased a Mitsubishi Shogun on hire
purchase terms. In order to verify his identity he produced a stolen driving licence in the name of
Mr Patel. The dealer contacted Shogun Finance Ltd, the claimant, requesting finance for ‘Mr Patel’. The
claimant finance company then conducted a finance search against the name of ‘Mr Patel’ and subse
quently accepted a hire purchase agreement signed by the rogue, giving him finance to purchase the
car. The rogue then paid a deposit of 10 per cent and drove the car away. The rogue sold the car to
Mr Hudson, the defendant. The rogue then disappeared and the finance company brought an action
for conversion from Hudson, who claimed that he had acquired good title to the car under the Hire
(2001) The Times, 4 July (CA)

Taking each point in turn, Lord Hobhouse considered that the document referred to
since the company was willing to deal with Mr Patel but not with the rogue. Lord Hobhouse
Of course it is not disputed that the rogue had no authority to deal on behalf of Mr Patel,
nor that he was Mr Patel. Mr Hudson dealt with this issue by stating that it was the rogue
Purchase Act 1964, s 27. Under this provision, where a private purchaser buys a motor vehicle from
someone who has it subject to a hire-purchase agreement or conditional sale agreement and does not
ment could not be enforced against Mr Patel since the fact that his signature had been forged
P & CR 156, which stated the principle that in a written contract the identities of the parties are
). Dyson LJ stated that the identity of the hirer was of crucial importance to the finance company
document; that the agreement was the written agreement contained in the written document; the
Mr Patel; that for the offer to be made the form had to have been signed by Mr Patel; and most
importantly the question in issue revolves around the construction of the written document alone.
course he did not sell the car to Mr Hudson. This was done by the rogue. Essentially the rogue
was a thief, who had no title to the car and could not therefore confer any title on
Mr Hudson –
nemo dat quod non habet
. Mr Hudson was therefore liable to the finance
In order to prove unilateral mistake as to identity, the person alleging mistake must prove



has to show that there was
an intention to deal with some other person
than the one with
the sheets of letterheaded notepaper. Wallis then sold the goods to the defendants, who bought them
in good faith. The plaintiffs now sued the defendants alleging that the contract with Hallam & Co. was
void for mistake and that no title could be conveyed to the defendants. It was held that their action
should fail since there was no mistake as to identity – they had intended to contract with Hallam & Co.
and that was whom they had in fact contracted with. The plaintiffs failed to show that there was some
other person with whom they had intended to do business; the court therefore rejected their claim.
The facts were that the plaintiff, Boulton, had bought the business belonging to Brocklehurst. The
defendant, Jones, had formerly dealt with Brocklehurst with whom he had a running account. One
been bound by the contract despite the fact that he could prove that he had made a mistake.
In order to prove mistake the party alleging it must show that at the time of contracting the identity of the person they were dealing with was of fundamental and crucial importance to
. This is not easy to prove since the mistaken party clearly has to produce evidence of
the fact from their conduct before or at the time of contracting. In these circumstances such
individuals are generally mistaken more as to the attributes of the person they are dealing
the mistaken party intends to deal with the person before them, whoever they are, and very
thought so. While the majority of the Court of Appeal considered that the contract was
stated, ‘amounted to face-to-face dealing as if they had been carried out at the [finance
company’s] office’. While this is only a dissenting judgement it is nevertheless a credible

been contracted with. In the
King’s Norton
case this was not apparent since there existed
the party alleging mistake merely to show that they did not intend to contract with a par
The facts of the case were that a rogue named North entered the jewellery shop owned by the plaintiff
and selected some pearls valued at £2,500 and a ring valued at £450. He then proceeded to write out a
cheque and as he did so stated, ‘You see who I am, I am Sir George Bullough’, giving an address in St James’s
Square. The plaintiff had heard of Sir George Bullough and on checking the telephone directory confirmed
the address given. The plaintiff then asked if he would like to take the articles with him, to which the rogue
Brooks Ltd
-tised for sale. A rogue called and agreed with one of the sisters to purchase the car for £717. When he proffered a cheque for the amount the sister adamantly refused to accept it, where-upon the rogue stated that he was P G M Hutchinson and that he had substantial business interests. Whilst the discussions were taking place the other sister checked the name and
Here a rogue claimed to be a signatory on a company account held with the plaintiff bank. The rogue
telephoned the defendant bank and asked to purchase some foreign currency which he would pay for
by a banker’s draft drawn on the company account held by the plaintiff. The rogue then telephoned
the plaintiff requesting the banker’s draft, which it handed to a ‘messenger’ whom the plaintiff thought
Brown Shipley & Co
Brown Shipley &
[1991] 2 All ER 690
The party alleging mistake must last of all show that they have taken
of the person with whom they are about to contract. This require-

It has been seen that the effect of mistake at common law is to render the contract void
, whereas mistake in equity has the effect of merely rendering the contract voidable.
Furthermore, equity is generally prepared to come to such a conclusion despite the fact that

Lord Denning stated:

Salvage (International) Ltd
. As stated earlier in relation to mistake as to the quality of the
subject matter of the contract, the case was based, first, on the ground that the contract was
void at common law and, second, that it was voidable for mistake in equity. Counsel for the
defendants had proposed that if the contract was not void at common law there was an
No one could fairly suggest that in this difficult area of the law there is only one correct
), supplemented by the more flexible doctrine of mistake in equity (as developed
found to be defective. This was taken up by the Court of Appeal by Lord Phillips MR, who

The effect of the case is thus often upheld as providing a general authority for the use of
res sua
. The case of
Huddersfield Banking Co
Henry Lister & Son Ltd
The defendant’s company had mortgaged its mills and the fixtures contained in them to the bank.
Eventually the company went into insolvent liquidation. The bank claimed that it was entitled to 35
looms in the mills on the basis that since these were bolted to the floor they represented fixtures and
thus fell within their security for the loans. If this was the case they could not fall into the hands of the
Official Receiver to be sold to pay off the general creditors. On touring the factory premises, the agent
of the bank and of the liquidator found that the looms were not in fact bolted to the floor and thus
fell outside the fixtures capable of being claimed by the bank. The bank therefore gave a consent order
for the looms to be sold. It then became apparent that the looms had in fact been bolted to the floor
but had been wrongfully disconnected by some unauthorised person. The bank immediately applied
for the consent order to be rescinded. The court held that the order had been made on the basis of a
common and mutual mistake and gave an order for rescission. Lord Kay stated:
contract was not held to be void for common mistake at common law. In equity, however,
the parties. Lord Winn dissented and considered the case no different from
Lever Bros
by stating that there was an underlying doctrine of equity, which was never

part of the function of equity to provide relief from a bad bargain. Thus equity only extended
to modify relief when the nature of a party’s mistake related to the contract’s subject matter
which are not void for mistake but are void by reason of an implied condition precedent,
Thus Denning held that in
there was a contract since the parties had agreed
the same terms in relation to the same subject matter and that, while there was a fundamen

allows only alteration of the instrument reflecting the contract.
Swainland Builders Ltd
Freehold Properties Ltd

he intention continued at the time of the execution of the instrument sought to be

In addition to these requirements for rectification to be appropriate there must be convinc
affirmed and supported by Lord Hoffmann and the other members of the House of Lords in
obiter judgements
intention as to part of the contract and that this existed up to the time the agreement was reduced into writing.The facts of Joscelyne v Nissen were that the plaintiff sought to have the written contract,
was evident. In this case, the father could show that, up to the contract being executed, both
[2011] EWCA 1153, the
appellant local authority (DDC) had entered into a contract to transfer its housing stock to the
respondent (DDH), a ‘registered social housing landlord’. The negotiations were complex with
regards the amount DDH would pay since the calculation involved a number of elements, one
of which that DDH would make good a deficit of £2.4 million in DDC’s pension fund for the
housing department staff who would be transferred to DDH. Version 1 of the contract provided
that DDH was to pay the pension deficit. DDH’s negotiator nevertheless believed that DDC
ing the deficit since the negotiator presented Version 1 as meaning that DDH would not have
to pay the pension deficit. The eventual transfer contract had a clause inserted (at the insistence
of DDH’s bank) that provided that DDC would pay the deficit, though DDC’s representatives
did not notice this clause in the final document. DDC alleged that this contract should have
provided for DDH to pay it and claimed for rectification of the contract so as to conform with
)-priate there must be convincing proof that the concluded instrument does not represent
the common intention of the parties. In establishing this failure, Lord Hoffmann in
[2009] UKHL 38 stated that evidence of continuing
common intention of the parties one is concerned with what, objectively speaking, one
to be given lesser weight where the intentions of the parties is contained within the docu
must fail since the crucial ingredient of the common intention of the parties did not extend
There was, however, a mistaken belief by both DDC and DDH that the transfer contract was

was made by Denning LJ in
Frederick E Rose (London) Ltd
William H Pim Jnr & Co Ltd

the part of A; thirdly, that B has omitted to draw the mistake to the notice of A. And I think
Thus rectification for unilateral mistake will be allowed provided it can be shown that the
non-mistaken party (B) knew of the mistake but had not drawn it to the attention of the
EWHC 32 (Ch), following George Wimpey UK Ltd v VIC Construction Ltd. In Riverplate
way. Broadly speaking, therefore, it has to be shown that B’s conduct is unconscionable.
2688, Liberty could not establish rectification for unilateral mistake since there was no evi-dence that the defendants had either actual knowledge or wilfully shut their eyes to the
able person would make so that it had acted in an unconscionable manner.
acquisition by a third party of rights under the written contract or where there has been a
lapse of time in applying for the remedy will cause the remedy to be lost.
If a person refuses to perform their side of the bargain it is open to the other party to apply
to a court of equity for a decree of specific performance to compel that person to carry out
their contractual obligations. Since this remedy, like the others, was discretionary, the court
would refuse to grant such a decree where the common law remedy of damages was regarded
as adequate redress, as it very often was, except where the goods could be regarded as unique
goods. Specific performance could, however, also be refused where one of the parties has
(1861) 30 Beav 62, the plaintiff was offered several plots of land by the
defendant for £1,250. Soon after sending the offer the defendant realised that he should
to give the plaintiff a decree of specific performance since it decided that he must have been
aware of the defendant’s mistake as he (the defendant) had already refused an offer of £2,000

This category of mistake forms a separate and distinct category of mistake at common law.
Cases arising in this type of mistake might occur where a person is induced by a false statement
made by some other person to sign a written contract that is fundamentally different from the
one they thought they were signing. While the person inducing the signing may well be a
party to the contract it might be the case that they are a third party to the contract.
by some fundamental statement induces
to sign a guarantee of
’s indebtedness to
’s bank,
. If
attempts to enforce the guarantee against
may attempt to avoid liability on the basis of mistake
as to the nature of the document signed. It is obvious here that
is not a party to the contract
The plaintiff was an elderly widow who had decided to give the title deeds of her house to her nephew,
so that he could use the property as security for a loan in order to go into business. The widow made
one stipulation, which was that whatever he did she would be allowed to live in the house for the rest
of her life. A document was prepared by a friend of the nephew’s, Lee, who was a dishonest managing
clerk, whereby the property was to be assigned to the nephew. In fact the document prepared by Lee
was a deed of conveyance giving effect to a sale of the property to Lee for £3,000, though this sum
was never paid. At the time the deed was signed by Mrs Gallie, she had broken her glasses and thus
relied on Lee’s explanation of the nature of the document. Lee then mortgaged the property to the

Traditionally this type of mistake was often referred to as
, literally trans-
lated as ‘it is not my deed’. The rule originated as a limited defence to the proposition that a
person was bound by any document signed by that person, as we have seen in

[1934] 2 KB 394. In fact the rule developed in medieval times when few people could
read or write and were thus dependent on others accurately to describe the contents and
meaning of a deed. Thus if the terms of a deed were read or explained in such a way that the
deed did not in fact represent the true intention of the signor, the signor could escape liability
on the basis that they would not have signed had the true situation been revealed to them.
The growth of literacy as educational opportunities increased raised serious doubts as to

that her plea would fail. While on the face of things, the two documents appear to be very
If the subject has never existed or ceased to exist prior to the entering into of the contract
then no contract can arise and therefore any agreement entered into is void
Occurs where, unknown to both the parties, the subject matter of the contract had ceased
– fermenting
corn (NB: this case was based on lack of consideration and not mistake).
‘... unknown to the parties, the buyer is already the owner of that which the seller
For mistake as to the quality to arise, the mistake must be as to a fundamental assumption

nature of the promise contained in the offer, e.g. sale of hareskins – per lb or per

Shogun Finance

prove each of the following:




than the one





, ‘it is not my deed’. Limited defence for a person who was bound,

Phang, ‘Common Mistake in English Law: The Proposed Merger of Common Law and Equity’ (1990) 9
Phang, ‘Mistake in Contract Law – Two Recent Cases’ [2002]
Cambridge Law Journal
Phang, ‘Controversy in Common Mistake’ (2003)
Conveyancer and Property Lawyer
Smith, ‘Rectification of Contracts for Common Mistake,
and Subjective States of Mind’
Law Quarterly Review
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)







ties giving their free consent to be bound by the terms of the agreement. It follows that
where a party is coerced into a contract by threats or undue pressure that stifles the principle
, which had a wider sphere of operation
general concept under this heading whereby relief would be given to an individual who had
Duress at common law relates to contracts induced by violence or the threat of violence. The
act or threatened act must be illegal in that it may amount to either a tort or a crime. It follows
that if the threatened act is one which would otherwise be lawful then this cannot amount

(1866) LR
1 HL 200). The effect of duress at common law is to render the contract voidable.
At common law it was always considered that duress had to be directed against the

There was a worldwide recession in the shipping industry with the result that the charter rates had
fallen substantially. The charterers of two ships renegotiated the rates of the charters, having warned
the owners that they would become insolvent unless this was done, although it was shown that the
existing rates would probably not have had this effect on the charterers. They also stated that should
action be taken against them for breach of contract no benefit would accrue to the owners since they,
Occidental Worldwide Investment Corporation

Sibeon and The Sibotre
[1976] 1 Lloyd’s Rep 293

The tests propounded by Kerr J were considered more fully in the following case.
would fail. Kerr J rejected the early doctrine of duress that was based simply on a threat of physical
violence. He stated:
I do not think that English law is as limited...For instance, if I should be compelled to sign a lease or
some other contract for a nominal but legally sufficient consideration under an imminent threat of having
The facts of the case were that the defendants had agreed to build a tanker for the plaintiffs at a price
to be payable in five instalments in dollars. The plaintiffs paid the first instalment but then the dollar
The Atlantic
[1976] AC 104, Lord Wilberforce and Lord Simon of Glaisdale said

choice’ but to submit to the agreement in a number of subsequent cases. The position can
Similarly in Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3205 (QB) where there was a threat to stop supplying automotive components unless an increased
price was paid amounted to duress on the basis that there were no alternative suppliers. The
claimants therefore had no realistic choice in the matter other than close down the produc
The facts of this case were that the plaintiffs, a firm of road hauliers, contracted with the defendants
Atlas Express Ltd
[1989] 1 All ER 641
In this case, the plaintiff’s vessel,
The Universe Sentinel
was ‘blacked’ by the defendant trade union. The
‘blacking’ operated as an instruction to the tugmen not to operate their tugs to assist and manoeuvre
the vessel, which was in breach of their contract of employment. The defendants demanded that the
plaintiffs pay $80,000 to the crew by way of back-pay and also contribute $6,840 to the union’s welfare
fund. These monies were paid by the defendants in order to release their vessel but then sought to
recover the money paid to the welfare fund. The defendants conceded that the money was paid under
Universe Tankships Inc
of Monrovia
International Transport Workers’

nature of the demand’. The effect therefore is that whilst action which is unlawful will
is legitimate, as can be seen from Lord Scarman’s example in the case of blackmail.
hand, the Court of Appeal stated that no duress could arise where legitimate rights were
threatened, however, these views of the Court of Appeal have now given way to those of the
[1994] 4 All ER 714, where the Court of Appeal confirmed that a lawful act
cial transaction, particularly if the party making the threat was acting in the bona fide belief
that its demand was valid and legitimate. The court considered that the development of the
so-called lawful act duress in pursuing a bona fide claim in a commercial context would
create an undesirable level of uncertainty in the commercial bargaining environment.
[2003] UKPC 22. In this case, a former member of the SAS
alleged that he had been subject to duress when signing a contract preventing him from dis
closing information relating to the work of the United Kingdom Special Forces after he left
the SAS. He alleged that the duress arose when he had been told that if he refused to sign the
The facts of the case were that a ship,
The Alev
, was chartered to carry a cargo of steel. The defendants
had an interest in the cargo. The charterers of the ship in fact had substantial financial problems, with
the result that they defaulted in paying instalments under the terms of the charterparty to the ship
owners, the plaintiffs. This default rendered the plaintiffs, by virtue of the bill of lading, liable to carry
Vantage Navigation Corporation
[1989] 1 Lloyd’s Rep 138
prevent delays, amounted to illegitimate pressure and therefore to economic duress.
Traxpo Enterprises
Pvt Ltd
coming but as the days passed they were increasingly driven into a corner. When a substitute
vessel was found, T had no choice but to accept the vessel on a full and final, take it or leave
it offer so that T’s agreement to waive its claims was procured by economic duress.

was subjected to pressure by unlawful action; alternatively, if conduct which was lawful
Mocatta J undoubtedly gave additional support to the test propounded by Kerr J for a doc-trine of economic duress, the judgement also produced a serious deficiency in the concept
of economic duress as stated by Kerr J. The problem is that the victim was placed on the
from the contract, leaving the victim economically disadvantaged, despite their right to sue
economic duress as this was regarded as an affirmation of the contract.

the making of the agreement, in the sense that it would not otherwise have been made
either at all or, at least, in the terms in which it was made. In that sense, the pressure must
The party alleging the economic duress is thus therefore required to prove that he would
not have entered into the contract but for (the ‘but for’ test) the improper or illegitimate
Sapporo Breweries Limited (A company incorporated under the laws
[2013] EWCA Civ 948, Tomlinson LJ stated, ‘economic duress is an emerging
this probably arises because the boundaries of the doctrine are still being formed. As the
cases indicate, the doctrine is well on the way to developing some established principles but
having to prove a suppression of will and voluntary consent to the transaction by the victim,
the matter is that the doctrine of economic duress is still evolving and is some way off being
Equity has always been more flexible in the way it grants or refuses relief. While the common
had been entered into because improper pressure had been placed on one of the parties.
subdivisions stating that this tended to ‘add mystery rather than illumination’. The reasoning
son. It was held that the father’s agreement had been extracted by virtue of undue influence
being exerted on the father. The agreements were held to be invalid.
Other examples of such undue influence include taking advantage of persons acting

(1764) 2 Eden 286; or a young man’s mentor

(1859) 7 HLC 750.

[1985] 1 All ER 821, it was held that in pre-
However, it is not sufficient simply to show ‘influence’. The claimant must prove that the
[1998] 3 All
that it is not enough simply to show that one party dominated
another, but that there had to be an actual unfair advantage exacted over the victim. In this
case the Court of Appeal decided that there was no actual undue influence since there was a
‘clear finding that Mr Nadeem did not take unfair advantage of his position. Seen through his
eyes, the transaction was obviously beneficial to his wife and was intended to be for her ben
tions of the dominant party. Simply because the dominating party considers the transaction
to be of benefit to the victim, should this necessarily be so? There is a certain arrogance in
assuming that the dominating party knows what is beneficial or advantageous for the victim.
would probably be considered to be a case

shifts to the wrongdoer to prove that the victim entered into the transaction of their own
volition, for instance by showing that the victim had received independent advice. The court
in turn then has to draw ‘the appropriate inferences of fact upon a balanced consideration
of the whole of the evidence at the end of the trial in which the burden of proof rested upon
for the worse, simply because they became married. Furthermore, the relationship of an
to presumed undue influence in
also arise from motives of affection or some other such reason and there was nothing strange
or unusual in that. Thus while there is no presumption of undue influence in such a relation
ship the court will note, as a matter of fact, the opportunities a husband may have in abusing
his wife’s confidence in him. This is taken into account alongside all the other evidence put
While the cases which cause most concern arise out of the husband and wife relationship,

case is a somewhat exceptional one and turns on its own
A husband and wife were the joint owners of the family home which was mortgaged to a building
security on the charge by seeking possession of the property. Soon afterwards the husband died. The
wife then appealed against the order for possession on the grounds that the mortgage had been
National Westminster Bank plc
[1985] 1 All ER 821
extended the guarantee and with it the charge over his property. Eventually a receiver was appointed
in respect to the company and as a result the bank sought to enforce its security against the farmhouse.
The defendant pleaded undue influence based on the fact that there was a long-standing relationship
relationship of the parties and that the presence of such undue influence allowed the trans
the line’ into the area of confidentiality. Lord Scarman did not approve of the latter expres
cient. He stated that one also had to show that the transaction was of itself wrongful in
that it constituted a manifest disadvantage to the person influenced. He found that the
transaction had not been unfair to the wife; indeed, quite the contrary, since it had
allowed Mr and Mrs Morgan to stay in their house on terms that were not substantially

the presumption of [undue influence] is not perfected and remains inoperative until the party
charity or other ordinary motives on which men act. Although influence might have been
Thus, the intention behind this prerequisite is to limit the first prerequisite so that undue
to her manifest disadvantage. He stated that in the narrow sense such a transaction is clearly
or ‘manifestly’ disadvantageous to the wife. She undertakes a ‘serious financial obligation’ for
which ‘she personally receives practically nothing’. However, in the wider sense there are
advantages to the wife in embarking on such a transaction. If the husband’s business is the
proposed transaction, so that he prefers his own interests to those of his wife’s. Here the
the obligation of candour and fairness he owes a wife who is looking to him to make the
major financial decisions’.
Rebutting the presumption – what is the effect of independent advice?
While it has been seen that the presumption of undue influence may be rebutted by the
person having the dominating influence showing that the other party had had access to
Mr O’Brien wanted to increase the overdraft facility of a company in which he was a shareholder. The
bank agreed a loan of £120,000 that was to be guaranteed by Mr O’Brien, his liability in turn being
secured by a second charge over the matrimonial home, which was jointly owned by Mr O’Brien and
his wife. The bank manager gave instructions for the relevant documents to be prepared, including a
advice. These instructions were not complied with and subsequently both husband and wife signed
Barclays Bank plc

[1993] 4 All ER 417

He stated that ‘the doctrine of notice lies at the heart of equity’ and ‘provides the key to
finding a principled basis for the law’. He went on to state that where there are two innocent
parties, both of whom enjoy rights, the earlier right prevails against the later one if the
the documents without reading them. The company’s indebtedness then increased beyond the agreed
limit and the bank took proceedings to enforce its security against the husband and wife. In her defence
her to seek independent legal advice. On this basis the bank was fixed with constructive notice


is a substantial risk in transactions of that kind that, in procuring the wife to act as
[1985] 2 All ER 281

Despite the fact that a creditor took the above precautions, Lord Browne-Wilkinson
referred to ‘exceptional circumstances’ that would still cause the transaction to fail. What
facts that made the presence of undue influence highly likely rather than a mere possibility.



