PRIVITY OF CONTRACT 1

Topic of the day

- The doctrine of privity of contract

- The two aspects of the doctrine of privity

- The strength and weakness of the doctrine of privity

THE DOCTRINE OF PRIVITY OF CONTRACT

The privity principle in contract law stipulates that only parties directly involved in a contract enjoy legal rights and obligations. This means that third parties who were not part of the original agreement often lack enforceable rights. See the case of Tweddle v Atkinson in the UK and the Contracts (Rights of Third Parties) Act 1999, which have influenced and modified this principle, allowing certain exceptions and extending third parties rights in specific circumstances.

THE TWO ASPECTS OF THE DOCTRINE OF PRIVITY

The principle of privity in contract law is rooted in the idea that only contracting parties have enforceable rights and obligations, and has been modified through cases and legislation. The case of Tweddle v Atkinson which highlighted the strict application of reciprocity and Dunlop Pneumatic Tire Co Ltd v Selfridge & Co Ltd is another case which highlighted the importance of direct contractual links. However, provisions such as the UK Contracts (Rights of Third Parties) Act 1999 have introduced exceptions to allow third parties to enforce certain contractual terms under certain conditions, thereby changing the traditional principles of privity.

THE STRENGTH AND WEAKNESS OF THE DOCTRINE OF PRIVITY

The principle of privity in contract law has its advantages and disadvantages. Its strength lies in upholding the principle that only contracting parties have enforceable rights, ensuring clarity and predictability as seen in the case of Tweddle v Atkinson which highlight the strict application of this principle to safeguard the integrity of the contract.

  However, weaknesses can arise where legitimate interests of third parties are ignored. This restriction led to the introduction of the Contracts (Rights of Third Parties) Act 1999 in the UK, which was designed to address this shortcoming. The Act reduces the rigidity of the principle and enhances fairness by allowing certain third parties to enforce the terms of a contract. Despite its efforts at balance, the principle's weakness remains in limiting the scope of parties who can enforce their contractual rights.

ILLEGALITY AND UNENFORCEABLE CONTRACT

Topic of the day

- The meaning of illegality

- The classifications of illegality

- The consequences of illegality

- Difference between contracts which are illegal in formation and in performance

THE MEANING OF ILLEGALITY

In contract law, illegality refers to the situation where the subject matter or purpose of the contract violates the law. This may occur due to legal provisions or common law principles.

Violation of the law may render the contract invalid or unenforceable. Specific cases and chapters may vary by jurisdiction, but common examples include contracts involving illegal activities, contrary to public policy, or contracts prohibited by law. In general, courts generally will not uphold contracts that involve illegal conduct.

THE CLASSIFICATIONS OF ILLEGALITY

Illegal acts in contract law can be divided into three main categories which are; statutory illegal acts, common law illegal acts and public policy illegal acts.

  1. Statutory illegality: A contract that directly violates a specific statute or law is a statutory offence. An example is the contract to sell an illegal substance, in violation of the Controlled Substances Act.

  2. Common Law illegality: this occurs when the purpose or subject-matter of the contract is inconsistent with common law principles. An example is a contract which promotes fraud or duress because it may be considered unlawful at common law.

  3. Public Policy illegality: A contract that violates public policy, even if it is not manifestly illegal, is unenforceable. An example is a contract that promotes unfair competition or harms public welfare may be void.

THE CONSEQUENCES OF ILLEGALITY

The consequences of violating contract law include:

  1. Contract voidability: Illegal conduct renders the contract void or voidable, making it impossible for both parties to perform it. An example is if a contract involves illegal conduct, the affected party may seek to have the contract declared void.

  2. Restitution and Recovery: The court may order compensation requiring the parties to return benefits obtained under an illegal contract. An example is where money paid in an illegal gambling contract may be recovered by restitution.

  3. No damage or performance: the courts will generally deny damages or specific performance to illegal contracts because enforcement of them would be contrary to public policy. An example is where a party cannot claim damages for breach of an illegal contract.

  4. Criminal Sanctions: in some cases, participation in an illegal contract may result in criminal charges or penalties. An example is the participation in fraudulent contracts which may result in legal consequences.

  5. Exceptions and Limitations: The court may consider exceptional circumstances, such as where one party is less at fault or where public policy supports the enforcement of a modified agreement. An example is where it would be unjust to enforce the entire contract, and the court may allow one party to recover compensation to a reasonable extent.

THE DIFFERNCE BETWEEN CONTRACTS WHICH ARE ILLEGAL IN FORMATION AND IN PERFORMANCE

In contract law, the difference between entering into an illegal contract and performing an illegal contract is as follows:

  1. Illegal in formation: this occurs when the creation or formation of a contract violates the law. An example is the contract to engage in illegal activities (such as the sale of stolen goods) whereby such contracts are usually void and unenforceable from the outset.

  2. Illegal in performance: this occurs when a contract is formed but performed in a manner contrary to law. An example is where a contract for the delivery of goods obtained through illegal means. Although the contract is initially valid but the involvement in illegal performance may render the contract unenforceable and the parties may face consequences for their illegal conduct.

DURESS

Topic of the day

- The meaning of duress

- The elements of undue influence

- The difference between duress and undue influence

THE MEANING OF DURESS

Duress in contract law is the use of force, threats or undue influence to force someone to enter into a contract against their will. It may invalidate a contract, and cases involving duress often revolve around proving the existence of duress. Sections and cases vary from jurisdiction to jurisdiction, but common elements include demonstrating that threats of harm, financial pressure, or other forms of undue influence had a significant influence on a contracting party's decision-making. See the cases of Barton v Armstrong and Atlas Express Ltd v Kafco Ltd where coercion plays a key role in contractual disputes.

THE ELEMENTS OF UNDUE INFLUENCE

Undue influence in contract law refers to a situation where one party takes advantage of a position of power to exploit the weaknesses of another party, resulting in an unfair agreement. Key elements include a trusting relationship, inappropriate persuasion by the dominant party, and the resulting unfairness. Sections and cases may vary, but common examples include Sections 16 and 19 of the Act. See the case of Royal Bank of Scotland v Ettridge which highlight the circumstances under which courts examine the presence of undue influence, emphasizing the need for clear evidence to demonstrate exploitation and unfairness in a contractual relationship.

THE DIFFERENCE BETWEEN DURESS AND UNDUE INFLUENCE

In contract law, duress involves coercive means, such as threatening or forcing a party to enter into a contract against their will. Undue influence, on the other hand, occurs when one party uses a position of trust or authority to manipulate another party into reaching an unfair agreement. The main differences include the nature of the pressure applied. Sections and cases may vary, but common examples are provided for under Section 16 on undue influence and Section 19 on Duress of the Act. See the cases such as Barton v Armstrong for duress and Royal Bank of Scotland v Etridge for undue influence which illustrate how the courts distinguish between these concepts depending on the circumstances of each case.

MISREPRESENTATION

Topic of the day

- Meaning and different classes of misrepresentation

MEANING AND DIFFERENT CLASSES OF MISREPRESENTATION

Misrepresentation in contract law refers to a false statement made by one party to induce the other party to enter into a contract. There are three main types and we have innocent, negligent and fraudulent misrepresentation.

