SYLLABUS - CONTRACT 1

Academic Year 2001-2002

UNIVERSITY OF THE WEST INDIES

COLLEGE OF THE BAHAMAS

FACULTY OF LAW - LL.B PROGRAMME

LA12B - CONTRACT 1

SYLLABUS

(1) AGREEMENT - The Phenomenon

A. Aspects of the Agreement

- Intention to create Legal Relations

- Formalities

B. The Existence of Agreement

- The nature of contractual agreement

- Consensus ad idem

- Objectivity and agreement

- Identifying the agreement

- Offer and Acceptance

- The Problem of Certainty

(2) CONTRACTUAL TERMS - The Content of the Agreement

A. Express Terms

- Identifying the Express Term

- The Collateral Contract

- The Nature of Express Terms

B. Implied Terms

- Methods of Implying a Term

- Excluding the Implication of Terms

C. Exemption Clauses

- Incorporation of the Exemption Clause

- Construction of Exemption Clauses

- Legislative and other Reforms

SYLLABUS - CONTRACT 1

Academic Year 2000-2001

(3) CONSIDERATION - Enforcing the Agreement

- The Function of Consideration

- The Nature of Consideration

- The Sufficiency of Consideration

- Consideration and the Modification of Contracts

- Promissory Estoppel

- Discharge of Debt

(4) PRIVITY - Who may Sue or be Sued on the Agreement

- The Doctrine of Privity

- Rationale of the Doctrine

- Attempts to Confer Benefits on Strangers

- Attempts to Impose Burdens on Strangers

- Reform of the Doctrine

OBJECTIVE: That the student should become familiar with the nature of contracts, and especially the basic principles relating to the identification of contractual obligation and some of the main preconditions to the enforcement of that obligation.

READ: Carlill v Carbolic Smoke Ball Co. (1893) 1 Q.B. 256 C.A.

TEXTBOOKS: Cheshire, Fifoot & Furmston; 13^th ed., Reprinted

Anson's Law of Contract (latest edition)

Chaudhary et al - West Indian Law of Contract

Treitel, G.H.. The Law of Contract, 10^th Ed., 1999.

CASEBOOKS: Smith & Thomas (8^th Edn.)

Bishop, Beale & Furmston (2^nd Edn.)

Chaudhary & Burgess (West Indian cases).

STATUTES: Sale of Goods Act (any jurisdiction).

Statute of Frauds (all jurisdictions).

GENERAL READING: Atiyah, P.S. - "Contracts, Promises and the Law of Obligations"

[1978] 94 LQR 193

Atiyah, P.S. - Essays on Contract, 1996, Clarendon Paperbacks

Macaulay - "An Empirical View of Contract" (1985) Wis.L.Rev.465.

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UNIVERSITY OF THE WEST INDIES

FACULTY OF LAW

LA12B - THE LAW OF CONTRACT - 1

AGREEMENT - The Phenomenon

A. Aspects of the Agreement

I. INTENTION TO CREATE LEGAL RELATIONS

The law of contract is basically concerned with the enforcement of agreements. Some

agreements, however, fall outside the purview of contract law.

As Atkin L.J. said in Balfour v Balfour [1991] 2 KB 571 @ 578:

"...It is necessary to remember that there are agreements between parties which

do not result in contracts within the meaning of that term in our law. The ordinary

example is where two parties agree to take a walk together or where there is an

offer and acceptance of hospitality..."

This phenomenon is ascribed by the courts to the intention of the parties rather than to the

rules of contract law, even though it is clear that the matter was never considered by the

parties:

"...Will you come to dinner on Tuesday?" "I have pleasure in accepting your invitation." -

constitute a proposal and acceptance, but no legal contract because the parties never intended

it to be ..." per Scrutton L.J. in Wyatt v Krelinger & Fernau [1933] 1 KB 793 @ 806.

(Emphasis added).

Since the presence of this issue in any case indicates that the parties did not share any

common intention, if indeed they had any intention at all, the true position would seem to be

that it is for the courts to decide whether or not an agreement or promise made in the

particular context should attract legal sanction.