Clearly the procedures are designed to ensure that the innocent party is given a maximum
Bank of Baroda
Undoubtedly, the contradictory decisions in these two cases are unsatisfactory and
produced further uncertainty and confusion in this increasingly complex area of the
is actually received. The case is also authority for the proposition that if the transaction
stances the solicitor is bound to inquire as to the nature of any onerous clauses. If the
solicitor does discover such clauses they should advise their client not to enter into the
transaction. If the client persists in carrying on with the transaction, the solicitor
should then refuse to act any further for the client, unless satisfied that the transaction
is one which, given the overall circumstances, the client should sensibly enter into free
A bank instructed a solicitor to act on its behalf for the purpose of ensuring that the wife received
independent legal advice as to her liabilities under a charge in the bank’s favour; the bank was entitled
to rely on the solicitor’s assurance that he had discharged his duty and given her professional independ
ent advice. This was so even where the solicitor was also acting for both the bank and the husband. It
was stated that deficiency in the advice given by the solicitor could not be imputed to the bank. On
the other hand, in
Royal Bank of Scotland
Barclays Bank plc
[1997] 4 All ER 816

to be simply an indication of ‘best practice’. Thus Steyn
It cannot be doubted that the decisions in the
As Lord Nicholls pointed out, this is an unusual use of constructive notice in that the law
if the husband has
ing guidelines as to when a bank is put on inquiry, the use of the expression ‘constructive
ensure that the risk of undue influence being exerted upon the wife has been reduced.
Lord Nicholls then set out some principles and guidelines regarding the position of lend
ers and the duties of solicitors in advising wives in transactions where a wife proposed to
advantage. Further, in such transactions there is a substantial risk that the husband has
take reasonable steps to bring home to the individual guarantor the risks he is running by
[2003] EWCA Civ 487, a wife attempted to
establish that a bank was put on inquiry because the loan had been made to benefit her
husband’s business and that she had received no benefit from the loan. The Court of Appeal
considered it was unnecessary to inquire into the latter two matters and considered that
undue influence arose on the basis of the ‘wider principle’ as set out above.
The bank is also put on inquiry if the wife acts as surety for the debts of a company whose

When a bank has been put on inquiry it need only take such reasonable steps as is necessary
to satisfy itself that the practical implications of the proposed transaction have been brought
wife has had brought home to her, in a meaningful way, the practical implications of the
itself. In practice, it will probably become usual for banks to supply the solicitor with the
facility, and the amount and terms of any new facility. If the bank’s requirement for security
arises from a written application by the husband for a facility, a copy of the application
should be sent to the solicitor. Of course the bank would need to obtain the consent of the
one. A bank must always take care therefore to ensure that reasonable steps are taken to
have become involved. They should also advise the wife that their involvement may be used
transaction. The solicitor will need to obtain confirmation from the wife that she wishes
tent of the advice provided by the solicitor will be dictated by the facts of the case.
As a minimum the solicitor would typically be expected to cover the following matters:
quences these will have for the wife if she signs them. The solicitor should draw her atten

terms, or grant a new facility without further reference to her. She should be told the


the bank fails to provide this information, then the solicitor must decline to provide the
by way of a second charge on her small flat. The flat was valued at £100,000 and was already
that the current level of indebtedness of the company would have meant that she would
The House of Lords’ decision in
For more on

(1886) 34 ChD 582, Bowen LJ
There ought, as it appears to me, to be a giving back and a taking back on both sides, including
This principle is important since it is designed to prevent unjust enrichment arising. In
, however, the wife obtained no benefit whatsoever and therefore the principle
had no application as regards the wife since she had nothing to give back. By the same token
it would be wrong to impose terms on any relief that she sought.
tion be assessed? At first instance in
Dunbar Bank plc
Nadeem and Another
[1997] 2
purchase the property, which she and her husband would charge to the bank to secure the
repayment of the loan moneys. In relation to the second agreement there was no question
the property by way of the loan because this was the extent of her enrichment. They thus
beneficial interest to her husband. It should be noted that her obligation to restore the
beneficial interest was not an obligation to restore it to the bank since it was not derived
from the bank. The consequence of the beneficial interest being restored to the husband
for possession of the property brought by the bank in order to recoup the loan.

intervention whereby relief would be given where some unfair advantage had been obtained
of a party to a transaction because of a substantial difference in the bargaining powers
In this case, the plaintiff (Cheese) bought a house with his great-nephew (Thomas) for £83,000. The
money for the purchase was raised by the plaintiff contributing £43,000 and the defendant £40,000
by way of a mortgage on the property for that amount. The house was purchased in the defendant’s
name, though it was agreed that the plaintiff would have sole use of the house for the rest of his life.
It was further agreed that on the plaintiff’s death the house would belong to the defendant exclusively.
Eventually the plaintiff became worried that the defendant was not paying the mortgage repayments,
conduct which inevitably would have placed his interest in the property at risk. The plaintiff thus sought

[1994] 1 WLR 129

which is concerned with transactions ‘not to be reasonably accounted for on the ground of
either before or after the making of the agreement. The Consumer Credit Act 2006, s 20 also
inserts a new s 140B into the 1974 Act that gives the courts powers to regulate unfair rela
tionships. Thus,
inter alia
, the court can require the creditor or any associate or former associ
ate to repay in whole or in part any sum paid by the debtor. The court can reduce or discharge
EEC. The terms on the list are not automatically unfair, but may be used to assist a court
when considering the application of the fairness test in s 62 to a particular case.
Director General of Fair
Suhail and Saud Bahawn Building



have to prove is that a confidential relationship has arisen and that the transaction itself
explaining why the transaction was not caused by undue influence is shifted to the





decision in
of a party to a transaction because of a substantial difference in the bargaining powers

Atiyah, ‘Economic Duress and the Overborne Will’ (1982) 98
Law Quarterly Review
Beatson, Burrows and Cartwright,
Anson’s Law of Contract
, 30th edn (Oxford University Press, 2016)
Bigwood, ‘Undue Influence in the House of Lords: Principles and Proof’ (2002) 65
Modern Law Review
Chen-Wishart, ‘Loss Sharing, Undue Influence and Manifest Disadvantage’ (1993) 110
Law Quarterly
Doyle, ‘Borrowing Under the Influence’ (1994) 15
Business Law Review
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
Korotana, ‘Undue Influence in the Context of the Residential Mortgage Transaction’ (2000) 21
Law Review
Levy, ‘Under Duress’ (2006) 156
New Law Journal
Nash, ‘A Killer Contract’ (2006) 156
New Law Journal
Pawlowski and Greer, ‘Constructive Notice and Independent Legal Advice: A Study of Lending Institution
Practice’ [2001]
Conveyancer and Property Lawyer
Phang and Tijo, ‘The Uncertain Boundaries of Undue Influence’ [2002]
Lloyd’s Maritime and Commercial
Law Quarterly
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)
Tamblyn, ‘Causation and Bad Faith in Economic Duress’ (2011) 27
Journal of Contract Law
Thal, ‘The Inequality of Bargaining Power Doctrine: The Problem of Defining Contractual Unfairness’ (1988)
Oxford Journal of Legal Studies
Tiplady, ‘The Judicial Control of Contractual Unfairness’ (1983) 46
Modern Law Review
Peel, Treitel
Law of Contract








way of uniform structure and what there is produces tremendous inconsistencies. Students
‘-ity and the law of contract is notoriously knotty territory’ and in fact it is one of the least satisfactory parts of the law of contract. Thrown into this mêlée is the coup de grâce for many
It is not necessary in order to resolve this appeal to undertake a comprehensive analysis of the
this area has been an evolving one, but its evolution has not followed a consistent pattern.
This topic concerns the fundamental principle that the courts will not enforce contracts
. Although this principle seems simple enough, the problem
sion the murder of another, at the same time, at the other end of the spectrum, it is also
sion. Thus there is a wide disparity in the seriousness of
, but the question

Following on from the above, it is possible to divide the incidence of illegality into two broad
categories: (1) contracts that involve the commission of a legal wrong, and (2) transactions
When contracts that involve the commission of a legal wrong are examined, it can be seen
sions; and crimes or civil wrongs that arise at common law. Contracts involving transactions
not being in the interests of the public. There are very many examples of these types of
transactions so this work will deal with what is probably a very broad selection, though they
In this work it has been decided to treat the subject matter under two categories – where
the law rather than as forming conceptual boundaries.

Where a contract is expressly declared to be prohibited in a statute then there is little doubt
that Parliament intended that the contract could not be enforced. An example of such a case

(1836) 2 M & W 149, below. Where the statute is silent on the point,

The defendants withheld part of the freight due to the plaintiffs on the basis that while carrying the
cargo the master of the ship had overloaded the ship contrary to the Merchant Shipping Act 1932.
The defendants contended that the plaintiffs in an action for the freight withheld could not enforce a
contract that had been performed in an illegal manner. The court held that the plaintiffs could succeed,
[1956] 3 All ER 683
An example of this approach may be seen in the case of

In the case the appellant, Somerfield Stores Ltd (S), had entered into a 15-month contract with
Parkingeye Ltd (P) whereby P was to install and operate a monitoring and control system in a number
Somerfield Stores Ltd [2012] EWCA Civ 1338
the law without meaning to do so or in a way which may be minor and indeed Devlin J had

The concept of a contract being illegal at common law is extremely wide and has its origins
in the idea that a contract would not be upheld if its effect was contrary to the common good
Before we proceed to analyse in depth contracts contrary to public policy, a word about
, discuss this area in two parts, namely, contracts illegal on
sidered void. In particular, as was indicated in the introduction to this chapter, authors
such a classification, as Treitel indicates, is an oversimplification since the effects of such
contracts vary so much that it is almost impossible to group them under these two headings.
In this work the contracts will be divided into contracts for the commission of an act that is
wrong at common law and contracts which are contrary to public policy. However, it must
It is clear that a contract to commit a crime must itself be illegal and the courts will not

[1951] 1 All ER 92, it was held that a contract that
-mitted suicide could not claim under a life insurance policy, even though the insurance
allowed a claim in such circumstances, provided the suicide (which was a crime at this time)
did not occur within two years of the making of the policy. The court considered that to
allow a claim to succeed would be to allow the deceased to provide for his relatives via a
criminal act. The principle, however, must be treated guardedly since there are a great many
statutory offences today which often do not require a guilty intention to secure conviction.
crime. It should be noted that in the field of motoring insurance it is still possible for an
insured person to claim against their policy despite the fact that their actions might amount
A contract will also be illegal if it has as its object the deliberate commission of a civil
seem that if both the parties are unaware of the illegality then the contract is enforceable by
and against each other. If, however, one party knows the contract to be illegal then it would
Not surprisingly a contract to defraud the HM Revenue & Customs or a rating/polling

in cases involving assault as seen in
(1846) 9 QB 371. Although in this case it
was held that the compromise was void, nevertheless Lord Denman CJ stated that normally
ity. He stated that compromise is not possible where the offence involves the public interest.
The case was not simply a case of assault but involved the public offence of riot and an
assault on a public officer (a sheriff’s officer) carrying out his duties.
has been concerned with the situation where a party attempts by means of a contract to
ries of contract which the law regards as unlawful since they tend to promote litigation
It is regarded as contrary to public policy to allow a person to sell their right of action to
another or, in fact, to allow a person to incite the bringing of litigation.
. A contract of maintenance arises when a person encourages and supports a
The plaintiffs, a firm of chartered surveyors, agreed to act for the defendants in their attempt to
acquire some amusement arcades. The contract required the plaintiffs to make applications for gaming
licences and planning permission, but their fees were only to be payable ‘in the event of ultimate suc
cess’. The plaintiffs successfully carried out their part of the contract but when they pressed the
defendants for their fee they were told that the contract was one of champerty and unenforceable.
Further they maintained that such a method of dealing was contrary to the rules of the plaintiffs’
professional body and as such contrary to public policy and void. With regard to the latter defence it
was held that an action that is contrary to the rules of a professional association was not necessarily
illegal at law. With regard to the allegation that the contract was one of champerty it was held that
such contracts only applied to the outcome of litigation. The plaintiffs were thus successful.
Arcadia Developments
Norfolk and
[2011] EWCA Civ 1149. The claimant’s (S) late husband
tion had not contributed towards his death, but S believed that the defendant trust had failed
ings. Another patient had also issued proceedings against the trust after contracting the same
infection. He assigned his claim to S for £1 and S pursued it in her own name and for her own
benefit. A district judge struck out the claim on the ground that a bare right to litigate was
incapable of assignment. On appeal, it was held that the claim was of a personal nature and
therefore incapable of assignment. It was further held that even if the claim was capable of

. Thus while S had honourable motives in bringing the action she did not
have a sufficient interest in the other patient’s claim to support the assignment of a bare
disputes of others. The Court of Appeal considered that the law on maintenance and cham
perty was open to further development as perceptions of public interest changed and it was
assignment of a cause of action in tort for personal injury. The court nevertheless considered
that it was not in the public interest to encourage litigation whose principal object was not
if it relates to litigation in a country where champerty is lawful. The cases of
Re Trepca Mines
2 All ER (Comm) 1083 clearly illustrate this point. This also indicates clearly that one is not dealing with an overriding matter of public policy which strikes down wherever such an
Such contracts have for many years been regarded as contrary to public policy and void.
of their right to have their case heard before the ordinary courts of law.
the contract, whereby an arbitration award must first be made before the cause of action can
be placed before the ordinary courts of law. Such a clause is known as a
and is not per se regarded as ousting the jurisdiction of the courts.
for an appeal to the court to challenge an award made in arbitration proceedings on the

ong; or

public policy for an individual to enter into a contract to marry while being already
unmarried couple would be enforceable. The undoubted change in moral principles may

As was indicated at the start of the chapter, the expression ‘illegal’ covers a multitude of sins,
The fundamental rule of the courts was stated as long ago as the eighteenth century when

(1775) 1 Cowp 341: that no person who is
No court will lend its aid to a man who founds his cause of action on an immoral or an illegal
ex turpi
, or the transgression of a positive law of this country, there the court says that he has no
but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant
would then have the advantage of it; for where both are equally in fault ...

aspect, or, where the contract involves some performance that is unlawful but in either case
taking on bunkers, the vessel was overloaded and the master thereby committed an offence,
ing the illegality as having the effect of making the contract prohibited. If it had been oth
erwise, the shipowners would not have been entitled to any freight and would therefore
have suffered an additional penalty, much greater than that provided for by Parliament, for
conduct which might have been unintentional. Thus at 288 Devlin J said:
according to its terms may involve the commission of an offence; or it may be intended by one
an unlawful act may be committed in the course of its performance. The application of the
doctrine of illegality to each of these different situations has caused a good deal of uncertainty,
The plaintiff, a pilot, made a contract to recover an aircraft that had been impounded in Nigeria. The
contract was illegal in that it was not so much a ‘rescue’ mission as a mission to steal the aircraft from
Shirlstar Container Transport Ltd
[1990] 3 All ER 366

The House of Lords unanimously rejected the Court of Appeal’s public conscience test,
i.e. whether it would be an affront to public conscience to grant relief for the illegality rule
Wilkinson, who gave the leading judgement, stated that the starting point was that title
to property can pass by way of an unlawful transaction; but held that a court would not
assist an owner to recover property if he had to rely on his own illegality to prove his title
– a distinction that had been recognised in
Bowmakers Ltd
Both Lord Goff and Lord Keith gave dissenting judgements in the House of Lords, preferring
to base their judgements on traditional principles, not least that, irrespective of how the
failure to enforce the claim would result in unjust enrichment, the extent to which enforcement would
encourage others to act in an illegal manner and the overall culpability of the parties. This was the
majority decision of the Court of Appeal with Gibson LJ dissenting. While Gibson LJ thought that
upholding the resulting trust would produce a fairer result, he considered that the proper principle
should be that equity should not give effect to an equitable remedy based on an unlawful transaction,
is selective in whom it will benefit since, in other circumstances, the presumption of
advancement may apply and a very different result could arise. Until its abolition by the
Equality Act 2010, s 199, the concept of the presumption of advancement was really an
modern impact. The presumption of advancement applied where a husband or father gave,
or ‘advanced’, money or property to his wife or children. The presumption did not operate
in relation to a man and his mistress and here a resulting trust would apply and, as we have
ing illegality not affecting his claim since this arose by way of the resulting trust.
In such a situation he could not rely on the principle of resulting trust that we saw in
his wife or children. If the husband or father was to recover his property, he had to first
overturn the presumption in order to establish a resulting trust. If his gift was made to
achieve an illegal purpose, for instance, to evade paying taxes, his claim would ‘rely’ on the
presence of the illegality and therefore he was prevented from recovering because of the

the sense that obligations under the contract could not be enforced by civil proceedings.
The Gambling Act 2005 has altered this position, making gambling contracts enforceable.
It was seen in our earlier examination of acts declared illegal that a contract either
expressly or impliedly prohibited by statute was void and unenforceable. In such a situation
the innocent party is not necessarily precluded from obtaining a remedy since it may be that
it may be possible to avoid the effects of the illegality by alleging the existence of a collateral
builders, contracted to modernise some houses for the defendant architect. At that time,
appropriate licences and since he had failed to do so, he was liable in damages. There are
limits to the use of this device since the finding and enforcing of a collateral contract must
, above. In such a case even claims
in quasi-contract, restitution and undue enrichment cannot be maintained. There are, how
potior est conditio defendentis
any property transferred or moneys paid under the contract. This result may arise where the
fully required. This position also applies even if the tenant was a knowing party to a contract
a landlord’s acceptance of a premium from the plaintiff to secure a flat was illegal, though the relevant statute did not allow for the recovery of such a premium. The court found that the plaintiff had little choice but to accept the terms of the landlord, who fully intended to exploit the deficiencies in the legislation. In these circumstances the plaintiff could recover the premium paid despite its illegality.The same criteria also apply where the less culpable party has been induced to enter the contract by virtue of some fraud or undue pressure by the other party. In

that the father’s claim would succeed since the attempt by the father to deceive his creditors
never materialised and therefore the son held the shares on a resulting trust and would have
claimant to rely on an illegal arrangement provided that he had voluntarily withdrawn from

The intervention of the Law Commission arose principally out of the case of the House of
Lords decision in

, which was examined above. In

, Lord
Goff called for the Law Commission to examine the whole area of the so-called illegality
defence. As a result, the wide-ranging difficulties associated with the issue of illegality in the
law of contracts (and other areas) subsequently became the subject of a review by the Law
(Law Com. No. 320). This report
consultative documents. The first,
Illegal Transactions
The Effect of Illegality on Contracts and
(Law Consultation Paper No. 154) in 1999, in which the law relating to the doctrine
of illegality as it operates in contract and trusts was examined. The second consultation
The Illegality Defence in Tort
(Law Consultation Paper No. 160) was published in 2001
and examined the law relating to illegality and tort. Following from these consultation
The Illegality
in 2009 (Law Consultation Paper No. 189). The reason for the third consultative
document was that, because of the length of time from the 1999 and 2001 consultative
documents, the Law Commission decided to consult further on its recommendations. It was
from its findings in the 2009 consultative document that the final 2010 report emerged.
Clearly the extent of the consultation work carried out by the Law Commission is a good
The Law Commission did not consider that the courts should have an open-ended discre
tion should be more structured in order to promote greater certainty. The Law Commission

Stone & Rolls v Moore Stephens (a firm) [2009] UKHL 39.The case of Gray v Thames Trains illustrates the use of the illegality defence in the law of
tort and therefore it may be said to have limited relevance to the law of contract. It is, how
The House of Lords decision involving the illegality defence in
Stone & Rolls Ltd
was not so clear-cut. The facts of the case were that Stone & Rolls (R) was
cle for defrauding banks. Moore Stephens (M) acted as auditors for R. An action was
brought against R and S for deceit and both were found to be liable but, as a result of that
judgement, R went into liquidation. R brought an action against M for negligence in that

The Law Commission considered that this approach and that adopted in
ously. The Commission recognised that the courts were now more willing to explore the
relevant policies that lie at the heart of the defence; further, that the courts were now also
The facts of the case Hounga was a 14-year-old Nigerian national who had agreed to come to the
United Kingdom to work for the defendant as an au pair. In order to gain entry to the UK she agreed to
take on a false identity. Hounga overstayed her visa and against this background suffered serious abuse
at the hands of the defendant. The defendant also threatened to reveal the girl’s illegal presence in
the UK if she complained and stated that she would be imprisoned if the authorities discovered her
illegal entry into the UK.. After an altercation the defendant threw Hounga out of the house and dis
missed her. Hounga brought a claim for unlawful discrimination under the Race Relations Act 1976
Allen [2014] UKSC 47
The Supreme Court by a majority (Lords Hughes and Carnwath dissenting in part)
allowed the appeal. The Supreme Court considered that the reliance test, that is the rule that
the claimant had to rely on the illegality, had been criticised for its arbitrary application and
that it was correct that the operation of the rule should be softened by reference to the public
policy considerations that surround the application of the principle on the facts of this case.
The Supreme Court considered that the illegality defence rested upon the foundation of
founds the defence’? and then ‘is there another aspect of public policy to which application
on the Canadian case of
Hall v Hebert
[1993] 2 SCR 159 which addressed the issue in the
My own view is that courts should be allowed to bar recovery in tort on the ground of the
plaintiff’s immoral or illegal conduct only in very limited circumstances. The basis of this

power, as I see it, lies in duty of the courts to preserve the integrity of the legal system,
and is exercisable only where this concern is in issue. This concern is in issue where a
damage award in a civil suit would, in effect, allow a person to profit from illegal or wrong
ful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal
law. The idea common to these instances is that the law refuses to give by its right hand
ex turpi
principle will not operate in tort to deny damages for personal injury, since tort
suits will generally be based on a claim for compensation, and will not seek damages as
In addressing the policy considerations or preserving the integrity of the legal system, the
majority of the Supreme Court considered that applying the illegality defence to bar the
claim for compensation could have the effect of encouraging employers to enter illegal
contracts of employment safe in the belief that they could discriminate against their
employees with impunity. Balanced against this, the court considered that the award by the
award was compensation for her injury to feelings from her dismissal; the award to not allow
for the evasion of a criminal penalty; and, the award would not have encouraged other
persons in the claimant’s position to enter into such illegal contract. The Supreme Court
therefore concluded that the considerations of public policy in favour of applying the
counter to a further issue of public policy that arose in the case in that to allow the claimant’s
case to be defeated by the illegality defence would breach the UK’s obligations under the
Court therefore decided that the public policy underpinning the illegality defence had to
give way to the UK’s public policy obligations against trafficking. The minority of the
where it arises, it arises in the public interest, irrespective of the interests or rights of the parties.
the judge may be bound to take the point of his own motion, contrary to the ordinary principle
parties’ rights. The contract is void, and any right derived from it is non-existent. But in gen
to the status quo ante, in the same way as upon the rescission of a contract) the courts withhold

Clarke and Sumption concurred with the result but by a different process of reasoning. The
fact that the constituted Supreme Court comprised nine law lords gives an indication of the
importance of the decision. The essence of the issues in
revolved around
first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and
With regards to the disproportionate nature of the loss, this can be clearly seen in
Tinsley v
her equitable interest in the property and conversely to have left Miss Tinsley unjustly

in that it may not offer the necessary degree of coherence or certainty. The decision is not

Such contracts are prima facie void as being contrary to public policy, which intervenes on
two grounds. First, the common law seeks to protect an individual from negotiating away
his livelihood to another, possibly contractually stronger, party, particularly where the
restraint is a general one. Second, the law understood, even in the earliest days of the doc-
trine in the sixteenth century, that it was not in the public interest for the state to be deprived
ated with the prevailing economic theory of the day, as regards the encouragement or dis-
A machine-gun manufacturer sold his business and agreed in the contract of sale to restrict his future
activities in that business worldwide for 25 years. The covenant was held to be valid and binding, even
though prior to this case the general principle was that general restraints of this nature were prima
facie void, while partial restraints were prima facie valid. The leading judgement in the case comes from
Lord MacNaghten who stated:
The true view at the present time I think, is this: The public have an interest in every person’s carrying on
void. That is the general rule. But there are exceptions: restraints of trade and interference with individual
liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justi-
ence to the interests of the parties concerned and reasonable in reference to the interests of the public,
while at the same time it is in no way injurious to the public.

