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References
DMA Financial Solutions v. BaaN U.K. 2000 W.L. 1629568; among other things considered in this case, was the issue of whether a contract existed between C, a computer consultancy, and D, a software developer, whereby C would provide training to D’s customers. C contended that the agreement which had been reached as a result of negotiations constituted a binding contract, whereas D argued that, in the absence of a written agreement no contract had been formed. It was held that a contract existed despite the absence of a written agreement since all relevant matters had been agreed and the parties had not negotiated on the basis that the outcome of their negotiations was to be subject to a written agreement.
For example Bills of Exchange must be in writing under section 3(1) of the Bills of Exchange Act 1882.
The only contracts nowadays that need to be evidenced in writing appear to be contracts of guarantee; Statute of Frauds 1677, as amended by the Law Reform (Enforcement of Contracts) Act 1954, and the Law of Property (Miscellaneous Provisions) Act 1989.
The term ‘void contract’ is a contradiction in terms since the whole transaction is regarded a nullity. It means that at no time has there been a contract between the parties. Any goods or money obtained under the agreement must be returned. Where items have been resold to a third party, they may be recovered by the original owner. See further infra, p. 83.
Thus, where in an advertisement a firm manufacturing carbolic smoke balls, promised to pay £100 to any person who caught influenza after using their product as directed, the Court held that this advertisement was an offer; Carlill v. Carbolic Smokeball Company [1893] 1 Q.B.256.
Gibson v. Manchester City Council [1979] 1 All E.R.972.
In Fisher v. Bell [1961] 1 Q.B.394, a shopkeeper displayed a flick knife for sale in his shop window, and was charged with the criminal offence of ‘offering’ to sell an offensive weapon. The Court held that he was not guilty of the offence since the display of the knife in the window was an invitation to treat and not an offer.
In Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd. [1953] 1 All E.R.482, the Court said that the display of goods on the shelves only constituted an invitation to treat and that when a customer placed the goods in the basket and presented them at the cash desk they were making an offer to buy at that point.
Esso Petroleum Co. Ltd. v. Customs and Excise Commissioners [1976] 1 W.L.R.I.
Thus, in Partridge v. Crittenden [1968] 2 All E.R. 421, C placed an advertisement, offering wild birds for sale, which was an offence. It was held that the advertisement was an invitation to treat and not an offer and therefore, C was not guilty of the offence charged. The Electronic Commerce (E.C. Directive) Regulations 2002 (S.I.2002, No.2013) must also be borne in mind. The Regulations do not apply to business conducted via facsimile or telephone, but apply to any business which (1) sells goods or services to businesses or consumers on the internet or by S.M.S. or e-mail, or (2) advertises on the Internet or by SMS. or e-mail, or (3) stores or conveys electronic content to its customers or provides access to a communication network.
Thornton v. Shoe Lane Parking Ltd. [1971] 1 Lloyd’s Rep.289.
Although depending on the circumstances of a case, Courts may find that an offer can be revoked by a subsequent offer made. See Pickford Ltd. v. Celestica Ltd. [2003] EWCA Civ. 1741.
Payne v. Cave (1789) 3 Term.Rep. 148. An offer is validly revoked by an offeror even where the offeree obtains the information through a third party and not the offeror himself; Dickinson v. Dodds (1876) 2 Ch.D.463.
Ramsgate Victoria Hotel Co. Ltd. v. Montefiore (1866) L.R. 1 Ex.109; in June D offered to buy some shares in C’s hotel. Although C did not reply to this offer, in November of the same year D allotted some shares to D who refused to accept them. It was held that C’s delay had caused D’s offer to lapse.
Northern Foods Plc. v. Focal Foods Ltd. [2003] 2 Lloyd’s Rep. 728; D sent a letter to C indicating the price for the supply food products. C wrote to D to offer a three year contract for the supply of such goods at D’s stated price. The issue arose later during the performance of the contract, as to whether C’s letter was an offer. It was held that C’s letter was indeed an offer to purchase goods at the stated price and the offer was accepted by D’s conduct in supplying such goods to C.
Tinn v. Hoffman & Co. (1873) 29 L.T.271; an offer was made by the sellers for a special price on the sale of 1,200 tons of steel. The offeree responded to this offer with a request to purchase 800 tons of steel. It was held that there had been no acceptance of the original offer of sale. Instead there had been a counter-offer to purchase 800 tons, and therefore the sellers were entitled to accept or reject this new offer.
Thus, in Pickford Ltd. v. Celestica Ltd. [2003] EWCA Civ. 1741, C faxed an offer to D setting out a price for the removal of D’s goods on a basis of £890 per vehicle load, and an estimated total price of £100,000. A couple weeks later and after C carried out a detailed survey for the removal, sent another more detailed offer to D for a fixed price of £98,760, and requested D to confirm acceptance of the contract. A few days later D sent a fax to C giving their ‘confirmation’ and stating that it related to C’s original offer price of £890 per vehicle load, and adding that the removal cost was ‘not to exceed £100,000’. C carried out the work and claimed £98,760, whereas D, relying on the original offer paid C £33,000 (i.e. on a vehicle load basis). It was held that D’s ‘confirmation’ related to C’s original offer, which, due to C’s second offer had been revoked. In any event, the Court found that D’s acceptance would amount to a counter-offer due to the introduction of the new term relating to the limit on cost not exceeding £100,000. This counter-offer was accepted by C’s conduct.
British Road Services v. A.V Crutchley Ltd. (1967) 1 W.L.R.835.
Lidl U.K. GmbH v. Hertford Foods Ltd. [2001] EWCA Civ. 938; C and D entered into a contract and although pre-printed terms of each were exchanged, the parties did not clearly agree whose terms should govern their agreement. C invoked a force majeure clause in its standard terms. The Court of Appeal found that the contract was governed by general law which did not contain a force majeure provision.
Lord Justice Dyson said that ‘“confirmation” is an ordinary word which is often used when an order is placed in acceptance of an offer. In my judgment it has no particular significance.’; Pickford Ltd. v. Celestica Ltd. [2003] EWCA Civ. 1741 at [22].
Felthouse v. Bindley (1862) 11 C.B.N.S.869.
Adams v. Lindsell (1818) 1 B.& Ald.681; on 2nd September D wrote to C offering to sell some cotton. On 5th September the letter arrived, after being misdirected in the post. C immediately posted an acceptance. On 9th September the letter of acceptance arrived, but meanwhile D had sold the cotton elsewhere, since D had received a reply as expected on 7th September. The Court held that the contract was completed, i.e. D’s offer had been accepted by C on the 5th September.
Re London and Northern Bank (1900) 1 Ch.220.
Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH. [1983] 2 A.C.34; where the Court held that an acceptance by telex from England to Austria caused a contract to be made in Austria. Also see Entores Ltd. v. Miles Far East Corporation [1955] 2 All E.R.493.
Henthorn v. Fraser [1892] 2 Ch.27; D offered to sell some goods to C. The next morning D posted a letter to C withdrawing the offer. The letter reached C in late afternoon on the same day. In the meantime however, C had posted an acceptance to D. It was held that D’s revocation was of no effect until it actually reached C. Therefore, D’s offer had been validly accepted by C when the letter of acceptance had been posted by C.
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. [1915] A.C.847.
Bainbridge v. Firmstone (1838) 8 A.& E.743. Sometimes, there is difficulty in distinguishing consideration from a gift; Esso Petroleum Co. Ltd. v. Customs and Excise Commissioners [1976] 1 W.L.R.l, C offered one coin showing the face of a footballer to customers who purchased C’s petrol. The majority of their Lordships thought that the coin was an offer of consideration to the customer to pay the price, whereas the minority considered the coin as a gift.
Roscorla v. Thomas (1842) 3 Q.B.234; C bought a horse from D, who after the sale gave C an undertaking that the horse was not vicious. C sued D on the basis that C had broken this undertaking since the horse proved to be otherwise. It was held that the payment of the purchase price, in this case C’s consideration, took place before the undertaking was given by D. Therefore, C had not furnished consideration for D’s undertaking. Consideration was in the past. Cf. Lampleigh v. Brathwait (1615) 80 E.R.255; D having killed a man requested C to obtain a Royal pardon. C managed to obtain it, and D then promised to pay C £100. Subsequently, however, D refused to honour his promise, and C sued him. It was held that in the circumstances D’s request contained an implied term to generally pay. The subsequent promise of the £100 was to fix the amount, hence, C was entitled to the payment. See also Simpson v. John Reynolds [1975] 2 All E.R.88.
Chappel & Co. Ltd. v. Nestlé Co. Ltd. [1960] A.C.87; wrappers from chocolate bars were held to form part of the consideration for the sale of a music record. Cf. Tesco Plc v. Customs and Excise Commissioners, The Times, 16 October, 2003, where C issued vouchers to members of its loyalty scheme on basis of points awarded for purchase of goods, and it was held that members of the scheme gave no consideration for the acquisition of the vouchers.
Thus, in Stilk v. Myrick (1809) 170 E.R. 1168, C was a seaman and during a voyage two of the crew deserted the vessel. D, the master, promised the rest of the crew to divide the wages of the two deserters between the remainder crew members if they would complete the voyage. On completion of the voyage, D refused to pay C his share. It was held that C was already contractually bound to complete the voyage and therefore did not provide any consideration for D’s promise of payment. Cf. Hartley v. Ponsonby (1857) 7 E.& B.872, where nearly half of a vessel’s crew deserted her, and the rest of the crew were promised payment of an extra sum of money if they would complete the voyage. C, one of the remaining crew members, was refused this payment. It was held that C was entitled to the payment on the grounds that the desertion was large enough as to make the voyage dangerous and discharge C’s original contract, i.e. his contract was fundamentally different from that which he had originally entered.
Pinnel’s Case (1602) 77 E.R.237. The House of Lords in Foakes v. Beer (1884) 9 App.Cas.605, reaffirmed that payment of a smaller sum in satisfaction of a larger is not good consideration. In this latter case C owed a sum of money to D, and he proposed to pay about a quarter of it in cash and the balance in instalments over a period of time, provided D would not pursue the matter and sue C. D agreed to this proposal, but when C paid the full amount, D claimed an additional sum which D claimed represented interest on the total sum of money C owed D. No consideration was found for D’s promise not to sue C by the Court. The effect of this rule is, however, limited by the equitable principle of promissory estoppel. Very simply, the law of Equity may protect a person who relied upon another person’s promise or representation, by not allowing the other person going back on his promise; Central Property Trust Ltd. v. High Trees House Ltd. [1947] K.B.130. Furthermore, it seems that the doctrine of promissory estoppel is a defensive doctrine; Argy Trading Development Co. Ltd. v. Lapid Developments Ltd. [1977] 1 W.L.R.444. Societe Italo-Belge Pour le Commerce et L’Industrie SA (Antwerp) v. Palm and Vegetable Oils (Malaysia), The Post Chaser [1981] 2 Lloyd’s Rep.695; a sale contract provided inter alia that C, the sellers, were required to declare the ship to D, the buyers, ‘as soon as possible after vessel’s sailing’. C actually made this declaration a month after the ship had sailed. D made no protest, and requested C to hand over documentation to sub-buyers. The documents were rejected by the sub-buyers, and subsequently by D, on the basis that the clause made time of the essence, and hence C’s delay in making the declaration entitled them to repudiate. C alleged that D’s non-protestation combined with their subsequent request for the handing over of the documents to the sub-buyers, operated to estop D from rejecting the documents. It was held that the short time that had elapsed between the date of the representation waiving the defect, and the fact that C, the sellers, had not been prejudiced in reliance thereon, it was not inequitable for D, the buyers, to enforce their rights to reject the documents, and they were not liable to C for damages.
Williams v. Roffey Bros. and Nicholls (Contractors) Ltd. [1990] 1 All E.R.512, C.A.; the Court took the view that a promise to pay an additional sum to secure performance of an existing contract would be enforceable on the basis that a promise which ensures timely performance of an obligation confers a benefit. The danger here would be such approach to the doctrine of consideration might allow commercial blackmail, falling short of duress. Cf. Re Selectmove [1995] 2 All E.R.521, where an Inland Revenue inspector agreed with a company that taxes already due and owing to the Inland Revenue would be paid by the company by instalments. Following payment of some instalments, the Inland Revenue demanded the balance to be paid at once. The Court of Appeal following the House of Lords decision of Foakes v. Beer (1884) 9 App.Cas.605, held that the agreement to pay by instalments was not binding since it was not supported by consideration.
Jones v. Vernon’s Pools Ltd. [1938] 2 All E.R.626; Appleson v. Littlewood Ltd. [1939] 1 All E.R.464. Indeed, in’ subject to contract’ negotiations, the basis would seem to be that even when all terms of the contract are agreed, they do not bind the parties until they sign a formal document; DMA Financial Solutions v. BaaN U.K. 2000 W.L. 1629568.
Edwards v. Skyways Ltd. [1964] 1 W.L.R.349.
See infra, p.91.
See infra, p. 94.
Section 1(2). Section 2(1) of the Mental Capacity Act 2005 clarifies that a person lacks capacity in relation to a matter ‘if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain’. The relevant test as to the ability of an individual ‘to make a decision’ is contained in section 3 of the Mental Capacity Act 2005.