Important considerations are the identity of the parties - see Jones v Padavatton [1969] 2 AER616;

their relationship - Merritt v Merritt [1970] AC 806; the nature of the agreement, (whether

social/domestic or commercial); any terms of the agreement relating to its enforcement - see

Rose & Frank Co. v J.R. Crompton Bros. Ltd. [1923] 2 KB 261; the extent of the reliance, and the

subject matter of the dispute - Parker v Clark [1960] 1 WLR 286.

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I. INTENTION TO CREATE LEGAL RELATIONS

See also the following:

1. Inferences from language (puff/inducement) - Lambert v Lewis [1980] 1 AER 978

2. Inferences from conduct ('reliance') - Kingswood Estate v. Anderson [1963] 2QB 169

3. Inferences from circumstances - White v Blackmore [1972] 2 QB 651; Coward v MIB

[1963] 1 QB 259 (overruled but not on this point); Licences Insurance Corp. v Lawson [1896]

12 LTR 501

4. Meaning of domestic agreement - Merritt v Merritt (supra); Balfour v Balfour (supra);

Pettitt v Pettitt [1970] AC 777; Jones v Padavatton (supra); Simpkins v Pays [1955] 3 AE 10;

Buckpiatt v Oates [1968] 1 AE 1145.

5. Commercial agreements - Carlill v Carbolic Smoke Ball Co. [1892] 2 QB 484; J. Evans

& Son (Portsmouth) Ltd. v Andrea Merzario [1976] 1 WLR 1078.

6. Rebutting presumption of contractual intention in commercial agreements -

Edwards v Skyways Ltd.[1964] 1 WLR 349; Bahamas Oil Refining Co. v Kristiansans Tankrederie

[1978] 1 Lloyd's Rep 211.

7. Commercial agreements between family members - Snelling v John G. Snelling Ltd.

[1973] QB 87.

8. Express denial of contractual intention - Jones v Vernons Pools Ltd. [1938] 2 AE 626;

Appleston v Littlewood Ltd. [1939] 1 AE 464; Rose & Frank Co. v J.R..Crompton Bros. (supra).

9. Goodwill agreements - Orion Insurance Co. v Shere Drake Insurance [1992] 1 Lloyd's Rep.239

10. Comfort letters - Kleinwort Banson v Malaysian Mining Corp Berhad [1989] 1 AE 785 (C.A.)

11. Esso Petroleau v Commrs. Of Customs & Excise [1976] 1AE 177; and

Sousa v Marketing Board [ 1962] 5 WIR 152.

See also:

Articles: "Letters of Comfort or Letters of Cold Comfort", A.D.M. Forte - Journal of Maritime Law

and Commerce, Vol 21 No 1, Jan. 1990, @ p 99

Caribbean Law & Business (No. 3) 445, (Cumberbatch)

Statutes: The Sale of Goods Act (Bahamas), s.20; (Jamaica), s.9

II. FORMALITIES

The law requires that certain contracts must either be in writing or evidenced in writing.

A failure to comply with the required formalities generally renders the contract

unenforceable, but see: Daulia Ltd. v Four Millbank Nominees [1978] Ch. 231;

Elias v Sahely [1982] 2 AE 801 (PC); First National Securities Ltd. v Jones [1978] 2 AE 221;

BG & TM Life Ins. Co v Harry [ 1962] LRBG 39 (CB 65).

See now also s. 2 of the Law of Property (Miscellaneous Provisions) Act, 1989 (U.K.) - contract for the sale or other disposition of an interest in land must be in writing containing all the agreed terms signed by each party to the contract.

Spiro v Glencrown Properties. [1991] 2 WLR 931

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B. THE EXISTENCE OF AGREEMENT

Reading:- Ch & F. Cap 3 ST - Part (1 - 5)

Anson - Cap. 2 CB - Cap. 1

Treitel - Cap 2 BBF- Cap. 9 (b), (e), (f), 10

WILC - Cap 1

THE NATURE OF AGREEMENT

Must there be a consensus ad idem?

Raffles v. Wichelaus (1864) 2 H & C 906

Byrne v. Van Tienhoven (1880) 5 CPD 344, 42 L.T. 371

The Objective Test

Storer v. Manchester C.C. (1974) 3 All ER 824, 828, per Lord Denning

Trentham Ltd. v. Archital Luxfer (1993) 1 Lloyds Rep. 25, 27 per Steyn L. J.