Maxim Nordenfelt Guns and Ammunition Co
. [1894] AC 535

AC 688 Lord Shaw identified two types of contracts which illustrate the types of interests
its nature, area and duration (see below). Lastly the covenantee has to show that the restraint
Contracts that are void as being unreasonable as regards the public interest are extremely
uncommon. One such example is that of


. It is clear that an employee’s connections with their former employer’s

by a canvasser not to work in a similar trade or business within 25 miles of London was
held to be unreasonable given the covenantor’s limited sphere of influence in his
The defendant was a man aged 43 who had been employed for 20 years in the paper tissue industry.
Hanover Insurance
indicated that a rather more
he entered into a severance agreement with the plaintiffs in which he was paid a year’s salary and
released from working for them for 12 months. This agreement was subject to a restriction that he was
not to join another company in the paper tissue industry within one year of leaving the plaintiff’s
operated worldwide but also restrained him from being involved in the paper tissue industry in any
capacity at all. It was held at first instance that an interlocutory injunction should be granted in that
there was a possibility that the defendant could have used confidential information in his new position.
The Court of Appeal (Simon Brown LJ giving the leading judgement) found that there was no
future employment in the paper tissue industry. The Court of Appeal decided that as a matter of policy
The facts of the case were that the business of Hanover Insurance Brokers Ltd (the first plaintiffs) was
sold to Christchurch Insurance Brokers Ltd (the second plaintiffs) in June 1993. The defendants were
all employees of the first plaintiffs (HIB); indeed three of the defendants were also directors of HIB,
who all resigned once the sale had been completed. It was alleged by the plaintiffs that the defendants
were attempting to solicit clients and employees of HIB both prior to and after leaving the employment
of HIB. These activities were explicitly forbidden by a restrictive covenant in their contracts of employ
ment. Subsequently the plaintiffs obtained an
ex parte
injunction (now called a without notice injunc
Hanover Insurance Brokers Ltd and Christchurch Insurance Brokers Ltd


case took place
It would appear that while the traditional approach of the courts of not rewriting restraint
of trade clauses persists, in principle at least, the courts are willing to provide a more relaxed
approach to rewriting a clause in order to provide a commercial logic to the contract by
ChipsAway International Ltd
Errol Kerr
[2009] EWCA Civ 320. The facts of the case are
that ChipsAway had rights to a system for repairing bodywork on cars, as well as providing
paints and other products used in the system. ChipsAway franchised the system and the
supply of the products to others but was not actually involved in the repairing process itself.
clients of this company, and therefore by applying this purposive approach the clause was enforceable
meaning and give effect to the obvious business intentions of the parties. In this case it
A sales representative, when taking up employment with the plaintiffs, brought with him customers
from his previous employment. On joining the plaintiffs he entered into a contract that contained a
restrictive covenant which stated that on terminating his employment with the firm he would not, for
the period of five years, solicit former customers on whom he had called during his employment. It was
held that the clause was unenforceable in that the duration of the restraint was unreasonable.

they had had no contract while employed by HIB. In arriving at its decision the Court of
The defendant, a sales representative, was employed under a contract that contained a restrictive
covenant that he would not, for two years after the termination of his contract, solicit any farmer or
tomers, but on this occasion the Court of Appeal held that this clause was too wide and
unenforceable. The court found that of the 2,500 customers of the plaintiffs, the defendant
case in two respects: first, the restriction prevented the defendant not
tion attempted to restrain the defendant from engaging in activities other than those for
on this issue,
Austin Knight (UK) Ltd
[1909] 1 Ch 763 a journalist covenanted not to work for any other newspaper within
20 miles of Sheffield. The principle behind the covenant was to protect so-called sources of
information. It was held that such interests could not be protected.
[1997] 1 All ER 1, it was held by the Court of Appeal that
a contract for the sale of a business. It should be borne in mind, however, that restraints
The respondent owners of two garages entered a solus agreement with the appellants whereby they
The House of Lords held that both transactions fell within the doctrine of restraint of
One party benefited from acquiring a chain of distribution which made the supply of its

by such an agreement. Since the validity is decided as a matter of private law should the case
come to court (which it may not do, of course), there is no possibility of such restraints being
challenged by third parties. The result of this state of affairs was the intervention of Parlia
ment by the passing of, first, the Monopolies and Restrictive Practices (Inquiry and Control)

Macaulay, an unknown songwriter, entered into a contract with Schroeder. The contract, which was a
standard-form contract, was very much in Schroeder’s favour in that it engaged Macaulay’s services
for five years during which time he assigned full copyright for all his compositions to Schroeder, which
was not obliged to publish or promote any of his work. Further, if Macaulay’s royalties exceeded £5,000
the contract was to be automatically extended for a further five years. Schroeder was free to terminate
the agreement at any time with one month’s notice, whilst Macaulay had no such right. Macaulay
subsequently alleged that the contract was an unreasonable restraint of trade and void.
It was held by the House of Lords that the agreement fell within the doctrine of restraint of trade
Lord Reid acknowledged that while full weight should be given to standard-form contracts established
by way of commercial practice, this did not apply where the parties were not bargaining on equal
Any contract by which a person engages to give his exclusive services to another for a period necessarily
to such restrictions: they require no justification. But if contractual restrictions appear to be unnecessary
or to be reasonably capable of enforcement in an oppressive manner, then they must be justified before
assign the fruits of his endeavours to Schroeder for five years, but what did Schroeder have to do in
Schroeder Music Publishing Co
In this case a different decision was arrived at. The facts were that in 1983 the plaintiff, George Michael,
and Andrew Ridgeley, comprising the pop group ‘Wham!’, sought to have their recording contract with
Inner Vision declared void on the basis that it was in restraint of trade. This dispute was subsequently
compromised by agreement and Wham! entered into a new contract with CBS in 1984. In 1987 George
Michael became established as a successful solo artist, and in 1988 a new contract was entered into
so as to give effect to his ‘superstar’ status. Also in 1988 CBS was taken over by Sony. The 1988
[1994] 1 All ER 755
In considering contracts in restraint of trade it should be noted that the doctrine can
[2011] EWCA Civ 1444. The facts of the case were that Wayne Rooney, a famous
agreement was renegotiated in 1990 so as to improve the plaintiff’s financial terms still further. In 1991
George Michael wished to change his personal and musical image and in so doing became dissatisfied
with Sony. He sought to have the 1988 agreement declared void and unenforceable as an unreasonable
restraint of trade and not in his interest.
It was held that it would be incorrect to treat the 1988 agreement as separate from the 1984
Inner Vision on the basis that the compromise itself was in restraint of trade, then any restraint of
being one of the most experienced and toughest negotiators in the business. It followed from this that
these arguments could not be used as against the 1988 agreement, which did not therefore attract
the doctrine of restraint of trade. It would be unfair and unconscionable to allow George Michael to

was received after the termination of the agreement. Proactive also appealed on the basis
trade was a footballer and the agreement did not relate to that activity but to his ability to
earn supplementary income and was ancillary to that activity. Proactive argued that the
In the Court of Appeal it was held in relation to the first point raised by Proactive that it was
sion. The court considered that the contract stated that the commission became due when
fore entitled to commission on payments made by third parties after the agreement had been
leading judgement, referring to the case of
Sony Music Entertainment Ltd

Severance amounts to the removal of the illegal elements of the contract, leaving behind a
severance, with the result that the whole contract was vitiated. The employee could not
recover wages owed to him despite the fact that he withdrew his claims in respect of
The plaintiff operated a general outfitter’s business, in Kidderminster, which was divided into different
departments. The defendant had been employed as a tailor and cutter in the tailoring department. His

The basis of the Court of Appeal’s decision seems to be that severance would have
altered the entire nature of the covenant. The original covenant was intended to protect
the entire business, while severance would have had the effect of protecting only that
part of the business, namely tailoring, in which the defendant had been employed. In
other words, the Court of Appeal considered the covenant to be entire, standing or
Where a contract is expressly or impliedly declared to be prohibited in a statute then there
is little doubt that Parliament intended that the contract could not be enforced

prohibited. Result – void
contract may be created lawfully but nevertheless be illegal because of the way in
Where the courts will not uphold a contract if its effect was contrary to the common good
contract of service contained a restraint of trade clause whereby he agreed that he would not, at any
time, be concerned in the trade or business of a ‘tailor, dressmaker, general draper, milliner, hatter,
haberdasher, gentlemen’s, ladies’ or children’s outfitter’ within 10 miles of the plaintiff’s store. It was
held by the Divisional Court that the clause was too wide but that it could become enforceable by
the severing of all the trades except that of tailor. The Court of Appeal also found the clause to be too
wide in that it sought to restrain the defendant from trades in which he had not been employed. The
court, however, refused to apply severance, stating that this was not possible where the covenant
formed a single covenant, which they found to be the situation here, rather than a ‘combination of
several distinct covenants’.


pari delicto


General principles

ing a person to be restricted in carrying out their lawful trade or business.


sonable not only as regards the parties to the contracting, but also as regards the inter


The construction of covenants and Hanover Insurance Brokers Ltd and Christchurch
ChipsAway International

Severance removes the illegal elements of the contract, leaving behind a valid and
Severance can only be used where it is consistent with public policy that renders the


After reading this chapter you should be able to:
1. Understand how contracts are discharged by performance with particular reference to
mitigation of the strict performance rule and time of performance.
2. Understand the different circumstances in which a breach of contract arises.
3. Know and understand the effects of breach on a contract and when the right to treat a
contract as discharged arises and when it is lost.
The basic rule in relation to performance of a contract is that it must be carried out strictly
in accordance with the terms of the contract. Failure to do so will entitle the innocent party
to allege that the contract has not been performed and will give them the right to claim
damages or to repudiate the contract and treat themselves as discharged from it, as well as
entitling them to claim damages (as we saw in Chapter 7 ). In the case of
. [1921] 2 KB 519 there was a contract for the sale of tins of canned fruit which
contained only 24 tins. It was held that the defendants could reject the entire consignment
even though the total number of tins delivered was correct.
Discharge by performance and breach
In this case there was a contract for a consignment of wooden staves to be used in barrel making,
described in the contract as being half an inch thick. At the time of delivery the price of timber had
fallen, and this meant that it was in the interests of the purchaser to be able to reject the cargo, since
he could then renegotiate the contract at a lower price or go elsewhere for the timber. When the
timber was measured it was found that most of it was 9–16 of an inch thick, though this difference
Arcos Ltd

[1933] AC 470
The position maintained by Lord Atkin needs qualifying in two ways. First, and Lord
Atkin hints at this qualification in the above passage, the law will not take notice of


unreasonable for them to reject the goods. There is thus now a statutory basis for the
would not have had any effect on the usefulness of the timber. The purchaser nevertheless was held
to be entitled to reject the cargo. Lord Atkin stated the position in the following terms:
ence does, stipulate for it...No doubt there may be microscopic deviations which businessmen and
therefore lawyers will ignore...But apart from the consideration the right view is that the condition of

It should be noted that under the Consumer Rights Act 2015 s 25 there is a corresponding
provision to s 30, however, s 25 is not limited to sales contracts though it only applies insofar
as it relates to trader to consumer contracts Section 25(1) provides that the consumer may reject
the goods if the wrong quantity is delivered, but if they choose to accept the goods then they
tracted for, the consumer has the additional option to reject the excess and keep the contracted
amount which must be paid for at the contracted rate – s 25(3) . Where the section entitles the
consumer to reject goods any entitlement for the consumer to treat the contract as at an end
depends on the terms of the contract and the circumstances of the case – s 25(4). By s 25(5), the
consumer rejects goods under this section by indicating to the trader that the consumer is
In this case, there was a contract by a seaman to serve on a ship bound from Jamaica to Liverpool. He
was to be paid 30 guineas ‘provided he proceeds, continues and does his duty...from hence to the
port of Liverpool’. Unfortunately he died at sea prior to reaching Liverpool. The defendants refused to
(1756) 6 Term R 320
The application of the rule requiring strict performance is particularly harsh when seen in the
above, and for this reason the courts have developed several rules which
have mitigated the effects of the general rule. An application of the conditions laid down by
Mitigating the strict performance ruleThe doctrine of substantial performanceIn many respects this doctrine is really an offshoot of the de minimis rule outlined above. It arises where a person in fully performing their side of the bargain hopes that they have done
since it protects the interests of the innocent party while allowing the individual concerned
In this case, there was a contract by the plaintiff to decorate and furnish the defendant’s flat for £750.
The defendant alleged that the workmanship was poor and defective but paid £400. The plaintiff sued
for the balance. The court found that there were defects in the work but that these could be cured for
some £55, and thus awarded the plaintiff the full amount of the contract less the cost of putting right
the defects and, of course, the amount already paid.
[1952] 2 All ER 176
The plaintiff, who had agreed to erect certain buildings for the defendant, could not claim on a

To offer a tender to perform is regarded as equivalent to actual performance. It is clearly
wrong to allow the promisee to avoid a contract for non-performance where the promisee
has refused to accept the offer of performance. Where such a situation arises it is open to the
promisor to treat the refusal as discharging them from any further obligations under the
performance as a defence to an action by the promisee for breach of contract.
The parties had contracted for the sale of 10 tons of linseed oil, which was to be delivered ‘within the
last fourteen days of March’. The plaintiffs delivered the oil at 8.30 pm on 31 March, a Saturday. The
defendant refused to accept delivery and it was held that the plaintiffs were able to recover damages
for the non-acceptance of the delivery of the oil. This decision needs, however, to be qualified in the
context of the modern law contained in the Sale of Goods Act 1979, s 29(5), whereby ‘Demand or
tender of delivery may be treated as ineffectual unless made at a reasonable hour; and what is a rea
sonable hour is a question of fact.’
has been examined in the context of performance of a
be borne in mind that the promisor is not discharged from the debt and must remain willing
and ready to discharge the debt, and that any special terms regarding payment must be

with; or

nature of the subject of the contract or the surrounding circumstances show that

who has been subjected to unreasonable delay gives notice to the party in
Bunge Cor-poration v Tradax Export SA [1981] 2 All ER 513.It is possible on the basis of the above for time in a contract to be initially not of the
essence but to become so on the giving of reasonable notice. The case of
Charles Rickards
[1950] 1 All ER 420, more fully discussed later provides authority for this
British and
before an innocent party could give such notice there had to be an unreasonable delay in
performance is given in the contract, albeit that the time is not stated as being of the essence.
[1991] 2 All ER 477 the Court of Appeal stated that
reasonable notice could be given making time of the essence as soon as the contractual date

[1893] AC 22 the party on whom that obligation rests fulfils the
obligation, notwithstanding protracted delay, so long as the delay is attributable to causes
was elaborated on by Kay LJ in
Peregrine Systems Ltd
Steria Ltd
[2005] EWCA Civ 239 (with
whom the other members of the Court of Appeal agreed) as follows:

would, in all the circumstances which are by then known to have happened, have been a
The appellant entered into a written contract to purchase a flat in Hong Kong for $HK4.2 million from the
[1997] 2 All ER 215
Time of performance is also important in consumer contracts conducted by means of
distance communications. The Consumer Rights Act 2015 s 28 provides that, unless the
parties agree otherwise, contracts must be performed within 30 days, taking effect after
the day in which the consumer sent the order to the supplier. If the supplier is unable to
perform the contract because the goods or services are unavailable within the period for
Where a person fails to perform their side of the contract then, subject to the mitigating
factors, they will be in breach of contract. A breach of contract will always give rise to a claim

[2013] EWCA Civ
577 [2013] 4 All ER 377 the Court of Appeal examined the test as to when a repudiatory
Ampurius would then lease the commercial units in the blocks on a 999-year lease. The
For more on

At first instance the judge held that there had been a repudiatory breach in that Ampurius

the fact that a party has not performed the contract in compliance with the terms of the
contract when the time for performance has arrived. It may, however, occur that a party
. The legal basis behind anticipatory breach is a somewhat elusive one; some
stances of the case that the other party does not intend to perform their side of the contract.
Naylor Benzon & Co
Cas 434 stated:
In this case there was a contract for the sale of land which allowed Wimpey, the purchasers, to rescind
the contract should proceedings compulsorily to purchase the property commence before the comple
tion of the sale. On the date the contract was signed, the local authority had already commenced
compulsory purchase proceedings in respect of part of the land. In the meantime the state of the
market had changed, with land prices becoming depressed, so Wimpey wanted to escape from the
contract. Just as in the
case, Wimpey took legal advice and proposed to Woodar that
they should renegotiate the contract, but that if these negotiations failed, they would rescind the
contract. Woodar alleged that Wimpey had no right to take such action, at which point Wimpey wrote
back rescinding the contract because they alleged that the contract had become discharged by way
of the local authority’s action. Woodar then alleged that the action of Wimpey amounted to repudiation
which they (Woodar) had accepted and that they were therefore entitled to claim damages. The House
of Lords held that Wimpey had not repudiated the contract.
Woodar Investment Development Ltd
1 All ER 571
sions, to which both parties had given their consent. And unless the invocation of that provi
that it has proved wrong in law cannot turn it into repudiation...the proposition that a party

(2012) points to three
The facts of the case were that there was a contract for the sale of a cargo of propane to be shipped
from Houston at a price of $400 per tonne. The contract provided that a bill of lading had to be ten
dered by the seller immediately after the loading of the cargo. Prior to the loading on 8 March the
buyer sent a telex to the seller stating that they were repudiating the contract and rejecting the goods.
This was held by the arbitrator to be a wrongful anticipatory breach that amounted to a repudiatory
breach. Following the telex the seller did not attempt to perform the contract. A few days later the
Vitol SA
Norelf Ltd (The Santa Clara)
[1996] 3 All ER 193

patory breach by one party could not arise either by words or conduct, provided these made
it clear that the innocent party was responding to the repudiation by treating the contract as
at an end. The court considered that while it might be more difficult to indicate acceptance of
the repudiation solely on the basis of conduct, it was possible for this to arise if an innocent
in breach of a condition or where the breach is such that it would substantially deprive the
innocent party (i.e. the seller in the present case) of the benefits they would receive under
It can be seen that very substantial practical difficulties arise from the Court of Appeal
decision and no doubt there was a sigh of relief when the seller appealed to the House of
Lords, who reversed the decision of the Court of Appeal. Their Lordships, Lord Nolan giving
obligation was capable of amounting to acceptance of an anticipatory repudiation by an
aggrieved party (the seller), depending on the particular circumstances of the case and the
of the repudiation requires no particular form. All that is necessary is for the communication
to treat the contract as at an end. Nor does the indication have to come from the aggrieved
party personally; all that is required is for the election to come to the repudiating party’s
The right to affirm the contract
Where a party to a contract is in breach of a primary obligation or where the party is guilty
tion of the contract, and the innocent party is free to treat the contract as still subsisting.
Where such a situation applies in a contract for the sale of goods, the seller remains liable to
deliver the goods in accordance with the contract, while the buyer remains liable to accept
A charterparty was entered into in June 1982 whereby the shipowner agreed to take a cargo of steel
coils from Durban to Bilbao. The charterparty contained an ‘expected readiness to load’ clause which
entitled the charterers to cancel the charterparty should the ship not be ready to load on or before
9 July. On 2 July the shipowners asked for an extension to the expected readiness-to-load date as they
wanted to load another cargo first and this meant that the ship would not be ready until 13 July. On
receiving this request the charterers immediately cancelled the charterparty and chartered another
vessel. The shipowners did not accept the repudiation and on 5 July gave notice to the charterers that
the ship would be ready to load on 8 July. When the vessel subsequently arrived in Durban on that date,
the shipowners gave notice that the ship was now ready to load. In fact this was not the case so the
charterers rejected the notice and proceeded to load the cargo onto the second vessel. The shipowners
brought an action for dead-freight.
In the arbitration proceedings that followed, the arbitrator upheld the shipowners’ claim on the
A further danger with affirmation lies in the possibility that a frustrating event may occur
after the innocent party has affirmed the contract. Frustration will be dealt with more fully
elsewhere but basically it amounts to an external event that renders the contract impossible.
The effect of frustration is automatic and radical in that it brings the contract to an end so that
both parties are excused from further performance of the contract. Where an innocent party
has decided to affirm a contract and there is an anticipatory breach, frustration will destroy the
rights of that party to sue for the breach when the date of performance on the contract arrives.
(1855) 5 E & B 714 where a ship was
chartered to sail to the Russian Baltic port of Odessa and to take a cargo from the charterer’s
agent within 45 days. On the ship’s arrival the agent stated that he could not provide a cargo
and told the plaintiff to take the ship away. The plaintiff kept the ship at the port and repeatedly
over the period in question asked the agent for a cargo and was in turn advised to take the ship
away from the port. Before the 45-day period expired the Crimean War broke out and this
rendered Odessa an enemy port and as a result the contract became frustrated. The effect of this
was that the plaintiff lost the rights to sue for breach of contract since the frustrating event had
The appellants were suppliers of litter bins to local authorities, although the bins were paid for not by the
local authorities but by businesses who had advertisements displayed on the bins. The respondents, who
The decision is clearly unsatisfactory and all the judges considered that the appellants
should not be allowed to succeed in such a claim, though none could find or develop a test
which allowed the general rule relating to affirmation while qualifying its application in such
a context. Lord Reid suggested that a claimant should not be allowed to affirm the contract
and continue with it unless they could show that they had a legitimate interest, financial or
It may well be that, if it can be shown that a person has no legitimate interest, financial or
otherwise, in performing the contract rather than claiming damages, he ought not to be

allowed to saddle the other with an additional burden with no benefit to himself. If a party
has no interest to enforce a stipulation, he cannot in general enforce it: so that it might be
said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed
to insist on it. And just as a party is not allowed to enforce a penalty, so he ought not to be
At the end of the day their Lordships reiterated the basic principle that, if one party to a
contract repudiates it, in the sense of making it clear to the other party that he refuses or will
Kerr J did not consider that damages would be an adequate remedy since it would be extremely difficult to assess not least because the
damages would have to be assessed in relation to a prospective six and a half year period
Kerr J was that the plaintiffs in that case were in fact assignees of the owners of the ship and
therefore to accept the repudiation of the defendants would be to put the plaintiffs in breach
[1984] 1 All ER 129 the shipowners chartered a ship to the plaintiff charterers for twenty-four
months. One year later the ship suffered from a serious engine failure that would take several
months to repair, the plaintiffs therefore told the shipowners that they had no further use

[2001] 1 Lloyd’s Rep 537 Clarke J at first
instance, having considered the above authorities stated the principle as being:
that an innocent party is entitled to continue to perform a commercial contract which has
been repudiated by the other party unless he has ‘no legitimate interest, financial or otherwise
)‘interest, the innocent party must have reasonable grounds for keeping the contract open, bearing in mind also the interests of the wrongdoer’. Staughton LJ, however, did not elabo-rate on what the test for a legitimate interest may be.The decisions clearly create a dilemma for the innocent party in that if they affirm but
can show no legitimate interest then they will not be able to claim the full damages
available – and that position is clearly fair. On the other hand, if they wrongly consider
charged, so that they can sue for their losses immediately, they may well find themselves
in breach of contract should they be unable to justify that stance in accordance with the
[2003] 2 Lloyd’s Rep 693 it was considered that Lord Reid’s
‘legitimate interest’ test, whilst clearly justifiable in order to disallow the innocent party
‘to saddle the other with an additional burden with no benefit to himself’ was clearly a
serious matter. Simon J considered that Lord Reid’s limitation should be confined to
‘extreme cases’ in which damages would provide an adequate remedy and that the right
able’. Simon J considered that the burden of preventing the innocent party from claiming
the election to repudiate or affirm the contract lies on the party breaking the contract and
that this burden cannot be discharged merely by showing the benefit to the other party is
small in comparison to the loss suffered by the contract breaker. The effect of such an
approach is, it is suggested, to alter the balance in favour of allowing affirmation of the
contract and claiming damages as appropriate. Simon J stated that the authorities had

mate interest in performing the contract rather than claiming damages.

be an adequate remedy and where an election to keep the contract alive would be
(Comm) a shipowner refused to accept early redelivery by a charterer under a long-term time
charter. The ship had been chartered for a duration of 59–61 months and within the charter
period of 59 months. The charterer then redelivered the ship 94 days earlier than the
for the balance of the minimum charter period. In arbitration the arbitrator held that the

to claim the contract price. For instance it might be submitted by the innocent party that
culty. The innocent party therefore faces the risk that the breaching party will direct any
The facts of the case were that two tenants took a lease on office premises for a five-year term from
January 2000 at a yearly rent of £23,101 payable quarterly in advance. They practised there as solicitors
until February 2003, when they quit the premises, having no further use for them. In January 2004 the
landlords began proceedings to recover rent arrears totalling £23,101 with VAT of £4,026.76. The ten
ants claimed in their defence that the landlords had failed to take steps to mitigate their loss by failing
The Court of Appeal dismissed the appeal. The basis of the tenants’ argument was that it
, wholly unreasonable for the landlord
ages would be an adequate remedy; furthermore, the landlord did not have a legitimate inter
est to protect in affirming the contract. The court considered that it was not clear if the
landlord was acting unreasonably in not taking their own steps to find a new tenant, rather
ants. The Court of Appeal also considered that damages may not be an adequate remedy. The
reason of the court was that, despite the contractual nature of the lease, where a tenant had
The facts of the case were that Twickenham Garden Developments (TGD) was instructed to carry out
some work for Hounslow Borough Council (HBC) on some land owned by the council. HBC purported
Hounslow Borough Council
Twickenham Garden Developments Ltd

‘co-operation’ by the borough. But I do not think that the point can be brushed aside so simply.
Quite apart from questions of active co-operation, cases where one party is lawfully in posses
valuable painting, contracts with B, a picture restorer, to restore it over a period of three
months. Before the work is begun, A receives a handsome offer from C to purchase the picture,
[2011] EWCA Civ 1330 that acceptance of a repudiatory breach did
AC 367. Rescission ab initio is very different from a failure of performance which entitles the

his bargain. The exercise by G of its right to recover the instalments of the contract price
under art 10 was not to be taken as an election on G’s part to affirm the contract and there
was no inconsistency in recovering instalments of the price under art 10 and recovering
tled to recover for the loss of the benefit that the performance would have brought. The loss
of those benefits accrues at the time of the repudiation. It is not open to the repudiating
party to seek to reduce the damages on the basis of some subsequent act of the innocent
party that might reduce the overall benefit that would have accrued. The point can be seen
Millennium Dome. The contract permitted the defendant, the New Millennium Experience
Co. Ltd (NMEC), to terminate the contract without cause provided it paid compensation
calculated in accordance with a term of the contract. This term permitted Koch to claim
nate the contract without cause and subsequently Koch filed for bankruptcy under German
law in August 1998. In 1999, the Court of Appeal granted Koch judgement in respect of
What is the effect where an innocent party is entitled to refuse performance of their
party does not deprive themselves of the right to refuse performance. Furthermore, it is

’()-chase a new yacht from the claimants. When the yacht was delivered in August 2002, the yacht’s keel was found to be substantially heavier than the manufacturer’s specification.
[1985] Ch 457 where the defendant entered into a contract for the assignment of
a lease that was subject to a covenant that the lease was not to be assigned without the
lent misrepresentation, though the plaintiff played no part in the deception. The plaintiff,
despite consulting his solicitors, was not aware that he had a right to rescind the contract

or a conditional sales contract) possession of the goods has been transferred to the

ere the contract requires the trader to install the goods or take other action to enable
the consumer to use them, the trader has notified the consumer that the action has
are of a kind that can reasonably be expected to perish after a shorter period of time, for
instance, fruit, the time limit for exercising the short-term right to reject in relation to those
All these provisions are adjusted if the consumer requests or agree that the goods be
replaced or repaired and in such circumstances the time limits under ss 22(3) and (4) stop
running for the waiting period whilst a repair or replacement is carried out. This must be
done within a reasonable time and without inconvenience to the consumer (NB: the
trader must bear the necessary costs incurred in doing so, i.e. parts, labour and postage –
s 23(2)b). If the goods supplied by the trader in response to that request or agreement do
not conform to the contract, then the time limit for exercising the short-term right to
reject is then, either 7 days after the waiting period ends, or if later, the original 30-day
time limit for exercising the right, extended by the waiting period. By s 22 (8) the waiting
period begins with the day the consumer requests or agrees to the repair or replacement
of the goods, and ends with the day on which the consumer receives goods supplied by
remedy (the repair or the replacement) is either impossible or is disproportionate compared
to the other remedies such as offering a refund or proving a price reduction to the

Whilst the trader must repair or replace the goods within a reasonable time and without

form to the contract;

goods; or

consumer has required the trader to repair or replace the goods, but the trader is in
breach of the requirement of s 23(2)(a) to do so within a reasonable time and without
make a deduction from any refund to take into account any use that the consumer has made
of the goods. There are limitations on this in the sense that such deductions cannot be made
A contract must be performed strictly in accordance with its terms otherwise the innocent
party can claim damages or repudiate the contract (
Re Moore & Co
Landauer & Co
it would be unreasonable for the buyer to reject the goods, subject to contrary intention
‘Entire’ contracts – a person’s contractual obligations are conditional on the other party
parties expressly stipulate that conditions as to time must be strictly complied

of the subject of the contract or the surrounding circumstances show that
Time not made of essence can become of essence on the giving of reasonable notice
Before a party gives reasonable notice, there must be an unreasonable delay (
British and
Reasonable notice can be given making time of the essence as soon as the contractual date
performed within 30 days, taking effect after the day in which the consumer sent his

Anticipatory breach: occurs when a party either expressly or impliedly, by words or conduct,
indicates that they do not intend to honour their obligations under the contract.
Burden of proof for anticipatory breach is beyond reasonable doubt (
Beatson, ‘Discharge for Breach: The Position of Instalment, Deposits and Other Payments Due Before


The general rule here is that since contracts are created by agreement, then they may be
extinguished by agreement. The rule thus stated is simple, but while the parties may agree
to extinguish the contract, there is always the possibility of one of the parties reneging on
the agreement and taking action against the other for breach of contract. It is therefore
advisable for the parties to formulate their agreement in terms of a second contract
supported by consideration. But if the agreement is contained in a deed, then no consid


agrees to sell the boat
tion in that the mutual release and the mutual promises in the new contract will be regarded
have application and there is insufficient consideration to support the variation.
The situation above is the position where the parties are entering into an agreement for their
mutual advantage, but different considerations apply where the advantage is only to benefit
one of the parties. Such a situation is termed a waiver and it normally arises where one party
requests an alteration of the terms of the contract and the other party agrees not to insist on
A chassis for a Rolls-Royce was ordered from the plaintiffs, who later also agreed to build a body for it
in ‘six to seven months’. At the end of seven months the body had not been completed and the defend
ant agreed to wait another three months. At the end of this period it was still not ready so the defend
ant gave notice that if it was not ready within four weeks he would cancel the order. At the end of this
period the body was still not ready so the order was cancelled. The Court of Appeal held that he was
entitled to do so since, even though he had waived the stipulation as to time of delivery, he had given
reasonable notice of his intention to make time of the essence. Lord Denning commented:
Whether it be called waiver or forbearance on his part, or an agreed variation or substituted perfor
legal relations. He made, in effect, a promise not to insist on his strict legal rights. That promise was
Charles Rickards Ltd
[1950] 1 All ER 420
Express provision for discharge
The parties may agree either expressly or impliedly in their contract that it will become
discharged should certain circumstances arise. A common example would be where the
discharging the contract.