Hart v. O’Connor (1985) 2 All E.R.880.
Gore v. Gibson (1843) 13 M.& W.623.
That is anybody who is under 18 years; s.1 Family Law Reform Act 1969.
Section 3(3), Sale of Goods Act 1979 (as amended). In addition, section 3 of the Minors’ Contracts Act 1987, empowers the Courts to decide whether it is ‘just and equitable’ for any property acquired by the minor under a contract (or any property representing it) to be transferred from the minor to the other party of the contract.
Edwards v. Carter [1893] A.C.360. With regard to civil litigation, a minor can sue through a ‘next friend’, i.e. an adult who will be liable for any costs awarded against the minor in the action, though the minor must indemnify the next friend. A minor defends a civil action through a ‘guardian ad litem’ who is not liable for costs. A minor’s father is usually the next friend or guardian ad litem. The expression now used instead of ‘next friend’ and ‘guardian ad litem’ is ‘litigation friend’.
Although, in general, the distinction between the legal personality of a company and the legal personalities of its members holds good, the concept of corporate personality is obviously open to abuse and Courts are prepared to investigate the activities of individuals who seek to hide behind the company front or ‘corporate veil’ as it is sometimes called; Customs & Excise Commissioners v. Hare [1996] 2 All E.R391.
Since 2004, a new ‘type’ of company has been introduced by E.C. Council by Regulation 2157/2001 on the Statute for a European company, O.J. L294, 10/11/2001, p.l. A European company would be known as a Societas Europea and the abbreviated title (’s.E.’) should precede or follow the name of the company. Such company will be able to set up in the form of European public limited liability company, and will have to have a share capital of at least €120,000. An’ s.E.’ company will be set up according to the requirement of the law of the country where it has its seat, and once registered a notice of this will have to be published in the Official Gazette of the European Communities. Most of the requirements of the country where the company has its seat will also have to be fulfilled accordingly, e.g. annual accounts. In the U.K. the Companies (Audit, Investigations and Community Enterprise) Act 2004 has also introduced the ‘Community Interest Company’ (C.I.C.) in s.26(1).
In fact, a person dealing with a company is not even required to consult the company’s memorandum or articles of association; S.35B, Companies Act 1985.
‘Director’ includes any person occupying the position of director, by whatever name called; section 741(1), Companies Act 1985.
Briefly, some of these duties are: (1) he should use the degree of skill reasonably expected of a person of his knowledge and experience; Finance Co. Ltd v. Stebbing [1989] B.C.L.C.498, (2) he need not devote his continuous attention to the company business, (3) he may delegate authority to a person he trusts; Dovey v. Cory [1907] A.C.477, (4) he must act bona fidei; John Crowther Group plc. v. Carpets International plc. [1990] B.C.L.C.460, (5) he must not make a secret profit; Boston Deep Sea Fishing and Ice Co. Ltd. v. Ansell (1888) 39 Ch.D.339, (5) no conflict of interest should arise between him and the company, Plus Group Ltd. v. Pyke [2002] EWCA Civ. 370, (6) he must declare any personal interests; section 317 Companies Act 1985, (7) he must seek approval of shareholders if a gratuitous payment is to be made to a director; section 312 Companies Act 1985, (8) he must have regard to the interests of the company’s employees; section 309 Companies Act 1985.
However, section 213 of the Insolvency Act 1986 (as amended) indicates that a director may be liable for ‘fraudulent trading’ if he continued to incur debts and trade while knowing that there is little chance of those debts being paid. Furthermore, section 214 of the same Act recognises a director’s liability for ‘wrongful trading’ if the director failed to take reasonable steps to minimise loss to creditors of the company at a time when he knew or ought to have known that there was no reasonable prospect of the company avoiding insolvent liquidation.
A ‘partnership’ or a ‘firm’ as is commonly called, does not have legal personality of its own, but it can sue and be sued in its own name. Property is owned in the names of the partners and land can only be conveyed to some or all of the partners as legal owners on trust for sale for all the partners in equity. A ‘club’ cannot make contracts of its own; these are usually made by a member or trustee of the club on behalf of the club, other members will only be liable if they have authorised the making of the contract. ‘Trade Unions’ also enjoy a unique position. They cannot be treated as bodies corporate. However, they can sue and be sued in their own name, they can make contracts and own property vested in trustees.
Bigos v. Bousted [1951] 1 All E.R.92; Cockshott v. Bennet (1788) 2 T.R.763. For example, a contract to assassinate someone, or to defraud the Inland Revenue would fell into this category; Alexander v. Rayson [1936] 1 K.B.169; C rented a flat to D, and in order to avoid tax they agreed that the money should be paid as 3/8ths for rent and 5/8ths for services. C sued D for unpaid sums for services. It was held that the agreement was made by both C and D for the purpose of defrauding the revenue authorities. Therefore, C and D were equally guilty and the contract would not be enforced.
Pearce v. Brooks (1866) L.R.1 Ex.213; C let a coach out on hire to D, a prostitute, knowing that it would be used by her to ply her trade. The coach was returned in a damaged state. C was unable to recover the hire charges or for the damage as the court refused to help him enforce a contract for an immoral purpose. Cf. Lloyd v. Johnson (1798) 1 B.& P.340. An agreement to pay an allowance to a mistress was held illegal; Franco v. Bolton (1797) 3 Ves.368. But a different approach is now adopted by the Courts on domestic relations; Tanner v. Tanner [1975] 1 W.L.R.1346.
Such as bribing an official; Parkinson v. Royal College of Ambulance [1925] 2 K.B.1, D was a charitable institution and Y was the secretary. Y represented, fraudulently to C, that the charity was in a position to obtain some honour, probably a knighthood, for him if he would make a suitable donation. C paid over the sum of £3,000 and said he would pay more if the honour was granted No honour of any kind was received by C, and he brought this action to recover the money he had donated to D. It was held that the agreement was contrary to public policy and illegal, thus no relief.
Porter v. Freudenberg [1915] 1 K.B.857
For example, a partnership intending to import whisky into America during Prohibition; Foster v. Driscoll [1929] 1 K.B.470.
Such as a contract not to prosecute a person for an offence concerning the public; Herman v. Jeuchner (1885) 15 Q.B.D.561.
If a transaction is on its face manifestly illegal the Court would refuse to enforce it; Birkett v. Acorn Business Machines Ltd. [1999] 2 All E.R. (Comm.) 429, C.A.; Ashmore Benson Pease & Co. Ltd. v. AV Dawson Ltd. [1973] 2 Lloyd’s Rep.21, C.A.
Edler v. Auerbach [1950] 1 K.B.359.
Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B.65.
Supra, footnote 345. Also see 21stCentury Logistic Solutions Ltd. (In Liquidation) v. Madysen Ltd. [2004] 2 Lloyd’s Rep.92.