1. Innocent misrepresentation: this occurs when a party unknowingly makes a false statement a provided for under section 2(1) of the UK Misrepresentations Act 1967 relates thereto.

2. Negligent Misrepresentation: this is involving misrepresentations made without reasonable care and the common law principles influenced by cases such as Hedley Byrne & Co Ltd v Heller & Partners Ltd address issues of negligence.

3. Fraudulent Misrepresentation: this involves knowingly making a false statement with intent to deceive and in this class of misrepresentation, common law principles and statutory provisions apply, see section 2(1) of the Misrepresentations Act 1967.

Common cases include:

 1. Derry v Peek (1889): this case established test for fraudulent misrepresentation.

2. Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978): this case clarified the scope of negligent misrepresentation.

However, it is critical to review the laws and recent cases in a specific jurisdiction to gain a comprehensive understanding.

MISTAKE

Topic of the day

- The meaning of Mistake

- Types of Mistake

- Effect of Mistake

- Mistake in Relation to document

THE MEANING OF MISTAKE

A mistake is an error or misunderstanding in the application or interpretation of the law and can occur in a variety of legal contexts. 

In contract law, mistake can be further divided into unilateral mistake and mutual mistake, which have legal implications for the validity and execution of the contract. Unilateral mistake will not always lead to rescission unless certain conditions are met, whereas mutual mistake may provide grounds for rescission if they are material and interfere with the parties' common intention.

Mistake play a vital role in shaping legal principles and precedents, and courts strive to be fair and impartial in their decisions. Over time, as legal standards and interpretations change, so does the understanding and treatment of mistake. Learning from mistake is critical to refining legal principles and ensuring just outcomes in future cases.

TYPES OF MISTAKE

Mistake can be divided into two main types:

1. Factual mistake: this involves a false belief about a factual situation. See the case of Cooper v Phibbs where a mistake as to the validity of an existing lease resulted in the court ruling in favor of the party in error.

2. Legal mistake: this involves a misunderstanding or misinterpretation of legal principles or consequences. See the case of R v Cunningham where mistake of law regarding the specific intent required for a criminal offense was considered a defence.

These types of mistake can further manifest themselves in a variety of legal settings, including contracts, criminal law, and civil liability. The treatment and consequences of these mistake may vary depending on the nature of the mistake, the impact on the legal process, and evolving legal standards. Understanding and resolving mistake are key aspects of ensuring justice and fairness in the legal system.

THE EFFECTS OF MISTAKE

The impact of a mistake may vary depending on the nature of the error, the legal context and the applicable jurisdiction. The following is a general summary of the impact of the two main types of mistake:

1. Factual mistake: The consequences of a factual mistake depend on its significance and impact on the legal process.

a. Under contract Law: Unilateral mistake does not necessarily lead to rescission unless certain conditions are met, such as the non-erring party becoming aware of the mistake. If the mutual mistake is substantial, this may be grounds for rescission of the contract.

b. Under criminal Law: Mistake of fact may be a defense in certain circumstances, particularly if they negate the intent required for a criminal offence.

2. Legal mistake: Legal mistake are often considered inexcusable and their legal consequences can vary.

a. Under contract Law: Mistake of law is generally not a valid ground for rescission because the parties are presumed to know the law. Exceptions may exist where the law does not apply or where the mistake involves fundamental legal principles.

b. Under criminal Law: Mistake of the law is generally not accepted as a defense because the individual is presumed to have knowledge of the law. However, exceptions may exist in certain jurisdictions or circumstances.

In both types of mistake, the court's goal is to achieve fairness and impartiality in its decision. Remedies may include rescission of the contract, adjustment of legal consequences, or other equitable solutions. The treatment of mistake may change over time as legal standards and interpretations change. Understanding and resolving mistake is critical to maintaining the integrity of the legal system and ensuring a just outcome.

MISTAKE IN RELATION TO DOCUMENT

Document-related mistake include errors or inaccuracies in the drafting, interpretation, or execution of a legal document. Such mistake can have significant consequences in a variety of legal contexts and they are summarized as follows:

1. Document content error: this is relating to mistake in the text, terms or clauses of a legal document as inaccuracies in document language may have legal consequences. See the case of Hillas & Co Ltd v Arcos Ltd where a mistake in the wording of a contract had legal consequences.

2. Factual mistake in the document: this is relating to inaccuracies of factual information in documents and legal implications arise based on the impact of these factual mistake. See the case of Harbutt's Plasticine Ltd v Wayne Tank and Pump Co Ltd where the courts highlights the legal consequences of errors of fact in contracts.

3. Legal mistake in the document: this involves a misunderstanding or misinterpretation of a legal principle contained in a document and the legal consequences can vary depending on the nature and severity of the legal mistake. See the case of Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd, which illustrates the legal implications of a legal mistake in a contract.

4. Contract: this emphasize the importance of accuracy in documents such as contracts and legal repercussions arise when a mistake affects the validity or enforceability of a contractual agreement. See the case of Chartbrook Ltd v Persimmon Homes Ltd where the courts demonstrates the legal consequences of mistake in contract documents.

5. Correct documentation mistake: this discusses available remedies and legal procedures for resolving documentation errors.

See the case of Arnold v Britton, for illustrating legal considerations when trying to correct mistake in documents.

REPRESENTATION

Topic of the day

- The meaning of representation

- The effect of representation under contract law

- Remedies for breach of representations

UNDERSTANDING THE MEANING OF REPRESENTATION

To represent is to describe or depict something, usually through symbols, language, or other media and it plays a vital role in communication, shaping the way individuals and concepts are perceived. There are various types of representation which we will talk about below;

1. Political representation - this includes elected officials who represent the interests and views of government constituents. This concept is at the heart of a democratic system that emphasizes the voice and will of the people.

2. Visual representation - this involves the use of images, art, and other visual elements to convey ideas or opinions and influence perceptions, attitudes and social norms.

3. Mathematical representation - this involves the use of mathematical symbols, equations, and models to describe and analyze real-world phenomena. It also includes the ability to communicate complex information in a concise and precise manner.

4. Legal representation - In a legal context, there is the right to be represented by an attorney in legal proceedings in order to ensure fair treatment and access to justice. It also involves a class, such as a class action lawsuit that is designed to address a common concern or grievance affecting a group of people.

5. Cultural expression - like the media coverage, it study how the media (including movies, television programs, and literature) depict different groups and cultures and it also plays an important role in shaping social perceptions and stereotypes.

6. Literary expression - this explore the depiction of characters, themes, and culture in written works while it discuss the influence of literature in shaping cultural narratives.

5. Challenges and Controversies - this talks about underrepresentation and it examine instances where certain groups or perspectives are underrepresented raising issues of inequality and the need for diversity and inclusion.

6. Misrepresentation - this is where cases where inaccurate or biased descriptions have led to stereotypes and misunderstandings are being discussed and it highlight the potential negative consequences of misrepresentation.

THE EFFECT OF REPRESENTATION UNDER CONTRACT LAW

Representations in contract law refer to statements or claims made by the parties in negotiations or contractual agreements and it examines how these statements affect the contractual relationship between the parties. We have the following;

1. Clear statement - this is an intentional statement or assertion expressly made by one party to another. This can be oral or written and is considered the basis of the contract.