Unilateral discharge usually arises where one party has fully performed their obligations
This chapter deals with the discharge of contracts by agreement. The general rule here is that
since contracts are created by agreement they may be extinguished by agreement.
Bilateral discharge
Accord and satisfaction

Occurs where one party has performed their obligations under the contract, the other
After reading this chapter you should be able to:
1. Understand what is meant by frustration in the discharge of a contract.
2. Know the modern development of the doctrine and understand that the modern test is
change in circumstances.
3. Recognise and apply the different applications of the doctrine.
4. Identify the factors that affect the operation of the doctrine.
5. Explain the legal effects of the doctrine both at common law and under the Law Reform
(Frustrated Contracts) Act 1943.
It has already been seen in relation to the discharge of contracts by performance that the
however, would be grossly unfair if a promisor becomes liable for breach of contract because
isor with the excuse that the contract has become frustrated.
Frustration is really an expression indicating that the contract, once entered into, has
that it brings about the immediate and automatic end to the contract, releasing the parties
Originally supervening events that were beyond the control of either party had no effect

(1647) Aleyn 26. Once the doctrine began to emerge, however, such was
frustration to be used as a defence to an action for breach of contract where the supervening
Mistake in relation
Discharge by frustration
event destroyed a fundamental assumption on which the contract was based. Second, the
courts recognised that contracts themselves could provide for the consequences of the
occurrence of such an event. The second point gave rise to so-called
force majeure

that business people commonly began to draft into their contracts in order to restrict the
effects of a frustrating event.
Just as business people could insert in their contracts express provisions dealing with
frustrating events, the courts were empowered to imply terms into contracts, as we have
In this case the defendant agreed to hire a music hall to the plaintiff. After the contract was made, but

(1863) 3 B & S 826
The court upheld the defence of the defendants, deciding that the principle contained

was confined to positive contracts. The contract in

was subject to an implied condition that the hall would continue to exist until performance
that, in contracts in which performance depends on the continued existence of a given person
in words other than positive, nor is there any express stipulation that the destruction of the
ued existence of the particular person or chattel.
From this basis the doctrine of frustration began to expand, though it always relied on the
The fictitious nature of the implied term was discussed in
Davis Contractors Ltd
ham UDC
[1956] 2 All ER 145, in which both Lord Reid and Lord Radcliffe expressed dis
satisfaction with the concept. Lord Radcliffe in particular thought that it was clearly illogical
Similarly, Lord Simon, in the
case, stated the test to be:
Frustration of a contract takes place when there supervenes an event (without default of
either party and for which the contract makes no sufficient provision) which so significantly
changes the nature (not merely the expense or onerousness) of the outstanding contractual
rights and/or obligations from what the parties could reasonably have contemplated at the
tions in the new circumstances; in such a case the law declares both parties to be discharged
from further performance.
Before we see how the doctrine of frustration has been applied in various types of situation,
it should be noted that the test amounts to a question of law, not fact, even though the issue
of fact heavily overlays the considerations of the court.
It is not possible to discuss all the circumstances in which the doctrine of frustration applies
since these are obviously innumerable, but it is possible to identify certain typical situations
Clearly this is the most obvious situation, an example of which has already been seen in

above. The death of an individual on whom the execution of the contract
A similar situation also arises where the subject, though not destroyed, ceases to be
revolves around the period of unavailability. If this is only a short time, then the courts
A contract relating to a member of a pop group contemplated that he would be able to work seven
evenings a week, should this work be available. The member fell ill and was advised to work only a
limited number of nights a week. In fact he ignored this advice since he considered himself sufficiently
well to work to the contract, and he did so. The court nevertheless held the contract to be frustrated
because it was possible that the member’s health could have broken down at any time, and therefore
it was necessary to employ another musician to be available to take the regular member’s place should
this event occur. This was, however, impracticable since it meant that the group had to rehearse twice,
in order to prepare the reserve member of the group should he be needed.

The Barron Knights Ltd

The unavailability of the subject matter of the contract does not, however, always cause a
[2008] EWCA Civ 856, where the Court of Appeal held that
if a supplier decided not to make unascertained goods available for shipment, thereby making
performance by the seller of goods to the buyer impossible, this is not of itself sufficient to
Blackburn Bobbin
[1918] 2 KB 467, in which there was a contract whereby the
defendants contracted to sell to the claimants Finnish timber. On the outbreak of the First
World War, the defendants’ source of the timber was cut off. The claimants themselves were
not aware that the timber was imported into the United Kingdom and that no stacks were held
here. The Court of Appeal held that there was no operable frustrating event since only the
seller was concerned about the source of supply. Basically, the seller took the risk of his source
of supply being available to perform his contract. These decisions also tie in nicely with the
concept that it is not a radical change of circumstances that triggers the doctrine of frustration
but a radical change in the obligations of the parties under the terms of the contract, as already
since in this case the contract would normally have been entered into on the common
It may happen that while it may be physically possible to carry out the contract, the non-
occurrence of an event specified in the contract, on which the contract is based, renders the
The plaintiff hired a flat to the defendant for 26 and 27 June 1902. The defendant intended to use the
flat in order to watch and celebrate the coronation procession of Edward VII which would pass by the
flat. No mention of this purpose was made in the contract. A prepayment of one-third of the rent was
made. Due to the sudden illness of the King the coronation procession was cancelled and the defend
ant refused to pay the balance of the rent owing. It was held that the plaintiff could not recover these
moneys since the contract had been frustrated by the cancellation of the procession. The court found
that the procession and the position of the flat formed the objective of the contract which was thus
frustrated and discharged as a result.
The defendant hired a motor launch for 28 and 29 June 1902 for the purpose of seeing the coronation

In commercial contracts it is common for the contract to require a party to carry out the
with that specified manner then the contract will be frustrated. A distinction is made
The ship was a time-chartered ship which became trapped on 22 September 1980. However, the court
upheld the decision of the arbitrator to find that the contract was frustrated, not on this date, but on 24
November 1980. The reasoning was that at the earlier date expert opinion considered that the war would
be quickly won by Iraq, thereby reducing the period of confinement. At the time of the later date the
expert opinion had changed to that of anticipating a protracted war, which clearly resulted in the contract
being frustrated. The courts thus have to balance the length of time of the charter with the temporary
unavailability of the vessel caused by the frustrating event. In the case of
Pioneer Shipping Ltd
at Spithead. It was held that the defendant was bound by the contract which had not been frustrated
by the cancellation of the review. The coronation review was held not to be the object of the contract
but merely the motive for the hiring of the motor launch on these dates. The court based its decision
One difficulty with frustration in such instances is when can one treat the contract as
discharged? The delay or unavailability of the subject matter might be for a short period or
Tioxide Ltd
[1981] 2 All ER 1030, a time charter envisaged that during a nine-month period
the vessel would be able to make six or seven voyages. In fact a strike at the port where the ship was being
loaded meant that the number of voyages within the contract period was reduced to two. It was held that
the contract was frustrated since the degree to which the contract was capable of performance was
inordinately small compared to that contracted for. Lord Wright stated the position:
If there is a reasonable probability from the nature of the interruption that it will be of an indefinite

is contract, and contracts are about the allocation of risk, and since the allocation and
assumption of risk is not simply a matter of express or implied provision but may also depend
on less easily defined matters such as ‘the contemplation of the parties’, the application of
ent’ is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence
of expense or delay or onerousness is not sufficient; and that there has to be as it were a break
Cricklewood Property & Investment Trust Ltd
Leighton’s Investment Trust Ltd
since if one rents a property for a particular purpose then surely if that purpose becomes
the procession was cancelled. From here the argument can be taken to the point that the
It has been seen that the basis of frustration lies in the fact that it amounts to a superven-
ing event that is beyond the control of the parties to the contract. It follows therefore that
if the event arises out of the actions of a party to the contract then the doctrine cannot be
relied on.
In this leading case, the appellants chartered a trawler from the respondents. The trawler was fitted

Ocean Trawlers Ltd
[1935] AC 524
The question of choice that arose in the case above with regard to the supervening event

In this case the plaintiffs needed to transport a drilling rig from Japan to Rotterdam. The defendant
possessed two specialist transportation systems capable of performing this task,
Super Servant One
Super Servant Two
. The contract was open as regards which vessel could be used, though the
choice of vessel rested with the defendants. In fact, although they did not mention this to the plaintiffs
at the time, the defendants intended to use
Super Servant Two
for the task and allocated other tasks
to the sister ship.
Super Servant Two
sank some six months before the contract was to be performed.
The defendants claimed that the contract was frustrated. The plaintiffs contested this application,
stating that the contract would still have been capable of being carried out but for the decision of the
defendants to allocate
Super Servant One
to other tasks. The supervening event thus lay in the hands
of the defendants. The Court of Appeal held that the contract was not frustrated since the loss of a
vessel to the contract was due to the actions of the defendants, even if they were neither negligent
nor in breach of contract.

[1990] 1 Lloyd’s Rep 1
Where the supervening event arises because of the negligent actions of one of the parties

had arisen because of a negligent act by the owners, then they
charging their contractual obligations.
The parties may make provision for what is to happen should a particular supervening con-
tingency occur. These clauses are the so-called
force majeure
clauses mentioned earlier. If the

(1874) LR 10 CP 125, a ship was chartered to sail ‘with all possible despatch’ from
repairs took eight months to complete, during which time the charterers repudiated the
clause the contract was still frustrated.
the contract had been upheld and a voyage to San Francisco had taken place the venture
would have been entirely different commercially.
See Chapter 13 for

[1904] 1 KB 493

case with the case of
since in the latter case the obligation to pay had not accrued at the time
of the supervening event. The result here was that the defendant hirer of the room was
not obliged to pay anything – all his future obligations ceased to exist at the time of
In this case the appellants ordered some machinery from the respondents for delivery to their factory
in Poland, paying £1,000 in advance by virtue of the terms of the contract. In 1939 Germany invaded
Fibrosa Spolka Akcyjna
case, perhaps
before the time of discharge in, or for the purpose of, the performance of the contract, the court
may, if it considers it just to do so having regard to all the circumstances of the case, allow him
exceeding the value of the said benefit to the party obtaining it, as the court considers just,

or for the purpose of, the performance of the contract, including any sums paid or

of the contract.

the Act cannot be doubted, but the Act itself contains defects. The subsection allows recov
case since the valuable benefit had already accrued
(1867) LR 2 CP 651 the defect becomes quickly apparent. In this case the plaintiffs
This is the leading case on the operation of s 1(3). The facts of the case were that there was a contract
sum. In accordance with s 1(3) this sum could not exceed the valuation placed on the valuable benefit.
Goff J stated that the valuable benefit should not be assessed on what had been paid out by BP in the
his concession had been enhanced but this had to be reduced, because of the effect of s 1(3)(b), by
into account that half of this benefit was attributable to BP’s efforts, and thus the valuable benefit
full, since it did not exceed the figure for the assessment of the valuable benefit, which by s 1(3) would
[1979] 1 WLR 783 (decision affirmed
by the House of Lords [1983] 2 AC 352)
receive nothing since no money was payable at the time of the frustrating event and all that
If the plaintiff had attempted to claim under s 1(3) in respect of a valuable benefit being
a valuable benefit...before the time of the discharge’. Furthermore, s 1(3)(b) itself clearly
indicates that the valuable benefit must first be assessed and then the court must consider the
Money payable
Ceases to be payable


son for these exceptions is that they are largely concerned with the apportionment of risk
does not relate only to s 7 since s 2(5)(c) also states that ‘any other contract for the sale, or
Frustration is really an expression indicating that the contract, once entered into, has
The clause must be capable of dealing with any form that the contingency may take, no
Frustration will terminate a contract automatically (
Hirji Mulji
Cheong Yue
From the date of the supervening event the parties are released from all future contractual
Any obligations that had already arisen under the contract had to be performed and
allowing the recovery of moneys where there had been a total failure of consideration.
compensation payable for expenses incurred in the performance of the contract (s
financial readjustment of the parties where one has received a valuable benefit under
Battersby, ‘Frustration: A Limited Future’ (1990) 134
Solicitors Journal
Beatson, Burrows and Cartwright,
Anson’s Law of Contract
,30th edn (Oxford University Press, 2016)
Clark, ‘Restitution and the Law Reform (Frustrated Contracts) Act 1943’ (1996)
Lloyd’s Maritime and Com
mercial Law Quarterly
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
Hall, ‘Frustration and the Question of Foresight’ (1984) 4
Legal Studies
Haycroft and Waksman, ‘Frustration and Restitution’ (1984)
Journal of Business Law
McKendrick, ‘Self-Induced Frustration and
Force Majeure
Clauses’ (1989)
Lloyd’s Maritime and Commercial
Law Quarterly
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)
Swanton, ‘The Concept of Self-Induced Frustration’ (1990) 2
Journal of Contract Law
Peel, Treitel
Law of Contract





erroneous since at common law the only remedy is damages or compensation for the breach
While a person may recover damages even where they have suffered no loss, it has to be
said that the majority of claims will be in circumstances where substantial loss has been

As has been indicated already, the basis of an award of damages is to compensate the
injured party for the breach of contract. It is for the innocent party to prove his loss from
the breach and that notwithstanding the breach he would have been able to carry his part

[2013] EWHC 3153 (Comm).

1 Ex 855, is to place the injured party in the same position they would have been in had
the contract been carried out, in so far as money is able to do this. The injured party is thus
claiming damages for the gains they could have reasonably expected from the execution
of the contract. They are thus claiming for loss of bargain or loss of profits. Such damages
Alternatively the injured party may decide not to claim for loss of bargain/loss of profits
’. The circumstances in which a party claims reliance loss
tive or uncertain. In such circumstances the injured party may find it simpler and safer to
claim any expenses incurred in performance of the contract. An example of such an instance
can be seen in the following case.
The defendant, an actor, had entered into a contract with the plaintiffs to produce a film. At the last
moment the defendant withdrew from the contract with the result that the plaintiffs had to abandon
the whole project. They decided not to sue for expectation losses since these clearly would be purely
speculative, but for loss of expenses, or reliance losses, in respect of moneys expended hiring other
actors, finding locations and engaging scriptwriters. The court allowed the claim for these items of
Anglia Television Ltd

[1972] 1 QB 60
case, as affirmed in

Mamola Challenger
[2010] EWHC 2026 (Comm), is also authority for the fact that the courts will

It seems to me that a plaintiff in such a case as this has an election: he can either claim for
The defendant wrongfully repudiated a contract under which the plaintiff was to print 48 issues of a
weekly newspaper. The only issue in the case arose as to the correct measure of damages. The plaintiff
claimed £176,903 as representing the gross profit having deducted direct expenses such as paper
The charterer of a ship (‘C’) agreed to charter the shipowner’s (‘S’) vessel for five years. Under the
charterparty S was required to make modifications to the vessel prior to delivery. S incurred expenses
in preparing the vessel for the necessary modifications to be made. It then became doubtful that C
would perform the charter and eventually S treated C’s conduct as a repudiatory breach of contract.
The result of this is that the preparatory expenses were wasted and provided S with no residual benefit.
S claimed as damages the expenses it had incurred in preparing the vessel for the charterparty. The
Omak Maritime Ltd
Mamola Challenger Shipping Co
. [2010] EWHC 2026

wasted expenditure cases’. S’s claim for loss of expenditure was based on an expectation
that the charterparty would be performed and therefore it was appropriate to have regard
Teare J stated that if it was possible for a claimant to recover the expenses he had
incurred in the expectation of the contract being performed and no regard was paid to the
claimant’s position had the contract been performed, then the defendant was effectively
underwriting the claimant’s decision to enter into the contract in the first place. Thus if
the claimant had made a ‘bad bargain’ in that his expenses exceeded his gross profit it was
clearly inappropriate for the defendant to have to pay for the claimant’s loss of expenses
because his breach had not caused that loss. Teare J allowing the defendant’s appeal stated
that a claimant’s expenditure is only recoverable where the likely gross profit would at
The burden was on the defendant to show that the likely profits would not at least equal
QB 16 considered. The arbitrators’ error was to regard a claim for wasted expenses and a
claim for loss of profits as two separate and independent claims which could not be mixed.
But the weight of authority clearly showed that both claims were illustrations of, and
, which required the court
to compare the claimant’s position with what it would have been had the contract been
Maritime Ltd
Mamola Challenger Shipping Co
[2010] EWHC 2026 (Comm) that the onus
as their expected profits. Such a burden of proof would be almost impossible to sustain. The
An example of a defendant being unable to discharge this burden of proof can be seen
[2013] EWCA Civ 24. In this case the Court of Appeal considered an
appeal by Grange (‘G’) against an award of damages in her action for breach of contract
against the Quinns (‘Q’) who had been found to have wrongly evicted G from her business
premises after six months and ten days of a six-year lease. When the lease was executed G
had paid Q a £9,950 premium for the goodwill of a business that they had carried on at
the premises. After the eviction, G brought a claim for loss of profits. An expert prepared
a report on the amount of profits which was unfavourable to G. She therefore abandoned
her claim for loss of profits and sought instead to recover the premium she had paid. At
will had no value and that in any event even if the contract had been fulfilled G would
not have recovered the amount of the premium. The judge therefore awarded G nominal
damages of £300. G argued that she should have been awarded the full amount of the
premium, or the full amount apportioned to take into account the time she had actually

In this case, the council had sold land to the defendant property developer. The contract required the
developer to develop the land on the terms of the planning permission to build 72 houses. Once the
defendant to build an additional five houses on the site. This was a deliberate and calculated breach
of the contract of sale to develop the site only in accordance with the terms of the original planning
permission granted by the council.
The council sued for breach of contract, claiming damages for the breach. The amount of the
damages claimed was the sum the council would have required the developer to pay in order to be
released from the condition in the contract. It was held that the council could recover only nominal
damages since it had not sustained any losses from the breach of the contract. The fact that the
defendants themselves made extra profits from their deliberate breach of contract was of no
Surrey County Council
Bredero Homes Ltd
[1993] 3 All ER 705
This traditional position was criticised by the Law Commission in its Consultation Paper
, 1993, where it suggested that
restitutionary damages for breach of contract. As already stated, Steyn LJ in
strongly disapproved of any moves towards such a development. He stated:
commercial and consumer disputes. It is of paramount importance that the way in which
disputes are likely to be resolved by the courts must be readily predictable. Given the premise
that the aggrieved party has suffered no loss, is such a dramatic extension of restitutionary
remedies justified in order to confer a windfall in each case on the aggrieved party? I think
not...The recognition of the proposed extension will, in my view, not serve the public
In some situations, however, the exploitation of a breach of contract is so cynical that a
A developer acquired land that was subject to a restrictive covenant that had been imposed for the
benefit of an adjoining estate and in breach of that covenant built houses on it. An injunction was
sought by the estate owners but their application was unsuccessful. They were, however, awarded
damages that were based upon the profits the defendant made from the breach of covenant. The
damages were assessed on the basis of what the plaintiffs could have expected to gain in agreeing to
relax the restrictive covenants. The award may be regarded as being in lieu of damages as permitted
under the Supreme Court Act 1981 (now Senior Courts Act 1981), s 50.
Wrotham Park Estate Co

The position regarding restitutionary damages for breach of contract was considered
may arise is uncertain, although he considered it would only be granted in ‘exceptional fixed rules can be prescribed’. He considered the criteria on which the
‘the fact that the breach was cynical and deliberate; the fact that the breach enabled the
appropriate where compensatory damages would not apply. The first category was that of
were contracted to provide. Lord Nicholls did not think this fell within the remedy of an
since this was capable of being remedied by a part-refund of the price,
thing they had contracted not to do. Lord Nicholls also rejected this as an appropriate cat
case. He considered that to include all breaches of negative stipulations within a
contract took the remedy to account for profits for breach of contract into the mainstream
(see below) where
there was an issue of finding a remedy that was reasonable in that it provided a balance

Niad’s breach undermined the ‘price watch’ scheme and, therefore, Esso was justified in
preventing Niad from acquiring the profits from its breach. Thus Esso succeeded in claiming
gain-based damages, or restitutionary damages, based on the
principle that compensa
basis, the court made an award that stripped Niad of the profits it had made.
Why are compensatory damages inadequate? In order to claim these types of damages,
for this number. Several months after the sale, O’Brien obtained planning permission to
In the case a dispute arose from the World Wrestling Federation’s (‘F’) use of the initials ‘WWF’ in con
nection with its activities. Those initials had been long used by the World Wide Fund for Nature (‘N’).
In 1994 the parties had entered into an agreement to compromise litigation and regulate the future
use of the WWF initials. The agreement did not give N an exclusive right to the initials; however, it did
substantially restrict F’s use of the initials. N brought proceedings, alleging that F had broken the agree
ment, and claimed damages. Subsequently N sought to amend its claim so that it could claim for an
account of profits on the basis of Blake. While it obtained summary judgement, it was refused an
application for an account of profits. The basis behind this decision was that there was nothing of an
WWF World Wide Fund for Nature
World Wrestling Federation Entertainment
In the trial of the preliminary issue Smith J provided a thorough and comprehensive
review of the authorities surrounding the issue of restitutionary damages in the law of
was of

tive covenant in the contract. The fallacy in this argument is revealed when it becomes clear
that the claimants never intended to relax the covenant and, therefore, no such opportunity
The Court of Appeal [2007] EWCA Civ 286 allowed the appeal on the second ground and
principle when it sought to amend its claim for an account of the profits. To raise such a claim
at this point in time was an abuse of process in that it had asked the earlier court to decide the
principle was unsustainable
at the earlier hearing. Chadwick LJ considered that to allow the claim would be ‘inconsistent
with the underlying interest that there should be finality in litigation’. With respect, this is
There is a further contradiction within the judgement. If an account for profits is, accord
Wrotham Park
allowable if they also are compensatory? One answer lies in the fact that an
of Appeal expressed reluctance in introducing restitution remedies into the law of contract.
damages are both
sation. The lack of clarity in this judgement unfortunately requires to be resolved in another
In summary, therefore, as an alternative to damages calculated on a conventional basis,
that being to place the claimant in the same position he would have been in had the contract
been performed, it is possible to award damages on the basis of a sum that might reasonably
amount to a preliminary assessment
claims for such sums are not subject to the limitations of remoteness, mitigation of loss and
so on that are frequently imposed on awards of damages.
Difference in value and cost of cure