Kiriri Cotton Co. v. Dewani [1960] A.C.192. In Atkinson v. Denby (1862) 7 H.& N.934, C was in financial difficulties and offered to pay his creditors a certain sum in full settlement. All the creditors except D agreed to this. D said that he would only agree if C paid him £50. C paid him £50 as demanded. It was held, that C could recover this payment of £50 because he had been coerced into defrauding his creditors.
Kearly v. Thomson (1890) 24 Q.B.D.742; C had a friend who was bankrupt and wished to obtain his discharge. D was likely to oppose the discharge and accordingly C paid him £40 in return of which D promised to stay away from the public examination and not oppose the discharge. D did stay away from the public examination but before an application for discharge had been made C brought an action claiming the £40. The claim failed because the illegal scheme had been substantially effected.
Thus, in Clay v. Yates (1856) 1 H.& N.73, it was held that a printer who had innocently printed libellous matter could recover his charges.
North Ocean Shipping v. Hyundai Construction, The Atlantic Baron [1979] Q.B.705.
Universe Tankships v. I.T.F, (The Universe Sentinel) [1982] 2 All E.R.67; Dimskal Shipping Co. S.A. v. I.T.W Federation, (The Evia Luck) [1991] 4 All E.R.871. Both cases involved ships sailing under flags of convenience. The shipowners were threatened by the International Transport Workers Federation (I.T.F.) that unless they entered into certain agreements with I.T.F. the ships would be ‘blacked’. The House of Lords in both cases held that the payments could be recovered since the contracts were obtained under ‘economic pressure’, i.e. blacking the ship, which is a form of duress, and were consequently voidable.
Tate v. Williamson (1866) 2 Ch.App.55; D had become C’s financial adviser. C lived an extravagant life-style and he sold his estate to D for half its value. A year later C died and his personal representatives were successful in setting aside the sale of C’s estate to D. Cf. National Commercial Bank (Jamaica) Ltd v. Hew [2003] UKPC 51.
Allcard v. Skinner (1887) 36 Ch.D.145; C joined a religious institution and promised to devote her property to the service of the poor. During her years in this religious order, she became a nun and gave a considerable amount of money and property to D, the Lady Superior of the Sisterhood. She later left the religious order. Although the result of C’s action against D is not important due to legal ‘technicalities’, the Court recognised that C’s gifts had been made under pressure, and hence under undue influence.
Lancashire Loans Ltd. v. Black [1934] 1 K.B.380; D in order to borrow money to maintain her extravagant mother’s life-style, created a charge on her property. She did not receive any advice except from a solicitor who was acting for her mother and the moneylenders. The lenders brought an action against D’s property. D claimed the defence of undue influence by her mother, and thereby successfully resisted the claim.
Midland Bank v. Shephard [1988] 3 All E.R.17.
Mathew v. Bobbins (1980) 256 E.G.603. Nowadays, as a result of employment legislation, servants are not dominated by their masters.
The misrepresentation statement does not have to be the sole inducement; Barton v. County Natwest Ltd. The Times, 29 July, 1999.
Bisset v. Wilkinson [1927] A.C.177; D was selling some land and C asked whether the piece of land on sale, could support 2,000 sheep. D had no such knowledge, and he answered in the affirmative, thus stating his belief. After C bought the land, he realised that the land could not support 2,000 sheep, and sued D for misrepresentation. The Court held that as D had no personal knowledge of the facts, and as the buyer, C, knew this, there was no liability on the seller’s part.
Bell v. Lever Bros. Ltd. [1932] A.C. 161.
With v. O’Flanagan [1936] Ch.575; D, a medical practitioner, wished to sell his practice to C. C was interested and in January D represented to C that the income from the practice was making £2,000 a year. The contract was not signed until May of the same year. In the meantime, D had been ill and the practice had been run by various other doctors. In consequence the receipts fell to £5 per week, and no mention of this fact was made when the contract was entered into. C claimed rescission of the contract It was held that C could rescind, as the representation made in January was of a continuing nature and induced the contract made in May. C had a right to be informed of a change of circumstances, and D’s silence amounted to a misrepresentation.
Per Lord Herschell, in Derry v. Peek (1889) 14 App.Cas.337, 374. Here, the Plymouth, Devonport and district Tramways Company had power under a special Act of Parliament to run trams by animal power, and with the consent of the Board of Trade by mechanical or steam power. Derry and some other directors of the company issued a prospectus, inviting the public to apply for shares in it, stating that they had power to run trams by steam power, and claiming that considerable economies would result. The directors had assumed that the permission of the Board of Trade would be granted as a matter of course, but in the event the Board of Trade refused permission. Therefore, the directors were sued for fraud. The Court held that the directors were not fraudulent but honestly believed the statement in the prospectus to be true.
Standard Chartered Bank v. Pakistan National Shipping Corporation and Others (No.2) [2003] 1 Lloyd’s Rep.227, H.L. In the case of purchase of shares, such damages would be the difference between the price paid and the actual value at the date of purchase. In simple words, it is the excess which the purchaser had paid over and above the market value at the date of the representor’s wrongdoing (misrepresentation); Great Future International Ltd. v. Sealand Housing Corp. (In Liquidation) [2004] EWHC 300.
Howard Marine and Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. [1978] Q.B.574.
Section 2(1), Misrepresentation Act 1967. It must be noted that a claim for damages in negligence may also be maintained under common law, Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964] A.C.465 ELL. As to the tort of negligence see supra, p.68.
Mopes v. Jones (1974) 232 E.G.717. D contracted to lease a grocer’s shop to C for 21 years but in D fact did not have sufficient interest in the property himself to grant such a lease, the maximum period available to him was 18 years. As no lease was supplied as originally promised, C shut the shop and treated the contract as repudiated It was held, that C was entitled to rescission for misrepresentation under the Misrepresentation Act 1967.
Oscar Chess Ltd v. Williams [1957] 1 W.L.R.370.
Section 2(2), Misrepresentation Act 1967.
Please note that there could also be an action in the tort of negligence under common law, Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964] A.C.465 H.L. As to the tort of negligence see supra, p.68.
Bell v. Lever Bros. Ltd. [1932] A.C.161.
Lewis v. Clay (1898) 67 L.J.Q.B.224; D was asked by Lord William Neville to witness a confidential document and signed in holes in blotting paper placed over the document by Neville. In fact Clay was signing two promissory notes/bills of exchange and two letters authorising C to pay the amount of the notes to Lord William Neville. The Court held that the signature of D in the circumstances had no effect. D was not bound by the bills of exchange.