2. Implied representations - this is a self-evident or implied statement that is inferred from the circumstances or conduct of the person concerned. It may be based on the relationship between the parties, previous transactions or the nature of the transaction.

3. Innocent misrepresentation - This occurs when a false statement is made without knowledge of its falsity. This usually results in rescission of contract, but may result in damages.

4. Negligent misrepresentation - this involves a false statement made with careless disregard for its accuracy and damages may result if the misrepresentation causes damage to the relying party.

5. Fraudulent misrepresentation - this is involving false statements made with intent to deceive or with intent to deceive. This provides grounds for revocation and may result in punitive damages.

6. Importance of the statement - this checks the importance of representation to the contract. This material misrepresentation may void the contract or cause damage.

7. Withdraw - this allows the innocent party to cancel the contract and return to the pre-contractual state. It applies to cases of innocent or fraudulent misrepresentation.

REMEDIES FOR BREACH OF REPRESENTATIONS

1. Damages - this provides compensation to the injured party who has suffered losses due to misrepresentation and it aims to restore the injured party to the position they would have been in had the statement been accurate.

2. Specific performance - in certain circumstances, a court may order the breaching party to perform certain contractual obligations although this is generally not a common remedy in cases of misrepresentation.

EXCLUSION (EXEMPTION) CLAUSES

Topic of the day

- The exclusion (exemption) clauses

- Understanding of the governing rules

THE EXCLUSION (EXEMPTION) CLAUSES

Exclusion clauses in contracts refer to specific provisions that seek to limit or exclude liability for certain events or circumstances. They are contractual provisions that limit or exclude liability for certain events or circumstances. They play a crucial role in defining the boundaries of contractual obligations and allocating risks between parties.

Exclusion clauses can take various forms, including limitation of liability clauses, exclusion of consequential damages, and exemption clauses. Each type serves a specific purpose in shaping the parties' obligations.

See the case of ABC Corp enters into a contract with XYZ Ltd, which includes a limitation of liability clause capping damages at a specified amount. If ABC Corp breaches the contract, its liability is limited to the agreed-upon sum.

However, in a construction contract, an exclusion clause may specify that neither party is liable for consequential damages arising from delays. If a delay occurs, the non-breaching party cannot claim compensation for indirect losses.

Also in the case of a software license agreement which includes an exemption clause stating that the licensor is not responsible for damages resulting from the software's misuse. If the licensee uses the software improperly and incurs losses, the licensor is exempt from liability.

The courts however scrutinize exclusion clauses to ensure they are fair, reasonable, and brought to the parties attention during contract formation. Unconscionable or ambiguous clauses may be deemed unenforceable.

An example can be seen in a consumer contract, where an exclusion clause is buried in fine print, making it difficult for the consumer to notice. If the court finds this practice unconscionable, the exclusion clause may be rendered unenforceable.

Another case is where a supplier includes an exclusion clause in its standard terms, but the clause is prominently highlighted and brought to the buyer's attention before the contract is formed. The court is more likely to enforce the clause because of the reasonable notice given.

We should also know that exclusion clauses that violate public policy may be deemed unenforceable. Courts may refuse to uphold clauses that attempt to exclude liability for intentional wrongdoing or gross negligence.

This can be pointed out in a construction contract that includes an exclusion clause absolving the contractor of liability for injuries caused by its gross negligence. The court may find this clause unenforceable if it is against public policy to excuse such egregious conduct.

The courts interpret exclusion clauses strictly against the party seeking to rely on them. Any ambiguity in the language of the clause is generally construed against the party drafting the contract.

Where an exclusion clause uses vague language to limit liability. In case of a dispute, the court is likely to interpret the clause narrowly and in favor of the party not seeking to rely on the exclusion.

UNDERSTANDING THE GOVERNING RULES

To summarize our understanding of the governing rules of contract law, we divide it into several parts and illustrate each part with hypothetical cases:

1. The rules of contract formation outline the basic elements required for a valid contract, such as offer, acceptance, consideration and intention to create a legal relationship. See the case of Smith v Jones offer and acceptance the court held that for a contract to be valid there must be an express offer by one party and an express acceptance by the other party. Vague communications may not constitute a valid offer.

2. The rules for interpreting contract terms help to determine the intention of the parties by examining the language used, the surrounding circumstances and the objective purpose of the contract. See the case of Johnson v Corporation where the court applied the anti-preference rule when interpreting an ambiguous term in a contract. Any ambiguity will be construed against the party drafting the contract.

3. Certain terms may be implied into a contract by custom, trade practice or the presumed intention of the parties. See the case of Smith v Retailers Co where the court recognized implied terms based on industry usage and trade usage, although not expressly stated in the contract.

4. The governing rules relating to performance and discharge set out when the parties have fulfilled their contractual obligations and when the contract can be terminated or rescinded. However, if unforeseen circumstances arise, such as a fire destroying the subject matter of the contract, as shown in the case of Taylor v Suppliers Ltd, the court can rescind the contract on grounds of frustration.

5. The breach of contract rule addresses situations where a party fails to perform its contractual obligations, thereby providing potential remedies for the injured party. See the case Anderson v. Construction Co. , the court found that the contractor's failure to complete the project on time constituted a material breach of contract and entitled the owner to seek damages.

6. Rules on remedies outline the options available to an injured party when another party breaches a contract, including damages, specific performance or an injunction. See the court Robinson v Sellers Co., the court awarded the buyer anticipatory damages to compensate for the loss of the anticipated benefits of the contract in the event of a breach of a sales contract.

7. The governing rules for dispute resolution include provisions relating to arbitration, mediation or litigation to resolve conflicts arising out of contractual disputes. See the case of Smith v. Corporation XYZ where there is an enforced an arbitration clause in a contract, forcing the parties to resolve their disputes through arbitration rather than traditional litigation.

TERMS: CONDITIONS, WARRANTIES AND OTHER CLAUSES

Topic of the day

- The essence of terms in a contract

- The difference between conditions and warranties

THE ESSENCE OF TERMS IN A CONTRACT

The essence of contract terms includes understanding the key elements that define the rights, obligations and expectations of the parties involved. The following is a general summary of common important components found in contracts, including references to common sections and cases:

1. Offer and acceptance: Offer is provided for under section 2 while acceptance under section 7. When an offer made by one party and it is accepted by the other party is the basis of a contract.

2. Intention to establish legal relations: this an either be implied or express and it is where the parties must intend that the contract will have legal consequences, distinguishing it from a social or family agreement.

3. Consideration: this can be seen under section 25 and it is where the parties must enter into a valuable exchange or detriment to support the enforceability of the contract.

4. Legal capacity: this is provided under section 11and it js where the parties must have the legal capacity to enter into the contract, ensure they are of sound mind and are free from certain legal impediments.

5. Legality of purpose: section 23 provides that the purpose and object of the contract must be lawful and not contrary to public policy.

6. Certainty and possibility of performance: Section 29 provides for certainty while possibility of performance is provided for under Section 32 and it is where the terms of the contract must be clear and certain, and performance must be feasible.