While damages for reliance losses or restitution are fairly readily quantifiable, this is not
The facts of the case were that the defendant (the owner) entered into a contract with two plaintiff
companies for the construction and enclosure of a swimming pool in his garden for a price of £70,178.
The contract expressly provided that the maximum depth of the pool was to be 7ft 6in. When the work
Ruxley Electronics and Construction Ltd
Laddingford Enclosures Ltd
[1995] 3 All ER 268 (HL)

three aspects. First, the question of reasonableness in the context of reinstatement; second,
disadvantage of having a pool of a depth shallower than that contracted for. The judge ordered that
the owner should pay £40,777 to the builders. The judge, however, considered that the owner was
entitled to £2,500 damages for loss of amenity.
The owner appealed, contending that the judge should have awarded damages for the breach or
deducted a sum from the contract price to reflect the need for the pool to be reconstructed to the
depth specified in the contract. The Court of Appeal allowed the appeal, finding that it was reasonable
to award damages to take into account the cost of replacing the pool in order to make good the breach
value of the pool. The plaintiffs appealed to the House of Lords, where their Lordships upheld the
findings of the judge at first instance and reversed the decision of the Court of Appeal.
It was further argued in the case that this was not a commercial contract but a contract for
a personal preference and that the test of what was reasonable had to have regard to those
personal preferences. Lord Lloyd considered that this was correct but that such preferences
could not be elevated into a separate category of damages with its own special rules. Personal
preferences were to be regarded as simply another factor to be taken into account, but only
sonable, as in the
case, a claimant is not entitled to have their personal preferences
satisfied. Lord Lloyd considered that a claimant could be compensated for loss of disappointed
expectations and did not consider that the law of damages was so inflexible that it could not
decision of the judge at first instance to make an award of £2,500 on this basis.
So far the question of reasonableness in the context of reinstatement has largely been
confined to building contracts; however, the principles apply in a wider context. A claimant
a fair award, though this was not contested in the House of Lords. The decision is also a good
indicator of the position that the courts will not shy away from making an assessment simply
reasonable steps to mitigate the loss by attempting to sell them elsewhere. This position can
In this case, there was a contract for the sale of a new Vanguard car but the defendants refused to
accept delivery. The defendants contested that the plaintiff dealers were only entitled to nominal
The situations described above tend to arise where there is a fixed retail price for the
the defendant that they do intend to perform. Thus Lord Wilberforce stated:
The general principle for the assessment of damages is compensatory, i.e. that the innocent
party is to be placed, so far as money can do so, in the same position as if the contract had
ment of damages as at the date of the breach, a principle recognised and embodied in s 51
of the Sale of Goods Act 1893. But this is not an absolute rule; if to follow it would give rise
to injustice, the court has power to fix such other date as may be appropriate in the
The facts of the case were that the shipowner, the Golden Strait Corporation (‘GS’), had chartered a
ship to Nippon (‘N’) by way of a period time charterparty dated 10 July 1998. The earliest contractual
date for termination of the contract was 6 December 2005. Clause 33 of the charterparty provided
that if war should break out between certain countries, named as including the USA, the United
Kingdom and Iraq, both GS and N would be entitled to cancel the charter. N repudiated the charter on
Nippon Yusen Kubishka Kaisha (The Golden Victory)

a contract were claimed, in what circumstances could the party in breach of the contract
rely on subsequent events to show that the contractual rights lost by the anticipatory breach
14 December 2001 by redelivering the ship to GS and three days later GS accepted the repudiation.
By the time the consideration for the damages for the breach came to arbitration the second Gulf War
had broken out. This event would have entitled N to cancel the charter had it still been current. At the
have received more compensation than they would have been deprived of. The House of
Lords, however, recognised that the principle as stated was subject to exceptions and should
not be applied mechanistically. The principle may be overridden if to do so would be to
provide a more accurate measure of compensation. The majority recognised that, while
ered that the value of the charterparty lost on the date of repudiation was one with four
years to run and that GS should be compensated to that extent considering that certainty
and predictability in contracts should not be overridden and that such a principle was
a long-established one in commercial contracts. The outbreak of war was no more than a
possibility and therefore they considered that at the time of the breach the contract had
four years to run. Thus they considered that the damages should be assessed on the full
The issue of producing a calculation of damages that mirrors the actual loss of a party with
Line Corp
(The Wren)
[2011] EWHC 1819 (Comm). In this case the appellant charterers,
build which was time-chartered for a minimum of 36 months. After five months Glory

the case of
it is known that the buyer received a horse which was every bit as valuable at the date of sale
Popplewell J, however, sounded one note of caution a note of caution about such an
approach, stating that departure from the prima facie rule must not infringe the parties’ own
... it is important to keep firmly in mind any contractual allocation of risk made by the parties.

, damages were on the assumption that the charter
would have only lasted for another 14 months. To assess the damages for the four years left
tract’. The most that can be said about one-off contracts of sale is that the facts may be differ-
In this case there was a claim for loss of earnings that arose from personal injuries caused by negli-
gence. The plaintiff was awarded a sum of £37,720 which represented the claim relating to loss of gross
earnings. It was held by the House of Lords that the damages had to be reduced by the amount the
plaintiff would have had to pay in tax in respect of that sum. Consequently the plaintiff was awarded
British Transport Commission

[1956] AC 185
The rule in
’s case establishes that damages will be reduced to take into account
is subsequently, in
may well successfully claim £35,000
take into account s 148, whilst the remaining £5,000 will be paid in full and left to be
taxed by HM Revenue & Customs itself.
Income and capital receipts of a trade, profession, office or employment (subject to the
above) are taxed by HM Revenue & Customs and therefore fall outside the
rule. Thus
, a motor dealer, successfully sues a customer for loss of profit on a sale caused by the
will receive the damages in full since they effec-
’s gross income
and duly taxed by HM Revenue & Customs. Similarly if
contracts to buy certain goods
for £1,000 and subsequently
fails to deliver in breach of contract so that
has to
may claim the £500 extra expense as dam-
will be awarded this amount in full since here the amount does
In this case, it was estimated that an employee who had been wrongfully dismissed would have
received £58,000 by way of salary over the next ten years. In fact the plaintiff had a large personal
fortune and therefore his damages were reduced by reference to his tax liability in respect of both
earnings and the personal fortune, despite the fact that the fortune might of course vary over that
period. The plaintiff was eventually awarded £18,000, though Pilcher J admitted that this was no
more than a rough estimation.

[1956] 2 All ER 652
It would seem much more sensible for the courts to award the gross sum to the claimant
was considered in 1958 by the Law Reform
Committee, 7th Report (1958) Cmnd 501, no recommendations arose out of the discussions.


arise whereby a breach of contract occurs but the defendant argues that the level of loss
sustained by the claimant has resulted, not from the breach of contract, but from some other
the nature of the causation necessary to establish liability for breach of contract (or in tort) was one of the most difficult areas of law. The Court of Appeal said that it was clear that if a
In this case the plaintiff hired a garage on a six-monthly contract basis for use in his business. During
In this case an accountant was employed to conduct an investigation into the affairs of a company.
tionable since it is clear that the accountant owed the claimant a duty of confidentiality.
Similarly, the actions of the manager are reasonably foreseeable since any employee is
bound to disclose information that may be damaging to their employer’s interests. Even
it resulted from the accountant’s breach of contract in the first place.
The plaintiffs’ mill had ceased working because of a broken crankshaft. As there was no spare shaft,
the broken one had to be sent to the manufacturer for use as a pattern for a new one. To this end the
plaintiffs engaged the defendant carriers to transport the shaft to the manufacturers. The defendants
were told what the item was, a broken shaft from a particular mill, and that the plaintiffs were the
partner and when found by a manager it was handed to the directors concerned. The directors subse
quently brought an action in defamation and secured damages from the plaintiff who, in turn, brought
an action against the accountant for breach of contract. The claim was dismissed by the House of Lords
on the basis that the action in libel did not result from the breach of contract but from the unforesee
able actions of the manager.

It can be seen that the rule in fact has two limbs to it. Some authorities consider that there

consequence of the breach. This type of loss is often referred to simply as ‘normal’ loss;

as may reasonably be supposed to have been in the contemplation of both the par
type of loss dealt with by this limb is usually referred to as ‘special’ or ‘abnormal’ loss.
able to them, which would have prevented any loss from occurring. It could not have been
loss required actual knowledge on the part of the carriers that their delay would result in
tial consequence by the claimants, they could not be held liable for that consequence. If
they had been given this knowledge then no doubt they would have taken steps to ensure
party ought to receive in respect of such a breach of contract should be such as may fairly and reasonably
contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties,
ment of the contract would suffice and this appears to be correct within the orthodox
approach. On the other hand in
British Columbia Saw Mill Co
The facts of the case were that the plaintiffs, hoping to expand their business, bought a second-hand
Victoria Laundry (Windsor) Ltd

true of the special losses which they could not have reasonably foreseen unless they had
actual knowledge of such losses at the time they entered into the contract. The defendants
knew nothing of the special government contracts and therefore they were not liable for
in contract was the same as the test applied in tort. This approach was subject to sharp
A ship was chartered to carry a cargo of sugar from Constanza to Basrah. At the time the contract was
entered into the charterer intended to sell the sugar as soon as it was unloaded at Basrah. Although
The Heron II
ity of the loss. Lord Reid, in particular, considered that the question of liability turned on
In this case there was a contract for the sale and installation of an animal feed hopper which was to
have a ventilated top. During transit to the site the ventilation hatch had been sealed and when
[1978] 1 All ER 525

, Lord Reid and the other judges agreed that a higher degree
of foreseeability is required in contract than in tort since they considered that a party to
a contract is able to ensure that he can recover for all the consequences of a breach by
informing the other party of any factors that increase the degree of risk. Lord Denning
, but it is
Lord Scarman did not agree with Lord Denning’s dual approach although he did agree
with the result in that damages should be recoverable since there was a serious possibility
ties then the extent or degree or seriousness of the damage is irrelevant. Lord Scarman
ment and also that it was in breach of contract. The judge in examining the remoteness rule
where there is concurrent liability in contract and in tort considered that there should only
be one test and considered that where the parties were in a contractual relationship, the
ability, which was more generous to WP. On this basis the judge found, applying the tor
was reasonably foreseeable and not too remote to be recovered in the tort of negligence. The
opportunity could be recovered in contract. His reasoning was that this opportunity did not
Withers appealed, arguing that the judge had wrongly adopted the tortious test for
a loss of chance claim and that, in the event that the tortious remoteness rule did not apply,

On the issue of remoteness the Court of Appeal considered that where contractual and
opportunity to draw special circumstances to each other’s attention at the time of formation
contemplation. The Court of Appeal considered that it made no sense at all for the existence
general profits are recoverable since these were of the type that were within the contempla
Once the kind of damage brought about by the breach of contract is found to be of
a type that is within the reasonable contemplation of the parties, whichever branch of
applies, the fact that the results are far more serious than
Brown v KMR Services Ltd [1995] 4 All ER 598.The issues surrounding the type and extent principles can be seen more recently in
where the defendant bank (‘RBS’) inadvertently

able within

In this case the House of Lords reviewed the operation of the first arm of the rule in
The facts of the case were that Mercator Shipping (‘M’), the shipowner, had chartered a ship to Transfield
Shipping (‘T’), for a period of five to seven months, to end no later than midnight on 2 May 2004. T
Transfield Shipping Inc
Mercator Shipping Inc
(The Achilleas)
[2008] UKHL 48;
reasonably entitled to expect. Furthermore, the liability of the valuer could not be extended

have been different if the second
have been liable for the losses sustained by M from the loss of that contract? Presumably
this would have been reasonably foreseeable and in the contemplation of the parties as a

To reiterate the orthodox rule with regard to normal loss, the defendant is liable for all types
of loss which were, or ought to have been in the contemplation of the parties at the time the
that being the case the defendant is liable for all losses no matter how high.
court on examining the contract and the commercial background, decides that the standard
approach would not reflect the expectation or intention reasonably to be imputed to the
that on a proper analysis of the contract against the commercial background the losses
caused by flooding could not be regarded as too remote even though those losses would not
()-den J considered that the broader ‘assumed responsibility’ approach found in the modified
dictable, uncontrollable or disproportionate’. In reality, he stated that the ‘assumption of
responsibility’ will be applied in all cases as a means of the courts departing from the standard
in the courts making a judgement that the circumstances are unusual or exceptional and to
that extent the matter of assumed responsibility now sits alongside the application of the
[2010] EWHC 2516
(Comm), where the claimant lessors of an aircraft claimed damages in respect of a lost sale of
an aircraft allegedly caused by late delivery. Here Tomlinson J considered that the lessee and
tract, have had it in mind that the loss of the follow-on sale or lease was ‘not unlikely’ to result

broken. On the other hand if there was evidence on the facts of a particular case that the
nature of the contract, the commercial background and any other special circumstances

provides that a defendant has an implied assumption of responsibility
suggest that the assumption of responsibility is an additional factor and is not implicit
within the first limb and to this degree there is a departure from the orthodox approach.
we saw earlier that in

. (1876) 1 QBD 274 it was held that simply informing
mencement of the contract would suffice. Such an approach signals a very different
and to that extent there is a departure from the
is approached in the manner

It has been seen how the basic concept of damages in contract, that is, to place the claimant
tion of loss
. Mitigation essentially means that a claimant will not be able to claim for losses
which could have been avoided by the taking of reasonable steps to reduce those losses once
The principle may be seen in the context of a fixed-term contract of employment, say,
cannot sit back and do nothing for the balance of the two years and then claim the full salary
for the period of the contract. They must attempt to reduce the loss as far as can be expected

[1895] 2 QB 253, attempt to


formed. The fundamental basis is thus compensation for pecuniary loss naturally flowing from
the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty
of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him
The facts of this case were that the appellants, Westinghouse, had contracted to supply turbines to
British Westinghouse Electric and Manufacturing Co
Underground Electric
The House of Lords held that they could not recover such costs. The respondents were
required to mitigate their losses and this they had done, but so efficiently as to eliminate the
costs of replacing the original turbines, and therefore nothing could be recovered as regards
these losses. They were, however, entitled to compensation for the losses sustained while
stances the benefit must be brought into account in assessing the claimant’s loss. This point
Globalia Business Travel (formerly
were that a cruise ship was subject to early redelivery in November 2007 under a time char-terparty when the charter still had two years to run. There being no available chartering
$23,765,000. If the vessel had been sold when the charter was due to come to an end in
November 2009, her value would have been $7,000,000, a fall in value of $16,765,000. The
opportunity arose. It could be that the shipowner, in adopting such a course of action might
if it had sought to sell after the breach. The Court of Appeal held that the arbitrator was
Armada Bulk Carriers
Ltd (The Fanis)
the mitigation process. Such a causal nexus is established by taking into account all the
circumstances, including the nature and effects of the breach, the nature of the profit,
the manner in which it occurred and any intervening or collateral factors which played a
part in its occurrence. The establishment of a causal nexus will result in the profits being
taken into account, as in this case but if that was not the case, then the profit made would
not be a consequence of the breach and the shipowner would be able to take advantage of

The rules on mitigation present particular problems in relation to anticipatory breach
this context, however, the attempts to restrict this rule as stated in The Alaskan Trader [1984] 1 All ER 129 should also be noted carefully. Thus the duty to mitigate in anticipatory breach arises only where the plaintiff elects to treat the contract as at an end.
those losses which they could have avoided by the taking of reasonable steps. Second, there
under reg 17 of the Commercial Agents (Council Directive) Regulations 1993, as held in
also arise separately and independently within an action in negligence, in which, of course,
the 1945 Act would apply. This position was also affirmed in
Barclays Bank plc
AB Marintrans
Comet Shipping Co
[1985] 3 All ER 442 and
Basildon District
Richcliff (Group) Ltd
[1992] 1 All ER 865

The Law Commission proposed in Law Commission Working Paper No. 114 that the
not found favour, probably because of the need to balance the interests of the parties within
the contract, particularly with regard to the equality of their bargaining power.
In 1993, the Law Commission published its report
Contributory Negligence as a Defence in
apportionment should be rejected where there was liability for breach of a strict contractual
of contract. If the defendant commits himself to a strict obligation regardless of fault (as
arises in contract), then a claimant should be able to rely on the defendant fulfilling his
obligations and should not have to take precautions against the possibility that a breach
that the rules on mitigation of loss were not a substitute for apportionment for contributory
The Law Commission considered, however, that where a claimant suffered damage partly
able care or exercise reasonable skill, apportionment should be allowed in respect of the
event of a breach. The courts therefore readily surrendered their right to make awards to
the will of the parties themselves as expressed within the terms of the contract. There were
substantial advantages to the judicial process by the adoption of this approach, such as
savings in time and expense. Despite the adoption of this position by the courts there was

the parties to a contract who use the words ‘penalty’ or ‘liquidated damages’

of the

o assist this task of construction various tests have been suggested, which if

be held to be a penalty if the sum stipulated for is extravagant and uncon
scionable in amount in comparison with the greatest loss that could conceivably

money, and the sum stipulated is a sum greater than the sum which ought to
is made payable by way of compensation, on the occurrence of one or more or
In this case a contract was entered into for the supply and purchase of tyres. The agreement was said
to be a ‘Price Maintenance Agreement’ under which the defendants were not to sell the tyres below
certain prices, not to sell to persons on a ‘black’ list, not to exhibit or export the tyres without consent
and, finally, not to tamper with certain marks on the tyres. The defendants had to pay £5 by way of
liquidated damages for every tyre cover or tube sold or offered in breach of the agreement. The
defendants sold a tyre below the plaintiff’s current list price, and he claimed the £5 damages. The court
held that the sum amounted to liquidated damages, the reason being that, while the sum involved was
disproportionate to the loss sustained, the motive behind the agreement was to prevent a price war,
as this would have damaged Dunlop’s selling organisation. The motive behind this clause therefore was
not to hold the defendants
in terrorem
of breaking the agreement, but to maintain balance within the
industry. From Dunlop’s point of view this would amount to a genuine pre-estimate of their possible
indirect losses.
Dunlop Pneumatic Tyre Co
New Garage and Motor Co
[1915] AC 79
On the other hand:

most an impossibility. On the contrary, that is just the situation when it is

This approach to penalty clauses in commercial contracts has been subsequently
’M & J
’Steria Ltd v Sigma Wireless Communications Ltd [2008] BLR 79; and McAlpine Capital Projects Ltd v Tilebox Ltd [2005]
disposed, where possible, to uphold contractual terms which fix the level of damages for
decline to consider a clause as a penalty where there is a good commercial justification that
This case concerned a contract that had been negotiated over many months through highly experi
Cavendish Square Holding BV
Talal El Makdessi
– Commercial Contracts

Lord Neuberger and Lord Sumption considered that Lord Dunedin’s dicta in Dunlop ‘had
be unfortunate since Lord Dunedin only intended his four tests to be considerations in a
perfectly adequately in consumer contracts but, as we have seen above, in commercial cases
the courts have adopted a broader approach by way of ‘commercial justification’ for clauses
Lordsvale Finance

Furthermore Global maintained that if Cadogan was entitled to those sums, Global sought
relief against forfeiture. Global also claimed that if the payments made were
non-refundable, so that Global forfeited those payments as a result of Global not paying
the full price, then this would amount to a penalty and was unenforceable. Global also
argued that Cadogan had suffered no loss and was entitled to nominal damages only, since
the plants had a value of $40–48 million in any event. It was held that Cadogan would
succeed in its claim since as a matter of construction the agreement made it plain that
Cadogan’s accrued rights under the contract were to be unaffected by the exercise of the
(2012) 147 CLR 205 where it was
penalty rule regulates only the remedies available for breach of a party’s primary obligations,
not the primary obligations themselves’. Also stating ‘there is a fundamental difference
surrender the goods, at the same time forfeiting any instalments already paid. Both deposits
and forfeiture clauses are regarded as guarantees that the contract will be performed.
The normal rule in relation to deposits is that if the money has been paid and the party
to whom it is paid breaks the contract, then the payer may recover the deposit either for
Where the person who has paid the deposit is in breach of contract, then one must

It may be noticed that the effect of a payee being able to keep a deposit which in fact
there is no, or little, relief available in cases of forfeiture which corresponds to that already
Credit Act 1974, s 100, or in contracts for the sale of land under the Law of Property Act 1925,
Where the court refuses to grant specific performance of the contract, or any action for the
, such relief will be granted ‘...
sale of the Gas Plants up to a maximum of US$10 million (plus any interest to which
Cadogan would be entitled) be paid to Cadogan with the balance, thus bringing the sum up
The plaintiff, who had entered a beauty contest and won the earlier stages, was prevented from com
it was clear that the plaintiff had lost a real chance of winning the
contest and as such was entitled to be compensated for that loss but, as we have already
noted, it does not always follow that what may be seen as speculative damages will the courts
(1951) 84 CLR 377, the court considered that the claim for loss of profits was so specula
tive that it would only award damages for reliance losses i.e. loss of expenses only. The

issue of causation was for WP to establish whether there was a real and substantial chance that
Separate from the issue of causation, however, is the issue of the quantification of the damages.
It does not follow that it is no longer relevant to consider the chances that WP would have
obtained the mandates. The evaluation of that chance is, however, not an issue of causation
but part of the process of the quantification of damages. It would be wrong in principle to treat
date were 100%. The judge was correct to reflect his view of the chances of WP obtaining the
mandate in his quantification of damages. In this respect the Court of Appeal did not disturb
the judge at first instance, finding that the chance of being some part of the contract was 60%
and that if WP had won some part of the contract, there was a 25% chance of being appointed
as the sole recruitment agency for Nomura and a 75% chance of being appointed with one or
more other firms. The judge considered that the overall chance of being awarded the contract
While damages may be available for losses which are clearly speculative, it is equally clear
that damages are not available as a punitive measure, since damages are purely compensatory
in nature. Nevertheless, damages are not confined to financial loss, though it is true that in
most of the cases discussed so far, the actions revolve around commercial contracts in which
fined to financial loss, the law is not as flexible as might first be supposed, since for many
years the principle was that physical inconvenience had to arise from the breach and not
, where loss of
In recent years a number of cases have arisen that have undermined the principle and