Saunders v. Anglia Building Society [1971] A.C.1004; C, a widow aged 78 years, signed a document which Lee, her nephew’s friend, told her was a deed of gift of her house to her nephew. C did not read the document but believed what Lee had told her. In fact the document was a gift of her interest in the house to Lee, who later mortgaged it to a building society. It was held that although the gift of C’s interest did not confer a title on Lee, however, as the transaction intended and carried out was the same, i.e. the transfer of C’s interest, and as C was negligent, by not reading it, the plea of non est factum was not available to her. Therefore, the document which is in fact signed must be ‘fundamentally different’, ‘radically different’, or ‘totally different’, in order for the plea of non est factum to be successful.
Higgins Ltd. v. Northampton Corporation [1927] 1 Ch.128; C entered into a contract with D for the erection of dwelling houses. However, in arriving at the price C made an arithmetical error. D concluded the contract, assuming that the price was correct. It was held that the contract was binding on the parties. In this case one party to the contract was mistaken, but the other party did not know, and did not ought to know of this mistake.
Cundy v. Lindsay (1878) 3 App.Case.459; C were linen manufacturers with a business in Belfast. Blenkarn, who was a fraudulent person, wrote to C from the address of 37 Wood Street, Cheapside, ordering a quantity of handkerchiefs but signed his letter in such a way that it appeared to come from a well-known and highly respected business called Blenkiron who were based at the address of 123 Wood Street C knew of the existence of Blenkiron but did not know the address. Therefore, the handkerchiefs were sent to 37 Wood Street. Blenkarn then sold them to E, and was later convicted and sentenced for the fraud. C sued D in conversion claiming that the property had not passed to Blenkarn or to E, as the contract C entered into with Blenkarn was void for mistake. It was held that there was a mistake as to the party with whom C were contracting, and therefore C succeeded in their action. Therefore, C was induced to contract with Blenkarn due to the disguise, which lead C to believe that Blenkarn was Blenkiron. For a more recent case see Shogun Finance Ltd. v. Hudson [2004] 1 A.C.919, where an innocent purchaser did not acquire good title to a car he bought from a ‘rogue’ who in turn had obtained it fraudulently by falsifying a signature. Interestingly, all three judges in this recent case expressed the view that this area of law was in need of clarification.
Lewis v. Averay [1972] 1 Q.B.232.
Such a premise would suggest that contracts made over a telephone or videophone are to be treated as face to face contracts. Indeed, the House of Lords was of this view in Shogun Finance Ltd. v. Hudson [2004] 1 A.C.919.
Leaf v. International Galleries [1950] 2 K.B.86; C bought from D a painting for £85, after being told by D that the painting was by Constable. In fact, both C and D mistakenly believed the drawing was by Constable. Five years later C discovered that the painting was not by Constable and sued for rescission of the contract. The Court treated D’s statement as a representation, and found it to be ‘innocent’. Therefore, no right of rescission was available to C. Also, in Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. [2002] 2 All E.R. (Comm) 999, the Court of Appeal reaffirmed that a common mistake as to the quality of the subject-matter of the contract would not avoid a contract, unless it rendered the subject-matter of the contract essentially different from the subject-matter which the parties had believed to exist. In this case, D agreed to provide a salvage service to a vessel. Consequently, D found a vessel which at the time was thought to be only 12 hours away from the stricken vessel. D agreed with C, the owners of that vessel, for the hiring of C’s vessel for five days. However, a couple of hours later, D discovered that C’s vessel was some 39 hours away from the stricken vessel and therefore sought to avoid the contract with C, on the basis that there had been a common mistake with regards to the distance of C’s vessel from the stricken vessel. It was held, that the contract could not be avoided by D for common mistake. For the exceptions of res extincta, and res sua, to this general rule, see Couturier v. Hastie (1856) 5 H.L.Cas.673, and Cochrane v. Willis (1865) L.R.1 Ch.App.58, respectively.
Wood v. Scarth (1858) 1 F.& F.293.
Raffles v. Wichelaus (1864) 2 H.C.906; D agreed to buy some goods from C, which were to be transported on board a ship called ‘Peerless’. In fact there were two ships with the same name sailing from the same port and carrying the same type of goods (cotton), one in October and one in December! C thought they were selling the goods on board the ship sailing in December, whereas D thought they were buying the goods on board the ship sailing in October. It was held that since this was a mistake relating to the very subject-matter of the contract, there was no contract in fact made between the parties.
Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [1959] A.C.133.
Shirlaw v. Southern Foundries Ltd. [1939] 2 K.B.206, [1940] A.C.701 H.L. In The Moorcock (1889) L.R. 14 P.D.64, C contracted with D, the owners of a wharf, to have C’s ship lie at D’s wharf. However, C’s ship was damaged because the water level fell and she touched the bottom. It was held that a term was implied in this type of contract that a wharf is safe for the use of the ships contracted to lie thereat
Gardner v. Coutts & Co. [1967] 3 All E.R.1064.
Liverpool City Council v. Irwin [1977] A.C.239; in a case of a block of flats communal parts over which the tenants and the landlord have rights of access, e.g. dustbin area, or stairs, a term may be implied that the landlord would maintain these parts reasonably safe.
Shell (U.K.) Ltd. v. Lostock Garages Ltd. [1976] 1 W.L.R. 1187. Where an estate agent was to receive a commission ‘on completion of sale’, it did not mean that a term was implied to the effect that the home owner should not sell the property privately, Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C.108.
Section 13, Supply of Goods and Services Act 1982.
Section 6, of the Unfair Contract Terms Act 1977; see infra, p.190.
British Crane Hire Corporation Ltd. v. Ipswich Plant Hire Ltd. [1975] Q.B.303; D hired a crane from C who were the owners. The agreement was an oral one, though after the contract was made D received a printed form from C, the owners, containing conditions. One of these was that the hirer of the crane was liable to indemnify the owner against all expenses in connection with its use. Before D, the hirers, signed the form the crane sank into marshy ground, though not due to D’s fault. C, the owners, were put to some cost in repairing the crane and sued D, the hirers, for an indemnity under the contract D, the hirers, claimed that the conditions had not been incorporated in the oral contract of hire. It was held that C knew that printed conditions in similar terms to those of D, were in common use in the business. Therefore, the conditions were incorporated into the oral contract, and C’s action succeeded.
Bunge Corporation v. Tradax Export S.A. [1981] 1 W.L.R.711; under a sale contract the buyers had an obligation to give the sellers notice that the vessel nominated for carriage of the goods was ready to load. Notice of readiness was in fact given four days late, and such failure to give notice on time was held to be a breach of a condition.
The Laconia [1977] A.C.850, [1977] 1 All E.R.545; a vessel was chartered by C under a time charter-party which provided that hire was to be paid in advance, and that ‘failing the punctual and regular payment of the hire’ D were to be at liberty to withdraw the vessel from C’s service. C made payment one day late, and D withdrew the vessel. It was held that the breach of the obligation to pay in advance was a condition and consequently D were entitled to withdraw the vessel from C.