The Leonidas D. (1985) 2 All ER 796

c.f. Hartog v Colin & Shields (1939) 3 All E.R. 566

The Indicia of Agreement

Gibson v Manchester C.C. (1978) 2 All ER 583, (1979) 1 WLR 294 (H.L.)

Capacity to Contract

Infants Relief Act, Ch. 120, (Bahamas) ss. 1-3

Infants Settlements Act, Ch. 122 (Bahamas) ss.1-4

Law of Infants (Amendment) Act (St. Vincent Bev. 1926 c.9) ss. 16-18

Nash v Inman [1908] 2 KB 1; Peters v Fleming [ 1840] 6 M.& W. 42; Roberts v Gray [1913] 1 KB 520;

DeFrancesco v Barnum[1890] 45 Ch.D. 430; Chaplin v Leslie Frewin (Publishers) Ltd. [1965] 3AE 764;

Steinberg v Scala [1923] Ch. 452; Valenti v Canali [1889] 24 QBD 166; Pearce v Brain [1919] 2 KB 310;

Coutts v Browne-Lecky [1947] KB 104; Stocks v Wilson {1913] 2 KB 235; Cowern v Nield [1912]2KB 419.

Married Women's Property Act (Belize c. 142) ss. 3-6

Wood v Lewis[1914] 3 KB 73.

Companies Act, (Barbados c. 308) ss. 17-25.

Ashbury Railway Carriage and Iron Co. v Riche [1875] LRHL 653; Church v Imperial Gas Light & CokeCo. [1837] 6 Ad. & El. 846, 1837.

Companies Act, (Guyana c. 89:01) 5.85

1. OFFER

An offer will be held to exist where the courts can identify an undertaking by the alleged offeror to

be bound to do the thing which, it is alleged, constitutes the contractual obligation. An offer is,

however, best defined by what it is not. It is not:

(a) A Statement of Present Intention or Preliminary Negotiation

Harvey v. Facey (1893) AC 552

Gibson v. Manchester C.C. (1979) 1 All ER 785

Kleinwort Benson v. MMC (1989) 1 All ER 785

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1. OFFER

An Offer is not:

(b) An Advertisement

Partridge v. Crittenden (1968) 2 AER 421

Andrews v R. (1984) C.I.LR. 40

Spencer v. Harding (1870) 23 L. T. 237

Cf. Carlill v. Carbolic Smoke Ball Co. (1893) 1 QB 256

McGowan v. Gomes (1891-93) LRBG 171

Harvela Investments v. Royal Trust (1984) 2 AER 65;(1985) 2 AER 966

(c) A Display of Items

Fisher v Bell (1961) 1 QB 394

PSGB v. Boots Cash Chemists (1953) 1. Q.B. 401

c.f. Fair Competition Act 1993 (Jamaica); Section 41

(d) A Letter of Intent

BSC v. Cleveland Bridge & Engineering Co. [1984] 1 AE 504

THE PROBLEM OF CERTAINTY

(a) Vagueness and Incompleteness

Hillas v Arcos [1932] 147 LT 503;

Raffles v. Wichelaus [1864] 2 H & C 906

Scammell v. Ouston [1941] AC 251

Nicolene Ltd. v. Simmons [1953] 1 QB 543

May & Butcher v. R.[1934] 2 KB 17n

Smith v Morgan[1971] 2 AE 1500

Beer v Bowden [1981] 1 AE 1070

Sudbrook Trading v Eggleton [1982] 3 AE 1

(b) The Promise to Negotiate in Good Faith

Hillas v.Arcos [1932] 147 LT 503

Courtney V. Tolaini[1957] 1 AE 716

Walford v. Miles[1992] 2 WLR 174

Pitt v. P.H. Asset Management Ltd. [1994] 1 WLR 327

Cumberbatch: "In Freedom's Cause" [1992] 12 Ox.J.L.S. 586

(c) Promises Subject to Contract

Chillingworth v. Esche [1924] 1 Ch. 97, 114

Alpenstow Ltd. v. Regalian Plc. [1985] 1 WLR 721

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2. ACCEPTANCE

Generally

R.v. Clarke [1927] 40 CLR 227 (Australia)

Taylor v. Allon [1966] 1 QB 304

Brisbane et al v. Joyles (St. Vincent, ECCA, Jan 12, 1998 unreported)

(a) The "Acceptibility" of Offers

Acceptance of an offer will only result in an agreement where the offer is

still capable of acceptance.

