Taylor Taylorssolicitors1outlookcom Contract Law Contract Terms The terms of a contract are binding obligations which the parties agree to perform to complete the contract they are its contents effectively Noncompliance will result in breach and the seriousness of that breach ID: 737225
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Journalism and MediaFiona Taylor Taylorssolicitors1@outlook.com
Contract LawSlide2
Contract TermsThe terms of a contract are binding obligations which the parties agree to perform to complete the contract – they are its contents effectively. Non-compliance will result in breach and the seriousness of that breach will affect what remedies are available. There are a number of ways in which terms can become part of the contract.Slide3
What is a contract?An agreement enforceable at law. An essential feature of contract is a promise by one party to another party to do or forebear from doing certain specified acts. The offer of a promise becomes a promise by acceptance. Contract is that species of agreement whereby legal obligation is constituted and defined between the parties to it. It can then be enforced in a court of law or other suitable forum.
There will be OFFER, ACCEPTANCE & CONSIDERATIONSlide4
Reasons for Contracts
because they create legitimate expectations in both parties that their promises will be carried out
because there one party often acts to their potential detriment, losses may be incurred as a consequence of agreeing to a certain course of action
because it would be unfair if one party carried out their part of the agreement for the other party to be allowed not to do soSlide5
What is an Offer?A contract usually starts with acceptance of an offer. An offer is a statement by one party, the
offerer
, (the person making the offer), identifying terms of an agreement by which s/he is prepared to be bound if they are accepted by the offeree, (the person to whom the offer is made
).
(Martin & Turner 2014)Slide6
The character of an Offera statement of willingness to be bound by the terms of the offer.
Distinguishable from an
‘invitation
to
treat’ (see below).
Distinguishable from a mere statement of price which does not indicate a willingness to sell
Special words may make an apparent invitation to treat an offer,
eg
competitive tenderingSlide7
Communicating an Offera statement of willingness to be bound by the terms of the offer.
Distinguishable from an invitation to treat
Distinguishable from a mere statement of price which does not indicate a willingness to sell
Special words may make an apparent invitation to treat an offer,
eg
competitive tenderingSlide8
Revoking an Offeran offer may be withdrawn any time up to acceptance
revocation must be communicated to the offeree to be valid
this may be through a reliable third party
a unilateral offer cannot be withdrawn while the offeree is still in the act of performanceSlide9
Terminating an OfferA
n
offer ends in one of four ways:
it is accepted so a contract is then formed
passage of time – whether stated time or a reasonable time
failure of a condition precedent (
ie
a condition that must be fulfilled before the offer is completed)
death of a partySlide10
Invitation to TreatAn invitation to treat is such that the person responding has not yet made an offer to buy, and therefore does not of itself give rise to a binding contract.
eg
invitation to council tenant to buy council house, auction catalogues, tenders to provide goods or services, advertisements, goods displayed in shop window, a statement of price made during negotiations indicating that an offer exists. Slide11
When contract is formed:
Invitation to Treat
eg
goods offered for saleSlide12
Offer to TreatThe significance of the invitation to treat is that the person responding to
it
has not accepted an offer, so their action does not at that point create a binding contract. Sometimes whilst something may seem like an invitation to treat, if it has the effect of an offer a positive response may lead to a binding contract being formed.
Acceptance may be deemed by conduct.Slide13
AcceptanceThere is no contract until there has been acceptance. The contract is formed immediately UPON acceptance.
It is vital to establish that the response to an offer is in fact acceptance and is communicated to the offeree. Slide14
Basic Rules of AcceptanceA
n
acceptance is an intention to be bound by the terms of the offer
I
t
must therefore
i
) be unequivocal
ii) be unconditional
iii) correspond precisely with the terms of the offer – this is known as the ‘mirror image’
rule.Slide15
Mirror Image Rulean attempt to vary the terms of the offer is a counter-offer! This is tantamount to rejection of the original offer so the original offer is therefore is no longer open to acceptance
if there is a counter offer, the terms of that will be included in the contract
the courts will not allow a party to benefit from both the counter offer and the original offer – you can’t have the best of both worlds!