The Mihalis Angelos [1970] 2 Lloyd’s Rep.43 C.A.; a clause in a charter-party provided the vessel will be ‘expected ready to load’ on a particular date. There was a considerable delay, and the charterers (D) repudiated the contract. It was held that the clause was a condition and therefore D were entitled to do so.
Schuler A.G. v. Wickman Machine Tool Sales Ltd. [1974] A.C.235, H.L.; D, entered into a distributorship agreement with C, which contained a clause purporting to make a condition that D would send its representatives to visit six U.K. manufacturers at least once in every week. D failed to make these visits a few times, and C sought to terminate the agreement for breach of the clause. It was held that this was not a condition as a single breach, however trivial would entitle the innocent party to terminate.
Lombard North Central plc. v. Butterworth [1987] Q.B.527, C.A.; a contract for the lease of a computer provided that punctual payment of each instalment of hire was of the essence and that failure to make due and punctual payment entitled C to terminate the contract. D was late in paying a couple of instalments and C sought to terminate the contract and damages. It was held that the provision made prompt payment a condition. The Court clearly suggested that stipulations making time of the essence indicate a condition of the contract. Cf. Torvald Klaveness A/S v. Arni Maritime Corp., The Gregos [1994] 1 W.L.R.1465, H.L., particularly the views of Mustill, L.J. and Templeman, L.J., on whether time of a vessel’s re-delivery under a time charter-party is of the essence.
Bannerman v. White (1861) 10 C.B. N.S.844; C intended to buy hops from D and asked whether sulphur had been used in the cultivation of the hops, adding that if it had, he would not even bother to ask the price. D said that no sulphur had been used, though in fact it had. It was held that D’s assurance that sulphur had not been used was a fundamental term of the contract, i.e. a condition.
(1876) 1 Q.B.D.410.
(1876) 1 Q.B.D.183.
Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B.26, C.A.; under a charter-party a vessel was hired for 24 months. On her first voyage, she suffered numerous break downs of machinery, mainly due to bad maintenance and incompetent and inadequate number of crew. It was subsequently estimated that the vessel would need 15 weeks of repairs to make her seaworthy. Before her repairs were successfully completed, the charterers repudiated the charter-party. The vessel’s repairs were subsequently completed, she was in a seaworthy state, and there were 17 more months left of the original charter-party period. The shipowners sought damages for breach of contract. It was held that seaworthiness was not a condition of the charter-party. The delay caused by the repairs was not so great as to frustrate the commercial purpose of the charter-party. Interestingly enough, this latter statement being the test applicable in such cases, was rejected by the House of Lords in Bunge Corporation v. Tradax Export S.A. [1981] 2 Lloyd’s Rep.1. Reardon Smith Line v. Hansen Tangen [1976] 1 W.L.R.989, H.L.; a ship which was going to be chartered, was described in the charter-party as Osak number 354 (this is the yard where it was built) when it was in fact Oshima number 004. In all other respects the ships were exactly the same. As this is a misdescription, i.e. usually considered to be a condition, the charterers sought to terminate the contract. The House of Lords rejected the argument and held that the description was not a condition but an innominate term and that since the injured party had not been deprived of substantially the whole benefit under the contract, the charterers were only entitled to damages.
A recent investigation by the Office of Fair Trading on cancellation charges by some major tour operators during the period 1998–2001, concluded that the charges were ‘a genuine estimate of the companies’ losses overall’; Office of Fair Trading, Holiday Cancellation Charges not Shown to be Unfair, PN 46/03 24 April 2003.
Cellulose Acetate Silk Co. Ltd v. Widnes Foundry Ltd. [1933] A.C.20; D agreed to construct a building for C by a certain date. The agreement between C and D provided that C was to pay £20 for every week’s delay beyond the agreed date. C were late by 30 weeks and D claimed £5,500 being their actual loss from the delay. It was held that the relevant provision in the contract was a genuine pre-estimate of loss, and C had only agreed to pay £20 a week. Therefore C were not liable for any additional sums of money claimed by D.
Dunlop Pneumatic Tyre Co. Ltd v. New Garage & Motor Co. Ltd. [1915] A.C.79.
Ariston SRL v. Charly Records Ltd., The Financial Times, 21 March, 1990; the Court of Appeal stated that such clauses will be construed on the principle that the sum payable for breaches should be proportionate to the extent of such breaches. By a clause C was to pay £600 for each day any of the items supplied to D were delayed. It was held that this was a penalty, because the same sum of money was payable irrespectively of whether it was a single item or any item that was delayed. Ford Motor Co. v. Armstrong (1915) 31 T.L.R.267; D agreed to pay £250 for each Ford car sold below the manufacturer’s list price. Furthermore, D agreed (i) not to sell Ford cars to other dealers in the motor trade, and (ii) not to exhibit any car supplied by Ford without their permission. The Court held that the clause was a penalty, and not for liquidated damages. The same sum was payable for different kinds of breach which were not likely to produce the same loss. In addition, its size, bearing in mind that it is a 1915 case, suggested that it was not a genuine pre-estimate of loss. Cf. Wallis v. Smith (1882) L.R. 21 Ch.D.243, where a clause provided that a sum of money will be payable to C for any’ substantial breach’ committed by D, and the Court of Appeal construed it as being a liquidated damages clause.
Hadley v. Baxendale (1854) 9 Exch.341; D unduly delayed delivery of a mill shaft to C, and so the mill was out of action for a considerable time. C had not informed D that the mill would be closed if D did not deliver it on time. It was held that C could recover damages for the delay in delivery, but not for loss of profits occasioned by closure of the mill. Therefore, there was no way that D could have foreseen that closure of the mill would be necessary as a result of the delay.
Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B.528; C, a company of launderers wished to expand their business and, they ordered a new boiler from D. The boiler was damaged during the course of its removal and as a result there was a five month delay in delivery. C claimed (a) damages of £16 per week for the loss of profits they would have made on the planned expansion of their laundry business, and (b) damages of £262 a week for loss of profits they would have made on extremely lucrative dyeing contracts. The Court held that C were entitled to (a), but they could not recover for the especially profitable dyeing contracts of which D were ignorant
Brace v. Calder [1895] 2 Q.B.253; C was employed by D who were a partnership. This partnership was going to be dissolved, and C was offered re-engagement on the same terms by the partners, but C refused. It was held that C was entitled to nominal damages as he had failed to mitigate his loss.
Where imprisonment may be imposed. As to civil contempt of Court see supra, p.12.