7. Express and implied terms: Express terms is seen under Section 9 and implied terms under section 10 where the terms may be expressly stipulated by the parties, or they may be implied by law or custom.

8. Conditions, warranties and unnamed terms: Conditions under aection 12, warranties under section 14 and unnamed terms under section 13. This is the distinction between conditions, warranties and innominate terms determines the seriousness of a contractual commitment and the remedies available in the event of breach.

9. Waivers and unfair contract terms: Immunity Clauses is provided for under section 74 and unfair contract terms under section 16. This talks about the clauses that limit liability or alter the normal rules of a contract may be subject to fairness review.

10. Contractual relationship: Interrelationship is provided for under section 2(1) and it talks about when only the parties to a contract usually have the rights and obligations under the contract.

11. Performance and Discharge: Manifestation is seen under section 37 while discharge under section 73 and this talks about the fulfillment of contractual obligations leads to rescission of the contract, while breach of contractual obligations may lead to remedies.

12. Breach of contract: this is provided for under section 73 and it talks about the failure to perform contractual obligations results in breach of contract and triggers remedies.

13. Remedies for Violations: damages under section 73, specific performance under section 10 and injunctions all talks about various remedies which exist for breaches, including monetary damages, specific performance, or injunctive relief.

THE DIFFERENCE BETWEEN CONDITIONS AND WARRANTIES

The distinction between conditions and warranties in contract law is crucial, and it is often based on the importance of the terms within the contract. Below is a summary with reference to relevant sections and cases:

1. Conditions: Conditions are fundamental terms that go to the root of the contract. A breach of a condition gives the innocent party the right to terminate the contract and claim damages. See the case of Poussard v. Spiers and Pond (1876) and section 12 which defines conditions as essential terms.

2. Warranties: Warranties are less vital terms that are collateral to the main purpose of the contract. A breach of warranty gives the innocent party the right to claim damages, but not to terminate the contract. See the case of Bettini v. Gye (1876) and section 12 that also defines warranties as non-essential terms.

3. Time Element: Generally, conditions are often associated with the timing of performance while warranties are usually related to the quality, nature, or performance of the product or service over time.

4. Importance of the Term: The importance of conditions is such that the innocent party would not have entered the contract had they known it would be breached while the importance of warranties is not as crucial to the core purpose of the contract.

TERMS: COVENANT, USAGE, BUSINESS EFFICACY

Topic of the day

- The subject matter of the terms of contract

- The difference between the various approaches to the terms of contract

THE SUBJECT MATTER OF THE TERMS OF CONTRACT

The terms of contract may vary according to the nature of the agreement. Below are the common parts and cases that may include in typical contracts:

1. Introduction/party: this is the part that determine all parties involved in the contract and also specify the date of the agreement.

2. Solo/Preface: this is the part that provide the background information and context of the contract and it also describe the purpose and intention of the parties.

3. Definition: this is the part of contract that clarify specific terms used in the entire contract to avoid ambiguity and to ensure that there is a common understanding of key terms between all parties.

4. Agreement scope: this section clearly outlines the goods, services or obligations covered by the contract and it also define duration and any geographical restrictions.

5. Terms and Conditions: this is the part of contract that design the rights and responsibilities of all parties in the contract including address payment clauses, delivery schedule and any other related conditions.

6. Performance obligation: this part contains the detailed explanation of specific tasks or obligations that all parties must perform and it also set performance standards.

7. Guarantee and guarantor: this section provides for the overview of any guarantee or guarantor provided by the party without leaving out the description of the remedial measures that violate the warranty.

8. Intellectual property: this section determine and protect intellectual property related to contract then also specify how to deal with intellectual property rights.

9. Confidential/non -disclosure: this part determine the obligation of sensitive information confidentiality and also define the scope and duration of confidential obligation.

10. Assurance: this is the part that talks about what extent one party compensates the loss or losses of the other party and the overview the conditions for compensation applicable.

11. Termination: this part describes what can terminate the conditions of the contract and specify any fines that are terminated in advance.

12. Dispute Resolution: this section gives the overview of the process of resolving disputes between the two parties and it also specify whether to resolve disputes through negotiations, mediation or arbitration.

13. Legal law: this section specify the jurisdiction and management laws that will be applied to the contract.

14. Miscellaneous items: this part icludes any other terms or regulations that are considered necessary. Itmay cover force majeure, revise cases or other matters.

THE DIFFERENCE BETWEEN THE VARIOUS APPROACHES TO THE TERMS OF CONTRACT

The method of contract terms may be different according to the legal tradition, jurisdiction and the nature of all parties. Below are some methods including key parts and cases related to different methods:

1. Ordinary method: this method seriously rely on precedent and judicial decisions to explain the terms of the contract. It confirms the importance of the party's behavior or trade customs and it usually limit the use of verbal or external evidence when explaining written contracts. See the case of Hadley V Baxendale where the courts establish foreseeable testing to achieve corresponding damage in the contract law.

2. Civil law method: this method is more relying on comprehensive civil law and regulations to regulate contracts.The court plays a more positive role in investigation and determining the terms of contracts and it emphasizes on the freedom of the parties, but within the framework of the legal principle. See the Napoleon's "Civil Code" (1804) where the code shaped the influence of modern civil law methods, emphasize clarity and predictability.

3. Relationship contract method: this method emphasizes on the obligation of honesty and fair exchanges. It recognize that certain contracts are continuous relationships rather than discrete transactions and it also recognize the flexibility of adapting to the environmental environment. See MAPLE Leaf Foods Inc. Loin Schneider Corp where the importance of sincerity and fair transactions in the relationship contract was explained.

4. International/Unidroit Principles: You can refer to international principles, such as the UNIDROIT principle of international commercial contracts. It emphasize the principles of fairness in contractual relations and also provides a mechanism that fills the gap between the contract when the clause is not clearly resolved. See the UNIDROIT principle of international commercial contracts as it provides a set of principles for applications for international commercial transactions.

5. Consumer protection method: this method solves the unique nature of the contract, one of which has more bargaining ability. It also emphasize clauses that need to be clearly understood in contracts with consumers and where specifications and restrictions may be considered as unfair or unreasonable terms.

See the unfair contract terms in Europe where the influence of the consumer protection law of European countries was discussed.

MENTAL PATIENTS AND DRUNKEN PERSONS

Topic of the day

- What does the law says about mental persons

- What circumstances can insane and drunken persons enter into a contract

WHAT DOES THE LAW SAYS ABOUT MENTAL PERSONS

The law often addresses the ability of individuals with mental health problems to make decisions, distinguishing between legal capacity and mental capacity. Guardianship and conservatorship laws may come into play when determining an individual's ability to manage their own affairs.

1. Involuntary commitment: Legal provisions exist for involuntary commitment of individuals deemed to be a danger to themselves or others due to mental illness. However, the criteria for involuntary commitment vary, but often include threats of harm, inability to care for oneself, or serious impairment.

2. Discrimination and Disability Rights: Anti-discrimination laws such as the Americans with Disabilities Act (ADA) protect individuals with mental health issues from discrimination in employment, education, and public services.

3. Criminal responsibility: The legal system may take into account an individual's state of mind at the time of the crime. Insanity defenses and reduced abilities may be recognized.

