CONTRACT LAW by jolinmilioncherie



Intention to Create Legal Relations

   Cheshire and Fifoot, ‘consideration has a somewhat
    unfortunate air of learning. It is in fact nothing more than a
    sign and symbol of bargaining’
   Ian Thomas; ‘Consideration is the price (need not be
    money) that one party pays for the other act or promise’
   Dunlop v Selfridge – Lords adopted Pollock's definition of
    consideration, ‘An act or forbearance of one party, or the
    promise thereof, is the price for which the promise of the
    other is bought’
            Three Types of
 Executory – Promise in return for promises
  which have not yet been carried out
 Executed – Promise in return for an act i.e. a

   Past – Too late! Not sufficient for legally
    enforceable agreement
Good Consideration
  Cases to use - 1

   Roscorla v Thomas – in this case a seller made a
    promise about a horse after it had been bought. Obviously
    this was made too late. ‘Caveat emptor’ – let the buyer
   Lampleigh v Braithwait – Braithwait promised
    Lampleigh £100 after the latter secured a royal pardon for
    him. Although the consideration was made too late it had
    been expected all along therefore liable
Good Consideration
  cases to use - 2

  Kennedy v Brown – Reinforced Lampleigh
  v Braithwait, it was held that bargain is
  struck when services are requested
 Tweddle v Atkinson – No consideration had
  been given by son in agreement with two
  fathers to give him money. As some
  consideration must be given for the promise
  of another party
         Privity of Contract
   The relationship which exists between the
    immediate parties to a contract which is
    necessary to enable one person to sue
    another on it
Sufficiency and Adequacy of
   Adequacy – Must be some consideration but does
    not have to be adequate i.e.
    a thimble           for a Ferrari

 Sufficiency – Must be of same value to the other
  party however trivial or disproportionate in worth
 Justification for this – Freedom of contract idea
   Thomas v Thomas – Husband wanted his wife to be
    able to live in the house he owned if he died, for £1 a year.
    Although this was not adequate it was sufficient to enforce
    the agreement
   Ward v Byham – Denning case. Father who agreed
    to support mother of his child as long as she kept the child
    well and happy claimed there had been no consideration.
    Court held that she was doing more then her legal
    obligation of not treating the child badly as she had to also
    keep it well and happy and hence consideration had taken
     Performance of an existing
            public duty
 General rule – If you are performing something which you are
  already bound to do, you cannot have consideration
 Collins v Godefory – It was held that giving evidence in a court
  case was not consideration as this was already a public duty
 England v Davidson – Davidson offers reward for evidence
  leading to a conviction of a person. England, a policeman does
  this and claims reward. When Davidson does not pay arguing
  that England was only doing his duty court held that private ads
  do not have to be answered by policeman, therefore England
  was going beyond his duty
     Performance of a contractual
   If one party is only performing his part of the contract he cannot claim
    for something extra
   Stilk v Myrick 1809 – When two sailors on ship left the captain
    promised to share their wages with the rest of the crew if they stayed
    on. Court held that the crew were only performing their parts of the
    contract. They were not doing anything extra therefore there was no
    consideration. Obiter: If their workload became wholly different to the
    original agreement it would be different, which was shown in:
   Hartley v Ponsonby 1857 – Same facts except 36 sailors were reduced
    to 19. Court held second agreement was different enough that they
    were doing more than their contractual duty.
  Williams v Roffey 1990 – Builders who have to
   meet deadline (otherwise they will lose their
   bonus) offer to pay extra to carpenters in order to
   get the job done earlier. Refused to pay and were
   successfully sued. Court held: ‘There was no
   hardship for the defendant in paying’. Defendant
   was reaping the benefit from the plaintiffs action.
 There are 3 BIG problems with this case;
- Did not investigate duress
- Completely ignored consideration
- Completely ignored precedent
    Performance of a contractual duty
          owed to a third party
   Shadwell v Shadwell 1860 – Uncle is sued
    for not giving promised money to nephew
    for the nephew getting married. The court
    held on grounds of benefit and detriment
    that the nephew had been relying on this
    money, and the uncle had an objective
    interest in the marriage before it took place
    Problems with the Shadwell
  How can this be justified when there appears to be
   no consideration
 Pollock – There are two possible breaches of the
   contract –
- Nephew not marrying
- Uncle not paying
   Nephew is opening himself up to being sued for
   the breach of contract which is the consideration
 Intention to Create Legal Relations