A rejection of an ancillary subject may still be a counter offer, although the main terms are accepted
A mere enquiry that does not seek to vary the terms of an offer is not a counter offerSlide16
Communication of an OfferUntil acceptance is communicated there is NO CONTRACT …
usually
Some exceptions. Silence is not normally enough.
Acceptance can be in any form.
Consumer Protection (Distance Selling) Regulations 2000.Slide17
Consideration
“A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”.
Which means what has it cost you or what have you gained., e.g. the money for the Mars Bar.Slide18
ConsiderationNeed not equal the value of the other thingMust be real, tangible, of value, i.e. SUFFICIENT (although that may be very little)
Must not be past, (unless the service was requested)
Must move from the
promissee
– to sue or be sued a party must give consideration (which does not mean just being thoughtful)Slide19
Consideration
What one is already bound to do under one contract cannot be the consideration for a new one unless it involves something extra or the other party gains extra benefit
An agreement to accept part payment only is unenforceable unless the payment is made earlier or in different form or the other party is prevented from revoking the promise by estoppel
The exception to the rule that consideration cannot be past relates to service originally requested and then carried out by the other party. A later promise to pay is enforceable, even though the agreement to pay comes after the service is rendered.
If third parties’ rights are affected there may not have to be movement of consideration from the
promissee
– Contract (Rights of Third Parties) Act 1999.Slide20
Intention to Create Legal Relations
Domestic and social arrangements – there is presumed to be NO intention to create legal relations unless the contrary is shown.
So arrangements between husband and wife, or parents and children are not usually enforceable. Arrangements usually are enforceable between estranged couples, domestic arrangements where money has changed hands and domestic arrangements where one party has suffered a detriment to comply with the agreement.
Business and commercial transactions – there is presumed to be an intention to create legal relations
unless the contrary is shown.Slide21
Formation of Contract1. Simple e.g. sale of goods and supply of services. These can be made orally, in writing or even implied by contract, so there is no specific format
2
. Speciality e.g. transfers of land and land interest. Must be in specific form either or deed or writing to be valid, e.g. guarantees.Slide22
VOIDVoid: Of no legal effect; a nullity; eg
an agreement for an immoral consideration. A contract may be void on the face of it, or evidence may be required to show that it is void. But when an illegal contract has been executed, money paid either in consideration or performance of the contract cannot be recovered back.
Slide23
VOIDABLEVoidable: an agreement or other act which one of the parties is entitled to rescind, and which until that happens, has full legal effect.
Eg
in case of fraud in a contract. If, however, the party entitled to rescind the contract affirms it, or fails to exercise his right to rescind within a reasonable time, so that the position of the parties becomes altered, or if he takes a benefit or acquires third party rights, then he will be bound by it. Slide24
Freedom of ContractInequality between the parties –
eg
big company versus unrepresented individual – exemption clauses
implied terms –
eg
in employment
use of standard from contracts – business practice
statutory protection of consumers
EU law
Authority to contract – if there is no authority to offer, usually an offer cannot be accepted
Legality
Capacity (Mental/legal)Slide25
Enforcabilitycapacity to contract;intention to contract;
consensus ad idem; mutuality of intent – offer and acceptance
valuable consideration;
legality of purpose;
sufficiency of terms.Slide26
Minors (not miners) – i.e. under 18.