[2001] 4 All ER 801
At first instance the judge found that Mr Farley had not suffered any pecuniary loss on
of physical inconvenience. Second, the case was outside the category where the ‘very object
of the contract [was] to provide pleasure, relaxation, peace of mind’. Mr Farley then appealed
Their Lordships allowed his appeal, stating that it did not matter that the object of
the contract was not to provide ‘pleasure, relaxation, peace of mind’ provided this was
an important part of the contract and that the surveyor had been specifically requested
to report on the issue of aircraft noise. Their Lordships thus reinterpreted the first

oped today. Lords Neuberger and Sumption set out a number of reasons why the rule
continues to be necessary:
Firstly, one of the primary arguments levelled against the rule is that there is now a
growing body of statute law that is applicable to this field. The landmark legislation
in this field is the Unfair Contract Terms Act 1977 though the operation of this now
confined to B2B contracts and anyway the thrust of the Act very different to the role
of the penalty rule which, as we have seen, is confined to the circumstances where
there is a breach of contract and is applicable where the provision is ‘a secondary
obligation which imposes a detriment on a contract-breaker out of all proportion to
any legitimate interest of the innocent party in the enforcement of a primary obliga
tion’. The thrust of UCTA, however, is very different to the penalty rule in that it regu
lates exclusion and limitation clauses rather than remedies. In consumer contracts the
Consumer Rights Act 2015, replacing the Unfair Terms in Consumer Contracts Regula
tions 1999, in Schedule 2 Part 1 provides a list of terms which may be regarded as unfair
and which provides:
A term which has the object or effect of requiring that, where the consumer decides
not to conclude or perform the contract, the consumer must pay the trader a dispro
portionately high sum in compensation or for services which have not been supplied.
A term which has the object or effect of requiring a consumer who fails to fulfil his
obligations under the contract to pay a disproportionately high sum in compensation.
On the face of things, therefore, penalty clauses are controlled but the Act is far from
a generalised form of control, not least the fact that it is confined to consumer contracts.
The effect of the controls set up by the UTCCR 1999 can be seen in the
here the £85 charge was not considered by the Supreme Court to have infringed the regu
lations since the charge was ‘not contrary to the requirements of good faith’ since
ParkingEye had a legitimate interest in managing the car park for the benefit of users and
the charge was necessary to protect that legitimate interest.
It should be noted that in the UTCCR 1999 the assessment of unfair terms in consumer
contracts was limited to contract terms which were not individually negotiated. This
limitation disappeared from the Consumer rights Act 2015 so to that extent at least the
scope of regulation has been widened.
Secondly, the statutory provisions are far from comprehensive in dealing with penalty
clauses and for this reason the rule continues to be necessary, particularly in non-con
sumer contracts. Indeed, in 1975, the Law Commission in its Working Paper No 61, ‘Pen
alty Clauses and Forfeiture of Monies Paid’, suggested that the scope of the penalty rule
should be expanded much along the lines of the Australian position set out in
v Australia and New Zealand Banking Group Ltd
(2012) 147 CLR 205. Certainly Lord
Mance (at para 167) considered that before any attempt is made to abolish or even radi
cally alter the penalty rule, then a great deal more research was required before entering
into such an exercise. Similarly in 1999, the Scottish Law Commission in its Report on
Penalty Clauses (Scot Law Com No 171) recommended that there should continue to be
judicial control over contractual penalties, whatever form they take – whether payment
of money or forfeiture of money or transfer or forfeiture of property. It also recommended
that judicial control should not be confined to cases where the promisor is in breach of
contract following the Australian line in Andrews.
Thirdly, as Lord Hodge pointed out, there are major areas such as non-consumer con
tracts, notably non-consumer contracts, which are not regulated by statute and where
there remains significant imbalances in the negotiating power between the parties to the
contract so that such businesses have little say as to the terms of their contracts and
which require some protection.
Fourthly, it can be said that the penalty rule promotes uncertainty in commercial deal
ings as the contracting parties may not be able to foresee the judges’ value judgement on
whether a particular provision is exorbitant or unconscionable. Arguably, however,
because the rule is so limited, this means that parties are free to negotiate arrangements
to fix the consequences of a breach occurring and this in turn has the benefit of avoiding
expensive legal disputes. As Lord Mance (at para 266) stated: ‘The criterion of exorbitance
or unconscionableness should prevent the enforcement of only egregious contractual
provisions.’ Equally the proposal that the rule should not apply to commercial transac
tions in which the parties are of equal bargaining power and each have the benefit of
professional legal advice was not welcomed in the Supreme Court. It was considered that
such an application of the rule would ‘risk adding to the expense of commercial disputes
by requiring the court to rule on issues of fact about the bargaining power of the parties
and the calibre of their respective legal advisers’, per Lord Mance at para 259.
Fifthly, the penalty rule is a common feature of virtually all legal systems in the western
world and therefore an ‘abolition of the rule against penalties would go against the flow

of legal developments both nationally and internationally’, per Lord Mance at para 265.
Note also the dicta of Lords Neuberger and Sumption at para 37 in this regard.
One issue with the penalty rule as it now stands is that it is subject to the fact that it
can only be applied where there is a breach of contract – the so-called ‘breach limita
tion’. The intervention is further curtailed by the fact that the rule only regulates rem
edies available for breach of a party’s primary obligations, not the primary obligations
themselves. As we noted earlier, the rule as formulated by the Supreme Court applies
where the provision is ‘a secondary obligation which imposes a detriment on a con
tract-breaker out of all proportion to any legitimate interest of the innocent party in
the enforcement of a primary obligation’. The emphasis on ‘secondary obligations’
presents the situation that the application of the rule may depend on how the obliga
tion is framed within the agreement. Thus, if the agreement provides that a party must
do something within the contract and provides that if he does not do that act, he will
have to pay a sum of money to the other party, then the obligation to pay that money
is framed as a secondary obligation to which the rule will apply. On the other hand, it
may be possible to frame the obligation as a primary obligation and in which case the
penalty rule is avoided. Thus if the agreement does not impose an obligation to perform
an act (a ‘primary obligation’) but nevertheless provides that he will pay a sum of
money if he does not perform (a ‘condition’), then the obligation becomes a condi
tional primary obligation, which is therefore ostensibly outside of the penalty rule
since the conditional primary obligation is simply providing a contractual alternative
to damages. Such a way of avoiding the rule arises from the fact that the rule only
applies in the context of a breach of contract.
The effect therefore is that by careful drafting, it is possible on the face of things to cir
cumvent the rule by disguising it as a payment conditional upon performance of a pri
mary obligation. The distinction between the two forms, however, is not an easy one to
draw. Lord Hodge, however, was clear that where parties have circumvented the rule so
that the substance of the contract is that it imposes a punishment for breach of contract
in the form of a disguised penalty, the courts may intervene. The principle, however, is
always one of ‘substance not form’ as seen in
Robophone Facilities Ltd
[1966] 1
WLR 1428 and
ou think that the reasons provided by the Supreme Court provide sufficient
reason for the maintenance of the rule against penalties?

he ‘breach limitation’ continue to be an over-arching principle of the
penalty rule?

he rule be widened much along the lines of the Australian position set out
Australia and New Zealand Banking Group Ltd
(2012) 147 CLR 205?

ould you consider that ‘freedom of contract’ should continue to provide a univer-
sal legal value in the context of the penalty rule so that the rule should be abolished
in favour of a statutory regime?


An injured party to be in the same position they would have been in had the contract
The injured party can claim damages for loss of bargain/ profits (‘expectation losses’) and
Claims in restitution are conceptually different from those for damages for breach of
the contract had been entered into, that is, as if the contract had not been made.

‘cost of cure’ basis (
Ruxley Electronics and Construction Ltd


Westinghouse Electric and Manufacturing Co
Underground Electric Railways



Victoria Laundry

. Remoteness in contract was not the
Mercator Shipping Inc (The
Claimant will not be able to claim for losses which they could have avoided by the taking
British Westinghouse Electric and
Law Reform (Contributory Negligence) Act 1945 reduces the amount of damages that
The courts will still regulate agreements regarding (i) penalty clauses and (ii) the regula

Pearce and Halson, ‘Damages for Breach of Contract: Compensation, Restitution and Vindication’ (2008)
Oxford Journal of Legal Studies
Peel, ‘Remoteness Re-Visited’ (2009) 125
Law Quarterly Review
Phang, ‘The Crumbling Edifice? The Award of Contractual Damages for Mental Distress’ (2003)
Journal of
Business Law
Robertson, ‘The Basis of the Remoteness Rule in Contract’ (2008) 28
Legal Studies
Smith and Atiyah,
Atiyah’s Introduction to the Law of Contract
, 6th edn (Oxford University Press, 2006)
Taylor, ‘Expectation, Reliance and Misrepresentation’ (1982) 45
Modern Law Review
After reading this chapter you should be able to:
1. Explain the nature of an order for specific performance and know the effect of such an
The nature of the remedy
Specific performance is an order of the court which compels a defendant to carry out their
Equitable remedies and limitation of
While an application for an award of specific performance will usually be made where
In this case the vendor and her husband were the co-owners of a house which they had entered into
A contract for the purchase of a valuable antique clearly would not be compensated by damages

Contracts to pay money do not usually attract an order for specific performance since
In this case a husband, who was the owner of a matrimonial home, entered into a contract to sell the
against the husband and his daughter, thereby resulting in the break-up of the family.
that they have not carried out their obligations under the contract at the time specified in the
contract. Where, however, the parties have agreed that time will be of the essence then specific
The facts of the case were that the defendant had contracted to grant a sub-lease to the plaintiff,
provided the plaintiff did some external and internal repairs to the premises. The plaintiff did the
internal repairs but, though he was ready and willing to do the external repairs, he was unable to do
so because the defendant had by then done them herself at her own expense. The defendant repudi
ated the contract and the plaintiff claimed for an order of specific performance. At first instance the
application failed since the availability of the remedy was not mutual at the date of the contract
because the defendant could not have compelled the plaintiff to carry out the repairs. The decision
was reversed on appeal to the Court of Appeal. Goff LJ stated that the principle of mutuality is:
albeit in the light of the whole contract of the parties in relation to the subject-matter, and in the absence
of any other disqualifying circumstances, the court will grant specific performance if it can be done

(1977) 121 SJ 793, Megarry VC stated that specific performance should not be regarded as a
prize to be awarded to the zealous and denied to the indolent. In that case a delay of over two
The facts of the case were that the plaintiffs granted the defendants a lease of a unit in a shopping
Argyll Stores (Holdings) Ltd
Lord Hoffmann was prepared to accept that an order of specific performance could be
made in exceptional cases where a one-off result was required, for instance, where a landlord
required a tenant to comply with a covenant to repair premises under a lease, since here
For more on
refer to Chapter 12 .
case, since the court could not compel the defendant to work solely for the plaintiff, though
The decision in

was followed in the case of

Here the action must be commenced within six years from the date on which the cause of
the breach, rather than from the time any damage occurs, as in actions for negligence.
cedural advantage in framing the action in terms of a tortious claim.
By s 23 an
action for an account
shall not be brought after the expiration of any time limit
which is applicable to the claim which is the basis of the duty to account, that is, six years
cause of action accrued, then the limitation period does not begin to run until the disability
the limitation period had already started to run, then any subsequent disability has no effect
on the running of time for the purposes of calculating the limitation period.
The position here is governed by s 32(1) of the 1980 Act which provides:

y fact relevant to the plaintiff’s right of action has been deliberately concealed from him

he period of limitation shall not begin to run until the plaintiff has discovered the fraud,
concealment or mistake (as the case may be) or could with reasonable diligence have

or other liquidated pecuniary claim...and the person liable or accountable
therefore acknowledges the claim or makes any payment in respect thereof, the right shall
be deemed to have accrued on and not before the date of the acknowledgement or the last
The result of the above provision is that if a person owes a debt to another then, every
time the debtor makes a part-payment of the debt or acknowledges the debt, the limitation
period begins to run afresh from the date of each part-payment or acknowledgement of
the debt. By s 29(7), however, once the debt is statute-barred then the right of action can
not be revived by any acknowledgement or part-payment. An effective acknowledgement
must be made in writing signed by the debtor, or their agent, and made to the other party
Specific performance is an order of the court which compels a defendant to carry out their
The defendant is liable to criminal proceedings for contempt of court if they fail to
if damages are an adequate remedy, then an order
specific performance is generally not awarded unless the
The rule that damages must be shown to be inadequate before equitable relief will be
After reading this chapter you should be able to:
1. Understand the nature of quasi-contracts and the broader body of law known as the ‘law
of restitution’.
2. Understand the nature of actions to recover moneys paid where there has been a total
3. Know how moneys paid under a mistake of law can be recovered.
4. Understand the nature of
claims and how
can be used
within a contract.
The doctrine of quasi-contract lies within a broader area of law known as the
. Historically, actions based in quasi-contract arose individually, though they possessed
or contracted during his infancy or to the extent of principal and legal interest upon a usurious
Quasi-contract and the law
through imposition (express or implied); or extortion; or oppression; or an undue advantage
taken of the plaintiff’s situation, contrary to laws made for the protection of persons under
upon the
(emphasis added)
Lord Mansfield saw this action as one which arose independently of an action in either
This approach did not find favour after the abolition of the forms of action, with the passing
of the Common Law Procedure Act 1852, for two reasons. First, there developed a hardening
of the categories into which legal obligations fell, those not being tortious of necessity being
not tortious, had to come within the law of contract. Second, since such obligations fell
within the law of contract their existence within this category had to be justified in legal

An action will lie in quasi-contract to recover moneys paid under either a contract or

not in breach of contract. Thus any moneys paid in advance in a contract that is subse
quently frustrated, for instance, may be recovered in circumstances where there has been a
total failure of consideration. The
case is a typical example of the operation of quasi-
break of war. Since the buyer received no benefit from the contract there was deemed to be
a total failure of consideration and it was clearly a case where the seller would have been
A shipyard entered into a contract to design, build and deliver a vessel to the buyers. The design and
construction formed part of the consideration. The contract was subsequently rescinded by the ship
yard before the ownership in the vessel passed to the buyers. It was held that the shipyard was able to
refute the claim by the buyers that they were able to recover an instalment of the contract price on
(1871) LR 6 CP 78 where the plaintiff paid a watchmaker a premium of £24 to
apprentice his son to him for six years. After one year the watchmaker died, though it was
held that the plaintiff could not recover his money since the failure of the consideration was
covered by the Law Reform (Frustrated Contracts) Act 1943, s 1(2), as a sum ‘
pursuance of the contract before the time when the parties were so discharged’.
form their side of the bargain then the usual remedy is to sue for damages for breach of
contract. The reason for the rule apparently is that the courts baulk at attempts to apportion
is not an absolute one and where apportionment is easy, as in the case of a divisible contract,
In certain circumstances it may be possible to convert a partial failure into a total failure of
The plaintiff bought a car from the defendant and used it for some four months. The plaintiff then
discovered that the defendant was not the owner of the car and had no right or authority to sell it.
The plaintiff sued to recover the price and succeeded. He was entitled to treat the contract as
discharged as there had been a total failure of consideration. Lord Atkin stated:

despite the above decision in
being total.
A contract for a lease provided that the landlord should carry out certain repairs, that immediate pos
session was to be given, that the lease be executed within ten days of the agreement and that on
execution the tenant would pay the landlord £10. The tenant duly went into possession and paid the
£10 in advance and prior to the lease being executed. In fact the landlord failed to carry out the repairs
or execute the lease within the ten-day stipulation, and as a result the tenant vacated the premises
and claimed his £10 on the basis of a total failure of consideration. The court applied the strict rule
that a person receiving part of the benefit he contracted for under the contract cannot recover his
moneys in quasi-contract. The tenant had occupied the premises, albeit for a short period of time, and
thus he could not recover his £10, though, of course, he might have been able to claim damages for
breach of contract and thus the decision is probably correct and proper in such circumstances.
A person who was buying a car on hire purchase, and thus had no title to the car, sold it before all the
instalments had been paid. The car was then bought and sold by several persons until it was eventually sold
by the defendant to the plaintiff for £1,275. The plaintiff used the car for 12 months before being told by
the finance company that the car belonged to them but that he could acquire the title by paying off the
final amount owing on the hire purchase agreement, a sum of £175, otherwise they would want the car
It was clear from the case that the defendant could not claim that the plaintiff had derived some
much at the time of rescission because of depreciation. The plaintiff had paid the price to acquire
the car in this context was totally irrelevant to the contract for the sale of the vehicle.
case is a means of mitigating the rule as applied in
. Its application in this way can result in great harshness simply because a party has
case, and
case itself. Nevertheless, there is nothing wrong
with the principle within it if it were to be confined to dealers who are making the purchase in
order to resell the item in question and who therefore require good title. In the case of the
Recovering moneys paid in a void contract
The basic rule here is that money paid under a void contract is recoverable, though this rule
then it is possible to recover moneys paid under such a contract.

Until recently the general rule of English law was that money paid under a mistake of law,
standing or knowledge of the facts, was irrecoverable. The rule dates back many years,

Islington London Borough Council
[1996] AC 669. Despite its long pedigree the rule has been
For more on
refer to Chapter 10 .

In the House of Lords their Lordships were unanimous in deciding that the rule that
money paid under a mistake of law was irrecoverable should be abolished. There was disa
ment was not made under a mistake of law. Thus Lord Lloyd stated:
If it is right that the House of Lords can change the law by overruling a previous decision of
money, provided that the money was received in good faith in the first place. Such a defence
overrules that earlier one. But what about the losing party in the case that forms the earlier
emphatically declared that such a party could not so recover since they
had not paid any money under a mistake of law but because the court had ordered them not
can be seen

quantum meruit
claim is defined as a claim arising where goods are supplied or services
rendered by one person to another in circumstances which entitle them to be recompensed
claims arise in two situations:
1 by way of an action in restitution, or
2 from within a contract.
In this case a dispute arose out of a 25-year lease which provided for an annual rent of £207,000, an
extra rent of £59,000 for years 4 and 5 and a rent review in 1995 at the end of year 5. No review took
place and accordingly the rent, as per the terms of the lease, should have reverted to the sum of
Nurdin and Peacock plc

[1999] 1 All ER 941
the benefit or advantage provided. In such a situation the appropriate question to ask is
Here the plaintiff was employed as the managing director of the defendant company. By virtue of the
articles of association of the company the plaintiff was required to take qualification shares within two
months of taking office, failure to do so rendering him unable to act. The plaintiff failed to take up the
shares but, nevertheless, the company executed an agreement under seal in which it agreed to pay
the plaintiff. In fact, the resolution of the directors to affix the company’s seal to the agreement was
invalid, which rendered the agreement void. The plaintiff’s action to recover the promised remuneration
in contract must, of course, have failed since the contract was void. He could, however, succeed in
quantum meruit
for services already rendered.

where work is done after the frustrating event and still carries on, with the result that it may
, though it is, of course, possible that a new contract will be implied,
and their obligations under it as discharged, the innocent party can elect to claim in
for work done rather than to sue in damages for breach of contract. It should be noted
able to those in default. Second, the breach must entitle the innocent party to treat the
of the party in default allow the other party to treat the contract as discharged halfway
formance on a
quantum meruit
basis. By accepting the partial performance the innocent
The doctrine of quasi-contract lies within a broader area of law known as the law of
The broad parameters in which the courts will grant relief for unjust enrichment have

o him.





to another in circumstances which entitle him to be recompensed by that other by receiv
Beatson, ‘Courts, Arbitrators and Restitutionary Liability for Breach of Contract’ (2002) 118
Law Quarterly
Beatson, Burrows and Cartwright,
Anson’s Law of Contract
, 30th edn (Oxford University Press, 2016)
Burrows, ‘Contract, Tort and Restitution – A Satisfactory Division or Not?’ (1983) 99
Law Quarterly
Burrows, ‘Law Commission Report on Pecuniary Restitution on Breach of Contract’ (1984) 47
Modern Law
Burrows, ‘No Restitutionary Damages for Breach of Contract’ (1993)
Lloyd’s Maritime and Commercial Law
Remedies for Torts and Breach of Contract
, 3rd edn (Oxford University Press, 2004)
The Law of Restitution
, 3rd edn (Oxford University Press, 2011)
Campbell, ‘The Extinguishing of Contract’ (2004) 67
Modern Law Review
Fifoot and Furmston’s Law of Contract
, 16th edn (Oxford University Press, 2012)
Jones, ‘The Law of Restitution: The Past and the Future’, in Burrows (ed.),
Essays on the Law of Restitution
(1991), p. 4
Goff and Jones
The Law of Restitution

After reading this chapter you should be able to:
1. Understand what is meant by privity of contract.
2. Know and understand the effects of the doctrine of privity of contract.
3. Explain how the doctrine of privity can be avoided by way of actions in tort and collateral
4. Know and explain the exceptions to the privity rule with specific reference to exceptions
The rule in English law is that only the parties to the contract may enforce the contract
against each other, even if the contract was entered into with the sole intention of benefiting
Privity of contract
that even if the husband had furnished consideration for the promises of his father and
father-in-law he would still not have been able to enforce the contract since the terms of the
contract were not addressed to him; there was no intention to make the husband a party to
The precise reasons for the presence of the rule are somewhat unclear and over the years
several different theories have emerged that have attempted to explain its existence. For
sidered unjust to allow a person to sue on a contract which cannot be enforced against
gain a benefit that is accruing to them only by way of the goodwill of the parties to the
The appellants sold tyres to a distributor on the basis that he would not resell them below the appel
lants’ list price and that if the distributor sold the tyres to a trade buyer, the distributor would ensure
that the trade buyer would also have the price restriction clause imposed on him. The distributor
sold the tyres to Selfridge & Co. and imposed the price restriction clause in the contract and pro
vided that Selfridge would pay £5 to Dunlop in respect of each tyre sold in breach of the price
restriction clause. Selfridge sold the tyres to customers below Dunlop’s list price and were sued by
them in respect of each transgression and an injunction was issued restraining Selfridge from fur
ther sales of tyres below the list price. It was held that their action would fail since Dunlop had
Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd

contract with the intention that
will be the object benefiting from the
will be unable to sue on the contract despite the intentions of the par-

The only way in which
can have the contract

that the third party could compel a promisee to bring the action by starting
the action himself and then conjoining the promisee as co-defendant. This process was
rejected by the Court of Appeal who took a traditional stance in relation to the
The basic position as regards third parties has a particular effect in relation to consumer
protection. It was seen in Chapter 7 that in contracts for the sale of goods, for instance, the
warranties imposed by the Sale of Goods Act 1979.
Contracts for the benefit of third parties do not affect the validity of the contract as
action may, however, affect the position of the third party.
It is clear that a third party cannot enforce the contract against the parties to the contract.
losses recoverable by the promisee are likely to be nothing more than nominal damages.
This problem can be seen in the case of

since if the widow as administra-
above receives the goods by way of a birthday present and they prove not to be of satisfactory
quality then
has no right of action against the seller since
is not a party to the contract. Again,
’s only hope is to enlist the help of the purchaser of the gift.
In this case a husband booked a holiday for himself, his wife and his two children. His original
booking proved to be unavailable and a substitute was found. The holiday proved to be a disaster
and fell far short of what had been promised. The company admitted liability for breach of contract
but appealed on the basis of the £1,100 damages awarded by the judge at first instance, since this
figure was only just short of the full cost of the holiday. Lord Denning agreed that as regards the
husband’s losses alone the award was excessive, but that the assessment was correct as regards
the loss sustained by the family as a whole. He considered that a promisee, as a matter of general
principle, was entitled to recover damages on behalf of third parties who were beneficiaries of
the contract entered into by the promisee and that the third parties could, in turn, compel the
promisee to hand over to them such proportion of the damages as represented their losses. The
other members of the court upheld the award but did not openly support Lord Denning’s
[1975] 3 All ER 92
The vendors had contracted to sell land to the purchasers for £850,000 for themselves and £150,000
Woodar Investment Development Ltd
1 All ER 571
Undoubtedly the decision of Lord Denning represented a substantial inroad into the
doctrine of the privity of contract, but was one that was comparatively short-lived.

and the doubtful
reasoning within it in the form of the Package Travel, Package Holidays and Package
In this case the need to prove an interest worthy of protection by the promisee was ignored by the court.
The obtaining of the stay of proceedings is not always a straightforward exercise. In

[1967] 2 QB 31 it was held that the grant of a stay of proceedings was
ing the undertaking against the promisor.
Clearly the
case runs contrary to the principles contained in the
case and submits that
or an injunction.
Where the parties have entered into a contract for the benefit of a third party under which

The law of torts, in particular the law of negligence, has developed to give relief to third
has been given a present that has been manufac-
is injured or otherwise suffers loss, then
will have a right of action against the negligent person, as seen in

For more on quasi-
was meant to put an end to the arguments, the plaintiff resigned. The plaintiff then brought an action
for the debt owed to him by the company. The plaintiff’s brothers were cited as co-defendants in the
action against the company. The brothers counter-claimed on the basis that the brother by resigning
had forfeited his rights in respect of the debts owed to him by the company. As a third party the company
could not rely on the agreement in order to avoid the debt so the brothers sought a declaration that
the agreement bound the plaintiff and that his action ought to be stayed. It was held by Ormrod J that
however, that on the facts there was no reason why the plaintiffs, despite the fact that they
would not suffer injury or damage as a result of the actions of the defendants, could not
maintain the action against them. It is unclear why the plaintiffs took such a course of
The plaintiffs employed contractors to repair and repaint their pier. The plaintiffs specified in the
contract with the contractors that they had to use the paint manufactured by the defendants,
since they had been persuaded by the defendants that the paint would last seven years despite
the harsh conditions to which it would be exposed. The contractors purchased the paint from the
defendants but it soon became apparent that it did not match the specification represented by
the defendants to the plaintiffs. In fact the paint only lasted three months and approximately
£4,000 had to be spent remedying the defects. The problem for the plaintiffs was that, since the