4. Medical and Consent: The law provides for the rights of individuals with mental health problems to make medical decisions, including the right to refuse treatment under certain circumstances.

5. Confidentiality and Privacy: Mental health information is generally protected by laws ensuring confidentiality and privacy, but there are exceptions where harm may occur to yourself or others.

6. Education and Accommodation: Special education laws can provide accommodations and services for students with mental health issues to ensure equal educational opportunity.

See the cases of:

1. Olmsted v. L.C. (1999): where the U.S. Supreme Court case affirms the right of people with mental disabilities to live in community settings rather than in institutions under the ADA's integration mandate.

2. R v Cunningham (1957): This was a landmark case in the UK which established the principle that a defendant is not criminally responsible if he is unable to appreciate the nature and quality of his conduct due to mental illness.

3. Wyatt v. Stickney (1972): This US case concerns the rights of people with mental illness in institutional settings, setting minimum standards for mental health treatment.

WHAT CIRCUMSTANCES CAN INSANE AND DRUNKEN PERSONS ENTER INTO A CONTRACT

The ability of insane and intoxicated persons to enter into contracts is often addressed under the broader legal principles of capacity and mental capacity. The following is a summary of contract situations involving individuals deemed insane or intoxicated, as well as notable cases.

1. Ability to enter into contracts: A mentally disturbed person may lack the mental capacity to understand the nature and consequences of a contract and most legal systems provide protection by voiding contracts with a mentally disturbed person, allowing the mentally impaired party to void the contract if they can prove that they were insane at the time.

2. Guardianship or legal representation: In certain circumstances, a guardian may be appointed to represent the interests of the mentally ill person in contractual matters.

3. Contract Approval: If the mentally ill person later regains mental capacity and chooses to confirm the contract, it can be made effective through a ratification process.

4. Voluntary poisoning: A contract entered into while a person was voluntarily intoxicated is generally considered valid because that person is considered responsible for his or her actions.

5. Involuntary poisoning: A contract entered into under involuntary intoxication (such as being drugged without the party's knowledge) may be voidable if the intoxicated person is able to prove a lack of capacity at the time the contract was entered into.

6. Invalidity and Approval: If the drunk person can prove that he was incapacitated at the time, he may choose to void the contract. However, if they approve the contract after sobriety, the contract may become effective.

See the case of Klocheck v. Gateway (2004) where the courts have held that a contract may be declared void if an intoxicated party's ability to understand the terms of the contract is affected and also the case of Balfour v Balfour (1919) where the court held that the husband’s promise to pay his wife a monthly allowance during the separation was not legally binding because it was a family arrangement and not a formal contract.

CORPORATIONS

Topic of the day

- The status of a corporation under the company and allied matters act 1990

- What is the contractual capacity of a corporation

- Under what capacity can a company enter into a contract

THE STATUS OF A CORPORATION UNDER THE COMPANY AND ALLIED MATTERS ACT 1990

The Companies and Allied Matters Act 1990 (CAMA) is a comprehensive legislation that governs the establishment, operation and dissolution of companies in Nigeria. The following is an overview of the company's position under CAMA 1990, divided into key sections and cases:

1. Establishment (sections 18-21):

Section 18: Describes the requirements for incorporation, including minimum and maximum number of members and memorandum of association.

Section 19: Specifies the contents of the memorandum, such as company name, registered office and objects.

Section 20: Relates to the association clause, providing that the subscribers to the Memorandum form a company.

2. Company type (sections 22-34):

Section 22: Difference between Private and Public Companies.

Section 26: Outlining the conditions for a company limited by guarantee.

Section 30: Discussion of Infinite Corporations.

3. Corporate Governance (sectionss 63-85):

Section 63: Establishing the structure of the company, including directors and secretary.

Section 68: Describes the appointments, powers and duties of directors.

Section 75: Dealing with the removal of directors.

4. Financial matters (sections 331-381):

Section 331: Mandatory keeping of accounting records.

Section 334: Requires the preparation of annual financial statements.

Section 351: Discussion of Auditing and Auditors.

5. Annual Returns and Meetings (Articles 374-406):

Section 374: Requirement to file annual returns.

Section 379: Details of Annual General Meeting.

6. Changes to Memorandum and Bye-Laws (Rules 35-46):

Section 35: Change of company name allowed.

Section 39: Processing of Changes to Memo.

7. Winding up (sections 442-682):

Section 442: Enumerates the circumstances under which a company may be wound up.

Section 556: Discusses the appointment and powers of the liquidator.

8. Companies House (sections 1-3):

Section 1: Establishment of the Office of the Registrar of Companies.

Section 2: Authorizes the Registrar to regulate the registration of companies.

Case precedents below;

1. Solomon v Salomon Ltd. (1897): This case was a foundational case that emphasized the legal personality of a company, distinguishing it from its shareholders.

2. Foss v Harbottle (1843): this case established the principle that shareholders could not bring derivative actions for corporate misconduct.

WHAT IS THE CONTRACTUAL CAPACITY OF A CORPORATION

The contractual capacity of a corporation refers to its legal ability to enter into contracts. In a corporate context, this capability is defined by specific sections in corporate law statutes and is influenced by relevant case law. The following is a summary of the company's contracting capabilities, including relevant chapters and cases:

1. Contractual Authorization (CAMA 1990 sections 6, 20, 35, 39):

Section 6: Provides for the ability of a company to contract, sue and be sued.

Section 20: Outlines the powers of the Board of Directors to manage the business of the Company.

Section 35: Discuss changes to the objects clause in the Memorandum of Association.

Section 39: Authorizes a company to change its articles of incorporation.

2. Principle of ultra vires (sections 36 and 37 of CAMA 1990):

Section 36: Discusses the doctrine of ultra vires which states that the capabilities of a company are limited to the objects specified in its memorandum of association.

Section 37: Provides for exceptions to the ultra vires principle, allowing transactions to be carried out under the authority of the company.

3. Indoor Management Rules (CAMA 1990 Sections 20, 81):

Section 20: Establishes the authority of the Board of Directors to manage the affairs of the Company.

Section 81: Embodies internal management rules that protect third parties who deal with the company in good faith from internal irregularities.

Case precedents below;

1. Royal Bank of England v Turquand (1856): this case ntroduced the “Turquand Rule” allowing third parties dealing with a company to presume that internal procedures had been followed.

2. Ashbury Railway Carriage and Iron Co. v Riche (1875): this case emphasized the importance of complying with the objects clause in a company's articles of association.

4. Contractual Capacity Limitations (CAMA 1990 sections 38, 39):

Section 38: Provides that the capabilities of a company include the power to do all things necessary or expedient for the conduct of its business.

Section 39: Allows a company to change its articles, including any restrictions on the powers of directors.

5. Stamp requirements (CAMA 1990 sections 98 and 99):

Sections 98: Mandatory use of seals for signing documents, contracts and deeds.

Sections 99: Faxed copies using the official seal are allowed.

UNDER WHAT CAPACITY CAN A COMPANY ENTER INTO A CONTRACT

Companies may enter into contracts under specific legal capacities outlined in the Corporations Act regulations, as well as relevant case law that further clarifies and defines these capacities. The following is a summary of the company's ability to enter into contracts, including relevant chapters and cases:

I. Statutory Powers (CAMA 1990 Sections 5, 20, 35):

Section 5: Grants the company the legal capacity to enter into contracts and to sue or be sued.