There are two groups of valid and enforceable contracts for minors
:
Valid
–
enforceable
Contracts for necessaries, (according to station in life and present needs). Must pay reasonably for goods or services actually delivered
Contracts for service, training or education – one adverse term will not invalidate the contract but must be substantially to minor’s benefitSlide27
MinorsVoidable – so can enter into, but may be set
aside:
Contracts to lease property
Contracts to purchase shares in a company
Contracts to join a partnership
Marriage settlementsSlide28
MinorsVoid, so cannot be enforced:
Loans
Goods or services other than necessaries
Accounts statedSlide29
IntoxicationA contract made by a person while drunk is voidable
if at the time of contracting the person did not know the quality of his/her acts and the other part knew of the intoxication
The party may ratify the contract upon reaching sobriety
S3 Sale of Goods Act 1979 where the contract is for necessaries, the party making the contract while drunk need only pay a reasonable price for goods actually deliveredSlide30
Mental IllnessA contract made by somebody mentally ill is voidable if when contracting the mentally ill person was unaware of the quality of his/her actions and the other party knew of the illness
A contract made while not ill will be binding despite consequent illness
S3 Sale of Goods Act 1979 where the contract is for necessaries, the party making the contract while mentally ill need only pay a reasonable price for goods actually deliveredSlide31
Privity - Who is party to the contract and has a right to take action in respect of it
Basic considerations: Who can enforce it? Who is a party to the contract? Who are you contracting with??
“Only a party to a contract can sue on it” Lord Haldane.
‘
Privity
of contract is the relation which exists between the immediate parties to a contract which is necessary to allow one person to sue another’. Slide32
Representations
Type of Representation
Liability
Basis for Liability or not
Terms
Create binding obligations so attach liability
Actually incorporated into the contract and so are the obligations under it
Mere representations
Attach no liability in themselves if correctly stated
Induce a party to enter a contract but do not become a part of it so no not binding
Misrepresentations
Can attach liability and therefore remedies
Even though not part of the contract the representation acted to induce the other party to enter into the contract and so “vitiated” their free will
Mere Opinions
Attach no liability in themselves
Opinion is not a matter of fact and is variable
Expert opinions
Can attach liability as terms if important enough to be
I
ncorporated
or as misrepresentations if falsely stated
Party is entitled to rely upon the skill and expertise of experts
Trade Puffs
Attach no liability
Mere advertising boasts so not expected to take seriously
Puffs with an attached promise
May attach liability
The promise is sufficiently specific to be relied upon. See
Carlill
v Carbolic Smoke Co below.Slide33
ReflectionBe aware when you are creating contractual arrangements. Especially consider offer, acceptance and consideration
Don’t sign contracts without reading them
Don’t enter into contracts you can’t fulfil
Before entering into a contract consider terms and conditions and whether these can be negotiated
Honour contracts
Get them in writing
Keep evidence Slide34
Contract TermsExpress terms – confirmed and incorporated by the parties to it. Must be seen to be of importance to one of the parties. May be oral or written. Usually close in time to making of contract. Example of reliance on expertise of one party, written, signed.
Implied terms – by custom, past dealings, to make sense of agreement or for business efficacy. There is an “officious bystander” test – presuming intention of the parties. Terms may be implied by statute – e.g. Employment and consumer rights. Implied by fact (apparently unexpressed intention of the parties) or by law.Slide35
Vitiating FactorsVitiating Factors
A contract may have defects which if known to the parties at the time of entering into the contract may have resulted in no contract being formed. These are called ‘
vitiating factors
’. They may result in either void or voidable contracts. In the first instance the nature of the vitiation is such that a valid contract could never have been formed. If the contract is voidable, the party affected by the vitiating factor may end the contract or continue with it, possibly replacing more appropriate terms. Slide36
Discharge of the ContractThe contract comes to an end in one of four ways:
Performance
Agreement
Frustration
BreachSlide37
Remedies for BreachDamages
unliquidated damages based on precise loss
liquidated damages fixed by parties at time of formation of contract
quantum
meruit
– payment for part-performance based on amount of work done
Note need for causation and
not
too remote.Slide38
Remedies cont.
Nominal Damages - When there has been breach but no loss
Loss of bargain – difference between quality promised and quality received
Failure to deliver – difference between cost under contract and cost of obtaining elsewhere
Loss of profit
Loss of chance
Damages for mental distressSlide39
Equitable Remedies Equitable Remedies
Specific performance
Injunctions
Rectification
RescissionSlide40
Duty to MitigateIf you have suffered as a consequence of breach of contract, you have a duty to do what you reasonably can to reduce the amount of the loss.
If you are unsure about any of this, please contact Fiona to
discuss.
©Fiona K. Taylor 2016