Section 52(1), Sale of Goods Act 1979 (as amended). For obvious reasons the Act does not provide the remedy of specific performance to a disappointed seller.
Since this part looks at the remedies for breach of contracts, it should be noted that such injunctions are referred to as ‘Final’ or ‘Perpetual’, which means that they are granted at trial as a remedy and would usually last until a specified date or in perpetuity.
Warner Bros. v. Nelson [1936] 3 All E.R.160; D was the film actress Bette Davis, and had agreed not to work for anyone else during the period of her contract with C, Warner Bros. In breach of this agreement D left the U.S.A. and entered into a contract with a third party in the U.K. The Court held that C were entitled to an injunction to prevent D breaking the negative provision in the contract.
‘Mareva’ Injuctions or as they are now called ‘Freezing Orders’ are another equitable remedy, mostly used at the interlocutory, i.e. before trial, stage of litigation. A freezing order would restrain a party from removing its assets from the jurisdiction, i.e. England and Wales. The party applying to the Court for such order would have to show inter alia that there is a real risk that the other party’s assets may be dissipated within, or removed from the jurisdiction; Z Ltd. v. A-Z and AA-LL [1982] Q.B.558, C.A.; Mareva Compania Naviera S.A. v. International Bulk Carriers S.A. (The Mareva) [1975] 2 Lloyd’s Rep.509, C.A.
Attorney General v. Blake [2000] 4 All E.R.268, H.L. It must be noted however, that an account of profits will be appropriate only in cases involving exceptional circumstances. Indeed, examples of this principle of awarding non-compensatory damages for breach of contract in commercial law are non-existent.
For a summary of limitation periods see supra, p.42.
Pinnel’s Case (1602) 77 E.R.237.
Cutter v. Powell (1795) 6 Term R.320.
Bolton v. Mahadeva [1972] 1 W.L.R.1009.
Moore & Co. v. Landauer & Co. [1921] 2 K.B.519. Such circumstances would now however be subject to s.15A of the Sale of Goods Act 1979 (as amended), and the result may be different if the breach of s.13 is considered to be’ slight’.
(1795) 6 Term R.320.
Under s. 13, Sale of Goods Act 1979 (as amended).
Moore & Co. v. Landauer & Co. [1921] 2 K.B.519.
Dakin v. Oxley (1864) 143 E.R.938.
[1952] 2 All E.R. 176.
(1795) 6 Term R.320; see supra, p.111, for the facts of the case.
Poussard v. Spiers & Pond (1876) 1 Q.B.D.410.
Bettini v. Gye (1876) 1 Q.B.D.183.
Section 30(1), Sale of Goods Act 1979 (as amended).
De Bernardy v. Harding (1853) 155 E.R.1586.
Planché v. Colburn (1831) 131 E.R.305.
Hochster v. De la Tour (1853) 118 E.R.922.
Omnium D’Enterprises v. Sutherland [1919] 1 K.B.618.
Poussard v. Spiers & Pond (1876) 1 Q.B.D.410.
Hochster v. De la Tour (1853) 118 E.R.922; D agreed to engage C’s services for a period of three months commencing 1st June. A couple of weeks later, and before performance of the service contract commenced, i.e. before 1st June, D notified C that C’s services would not be needed. C sued D for breach of contract in May, and D alleged that C could not start such action before 1st June, i.e. the time for performance of the contract was reached. It was held that C was entitled to commence an action for damages before 1st June.
Force majeure clauses in commercial contracts have the effect of entitling the parties to be discharged from further performance, should one or more of the events described in the clause occur. It must be noted that where such clauses purport to apply the doctrine of frustration on the contract, they would be subject to the doctrine’s requirements; Channel Island Ferries Ltd. v. Sealink U.K. Ltd. [1987] 1 Lloyd’s Rep.559 (Q.B.D. (Comm)). In this case C and D agreed to a joint venture agreement, whereby they would use their ships to provide a ferry service on the Channel Island route. The agreement contained a broad force majeure clause which included strikes. The crews of D’s vessels promptly took industrial action and organised sit-ins. C sued D for breach of contract, and D sought to rely on the strike as force majeure. It was held that the strikes had not come about for reasons beyond D’s control, hence, not within the force majeure provision. For a successfully invoked force majeure clause, see Pagnan SpA v. Tradax Ocean Transportation SA [1987] 2 Lloyd’s Rep.342.
Poussard v. Spiers & Pond (1876) 1 Q.B.D.410.
Norris v. Southampton City Council, The Times, 27 January, 1982; C was a cleaner and he was convicted of assault and reckless driving and was sentenced to a term of imprisonment. His employers, D, dismissed him, and he claimed that his dismissal was unfair. The Tribunal held that the contract of employment was frustrated and that C was not dismissed and therefore not entitled to compensation. However, the Employment Appeal Tribunal added that frustration could only arise where there was no fault by either party. The impossibility of further performance was brought by Norris’s fault.
[1915] 3 K.B.676.
(1863) 122 E.R.309.
[1903] 2 K.B.740.
Tsakiroglou & Co. Ltd. v. Noblee and Thorl GmbH [1962] A.C.93.
Clark v. Lindsay (1903) 19 T.L.R.202.
Norris v. Southampton City Council, The Times, 27 January, 1982. See also, Ocean Tramp Tankers Corp. v. V/O Sovfracht, The Eugenia, [1964] 2 Q.B.226, C.A. In J. Lauritzen A.S. v. Wijsmuller B.V., The Super Servant Two, [1990] 1 Lloyd’s Rep.1, C.A., the existence of a choice between two vessels was provided in the contract but D did not exercise it when one of the two vessels was lost, and subsequently claimed frustration. It was held that since D had elected not to make the alternative vessel available to C, the contract was not frustrated.
Cricklewood Property and Investment Trust Ltd. v. Leighton’s Investment Trust Ltd. [1945] A.C. 221; C leased some land to D for a period of 99 years and with the proviso that (i) D were going to build some shops within the period of the first 12 months, and (ii) ground rent would only be assessed and commence being payable upon notification by C relating to the of the building of the shops. Once D obtained notification, C (the lessors) claimed payment of the ground rents. D (the lessees) repudiated liability on the ground that the obligation to pay rent had been discharged by frustration, because of the war-time restrictions placed by the Government on building, which had made it impossible to erect the shops. It was held, that even if the doctrine of frustration could apply to a lease, the circumstances did not justify such application; the lease had not been determined by frustration, and the liability for rent continued. Hillingdon Estates Co. v. Stonefield Estates Ltd. [1952] Ch. 627; in 1938, C entered into a contract for the sale of certain lands to D, the purchasers. In 1948, the City Council made a compulsory purchase order affecting one piece of land A few weeks later notices were served by the City Council on the sellers and purchasers. D, the purchasers, alleged that they were discharged by frustration, on or before the date of the service of the notices, from liability to perform any of the agreements on their part contained in the contract and became entitled to recover from C, the sellers, a sum representing interest on the purchase price of the affected piece of land D, the sellers, counter-claimed for specific performance of the contract. Held, the contract had not been frustrated, since the compulsory purchase order duly affected D, the sellers, in so far as they were given notice of it, and, if they chose to enforce the contract, they were under no obligation to do anything except to convey the property subject to, among other things, the compulsory purchase order. The reason for the Court’s finding although it might seem odd at first sight, is very sound in so far as principles of land law are concerned. When there is a contract by S to sell land to B at a certain price, in English law B becomes the owner in equity of the land, subject, of course, to his obligation to perform his part of the contract by paying the purchase money. From the moment the contract is entered into S holds the legal estate as trustee for B, the purchaser.