(i) Termination of Offers

Lapse of Time

Routledge v. Grant [1828] 130 E.R. 920

Pitt v. PHH Asset Management Co. [1993] 4 AE 961

Ramsgate Victoria Hotel Ltd. V. Montefiori [1866] LR 1 Ex. 109

(ii) Revocation

Byrne v. Van Tienhoven [1880] 42 LT 371

Dickinson v. Dodds [1876] 2 Ch.D. 463

Errington v. Errington and Woods [1952] 1 KB 290

Daulia Ltd. v. Four Millbank Nominees [1978] Ch. 231

Cf. White & Carter (Councils) Ltd. v. McGregor [1962] AC 413

(iii) Death

Bradbury v. Morgan (1862) 1 H & C. 249

Re Irvine (1928) 3 D.L.R. 268

(iv) Supervening Impossibility

Financings Ltd. v. Stimson (1962) 3 All ER 386 (CA)

Akin Taylor & Co. Ltd. v. Gammon (Nigeria) Ltd. (1967) 1 A.L.R.(Comm) 271

(v) Counter Offers

Hyde v. Wrench (1840) 94 E.R. 132

Buckle v. Dunkley (1966) G.L.R. 63

N.W. Leicester District Council v. EMHA (1981) 1 W1R 1396

Stevenson, Jacques & Co. v. McLean (1880) 5 QBD 346

Sousa v. Marketing Board (1962) 5 W1R 152

N.B. An issue of "acceptibility" is also raised where the offer is mistakenly expressed.

Hartog v. Colin & Shields (1931) 3 All ER 536

Aircool Awning Ltd. v. Silvera (1986) 10 W1R 14

Centrovincial Estates PLC v. Merchant Investors Ass. (1983) Comm. L.R. 158

Smith v. Hughes (1871) L.R. 6 Q.B. 597

Raffles v. Wichelaus (1864) 2 48C 906

Falck v. Williams (1900) A.C. 176; Henkel v. Pape (1870) L.T.R. 41

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(b) The Nature of Acceptance

(1) Conduct

Brogden v Metropolitan Ry Co. (1877) 2 App. Cas. 666

Trentham Ltd. v. Archital Luxfer (1993) 1 Lloyds Rep. 25

(2) Signature & non est factum

L'Estrange v. Graucob (1943) 2 K.B. 394

Tilden Rent-a-Car v. Clendenning (1978) 83 D.L.R. (3d.) 400

Saunders v. Anglia Building Society (1970) 3 All E.R. 961

Tomlinson v. Chai Chong (1946-40) 5 J.L.R. 181

Miller v. Ebanks et al (1994-95) C.I.L.R. 46

Maeniani v. Saemala (1980-84) LRC (Comm.) 339

UDT Ltd. Western (1976) 1 QB 513

Norwich & Peterborough Building Society v Steed (No.2) (1993) 1 All ER 330

Brown v Blake (1985), (unreported, Jam.) (W1LC 175)

Avon Finance Co. Ltd. v. Bridger (1985) 2 All E.R. 281

(3) Counter-Offers

Hyde v. Wrench [1840] 49 ER 132

Stevenson v. McLean [1880] 5 QBD 346

(c) The Communication of Acceptance

(i) Generally

Carlill v. Carbolic Smoke Ball Co. Ltd. (1892) 2. Q.B. 484

Robophone Facilities v. Blank (1986) 1 WLR 1423

Holwell Securities Ltd. v. Hughes (1974) 1 All ER 161

Brinkibon Ltd., Stahlwarehandels.(1983) 2A.C. 34

The Brimnes (1975) Q.B. 929.

(ii) Silence

Felthouse v. Bindley (1862) 11 C.B. (N.S.) 869

Food Corporation of India v. Anticlizio Shipping Cor. (1987) 2 Lloyds

Rep. 130, 146 per Nicholls L.J.