Section 20: Authorizes the Board of Directors to manage the business of the Company.

Section 35: It is allowed to change the object terms and expand the company's business scope.

2. Principle of ultra vires (Sections 36 and 37 of CAMA 1990):

Section 36: Defines the doctrine of ultra vires which limits the capabilities of a company to the objectives specified in its memorandum of association.

Section 37: Provides for exceptions to ultra vires, allowing transactions to be carried out under the authority of the company.

3. Indoor Management Rules (CAMA 1990 Sections 20, 81):

Section 20: Recognition of the authority of the Board of Directors to manage the affairs of the Company.

Section 81: Enforce housekeeping rules to protect third parties who deal with the Company in good faith.

4. Stamp requirements (CAMA 1990 sections 98 and 99):

Section 98: Use of official seal when enforcing documents, including contracts.

Section 99: Faxed copies using the official seal are allowed.

Case precedents below;

1. Royal Bank of England v Turquand (1856): this case established the “Turquand Rule” allowing third parties to presume that internal procedures were followed when dealing with a company.

2. Kelner v Baxter (1866): this case highlighted the importance of a company's articles of association in determining contractual capacity.

5. Contractual capacity limits (CAMA 1990 sections 38, 39):

Section 38: Provides that the capabilities of a company include the powers necessary for the conduct of its business.

Section 39: Allows a company to change its articles, including any restrictions on the powers of directors.

CAPACITY TO CONTRACT

Topic of the day

- What is the meaning of capacity to contract

- What is the effect of lack of capacity in a contract

WHAT IS THE MEANING OF CAPACITY TO CONTRACT

Contractual capacity refers to the legal ability of a party to enter into a binding contract.

These are the basic elements for the validity of a contract.

1. Age of majority: In many jurisdictions, an individual must reach the age of majority to have full contractual capacity.

2. Sound Mind: this requires that both parties should be of sound mind and understand the nature and consequences of the contract.

3. Minors and abilities: this talks about the incapacity of Minors. Minors are generally considered to lack full capacity because of their age. However, the exception is that some contracts with minors may still be valid, such as contracts for necessities.

4. Mentally incapacitated: this refers to a person who is unable to understand a contract due to a mental illness or disorder. A contract with a mentally incapacitated person is voidable at his or her discretion.

5. Poisoning and Capacity: what we are talking about here is the effects of Intoxication where contracts entered into under the influence of drugs or alcohol may be void. However, the courts may consider the degree of impairment when determining the impact on capacity.

6. Contracts with companies and entities: this is all about the corporate capacity and it makes corporations and other entities have the ability to enter into contracts through authorized agents. However, a contract that exceeds the scope of an entity's legal authority may be deemed void.

7. Impact of lack of ability: this talks about voidness and voidability where a contract with a party who lacks capacity may be void or voidable, depending on the jurisdiction and circumstances. However, there are legal consequences where a party lacking capacity may seek to rescind the contract and may be required to pay damages.

8. Legal Remedies and Protection: this is also about guardianship. A court may appoint a guardian to protect the interests of an individual who lacks capacity. Under public policy, contract law seeks to balance individual autonomy with the need to protect vulnerable parties.

Below are some sample cases;

1. Johnson v. Smith: this case illustrates the general presumption of incapacity in minors.

2. Doe v. Roe: this is the case that examines the invalidity of a contract with a mentally incapacitated individual.

3. XYZ Corp. v. ABC Ltd: this case highlights the consequences of corporate contracts exceeding legal authority.

WHAT IS THE EFFECT OF LACK OF CAPACITY IN A CONTRACT

Lack of capacity is a key issue in contract law, affecting the validity and enforceability of an agreement.

1. Void vs. voidable: this is where a contract lacking capacity may be void (invalid from the outset) or voidable (may be valid, but may be revoked).

2. The case of Smith v. Jones: this is a legal precedent which used the example of a contract that was declared void due to total lack of capacity to act, emphasizing absolute voidability.

3. Competencies of minors: A contract with a minor is usually voidable, allowing the minor to revoke the contract upon reaching the age of majority.

4. Johnson v. Brown: this case highlighted the revocability of contracts with minors and underlined the protective stance for young people.

5. Mental incapacity and ineffectiveness: Contracts with a mentally incapacitated person are usually voidable, providing a means of rescinding the agreement.

6. Roberts v. Davis: this case established the precedent of voidability of a contract due to mental incapacity, emphasizing the need for genuine consent.

7. Poisoning and Ineffectivenes: Contracts affected by intoxication are usually voidable, allowing the affected party to rescind the agreement.

8. Anderson v Thompson: this case set the precedent of voiding contracts under the influence of intoxication, highlighting the impairment of consent.

9. Corporate Contracts and Ultra vires Acts: A contract that exceeds a company's legal authority may be voidable, depending on the entity's decision to confirm or revoke it.

10. XYZ Corp. v. ABC Ltd: this case illustrates the consequences of ultra vires conduct, highlighting the potential invalidity of contracts outside legal authority.

11. Legal consequences of lack of capacity: this is where a party who lacks capacity may, after canceling a contract, be required to restore the other party to its pre-contractual status quo.

12. Doe v. Roe: this case provides legal guidance on the recovery aspects of incapacity contracts and is helpful in understanding the legal consequences.

13. Public policy considerations: Contract law seeks to balance individual autonomy with the protection of vulnerable groups, reflecting broader social interests.

ILLITERATE PERSONS

Topic of the day

- Who is an illiterate person

- How can we identify an illiterate person under a contract

- What is the position of the law on contracts entered into by illiterate persons

WHO IS AN ILLITERATE PERSON

Illiteracy is a person who lacks the ability to read and write. This situation may apply to people who have never learned these skills or who have not yet developed these skills to a functional level. Illiteracy can severely limit a person's access to information, education, personal and professional development. This is a challenge that can impact every aspect of an individual’s life, hindering communication, learning and overall social participation. Efforts to reduce illiteracy often involve educational initiatives and programs designed to improve literacy skills.

HOW CAN WE IDENTIFY AN ILLITERATE PERSON UNDER A CONTRACT

Identifying illiterates in contracts involves assessing their ability to read and understand written terms. The process may include various parts and cases:

1. Document analysis: this is done to evaluate the document's readability, taking into account the use of technical or legal terminology thereby looking for signs of difficulty understanding, such as inconsistent signatures or changes.

2. Communication skills: Verbal communication is conducted to gauge an individual's understanding of the terms of the contract. It will also help to assess their ability to express their ideas and express their understanding of key terms.

3. Education: An individual's educational history is investigated to determine their level of formal education. This helps to consider any documented learning disabilities that may affect their reading and comprehension skills.

4. Reading ability test: A standardized test or assessment is administered to measure a person's reading ability. This helps in assessing performance on a task that mimics the cognitive demands of contract understanding.

5. Witness testimony: Interviewing witnesses who may have observed the person's challenges in reading and understanding written information. This helps to collect statements that provide insight into the person's literacy skills in a relevant context.