The doctrine of privity of contract has often been subject to sharp criticism, in particular
doctrine that is by no means absolute since the courts and Parliament have seen fit from
transaction but by anyone to whom the debt is negotiated and who is deemed to be a ‘holder
in due course’. By virtue of s 38(2) the holder in due course may take action not only against
rights to be transferred to a third party where an insured person is insolvent. The core

the purpose for which they were intended, that is to compensate an injured third party, so
that they do not fall into the general funds of the insured where they may be swallowed up
Walford, acting as a broker, arranged a charterparty between the owners of a ship and a charterer.
The charterparty provided that the shipowners would pay commission owed to Walford by the
charterers. The shipowners subsequently refused to pay Walford’s commission and so he brought
an action for breach of contract as beneficiary under a trust. In such circumstances it was a normal
practice of the shipping industry for the charterers to sue as trustees on behalf of brokers and
this practice was acknowledged by the shipowners. It was thus possible for a broker to sue in the
name of a trustee promisor, namely, the charterers. From that proposition the House of Lords
found that the promisor could waive that requirement thus allowing the broker beneficiary to sue
in his own name.
Les Affréteurs Réunis SA
Leopold Walford (London) Ltd
Clearly the trust idea could have been used to drive a large hole in the doctrine of privity
of contract but this was not to be. The courts limited the application of the principle by
imposing the requirement that to create a trust certainty of intention must be shown
clearly from the circumstances of the case. Such certainty of intention to create a trust will
not be regarded as arising simply where the parties enter into a contract for the benefit of
It is not legitimate to impute into the contract the idea of a trust when the parties have given no indication that such was their intention.Similarly, in the same case, Du Parcq LJ stated:It is true by the use possibly of unguarded language, a person may create a trust...but unless
stances of the case, I think that the court ought not to be astute to discover indications of such
The above comments do not destroy the possibility of the occurrence of a constructive trust
Ricardo Consulting
()with the defendant on behalf of its parent company, the subsidiary would not be able to
[2000] 4 All ER 97, where he stated that the recovery of damages
in such circumstances can only arise where the claimant ‘expressly enters a contract as a
exception in
[1839] 6 Cl & F 600, which has been affirmed in
a breach of contract in circumstances where the contracting parties contemplated that a
breach by one was likely to cause loss to an identified or identifiable stranger to the contract.
The purpose therefore was to prevent a claim for damages from falling into a legal ‘black
The rule has been applied more recently in the House of Lords in the joint appeals of
[1994] 1 AC 85, where the so-called ‘black hole’ can be
enters into a
If the building
An application of the general rule
It may be argued
does not own the land or the building, no loss has been suffered and
ing clearly suffers damage but, since
is not a party to the contract, there is no right of
action against
Thus the claim falls into the ‘black hole’ with neither
being able

text of contracts for the carriage of goods. Thus a consignor of goods could recover damages
from a carrier for loss or damage to goods in transit, even if the goods had become the prop
erty of the consignee before the loss or damage occurred, and who had not acquired any
rights to sue the carrier under the contract of carriage. The effect of the joint appeals in the
cases, however, was to extend this principle to building
contracts. This meant that an employer could recover substantial damages from a contractor
on the basis that the employer had contracted on behalf of the owner of the land. A further
The Council wished to build a new recreational centre but, to avoid some of the financial constraints,
employed Morgan Grenfell (Local Authority Services) Ltd (‘MG’). MG entered into contracts for the
construction work with the defendants, Wiltshier Northern Ltd (‘W’), for the benefit of the Council. A
collateral agreement provided for MG to pay W and then the Council would reimburse MG, who would
assign to the Council all rights which MG had against W.
Darlington Borough Council

an entirely different ground – ‘the broader ground’. This broader ground states that
has a
in their own right and that the damages may be more than nominal
this being the loss of the value to him of performing the contract to provide
with the
had agreed to provide – referred to as the ‘performance interest’.
The facts of the case were that the contractor, McAlpine, was employed by Panatown to design and
Alfred McAlpine Construction Ltd v Panatown Ltd
At first instance the arbitrator rejected McAlpine’s defence, but the official referee on

the employer, Panatown, could not claim for the defective work. On the other hand, the
duty of care deed was also clearly intended to create a separate right of action by the site/
building owner against the contractor if the contractor was in breach of the terms in the
duty of care deed. There was no intention within this deed, however, to prevent Panatown
Clearly this reasoning poses a problem in that there is a risk of a double recovery arising
against McAlpine, one by Panatown and one by UIPL. It is this risk that forms the basis of
McAlpine’s obligations could be enforced not only by Panatown, but also by UIPL and
Lord Browne-Wilkinson considered that the direct cause of action given to UIPL pre
vented any claim by Panatown on the ‘narrower ground’. This is clearly correct since the
whole basis of the rule in
Panatown had suffered no damage to its performance interest and on this basis the House
is limited to situations where
damage is caused to property which is transferred to a third party by one of the contracting
parties. While the scope of the rule has been extended from contracts for the carriage of goods
to contracts generally, it is nevertheless bound by this restriction, at least for the moment. It
Contracts (Rights of Third Parties) Act 1999. Section 4 provides that, ‘Section 1 does not
affect any right of the promisee to enforce any term of the contract’.
any condition, right of entry, covenant or agreement over or respecting land or other property,
Lords Denning, Salmon and Danckwerts applied the literal rule to this

Rep 16a. For his part
can also enforce such covenants against the landlord. There is said
on the basis of privity
The facts of the case were that the plaintiff was the owner of a number of plots of land in Leicester
Square. The plaintiff sold the gardens to a purchaser who entered a covenant to the effect that he
would maintain the status of the gardens and that he would not build on the site. After the land in
question had passed through the hands of several purchasers it came into the hands of Moxhay, the
defendant. Despite the fact that Moxhay knew of the restrictive nature of the covenant in relation to
the land, he nevertheless proposed to build on it. The original party could not, of course, obtain dam
ages against Moxhay at common law for being in breach of the covenant since he was not a party to
the contract with Moxhay. Instead the plaintiff sought the equitable remedy of an injunction to restrain
Moxhay from building. The court issued the injunction on the basis that to allow the defendant to
ignore an obligation of which he had knowledge at the time he purchased the property was contrary
to the principles of equity and good conscience.
car? Is it possible for the hirer to restrain the new owner from using the car in a manner
normally grant an injunction only where, first, damages are inadequate and, second, the
unlikely in the normal course of things that the courts will grant an injunction in such
Despite the above it would appear that the courts have attempted to extend the principles
In this case the Dominion Coal Co. Ltd had a long-term charterparty of a ship, the
Lord Strathcona.
owners of the ship sold it and after a series of transactions it came into the hands of the Lord
Strathcona Steamship Co., the respondents, who were fully aware of the charterparty at the time of
the purchase and in fact specifically agreed with the sellers to abide by it. The respondents later broke
the charterparty when they refused to yield up the ship at the start of the charter period. The respond
ents were sued by the appellants but claimed as a defence that since they were not parties to the
original charterparty they were not bound by it. The Privy Council rejected the contentions of the
respondents and awarded an injunction restraining them from using the ship in a manner that was
inconsistent with the charterparty.
but also around the fact that the person attempting to enforce the restrictive covenant owns adjoining
Lord Strathcona Steamship Co.
Port Line Ltd
Ben Line Steamers Ltd
[1958] 2 QB 146 Lord Diplock considered the
Lord Strathcona

The facts of the case were that the minority shareholders in the first four defendants (‘the Russian com
panies’) agreed to sell their shareholdings to Leisure Investments (Overseas) Ltd (LIO Ltd). The Russian
companies were in fact English registered companies which had traded in Russia prior to the 1917 revolu
Law Debenture Trust Corporation plc
Ural Caspian Corporation Ltd and
[1993] 2 All ER 355
In his judgement, Hoffmann J considered that the principle in
De Mattos
only gave
rise to a possibility of an award of a prohibitory (negative) injunction, that is to restrain an
acquirer of this property from doing acts which are inconsistent with the performance of the
contract by the original contracting party. He stated that the principle has never allowed the
imposition of a mandatory injunction to compel the acquirer of the property to carry out an
obligation to perform covenants imposed on his predecessor. To support his position
In this case a shipping company had agreed to carry a drum of chemicals for the plaintiffs. The bill of
lading limited the shipping company’s liability to $500. The shipping company had contracted with the
defendant stevedores for the latter to unload the drum, specifically stating that the defendants were
[1962] 1 All ER 1

While the privity rule was fatal to the claim, Lord Reid stated that a third party could have
the benefit of an exemption clause in agency. While this exception to the doctrine of privity
will be dealt with in the next chapter, the comments of Lord Reid are worth noting. He
I can see a possibility of success of the agency argument if (first) the bill of lading makes it clear
that the stevedore is intended to be protected by the provisions in it which limit liability,
do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any
Reid’s statement did not go unnoticed, however, and it led to the development of ‘Himalaya’
Himalaya clause may read as follows:Without prejudice to the foregoing, every such servant, agent and subcontractor shall have
the benefit of all exceptions, limitations, provisions, conditions and liberties herein benefiting
the carrier as if such provisions were expressly made for their benefit, and, in entering into this
contract, the carrier, to the extent of these provisions, does so not only on [his] own behalf but
The Mah-kutai [1996] 2 Lloyd’s Rep 1].The remarks of Lord Reid were taken into account in the following case.
A M Satterthwaite & Co. Ltd (The Eurymedon)
[1975] AC 154
The decision in
The Eurymedon
has since been affirmed in the case of
Port Jackson
[1980] 3 All ER 257, where Lord Wilberforce stated that the principle contained in Lord
Reid’s statement was now of general application. The principle is, however, always subject
to the general principles contained in the law of agency. Thus, in
Southern Water
[1985] 2 All ER 1077 the attempt to bring third parties within the scope
of the exemption via agency failed on the basis that the third parties (who are the princi
is that this type of agency cannot arise without there being
at the time of the contract. Since the third parties, who were
subcontractors, could not possibly have been ascertained at the time the main contract
was entered into, they could not ratify the acts of the agent and thereby gain the benefit
of the exemption clause. The problem of agency arising in such circumstances must clearly
point to a major weakness in the use of agency to bring third parties within the ambit of
Himalaya clause, it would clearly be wrong for stevedores in the USA to be able to claim the
with the jurisdiction chosen by the carrier for the resolution of any disputes. The exclusive
induced into the contract by the undue influence, misrepresentation or some other legal
wrong of her husband, she will be entitled to rescind the contract. This therefore provides

The doctrine of privity of contract has been criticised, not so much with regard to the rule
the grounds of lack of privity. The Law Commission considered that such a general approach
could not address in a satisfactory manner all the situations in which third party rights arise.
For instance, the Law Commission considered that the problem of defining the class of third
party beneficiaries would not be solved by such a piece of legislation and that it was incorrect

the contract. The Law Commission also considered that the third party would have the right
With regard to defences, the Law Commission considered that the third party’s rights
Following on from its Consultation Paper No. 121, the Law Commission published its
of contract should no longer apply to prevent third parties from enforcing contracts that
to make the statute book because of the general election of that year. It was subsequently
The Act provides a major exception to the privity of contract rule – it is not a wholesale aboli


On this basis it would seem that all third parties will be assumed to have the right to enforce
the contract and that this right is cut down if, on a true construction of the contract, the
contracting parties do not intend a third party to have the right to enforce it. The meaning

of ‘purports’ was considered in the case of
Prudential Assurance Co. Ltd
[2007] 3 All
ER 946 where the court examined what was necessary to satisfy the requirements of that
‘to bear
In this case, a person entered into a contract with his solicitor for him to draft a will. The solicitor failed
to deal with the matter expeditiously so that the client died before the will had been drafted. The
potential beneficiaries, who failed to gain an interest in the deceased’s estate because of the lack of a
will, successfully sued the solicitor in tort. Clearly they had no right to sue in contract on the basis of
existing law of contract principles relating to privity of contract. Would they be able to succeed under
benefit on her. The nephew could only avoid liability if he could show that there was no
To what extent are a third party’s rights limited by the terms of the contract? This is dealt
and conditions imposed by the contract. Thus a third party does not have any greater rights
What remedies are available to the third party? This matter is dealt with in s 1(5) which
breach of contract are equally available to the third party seeking to enforce their rights
under s 1(1). The expression ‘action’ is understood to mean that the third party is only enti
tled to remedies that a court could award. The third party is not entitled to terminate a
not sue for a remedy under the law of restitution, for instance. The provision goes on to state
they had been a party to the contract. Thus the normal rules of law that govern such an
entitlement apply equally to the third party’s claim. They must mitigate their losses, they
cannot claim for damages which are too remote and subject to other restrictions which
apply to the remedy they are claiming. Thus the rules regarding time (the doctrine of laches)
ested third party, as in the case of
[1984] Ch 283. Similarly, the equitable rule that
‘Equity will not assist a volunteer’ will also be limited with the passing of the 1999 Act,


Section 2(2) provides that the assent referred to in (a) above may be by words or by conduct,
although if the assent is sent by post then the postal rules are specifically excluded from
sent of the third party. Alternatively the contract may expressly require that the third party’s
consent is required, but only in cases outside those stated in s 2(1)(a)–(c) above.
One of the difficulties with the general requirement that the consent of a third party is
required to cancel or vary the contract arises where the third party cannot be traced or is
a court may dispense with the need for consent if it cannot reasonably be ascertained

uld have been available to him by way of defence or set-off if the proceedings had been

brought by the third party, and

has the effect of making a third party’s claim subject to
The promisor,
may enter into a contract with
(the promisee) for the purchase of a car. It is agreed
will pay the purchase price to the third party,
transfers his car to
by reason of some other totally unrelated contract, then they may agree to insert an express term in
the contract for the sale of the car that

then, in any proceedings brought in reliance on that section by the third party, the court shall
reduce any award to the third party to such extent as it thinks appropriate to take account of
In its deliberations the Law Commission refused to make any recommendations as to
Section 7(1) provides that ‘Section 1 does not affect any right of remedy of a third party that
ing statutory and common law exceptions to the privity of contract rule. Thus a third party
will still be able to rely on actions in tort or collateral contract devices in order to take action.
Similarly, in appropriate cases they will be able to rely on Himalaya clauses and the law of
Act, such as ss 2 and 3, apply only where s 1 itself applies and not in any other
gence, except where personal injury or death results. Thus a promisor is not restricted in
By s 7(3) the provisions of the Limitation Act 1980 that apply to simple contracts and
falls outside the Package Travel, Package Holidays and Package Tours Regulations 1992), and
Mrs Beswick would now

could not pursue an action against the shipping company in vicarious liability because of
the presence of an exclusion clause. However, she successfully sued the captain and bosun
who were not within the ambit of the company’s exclusion clause. The effect of the Act
would now be to draw the protection of the exclusion clause not just around the company
itself but also around its employees, agent and subcontractors, but only in contracts for
the carriage of goods. Thus the plaintiff would still have an action for personal injuries
against the captain or bosun today, though not if her action was to recover for damage to
those seen in
Alfred McAlpine Construction
should now be placed on a some
what simpler footing, provided always that the rights of third parties are not excluded. It
is that one party, the employer, is contracting on behalf of a third party and for their
malities are not complied with. For instance, in the law of trusts, in order to create an express
Re Kay [1939] ChD 329, have always refused such applications. The reasoning in these cases is that the courts wi-ll not allow the beneficiaries to compel the trustees to seek specific perfor-mance, since this would be allowing the beneficiaries to enforce indirectly what the law
eficiaries will almost invariably fall within s 1 either because the trust is stated to be expressly
for the benefit of the beneficiaries or because the trust purports to confer a benefit on them.
landlord and tenant.
The scenario that arises here concerns a situation where a landlord (
) gives a lease (the ‘head lease’)
to a tenant (
), who then gives a sub-lease to a subtenant (
). Of course there is privity of contract

A third party could persuade the buyer to enforce the contract against the seller but the
to a situation where a
can be recovered if there is a total failure of consideration by one party.
Married Women’s Property Act 1882, s 11 – a husband’s life assurance for the benefit of
by the original party to the transaction but by anyone to whom the debt is negotiated

Section 1(1) – a third party can enforce a contract made for their benefit, or when a con
as a member of a class or as answering a particular description but need not be in existence
Adams, Beyleveld and Brownsword, ‘Privity of Contract: The Benefit and Burdens of Law Reform’ (1997)
Modern law Review
Andrews, ‘Strangers to Justice No Longer – The Reversal of the Privity Rule Under the Contracts (Rights
of Third Parties) Act 1999’ (2001)
Cambridge Law Journal
Beatson, Burrows and Cartwright,
Anson’s Law of Contract,
30th edn (Oxford University Press, 2016)
Burrows, ‘Reforming Privity of Contract: Law Commission Report No 242’, [1996]
Lloyd’s Maritime and
Commercial Law Quarterly

Coote, ‘The Performance Interest, Panatown, and the Problem of Loss’ (2001) 117
Law Quarterly Review
Flannigan, ‘The End of an Era (Error)’ (1987) 103
Law Quarterly Review
Cheshire, Fifoot and Furmston’s Law of Contract,
16th edn (Oxford University Press, 2012)
Law Commission Consultation Paper No. 121,
Privity of Contract: Contracts for the Benefit of Third Parties,
Law Commission Report No. 242,
Privity of Contract: Contracts for the Benefit of Third Parties
Macmillan, ‘A Birthday Present for Lord Denning: The Contracts (Rights of Third Parties) Act 1999’ (2000)
Modern Law Review
After reading this chapter you should be able to:
1. Know how contractual rights may be assigned both at common law and in equity.
2. Know the requirements needed for a voluntary assignment of contractual rights at
common law.
3. Know the requirements needed for a voluntary assignment of contractual rights in equity.
4. Understand the principles applicable for a statutory assignment of contractual rights
under the Law of Property Act 1925.
5. Know some of the other factors that apply to the assignment of contractual rights, such as
rights which are not assignable.
6. Know the general principles relating to the assignment of liabilities.
See Chapter 19 for
Assignment of contractual rights
This chapter will be concerned with the means by which this chose in action can be
place either where a party to a contract dies or where they are declared bankrupt. In the case
of death, the contract survives both against and for the benefit of the estate, thus allowing
trustee may take steps on behalf of the estate to enforce it. The ability of the trustee to
there is a breach of contract after the commencement of the bankruptcy, the right to enforce
to intervene and take any moneys recovered by the bankrupt which are not required for the
out of a breach of contract.
At common law the general principle was that choses in action could not be assigned, with
the exception of those involving the Crown and the assignments of negotiable instruments.
The problem of assignment at common law led to the development of a doctrine in equity

the assignment is said to be non-absolute. This may occur in three circumstances:


, if, for instance, the assignor
decides to transfer only part of their rights in a debt owing to them under a contract.
An assignment may be by way of a charge. Unlike a mortgage, which transfers an entire
fund to the assignee, a charge only entitles the assignee to a payment out of the fund.
In this case a schoolmaster, in consideration for a loan of £15, assigned such part of his income and
assignment of the schoolmaster’s salary since it was only mere security that enabled the lender to have
recourse to the salary should the state of indebtedness render this desirable. The assignment merely
amounted to a charge on the salary and was thus not absolute.
A firm of building contractors executed an assignment which read:
Durham Brothers
its commencement or cessation is conditional
Anson’s Law of Contract



, the action is one
need for the assignee to join the assignor in the action. The assignee can sue in their own
In a non-absolute equitable assignment of an equitable chose in action, as we have



, the basic premise
still presides, in that no particular form is required, and it is thus possible for such an assign
-cies were handed by a father to his son, and at the same time it was requested that the
be effective as a valid assignment despite the fact that no notice of the assignment was given
It should be noted that it is always possible for the contract itself to provide that any
An equitable assignment of an equitable interest is void unless it complies with s 53(1)(c)
be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised by writing or by will.It should be noted that this provision covers equitable choses in action comprising both
The Law of Property (Miscellaneous Provisions) Act 1989, s 2(1) provides:
A contract for the sale or other disposition of an interest in land can only be made in writing
and only by incorporating all the terms which the parties have expressly agreed in the docu
the form of mere permission. The language is immaterial if the meaning is plain. All that is
It can be seen from the above that the writing encompassing the assignment can be directed
Notice may be either to the assignee or to the promisor (debtor).
An assignment is ineffective unless the assignor or someone acting on their authority has
(1885) 31 ChD 282 that a person can have
right to repudiate the assignment when they gain knowledge of it.
The basic rule in notice to the promisor (debtor) is that notice of an equitable assignment
to the debtor is not required to perfect the title. There are, however, sound reasons why such
First, should the debtor make any payments to the assignor in ignorance of the assignment,
the assignee will nevertheless be bound with respect to those payments. The assignee will not,
for instance, be able to recoup from the debtor any moneys lost by reason of the assignor
(1828) 3 Russ 1, an assignee should give
’-ally direct the debtor to pay or transfer the benefits under the contract to the third party as an assignee, rather than in some other capacity such as, for example, an agent for the prom-isee/creditor. If the notice does direct the debtor to pay the moneys to a third party as an agent of the promisee/creditor, then the debtor will not be liable to the assignee should they
is also true in the case of a voluntary equitable assignment of a chose in action. In the latter
case all the formalities to give effect to the assignment of the chose in action from the assignor
It was stated earlier that s 25(6) of the Judicature Act 1873 introduced a general form of
Any absolute assignment by writing under the hand of the assignor (not purporting to be by
way of charge only) of any debt or other legal thing in action, of which express notice in
writing has been given to the debtor, trustee or other person from whom the assignor would
having priority over the right of the assignee) to pass and transfer from the date of such notice:
1 the legal right to such debt or thing in action;
2 all legal and other remedies for the same; and
3 the power to give a good discharge for the same without the concurrence of the assignor.
It should be noted that s 136 has not abolished equitable assignments and these will continue
to exist where an assignment does not comply with the requirements of s 136. In truth all the
provision has done is to allow the rights of the assignee to be exercised in a more direct manner
so that they can sue in their own name without the need for joinder of the assignor arising, as

[1903] AC 414.
Care must be taken in construing the words ‘any debt or other legal thing in action’ in
s 136(1). At first sight this appears to confine the statutory form of assignment to legal choses
in action, that is, those choses in action which were formerly only enforceable within the
benefit of the contract to the assignee, as an assignee and not merely as an agent of the
assignor. Apparently if the date or the amount of a debt which is the subject of an assignment
is incorrectly stated, then the assignment will be invalid. It would seem that the main point
is that the terms of the assignment must be stated with a sufficient degree of certainty.
Notice of the assignment must be given to the debtor/promisor
It was held in

[1942] 2 KB 1 that notice takes effect when it is
received by the debtor/promisor. The postal rules, for instance, have no application here.
The problem that arises here occurs where an assignor decides to make two or more assign-
culty, but if it transpires that moneys owed under the chose in action by the debtor are

lose their priority to a subsequent assignee who, having no knowledge of the first assignee’s
Where the interest to be assigned is an equitable interest under a trust fund, then the
When an assignee takes the assignment of the benefits of the contract from the assignor, they
also take the risk of any defences that may be available to the debtor/promisor against the
assignor should the assignee have to take action against the debtor/assignor. The assignee is
solely to equitable remedies that may be available to the debtor. It will include common law
not raise against the assignee any personal claims they may have against the assignor. This
problem is particularly prevalent in claims of fraud that may have accrued against the
assignor by the debtor. The problem is well illustrated by the following case.
The Union Trust was induced into a contract to buy a newspaper by the fraudulent misrepresentation
of a person named Price. The purchase price was £1,000, of which £200 was payable immediately and
the rest by instalments. Price assigned the £800 debt to Stoddart who took it without knowledge of
the fraudulent actions of Price. The Union Trust were subsequently sued by Stoddart for the moneys
owing, but they counter-claimed for damages exceeding the £800 on the basis of the fraud that had
Union Trust should have sought the rescission of the contract rather than merely damages, since this
action would tend to strike at the existence of the contract itself rather than at the more personal liabil
ity of the assignor to pay damages.
Union Trust
Where the equities accruing to the debtor arise out of a separate contract or transaction

Tower Publishing Co
[1897] 1 Ch 21 it was held that a contract by an author
to write a book for a publisher amounted to a personal contract so that the author could
restrain the publisher from assigning the contract to another. The logic here is that the
author entered into the contract with the publisher on the basis of the latter’s skill and
judgement in that capacity.
Public policy
As explained under ‘Contracts tending to corrupt the public service’, the law does not allow