Re Selectmove Ltd. (1995) 1 W.L.R. 474

(iii) Who may Accept an Offer

Powell v. Lee (1908) 99 L.T. 284

Edgar v. Demerara Mutual Life Assurance (1990-91) 4 Carib.Comm. L. R. 222

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3. AN ANALYSIS OF AGREEMENT

(1) The Battle of Forms

British Road Services v. Crutchley (1968) 1 All ER 811

Butler Machine Tool Co. v. Ex-Cell-O-Corpn (1979) 1 All ER 695

Uniform Commercial Code - Section 2 - 207

(2) Implied Agreement

Shanklin Pier v. Detel Products (1951) 2 KB 854

Clarke v. Dunraven (1897) A.C. 59

Upton-on-Severn R. D. v. Powell (1942) 1 All ER 220

Norweb p.l.c. v. Dixon (1995) 3 All E.R. 952

Tanner v. Tanner (1975) 1 WLR 1346, 1350

(3) Cross Offers

Tinn v. Hoffmann & Co. (1873) 29 L.T. 271

FOR TUTORIAL DISCUSSION

• Darby and his wife are contemplating divorce. One day, during a heated argument over the amount of time Darby spends on the golf course, Darby tells her that she can have his golf clubs for $5.00. The set is worth at least $2,500.00. Joan offers him the $5.00 but Darby insists that he is not serious.

Later, they both contribute $10.00 to purchase five Lotto chances. They win a prize of $500.00 but Joan is unwilling to share it once she has collected the winnings, on the basis that she alone chose those particular numbers.

Finally Darby agreed to transfer his interest in a plot of land his uncle has left him to Joan for $2,000.00. The agreement is not in writing and he now refuses to transfer the property to Joan.

With reference to decided cases, advise Joan.

• Critically discuss the view that the intention of the parties is an irrelevant consideration in the court's decision as to whether to refuse enforcement of an agreement on the grounds that there was no intention to create legal relations.



• "An agreement, if it is to be enforced, must be certain or, at least, capable of being rendered certain..."

Discuss.

• Darby says to his wife, Joan, "I will sell you the housing lot which I inherited for $100,000. I will also sell you my car and let you have my golf clubs on hire-purchase". Joan replies, "I accept all your offers". Both of them sigh a document reading as follows: "Subject to contract, Darby agrees to sell Joan his lot for $100,000, and to sell her his car and let her have his golf clubs on hire purchase".

The next day, Darby announces to Joan that, on maturer reflection, he has decided to retain the land, the car and the golf clubs so as to be able to leave them to a cats' home.

With reference to decided cases, advise Joan.

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FOR TUTORIAL DISCUSSION

• Johnny, aged 17, asked Michael (Thompson), a professional basketball player, to instruct him in the art of

rebounding. After four years' instruction, Johnny accepted a contract to play basketball in the NBA, and thereupon promised to pay Michael $25,000 for his past instruction as soon as he, Johnny, had completed his first season. After his first season Johnny returns home, but refuses to pay Michael anything.

With reference to decided cases, advise Michael.

• Prepare arguments for and against the enforcement of the promise to negotiate in good faith.





• X promises to pay Y $500.00 if Y will build a box for X. After Y has completed two sides of the box,

X tells him that he will not be needing the box anymore. Advise Y.

• When is an agreement unenforceable due to a lack of certainty?





• In what circumstances will silence constitute acceptance?





• Discuss the nature of and the consequences of a plea of non est factum.

• Write brief notes on:

(a) The Battle of the Forms.

(b) The acceptance of an offer which is mistakenly expressed.

• On 3 July, during a national telephone and telegraph strike, John receives a letter from Susie saying:

"You can have my Mercedes for $30,000.00. I have to send this by post because of the strike".

On 4 July, Susie sends a letter to Lennie by hand offering to sell him the Mercedes for $10,000.00.

On 5 July, the strike is settled.

On 6 July, John posts a letter to Susie accepting her offer, which is lost in the post.

On 7 July, Susie telegraphs to John withdrawing her offer.

On 8 July, Lennie posts a letter to Susie, accepting her offer provided she will throw her bicycle in for the same price.

On 11 July, Susie advertises an auction of the Mercedes without reserve.

On 12 July, Susie sells the Mercedes to Shawn for $30,000.00.

On 13 July, Susie receives Lennie's letter, and Ormond turns up for the auction.

On 14 July, Lennie telegraphs to Susie, "Cancel previous letter. Accept offer".

Advise Susie.

Lecturer: Rubie M. Nottage (Mrs.) B.A. (Queens),

LL.B. (Hons.), LL.M. (Lond.) M.B.A. (Templeton), B.A. Theology (Oxon.)

January 2002