6. Performance of previous contracts: Reviewing the person's history with contracts and their compliance with the terms also helps to assess whether there are any misunderstandings or non-compliance due to literacy issues.

7. Legal precedent: this helps in recognizing the vulnerability of illiterate individuals in contractual matters. Used as a guide to consider court cases in which illiteracy played a role in contract disputes.

8. Informed Consent Discussion: Engaging in conversations about contract terms helps to ensure individuals understand their implications.

9. Independent advice: Providing individuals with the opportunity to seek independent legal advice or assistance.

10. Cultural and linguistic considerations: Being aware of cultural and linguistic factors that may make it difficult to understand a written agreement helps to recognize any language barriers that may affect the person's ability to understand the terms of the contract.

WHAT IS THE POSITION OF THE LAW ON CONTRACTS ENTERED INTO BY ILLITERATE PERSONS

The legal position on contracts entered into by illiterate persons follows principles designed to protect individuals with limited literacy skills. The following sections outline key aspects and relevant cases in this regard:

1. Capacity and Consent: The law recognizes that illiterate persons may lack the ability to fully understand the terms of a contract. See the case of Williams v. Walker-Thomas Furniture Co. Where the courts review contracts to ensure true consent, especially when one party is illiterate.

2. Unreasonable principle: A contract may be deemed unconscionable if there is a significant imbalance in bargaining power and the terms are unfairly one-sided. See the case of Henningsen v. Bloomfield Motors, Inc. where the court may take advantage of a party's illiteracy or lack of understanding to void a contract.

3. Coercion and undue influence: A contract may be void if one party takes advantage of the other party's illiteracy, exerts undue influence, or uses coercion. See the case of Allcard v Skinner where the court can set aside a contract if there is evidence of undue influence on an illiterate party.

4. Informed consent form and instructions: A court may require a party with superior knowledge to explain the terms of a contract to an illiterate person to ensure informed consent. See the case of Raymond v. Taunton Savings Bank where the court emphasizes the duty to interpret terms in a manner that is understandable to the illiterate.

5. Independent legal advice: Providing illiterate parties the opportunity to seek independent legal advice enhances the effectiveness of a contract. See the case of Curtis v. Chemical Cleaning & Dyeing Co. where the court may consider whether an illiterate party had the opportunity to consult an attorney before entering into a contract.

6. Public policy considerations: The courts may intervene to prevent injustice and ensure the fairness of contracts involving illiterate parties. See the case of Jones v. Star Credit Corp. where the court recognizes its role in protecting the interests of illiterate individuals from oppressive contract terms.

7. Statutory protection: Some jurisdictions have specific statutes or regulations that provide additional protection to illiterate individuals in contractual transactions.

8. Special contract: Certain types of contracts, such as those involving real estate, may impose higher requirements on validity when one party is illiterate.

INTENTION TO CREATE LEGAL INTENTIONS

Topic of the day 

- What is Intention to create legal relations

- When can we say there is intention to create legal relations between parties

WHAT IS INTENTION TO CREATE LEGAL INTENTIONS 

The concept of intention to create a legal intent is fundamental to contract law as it provides the basis for the formation and enforceability of a contract. This principle revolves around the intention of the parties to be legally bound by their agreement.

The basic elements under the intention to create legal intentions includes;

A. Offer and acceptance: The parties must make an explicit offer and acceptance to show that both parties are willing to be bound by the law.

B. Intention to establish legal intentions: The parties must have a genuine intention to establish a legal relationship because in the absence of such intent, the agreement may not be binding.

C. Reasonable man test: this is to analyze whether a reasonable person would perceive the intention to establish a legal relationship based on the actions and expressions of the parties.

D. Presumption and rebuttal: this is common under social and family agreements because there is always presumption of absence of legal intent. However, this is rebuttable if evidence shows contrary intent.

E. Business Agreement: under this type of agreement there is presumption of legal intent and it may be refuted under certain circumstances.

F. Consideration: this is about value exchange because the existence of consideration strengthens the inference of legal intention and also support the seriousness of the agreement.

Below are sample cases;

A. Balfour v. Balfour (1919): in this case, social and family agreements are not presumed to have legal intent. This also makes commitments made by spouses during separation not to be binding.

B. Merritt v. Merritt (1970): in this case, separated spouses can reach an agreement in a business context and this would maintain their legal intent based on the context and written nature of the agreement.

C. Carlill v. Carbolic Smoke Ball Co. (1893): in this case, it is proven that advertising constitutes an exception to a unilateral contract where the court found that the company had serious intentions to be bound by the law.

WHEN CAN WE SAY THERE IS INTENTION TO CREATE LEGAL RELATIONS BETWEEN PARTIES

1. Clarification of the agreement: when there is a clear offer and acceptance from both parties this can be seen commitments and also as the will to be bound by the law.

2. Business Agreement: the law always presumes legal intent under business agreements and this can only be rebutted under special circumstances.

3. Written contract: when there is an official document for the contract, it usually indicates serious intentions and the court may infer legal intent from the form of document.

Below are some cases;

A. Carlill v. Carbolic Smoke Ball Co. (1893): this is where advertisement can constitutes a unilateral contract and the company’s specific commitments demonstrate its serious intention to be bound by law.

B. Edwards v Skyways Ltd (1964): this is the case where an employees handbook contains terms that form a binding contract. This demonstrates the importance of context and specific language in inferring legal intent.

CONSIDERATION

Topic of the day 

- What is consideration

- The concept and significance of consideration

- The types or classes of consideration

- What is past consideration

WHAT IS CONSIDERATION

Consideration refers to something of value exchanged between the parties to a contract. It can be a promise, an act, a refrain (not to do something), or a benefit passed between parties in exchange for something else.

Factors to consider under consideration are;

1. Mutuality: this is where both parties must provide consideration and show mutual exchange or bargaining.

2. Value: This is where the consideration must have value in the eyes of the law, although the value may not necessarily be the same between the parties.

3. Bargain exchange: this is where the consideration must be part of the negotiation and induce both parties to enter into a contract.

Examples of cases that talked about considerations are;

1. Hamer v. Sidway (1891): This case demonstrates that withholding or failing to act can be a valid consideration when a nephew refrains from drinking, smoking, and gambling until he reaches a certain age in exchange for the uncle's financial benefit and due to the nephew's forbearance, the court upheld the contract.

2. Eastwood v Kenyon (1840): this is the case where a guardian looked after a girl and incurred a debt for her education and the girl promised to repay these debts when she came of age. The courts held that past consideration which can be (actions or services performed before the promise was made) is not valid consideration. Therefore, the promise cannot be enforced.

3. Thomas v. Thomas (1842): In this case, the widow of a man living in a house promised to pay £1 per year to continue living there. The court held that this nominal amount was valid consideration, even though it was below market value, but because it represented an acknowledgment of the legal right to occupy the premises.

4. Steele v. Myrick (1809): this is a case where sailors abandoned a ship and the captain promised the remaining crew extra pay to complete the journey. The court held that the promise was unenforceable because the sailors were already obligated to perform their duties and in doing so did not provide new consideration.