Thus, in Chandler v. Webster [1904] 1 K.B.493, D agreed to let C have a room for the purpose of viewing the coronation procession, for £141 15s. The contract provided that the money be payable immediately. The procession did not take place and C, who had paid £100 on account, left the balance unpaid Furthermore, C sued to recover the £100 and D counter-claimed for £41 15s. It was held that C’s action failed and D’s counter-claim succeeded because the obligation to pay the rent had fallen due before the frustrating event. This was a very strict rule, and a distinction was drawn on such matters by the House of Lords in Fibroasa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C.32; advance payments could be recovered only where there was a total failure of consideration.
B.R Exploration v. Hund (1983) 2 A.C.352.
Almost identical provision can be found in Art. 7(1) of the 1986 Hague Convention. Similarly, the freedom to chose the applicable law is retained in the Electronic Commerce (E.C. Directive) Regulations 2002 (S.I.2002, No.2013).
It must be noted that arbitration agreements are considered as separate agreements within a contract. For arbitration, see supra, p.14.
Ennstone Building Products Ltd. v. Stanger Ltd. (No.2) [2002] EWCA Civ. 916; the presumption of Article 4(2) was not overridden where two English companies concluded a contract in Scotland, the contract was to be performed in Scotland, and a breach of the contract occurred in Scotland. Thus, English law was the appropriate law to apply to such contract, since it was closely connected with England.
In an employment contract the law applicable has been held to be that of the State where the employee principally works; Mulox I.B.C. v. Geels [1994] I.R.L.R.422. The performance which is characteristic in a guarantee contract is the duty to pay; Samcrete Egypt Engineers & Contractors SAE v. Land Rover Exports Ltd. [2001] EWCA Civ 2019, where C and X entered into a distributorship agreement subject to English law and Court jurisdiction, but only after C was provided with a guarantee from D, who were the parent company of X. The guarantee did not include a choice of law clause, and stated that any payments due to C will be made in England. A dispute arose between C and D, and consequently, C commenced legal proceedings under the guarantee contract, in England The question arose as to whether the characteristic performance of the guarantee contract was to be made in Egypt, where D had its seat, or England, where C had its seat. There was sufficient evidence of connection to England, including the fact that the payment under the guarantee was to be made in England, and that the distributorship agreement made England the country most closely connected to the contract of guarantee.
Raiffeisen Zentralbank Osterreich AG v. Five Star General Trading LLC (The Mount I) [2001] 1 Lloyd’s Rep.597, C.A.; D contended that an assignment of an insurance policy was invalid since under the Rome Convention the notice of assignment involved a transfer of property and as the claim was a proprietary one, it was governed by French law (lex situs). It was held that the assignment was an assignment of a contractual obligation and as such, in English law, the Rome Convention should apply. Further, that since the insurers and the insured had agreed for their insurance contract to be governed by English law, the assignment should also be governed by English law.
Amin Rasheed Shipping Corp. v. Kuwait Insurance Co. (The Al Wahab) [1984] A.C.50, H.L.
See infra, p.186.
Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C.583, H.L.; the parties entered into a standard form agreement published by the Royal Institute of British Architects (R.I.B.A.). A dispute arose, and the House of Lords held, inter alia, that the use of the English R.I.B.A. form contract indicated an intention that English law was the proper law of the agreement
Thus, if X in Paris receives a shipment order from Y in Japan on C.I.F. Tokyo terms and X accepts this order, the likely governing law of the contract will be French, as it is to be performed in France by delivery of the goods on board a ship sailing for the agreed port of destination; Johnson v. Taylor Bros. & Co. Ltd. [1920] A.C.144, H.L. Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH. [1983] 2 A.C.34; the Court held that an acceptance by telex from England to Austria caused a contract to be made in Austria, i.e. where the contract was concluded.
Thus, in Benaim & Co. v. Debono [1924] A.C.514, an offer by X in Gibraltar to sell on F.O.B. terms to Y in Malta was made and accepted. Y rejected the goods and the question arose as to whether the law of Gibraltar or Malta applied to the contract. It was held that although the posting of the acceptance letter took place in Malta and therefore the contract was concluded in Malta, the place of performance was Gibraltar since the goods were shipped F.O.B. Gibraltar. Thus, the applicable law was that of Gibraltar.
Compagnie Tunisienne de Navigation SA v. Compagnie d’Armement Maritime SA [1971] A.C.572, H.L.; the charter-party had an English arbitration clause, but a choice of law clause in terms that the contract should be ‘governed by the law of the flag of the vessel carrying the goods’. Another clause stated that the ship was to be ‘governed or controlled or chartered by French shipowners’. Therefore, it appears that the parties anticipated that ships flying French flags would be employed. In fact, shipments were mad on a number of ships flying differing flags. It was held that the two clauses pointed to a choice of French law.
See infra, p.189.
Phillips v. Eyre (1870–71) L.R. 6 Q.B.1; Boys v. Chaplin [1971] A.C.536. See also Gotha City v. Sotheby’s (No.2), The Times, 8 October, 1998.
Kuwait Airways Corp. v. Iraqi Airways Co. (Damages) [2004] EWHC 2603.
Section 11, Private International Law (Miscellaneous Provisions) Act 1995.
Judgments obtained by Commonwealth countries are enforced by the application of the Administration of Justice Act 1920.
Council Regulation (E.C.) No. 44/2001 of 22nd December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. The Regulation applies to all judgments after 1st March 2002, and applies to all E.C. member States except Denmark. The important part to note is that under Article 23(1) of the Judgments Regulation the parties are free to choose which Court will have jurisdiction and this jurisdiction will be exclusive unless the parties have agreed otherwise.
As supplemented by the Civil Jurisdiction and Judgments Order 2001.
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(2006). The Law of Contract. In: Principles of Law Relating to International Trade. Springer, Boston, MA. https://doi.org/10.1007/0-387-30699-4_4
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