(1841) 8 M & W 149) and similarly
(‘Contracts prejudicial to the administration of justice’) it does not allow a wife to assign her
(1884) 27 ChD 160).
The general rule is that it is only the benefits of a contract that are assignable, not the bur-
dens, unless the consent of the promisee is first obtained. The reasoning here is that it should
not be possible to compel the promisee to accept performance of the contract from someone
other than the promisor. It is nevertheless possible to achieve this position by novation
Discharge may take the form of: extinction of the
investigate sums due from one party to another
accepted by creditors in satisfaction, or adjustment,
goods is a vital stipulation, the breach of which
delays the vesting of a right until the occurrence of
binding contract requires
where there is a mistake as to the terms of a
duress (i.e. illegitimate pressure resulting in
cause of action) preventing a person from denying
classified. Innominate terms in a contract are also
delay in the assertion of a right will defeat equities.
document used to bring into existence a term of
This type of authority,
abuse of dominant position 477–8
abuse of process 560–1
acceptance 28–31,
battle of the forms
battle of the
communication 40–9
munication of acceptance
conditional 32–3
intention to be bound 31
counter-offers, and 31–40
cross-offers, and 28
definition 28–30
fact of 30–1
inference by conduct 30–1
objective intention of parties 16
transmission of unanimity 29–30
unilateral contracts 31
accord and satisfaction 526,
account, action for
account for profits 557–62
accountants 299, 313
limitation of actions, and 632–3
actions for payments made under mis-
take of law 640–3
principles 641
actions to recover money paid 636–40
converting partial into total failure of
consideration 638–9
partial failure of consideration 638
recovering moneys paid in void
contract 640
total failure of consideration 637
Additional Residential Payment (ARP)
adequacy of consideration 74–5
adhesion contracts
administration of justice
contracts calculated to oust 442–5
advancement 452, 454–5
intention to create legal relations
offer, and 20
affirmation of contract 507–15,
rescission, and 322
privity of contract, and 659
agreement 15–66
assessing presence of 15–7
agreement, discharge by 525–9
express provision for 528
form of 526–7
rescission 526–7
variation 526–7
Agricultural Industries Confederation
(AIC) 227
anti-competitive agreements 477–8
anticipatory breach 501–2, 504–7, 512,
513, 523, 571, 599,
apprenticeships 185
arbitration 445–6
illegality, and 445–6
Ashbourne Management Services Ltd
(AMS) 275
assault 442
assignment 686–98
absolute 689
assignees taking subject to equities
chose in action 686
consideration 693–4
form 690–1
joinder of assignor 690
notice 692
requirements 690–3
liabilities 697
non-absolute 689–90
non-assignable rights 696–7
express exclusion 696
personal contracts 696–7
public policy 697
rights of action 696
priority 694–5
statutory 693–4
essentials 694
voluntary, common law 687–8
voluntary, equity in 688
assumpsit 4–5
auction sales 22,
forms 22
offer, and 22
audit/auditors 460
available market 568–9
damages, and 569
bankruptcy 94, 292, 517, 626, 687
constructive notice 421–2
identity 379
lending by 263
overdrafts 273–4
undue influence 413–14
unfair terms 429–30
bargain, notion of 11
bargaining power
equitable relief 428–9
good faith 429
inequality of 428–30
legislation, and 429–30
unfairness 429–30
advice to clients 313
battle of the forms 34–40, 222
analysis in terms of offer and accep-
tance 37–40
claimant alleged 39
conduct of parties, and 36–7
contractual document 40
defendant alleged 39
modern examples 39
objective approach 36, 38
prevail clause 40
subjective approach 36
beneficiaries 654
will, under 675
bilateral contracts
consideration, and 82–3
intention to create legal relations,
and 104–5
revocation of offer 49–52, 64–5
bilateral discharge 526–7,
bilateral offer 18
blue pencil test 483
breach of contract 498–521
breach limitation 619
damages 608–12
Note: page references in bold refer to entries in the Glossary
breach of contract (
effects 507–21
non-acceptance, caused by 567–8
non-delivery, caused by 567
primary obligation 498–500
repudiation 501–6
right to affirm contract 507–15
right to treat contract as discharged
loss of right 518–21
burden of proof
damages 553–4
economic duress 405–7
business common sense 160–1
business efficacy test 168–71, 168–74
business liability 237–40
business to business (B2B) 176, 178
businesses and consumers (B2C) 178
capacity 109–21,
corporations 110, 116–21
mentally disordered persons 110
natural persons 109–16
necessaries 110
cardinal rule 173
cartel 478,
damages, and 405–6, 578–80
economic duress
caveat emptor
certainty of terms 56–9
clause for resolution of disputes 58
contract uncertain but performance
contract uncertain but yet to be
performed 56
executory contracts 59
interim executory contract 56, 59
loosely drafted contract
champerty 696,
banks, by 273–4
chartered corporations 110
part payment of debts, and 92
chose in action 696, 697,
assignment 686
intention to create legal relations
coercion of will 400–1
collateral contracts 147–8,
exemption clauses, and 236
express terms 147–8
parol evidence rule 148
privity of contract, and 657
terms of mere representations 147–8
commercial agency agreements 478–9
commercial agreements
intention to create legal relations
commercial contracts 606
common mistake
communication of acceptance 40–9
e-commerce 48–9
general rule 40–1
instantaneous forms 45–7
emails 47–8
manifestation 40
postal rule 43–5
reasonableness 45
prescription of particular mode 45
silence 41–3
telex 46
unilateral contracts 42
waiver 42
companies 116–21
capacity 116–21
ultra vires
ultra vires
damages, and 550
Competition and Markets Authority
(CMA) 278–9
compositions with creditors
part payment of debts, and 92–3
condition precedent 32, 55, 356–7, 493,
conditional acceptance 32–3
conditions 202–4,
consensus ad idem
consensus mistake
consideration 11, 67–97,
actions to recover money paid 636–40
adequacy 74–5
bilateral contracts 82–3
definition 68–9
development 67–8
economic value 74–5
equitable assignment 692–3
exchange of promise 73
executed 69
executory 69
insufficiency 75–95
moving from promisee 73–4
part-payment of debts 84–95
cheques 92
common law rule 84–7
compositions with creditors 92–3
exceptions to rule in
Williams v Roffey Bros
, effect 93–5
partial failure 638
past 69–70
Bills of Exchange Act 1882, s 27 72
exceptions to rule 70–2
Lampleigh v Braithwait
, rule in 70–1
Limitation Act 1980, s27(5) 71
statutory exceptions 71–2
performance of existing obligations
claimant bound by existing con-
tract 79–83
economic duress 79–81
existing contractual duties owed to
third parties 83–4
policing 76–8
promissory estoppel 81–3
public duty imposed by law 76–9
privity of contract, and 73
promissory estoppel
simple contract 67–8
something of value 68
specialty contract 67–8
sub-principles 69
sufficient 74–95
total failure 637
privity of contract, and 656
valuable 74
construction of contracts 149
advance delivery bonds 162
business common sense 160–1
contextual approach
desperate remedy 154
literal approach
‘old intellectual baggage’ and evo-
lution 152–4
seminal re-statement of interpreta-
tion 151–4
widespread injustice 154
contextualism 155
correction of mistakes 161
estoppel by convention 163–4
factual background 150
intentions of parties 154–5
pre-contractual negotiations 156,
158, 159, 162
principles 154–64
exclusionary rule 156–9
matrix of fact 155–6
meaning of words 159
objective test 154–5
presumption, linguistic mistakes
rectification 161, 163
constructive notice
avoiding 419–26
banks, and 421–2
consumer contracts 606
Consumer Credit Act 1974 263
Consumer Credit Act 2006 263
consumer insurance contract
meaning 297
Consumer Insurance (Disclosure and
Representations) Act 2012 315–9
basis of the contract clauses 319
careless misrepresentations 318
duties of consumer 316–7
qualifying misrepresentation 317
reasonable care 316–7
otection 7
Consumer Protection (Distance Selling)
Regulations 2000 195–6
cancellation, right of 196
performance of contract 498
Consumer Rights Act 2015 (CRA) 140,
175–8, 340, 429–30, 494, 515, 617
buyer beware 175
caveat emptor 175
consumer contracts for goods, digital
content and services 179–87
contracts for supply of digital content
contracts where trader supplies ser-
vice to consumer 185–7
definitions within 177–8
business 178
consumer 177
Digital content 178
goods 178
individual’s trade, business, craft or
profession 178
microbusinesses 177
person 177
supply 178
trader 177
European Directives, and 176
implied terms in contracts outside
implied terms in contracts within
intention 176
overview 175–7
right to reject 520–1
Consumer Rights Act 2015 Part 2
application 257
bar on exclusion or restriction of
negligence liability 276
contra proferentem
rule 277
contracts and notices 257–8
duty of court to consider 279
enforcement of law 277–9
overview and history 255, 257
principles 259–76
term or notice being unfair 277
terms and notices within 259
transparent, terms and notices 277
consumer to consumer (C2C) 176, 178
contra preferentem
rule 228, 230,
definitions 9, 13
evolution 3–5
contracts of adhesion 7–8
contracts of employment
restraint of trade, and 474–5
Contracts (Rights of Third Parties) Act
1999 674–82
cancellation or variation of contract
by original parties 676–7
defences available to promisor 677–9
effect 680–2
excluded contracts 679–80
general right of third party 674–6
third parties, relating to 680
contributory negligence 599–601,
Act of 1945 599
fault 599
fraudulent misrepresentation, and
Contributory Negligence Act 335
counter-offers 31–40
clarifying terms 33–4
conditional acceptances, and 32–3
effect 31–2
covenants 3–4
compositions with
with creditors
acceptance, and 28–9
crystallising concept 576
custom 145
terms implied by 196
damages 328–36, 549–624
actions for agreed sum 563
actual losses 555
assessment 550–78
tax, and 577–8
time, question of 569–7
available market 568–9
breach of contract 608–12
burden of proof 553–4
causation, and 578–80
compensation 550
contractual provisions relating to
limitation 601–8
contributory negligence 334–6,
cost of cure 563–6
deposits 609–12
difference in value 563–6
equitable relief, in lieu of 556
expectation loss 550
fiduciary obligation, and 559
forfeiture clauses 609–12
fraudulent misrepresentation 328–31
gain-based 561–2
innocent misrepresentation 332
in lieu of rescission 325–8
in lieu of specific performance and
injunction 631
limitations on availability 578–96
liquidated 602–8
market, and 567–9
measure under s2(2) 332–4
misrepresentation, for 328–36
mitigation of loss 596–9
negligent misrepresentation 331
non-acceptance, breach caused by
non-delivery, breach caused by 567
non-pecuniary losses 612–19
not adequate remedy, where 626–7
penalties 602–8
personal preference, and 566
quantum, factors influencing 596–619
reliance loss 550–4
remoteness 564
remoteness of
restitutionary loss 554–62
skimped performance 558
speculative 612–19
time, question of 569–77
rule 492,
offer, and 55
offer, and 55
deeds 125
formalities 125
del credere
Statute of Frauds section 4 134
delegatus non potest delegare
deposits 609–12,
Digital content 182
Director General of Fair Trading 278–9
discharge by agreement
agreement, discharge by
discharge by breach
of contract
discharge by performance
dishonesty 308
displays of goods for sale
offer, and 20–2
divisible contracts 495–6, 522,
draft Act 255
capacity 110
necessaries 110
Dunlop v Lambert
, rule in 660–4
duress 397, 398–33,
common law doctrine 398–407
early doctrine 398
economic duress
economic duress
effects 407
rescission, and 407
e-commerce 48–9
communication of acceptance 49
economic duress 79–81, 398–407,
burden of proof 405–7
causation 406–7
coercion of will 400–1
emergence of doctrine 398–9
illegitimate pressure of threat 401–6
protestations of victim 405–6
tests 399–400
emails, communication of acceptance
employment law
intention to create legal relations 106
entire agreement clauses 148–9
equality of bargaining power
gaining power
equitable assignment 692–3
equitable estoppel
equitable relief
bargaining power, and 428–9
damages in lieu of 556
equitable remedies 625–31
mistake in 379–91
voluntary assignment 688–93
equity will not assist a volunteer 630
convention, by 163–4
promissory 81, 83
estoppel by convention 163–4
ex turpi causa non oritur actio
ex turpi causa
principle 463–4
exclusion clause
exclusive trading 476–7
executed consideration
executory consideration
executory contracts
certainty of terms, and 59
exemption clauses 217–85,
collateral contracts 236
common law limitations 217–19
construing 228–34
contra preferentem
factors limiting effectiveness 234–55
fundamental breach of contract
carriage of goods by sea 231
Unfair Contract Terms Act 1977,
incorporation by notice 219–25
adequate steps 220–2
contractual document 219
degree of notice required 219–24
nature of exemption clause 222–25
time when notice given 224–5
incorporation by previous course of
incorporation by signature 218–19
incorporation into contract 218–28
misrepresentation, and 234
nature of 222–5
negligence 233–4
overriding oral undertaking 236
protecting third parties in 668–70
statutory limitations 236–55
third parties 235–6
Unfair Contract Terms Act 1977
Unfair Contract Terms Act 1977
expectation loss 550,
express terms 140–55
collateral contracts 147–8
construction of contracts 149
construction of contracts
entire agreement clauses 148
good faith 201
incorporation of statements 140–7
Consumer Contracts 141
Consumer Rights Act 2015 140
custom 145
fraudulent misrepresentation 144
importance of statement 142
incompleteness 146–7
invalidity 146
non-operation 145
parol evidence rule 144–5
reduction of contract into writing
special knowledge or skill 143–4
timing 141
mere representation 140
misrepresentation 140
contracts prejudicial to 447
family arrangements 99–100
fiduciary obligation
damages, and 559
fiduciary relationship 296–8, 296–8
fitness for purpose 193,
force majeure
forfeiture clauses 609–12,
formalities 124–36
contracts required to be evidenced in
writing 130–5
contracts required to be in writing
leases 128
options 128–30
forms of action 3–4
limitation of actions, and 632
fraudulent devices 311
fraudulent misrepresentation 144,
carelessness 312
contributory negligence, and 600
damages, and 328–31
dishonesty 308
express terms, and 144
free on board contract
freedom of contract 5–6, 8
freehold land
frustration 530–46,
destruction and unavailability of
subject matter 533–4
development of modern doctrine
emergence of doctrine 530–1
express provision for 540
inability to comply with specified
manner of performance 535
leases 537–8
legal effects 540–5
common law 540–1
non-occurrence of central event
officious bystander test 532
self-induced 539
supervening illegality 537
unavailability 535–7
fundamental breach of contract
exemption clauses, and 231–3
Gambling Act 2005 451–2
good faith 196–202
bargaining power, and 429
contractual term, as 196–202
express term 201
influence of principle 198–9
meaning 202
presumed intention of parties 198–9
unfair terms in consumer contracts
Unfair Terms in Consumer Contracts
Regulations 1999 196
minors, and 116
Statute of Frauds section 4 131–2
hire purchase
ignorance of law
illegality, and 452
illegality 434–87
affront to public conscience 450
arbitration 445–6
classification 435–6
commission of act wrong at common
law 441–2
common law 441–8
contracts calculated to oust jurisdic-
tion of courts 445–6
contracts prejudicial to administra-
tion of justice 442–5
contracts prejudicial to status of mar-
riage and family 447
contracts tending to corrupt public
service 446
effects 448–57
Gambling Act 2005 451–2
ignorance of law, and 452
Law Commission, and 457–68
nuptial agreements and maintenance
public policy 435, 441, 442–8, 450
recovery of money or property 453–7
illegal contract not relied on 456–7
illegal contract withdrawn from
parties not in
pari delicto
reform 457–68
reliance principle 451, 452
sexually immoral contracts 447–8
tatute 436–40
contract prohibited 436
contracts performed in unlawful
manner 437–40
supervening 537
implied contract 636
implied terms 164–96
business efficacy test 165, 168–74
consumer contracts for goods, digital
content and services 179–87
Consumer Protection (information,
cancellation and additional
charges) Regulations 2013 195–6
Consumer Rights Act 2015
sumer Rights Act 2015 (CRA)
contracts for supply of digital content
contracts for supply of goods 179–82
contracts where trader supplies ser-
vice to consumer 185–7
courts, role of 164
custom 196
fact, as matter of 166–74
law, as matter of 174–8
courts, by 174–5
statute, by 175–8
officious bystander test 166–8
Sale of Goods Act 1979 187–94
Sale of Goods Act 1979
Supply of Goods and Services Act
1982 194–5
in pari delicto, potior est conditio defenden-
indemnity 321–2
Statute of Frauds section 4 132–4
Industrial Revolution 5, 6
inequality of bargaining power 428–30
bargaining power
legislation, and 429
information, requests for
offer distinguished 26–7
injunctions 630–1,
damages in lieu of 631
nature of remedy 630
prohibitory, limitations on
use 630–1
innocent misrepresentation 315
innominate terms 204–9
Insurance Act 2015 312
intention to create legal relations
advertisements 105–6
bilateral contracts 104–5
burden of proof 104–5
clergy 106–7
commercial agreements 101–7
employment law 106
family arrangements 99–100
general principles 98–9
letter of comfort 104
social and domestic arrangements
statutory obligation 106
intermediate terms
intra vires
invitation to treat
offer distinguished 19
jurisdiction of courts
contracts calculated to oust 445–6
contracts calculated to oust adminis-
tration 442–5
laches, doctrine of
land, sale or disposition of interest in
formalities 126–8
Law Commission
privity of contract, and 671–3
reform of illegality defence, and
law reform
privity of contract 671–3
Law Reform (Frustrated Contracts) Act
1943 541–5
contracts falling outside 544–5
financial readjustment 542–4
recovery of money paid 542
formalities 128
frustration 537–8
legal relations 11
banks 263
letter of comfort 104,
limitation clauses 217,
limitation of actions 631–3,
acknowledgement, and 632–3
Act of 1980 631–2
action for account 632
actions founded on simple contract
actions founded on speciality con-
tract 632
fraud, and 632
mistake, and 632
part-payment, and 632–3
suspension of 1980 Act by virtue of
disabilities 632
liquidated damages 602–8
Marine Insurance Act 1906 309, 312
contracts prejudicial to 447
material circumstance 297
material misrepresentation 298–300
Mental Capacity Act 2005, 110
Mental Health Act, 110
mentally disordered persons
capacity 110
certified insane 110
not certified insane 110
necessaries 110
merchantable quality
minors 110–16
beneficial contracts of service 112–13
capacity 110–16
contracts binding on 111–13
guarantees 116
necessaries, contracts for 111–12
restitution 115–16
tortious liability 114–15
voidable contracts 113–15
misfeasance 4
misrepresentation 140, 289–350,
damages for
definition 290
establishing 314
exclusion of liability 336–45
entire agreement clauses 337–8
fraud 337
non-reliance clauses 338–9
statutory contracts 339–45
exemption clauses, and 234
fraudulent misrepre-
inducement, fact of 298–300
innocent 315
material 298–300
mere representations, and 290
nature of 307–15
negligent misrepresen-
reliance 300–7
representee unaware of misrepre-
sentation 305–7
truth known to representee 302–5
reliance and inducement 300–7
misrepresentee to contract 300–2
remedies 320–36, 333
change of circumstances 294–6
confidential/fiduciary relation-
half truth 296
statements of intention 293
statements of law 290–1
statements of opinion 291–3
Misrepresentation Act 1967 241, 312, 334
Misrepresentation Act 1967, s2(1) 315
mistake 351–96
common initial 353, 355–66,
common law 353–79
overview 479
consensus 353, 367–9
correction 161
equity 379–82
mistake (
specific performance
existence of subject matter, as to
fundamental, rescission and 384
identity of person contracted with
banks 379
deception, and 372
effects 371
face-to-face sale 374
importance of identity 376–7
intention, and 375
matters to be proved 374–5
nemo dat
rule 374
inter praesentes
law of 354
actions for payments made under
limitation of actions, and 632
mutual 353, 367–9
nature of document signed, as to
quality of subject matter, as to 358–67
allocation of risk, and 362
criteria 362
doubt as to law 363
implied term, and 364–6
impossibility 367
reasonable grounds for belief 361
res extincta
restitution, and 354
third parties, and 352
title, as to 357–8
unilateral 353, 369–79,
unilateral mistake
mitigation of loss 596–9,
mutual mistake 353, 367–9
nature of document
mistake as to 392–3
capacity, and 110
minors, and 111–12
exempting liability for 233–4
unfair terms, and 238
negligent misrepresentation 313–15
proximity 313
contracts tending to corrupt 446
puffs 19
quantum meruit 643–6,
contracts discharged by breach 645
definition 643
frustrated contracts 644–5
implied agreement to pay, where 646
outside contract 644
part-performance accepted, where
restitutionary actions 643–5
services rendered in contemplation
of contract 645
use within contract 645–6
void contracts 644
quasi-contract 635–6,
Race Relations Act 1976 462
reasonable foreseeability
remoteness of damages, and 584–7
reasonable requirement: UCTA 1977
anti-evasion provisions 254–5
clarity of term 242–3
discretion of courts 242
equal bargaining power, and 248–51
guidelines 243
insurance, and 247
limitation clauses, and 253
matters to be considered 245–6
negligence, and 244–5
non-interventionist approach 251–2
trade practice 251–2
rectification 163, 386–91,
common intention of parties, and
mutual mistake, and 387–8
options 129–30
outward expression of accord, and
principles 386–90
requirements 387
unilateral mistake 390–1
remoteness of damages 580–96,
application of orthodox approach
orthodox rule 580–2
orthodox rule versus modified rule
reasonable foreseeability 584–7
type and extent principle 587–96
renunciation 501
mere, terms of 147–8
repudiation 501–6
breach, and 501–6
res extincta
res judicata
res sua
rescission 320–1, 382–6, 526–7,
affirmation 322
bars to remedy 322–5
common misapprehension 384
damages in lieu 325–8
discharge by agreement, and 526–7
duress, and 406–7
fraudulent claims 321
fundamental mistake 384–5
intention of parties, and 389–90
lapse of time 323–4
restitutio in integrum
restitutio in integrum
impossible, where 295
law of
minors, and 115–16
unilateral mistake 384
voidable contract 382
restitutionary loss
damages 554–63
restraint of trade 468–82,
abuse of dominant position 477–8
anti-competitive agreements 477–8
commercial agency agreements
construction of covenants 471–82
contracts of employment 474–5
exclusive trading 476–7
general principles 468–9
reasonableness 469–71
factors influencing 470–1
parties to contract 469–70
public interest 470
rights ancillary to occupation 480–1
sale of business 476
solus agreements 476
unfairness 481–2
restrictive covenants
revocation of offer 49–54
bilateral contracts 49–52, 64
communication of 49–52
negligence, and 46
notice of 50
offer to general public 50
second offer prior to offeree accepting
first 50–1
unilateral contracts 52–4
Romalpa clauses
restraint of trade 476
Sale of Goods Act 1979 175, 176, 187–94,
implied terms 187–94
description, as to 189–90
fitness for purpose, as to 193
merchantable quality 191–3
sale in course of business 190–2
sample, as to 193–4
satisfactory quality, as to 190–3
title, as to 187, 189
satisfactory quality 190–3,
Scott v Avery
severance 277, 482–4,
agreement not altered by 483–4
blue pencil test 483
illegality not main part of contract
sexually immoral contracts 447–8
misrepresentation, and 293–8
acceptance, and 41–3
misrepresentation, and 293–8
simple contract
consideration, and 67–8
social and domestic arrangements
social protectionism 6–7
responsibilities 424–6
solus agreements 476–7,
specialty contract
consideration, and 67–8
specific performance 391, 625–30
damages in lieu of 631
damages not adequate remedy
discretion, exercise of 628–30
equity will not assist a volunteer 630
factors to be considered 626–30
mutuality 627–8
nature of remedy 625–6
privity of contract, and 655
speculative damages 612–7
standard-form contracts 6, 7–8,
statements of intention
misrepresentation, and 293
statements of law
misrepresentation, and 290–1
statements of opinion
misrepresentation, and 291–3
Statute of Frauds section
4 130–5
del credere
agents 134
guarantee part of larger transaction
guarantees 131–2
indemnities 132–4
promises made to third-party debtors
protection of property 135
statutory corporations 116
in transitu
subject to contract
substantial performance 494
sufficiency of consideration 74–95
Supply of Goods and Services Act 1982
175, 176, 194–5
contracts for supply of goods 194
contracts for supply of services
damages, and 577–9
communication of acceptance 45–7
tender of performance 495,
forms 23
offers, and 22–4
referential bids 23–4
standing offer, and 23
tenders 22–4
terms 139–212
classification 192–7, 202–9
express terms
good faith 196–202
implied terms
innominate 204–9
Thatcherism 8
third parties
exemption clauses, and 234–6,
general right 674–6
privity of contract, and 664–71, 673
undue influence, and 416–18
ticket cases 24–5
timetables 24
implied term as to 187–9
mistake as to 357–8
tort, actions in
privity of contract, and 656–7
trespass 4,
privity of contract, and 659
uberrimae fidei
297, 309,
ultra vires
avoiding effects of 118–19
Companies Acts 1989 and 2006
capacity of company 120
capacity of company and third
parties 121
capacity of directors 120–21
interested persons 117
loans of money 118
scope of doctrine 116–19
undue influence 397, 408–28,
actual 408–9
bank put on inquiry 422
bargaining power, and 428–30
constructive notice, avoiding 419–26
effect on third parties 416–18
effects 426–8
equitable doctrine 408–28
presumed 410–16
burden of proof 414
‘calling for an explanation’ 414–16
confidential relationship 410–11
independent advice, effect of 416
manifest disadvantage 414–16
rebutting 416
relationship of parties 413
solicitor, responsibilities of 424–26
trust and confidence 412
steps to be taken by bank when put
on inquiry 423–4
unfair advantage 408
Unfair Contract Terms Act 1977 154,
237–55, 267, 340, 617
exclusions 237
freedom of contract, and 237
liability in contract 239–41
misrepresentation 241
negligence, and 238
remoteness requirement 241–53
reasonable requirement:
UCTA 1977
requirement of reasonableness
Unfair Terms in Consumer Contracts
application 257
assessing whether contract term is
unfair 260–71
bar on exclusion or restriction of
negligence liability 276
contra proferentem
rule 277
contracts and notices 257–8
Director General of Fair Trading
duty of court to consider 279
effect of term being found
unfair 277
enforcement of law 277–9
good faith 260–5
overview and history 255, 257
principles 259–76
provisions not subject to fairness
test 275
terms and notices within 259
transparent, terms and notices 277
Unfair Terms in Consumer Contracts
Regulations 1999 (UTCCR) 255,
bargaining power, and 429–30
unilateral contracts
acceptance, and 31
revocation of offer, and 52–4
unilateral discharge 528,
unilateral mistake 369–79
identity of person contracted with
rectification, and 390–1
rescission, and 384
terms of contract, as to 370
variation of contract
discharge, and 526–7
void contracts
quantum meruit 644
voidable contracts
minors 113–4
rescission, and 382–6
restitution, and 382–6
waivers 42, 527,
warranties 202–4,
contents of 25–6
beneficiaries under 675
formalities 126–35

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