    Basically means that both parties would
     intend to sue if a contract is not met
    Two presumptions:
1.   Social/domestic agreements –
     presumption that there is not intention to
     create legal relations, unless proved
2.   Business agreements – Opposite is true
    Cases on Domestic
 Balfour v Balfour – Husband and wife who return
  to England with a view to leaving again. She
  becomes ill and stays, with him agreeing to pay
  £30 a month. After arguing he refuses to pay.
  Court held – This was a Social/domestic
  agreement and so there was no intention to create
  legal relations
 Merrit v Merrit – Similar type of case but as
  couple were going through divorce at the time an
  intention to create legal relations was assumed
 Honourable pledge clauses – this is an example of
  when the presumption of the intention to make
  legal relations can be rebutted
 Rose and Frank company v The Crompton
  Brothers – A clause saying that two companies
  were not entering into a ‘formal or legal
  agreement’ but a ‘definite expression and record
  of the purpose and intention’ of the two parties.
  The court held this was sufficient for the
  presumption to be rebutted
   All parties in a contract must have full capacity for
    the contract to be legally enforceable
   Most people have full capacity except for these
    three groups
-   Corporations (registered business organisations)
-   Persons of unsound mind and drunkards
-   Minors
 Corporations are protected by the
  incorporation procedure in company law
  which gives them limited liability to others
 However there may be some capacity given
  to corporations in order to protect
  shareholders, and investors etc. The
  provision for this is usually given by
  instrument, so by certain statutes
        Mental disability and
 For a person to be protected by this defence they
  must prove that:
- They do not understand the nature of the
- The other party was aware of this Hart v
  O’Connor – Privy council said that where one
  party is not aware of the incapacity of the other
  and the state of the afflicted party is not apparent,
  then the contract will be regarded as a valid
  contract between two people of sound mind
        Diplomats and Sovereigns
 Limited protection is given to those who
  work on behalf of their country
 In practice it is only seen actively in minor
  incidents, apart from a few rare high profile
 Person under 18 – Family Reform Act
 Generally the law protects anyone under the
  age of 18
 But there are some examples of when a
  contract with a minor is valid (see next
 A minor will be liable for a contract for the sale of
 Necessaries – Shelter, food, clothing, also
  anything which is essential and suited to the
  minors position in life
 Sale of Goods Act s3(3) defines necessaries as,
  ‘goods suitable to the condition in life of the
  minor and to his actual requirements at the time of
  sale and delivery’
             Nash v Inman
   Cambridge university student claimed he
    did not have capacity to form a contract
    buying eleven waistcoats. Court held that
    although at the time this was normal student
    clothing, the students father had already
    supplied him with waistcoats and so these
    were not actually required. However this
    position may be different if a similar
    situation arose today
         Necessaries (contd)
 If a contract for services is particularly onerous
  (harsh) on the minor it will not be considered
  binding even if it is necessary
 Fawcett v Smethurst Minor hired vehicle to
  transport his goods – necessary but one clause in
  the contract would have left him liable for the cost
  of repairs to the vehicle. As this was deemed to be
  onerous the contract was held to be not binding
    Beneficial Contracts of Service
 Second type of contract with a minor which
  could be honoured by the courts
 Often takes the form of a contract of
  employment, education, or training for a
 Regarded as an extension to idea of
  necessaries as learning a skill or trade is
  essential to support themselves
 What is a Beneficial Contract of
 Relatively self explanatory; if the contract of service is
  beneficial to the minor then it will be binding even though
  an individual clause may not be to their advantage. On the
  other hand, if the contract is oppressive it will be
 De Francesco v Barnum – 14 year old girl had formed a
  seven year agreement to train as a dancer. The agreement
  said she could not accept any other work, could not marry
  or travel abroad, and their was no guarantee of work from
  her stage master. The court held this was oppressive and
  therefore unenforceable
         Voidable Contracts
 Third and final type of contract that can be made
  with a minor which may be binding
 Contract of ongoing nature, such as the renting of
  accommodation. In this case the contract will be
  regarded as valid unless the minor repudiates it
  before reaching 18 or within a reasonable time
 Edwards v Carter – Lord Watson explained this
  situation as follows; ‘If he (the minor) chooses to
  be inactive, his opportunity passes away; if he
  chooses to be active, the law comes to his
   Exactly what is a reasonable amount of time
    for the repudiation to tale place after the
    minors 18th birthday?

• It is a decision for the court to make given the
particular circumstances.
    What is the effect of the
 The minor’s obligations end, and he is
  generally not entitled to money already paid
  unless there was a complete lack of
 It is also possible that minor could be held
  liable for debts incurred up to the point of
     The Minor’s Contracts
            Act 1987
     Two main provisions were made in this act;
1.    Where a minor enters into a contract for a loan,
      guaranteed by an adult, the guarantee is
      enforceable against the adult
2.    Where a minor unjustly acquires goods under an
      unenforceable contract, the court may order
      restitution (handing back) of the goods, or of
      ‘other property’ representing the goods


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