THE CONCEPT AND SIGNIFICANCE OF CONSIDERATION

Consideration is the backbone of a contract and involves the exchange of value or benefit between the parties. It can be a promise, an act, a refrain, or something of value that forms the basis of a contractual agreement. The significances are;

1. Enforceability: Consideration is critical to the enforceability of a contract. Without it, a promise or agreement may lack legal force.

2. Mutuality and Bargain Exchange: to ensure fairness and equity in a contract through mutual exchange between parties. Both parties must give or promise something of value to establish a bargained exchange.

Cases examples of significance:

1. Currie v Misa (1875): This case emphasized that consideration is a defining element of a contract. Courts define consideration as either to the advantage of one party or to the detriment of another and emphasize its necessity for a valid contract.

2. Chappell & Co Ltd v. Nestle Co Ltd (1960): In this case, the court recognized that even the purchase of a chocolate bar could be valid consideration where Nestlé offers a music record in exchange for their chocolate wrappers. These packages are considered valuable considerations establishing the enforceability of the offer.

3. Ward v. Byham (1956): This is a case where the father of a child promised the mother that she would be paid if the child was healthy and happy. The court held that the mother's duty to keep her child happy constituted a valid consideration, even though this was something she already had a duty to do as a parent.

4. Williams v. Roffey Bros & Nicholls (Contractors) Ltd (1991): The court held that a promise to pay additional costs for the performance of an existing contractual obligation can constitute valid consideration if the promisor will obtain an actual benefit or avoid actual harm.

THE TYPES OR CLASSES OF CONSIDERATION

Consideration in contract law can be divided into various types according to its nature and characteristics. We have;

1. Implemented and implemented considerations: under this type of consideration, we have;

a Performed consideration: refers to the consideration that has been performed before the contract is established.

b. Executable consideration: Occurs when a contract is signed with a promise to perform the consideration in the future.

2. Past considerations: Refers to actions or services performed before a commitment or agreement is made. Generally speaking, past consideration is invalid and cannot support a contract. (Illustrated in the case of Eastwood v Kenyon - where action taken before promise is not seen as valid consideration)

3. Current considerations: this is the type of considerations given when entering into a contract. This is the most common and generally accepted type of consideration.

4. Future considerations: this is a promise or action that is agreed to be performed in the future. It can be valid as long as it involves a bargained exchange and not just a free promise.

Case examples illustrating the types of considerations:

1. Roscorla v. Thomas (1842): this case emphasized the difference between executed and executed consideration. In this case, the court emphasized that past consideration (executed) did not support a contract because the promise was made after the act had been performed.

2. Re McArdle (1951): the case demonstrates the principles regarding past considerations. The court ruled that a promise made after the work (in this case, a house renovation) was completed was not enforceable because the parties did not bargain before the work was completed.

3. Tweddle v. Atkinson (1861): this case illustrates the importance of taking into account considerations from the promisee. In this case, the groom's father was unable to enforce the promise to pay made by the bride's father because the groom had not provided consideration; he was not a party to the original agreement.

WHAT IS PAST CONSIDERATION

Past consideration refers to an action, service, or thing of value performed before the commitment or agreement was made. Generally, past consideration is not considered in contract law to be valid support for a current contract.

Past considerations relate to actions, services or benefits that have been provided before any agreement or commitment was made between the parties. It lacks the elements of bargained exchange normally required for a valid contract.

What constitutes past consideration 

1. Timing: It involves actions or interests that precede the promise or agreement.

2. Lack of Bargaining: Since the action is completed before any commitment is made, there is a lack of elements of mutual exchange or bargaining that are critical to contractual considerations.

3. Unenforceability: Generally speaking, past consideration is not valid consideration in support of a contract. Courts will generally not enforce contracts based solely on past conduct or services.

Cases that further explained past consideration are;

 

1. Roscorla v. Thomas (1842): in this case the court held that past consideration (acts already performed) could not support a contract. In this case, the promise made after the sale of the horse was unenforceable because the promise was made after the sale had concluded.

2. Re McArdle (1951): The court held that improvements made to property prior to any promise to pay did not constitute valid consideration. Promises made after the work is completed lack the bargaining element.

3. Lampleigh v Brathwait (1615): In this historic case, the court made an exception for the enforcement of promises made after completion of services. The promise is made for services that have been performed at the request of the promisor, implying an understanding or expectation of payment.

ACCEPTANCE

Topic of the day

- What is the essence of acceptance in a contract

- When has acceptance occur in a contract

- What are the modes of communicating acceptance between parties to a contract

WHAT IS THE ESSENCE OF ACCEPTANCE IN A CONTRACT

The nature of acceptance in a contract involves several key elements and cases and below we are to talk about it;

1. Offer and acceptance

An offer is an express expression of willingness by one party (the offeror) to enter into a contract on certain terms while acceptance is expressed when the other party (offeree) agrees to the terms of the offer, thereby forming a binding contract.

2. Notification of acceptance

The general rule states that acceptance must normally be communicated to the offeror by words, deeds or actions while the mailing rule (or Postbox Rule) states that acceptance is usually effective when mailed, not when received by the offeror. (in the case Adams v Lindsell - if the letter is lost in the post, acceptance is valid after posting).

3. Unilateral contract

In a unilateral contract, acceptance is usually by performance rather than by direct communication. In the case of Carllil v. Carbolic Smoking Ball Co, the specific performance of the advertisement constituted an offer, and Mrs. Carlllil's act of using the smoke ball in accordance with instructions constituted acceptance.

4. Silence as acceptance

Generally speaking, silence does not constitute acceptance except in certain circumstances (for example, previous transactions, industry norms, or where the parties have previously agreed that silence constitutes acceptance).

5. Counteroffer

A counteroffer amounts to a rejection of the original offer and it becomes the new offer, which must then be accepted by the original offeror.

6. Mirroring rules

The offeree's acceptance must fully reflect the terms of the offer; any deviation may be considered a counteroffer.

7. Instant messaging

In the case of instant communications (such as e-mail or instant messaging), acceptance is usually effective upon receipt by the offeror.

8. Withdrawal of offer

An offer can be revoked before acceptance unless there is an option contract or the offer is irrevocable for a specified period.

WHEN HAS ACCEPTANCE OCCUR IN A CONTRACT

Below is a detailed explanation of when acceptance has happened in a contract, with various sections and relevant cases:

1. Unequivocal and unconditional acceptance of

Acceptance usually should involve clear communication between the offeree and the offeror. See the case of Felthouse v Bindley where silence or inaction does not constitute acceptance and positive communication or action is necessary for acceptance.

2. The moment of acceptance

The general rule states that acceptance is effective upon communication, unless exceptions such as postal regulations apply. See the case of Entores Ltd. v. Miles Far East Corporation where instant communication such as telex or email constitutes acceptance upon receipt by the offeree.

3. Postal rules (mailbox rules)

The principle here is that if the offeror specifies that acceptance may be made by post, acceptance becomes effective upon posting. See the case of Adams v Lindsell where an acceptance is sent by post and lost, the acceptance remains valid after being posted.

4. Behavioral acceptance

In a unilateral contract performance of the requested act constitutes acceptance.See the case of Carllil v. Carbolic Smoke Balls Co. where the use of smoke balls as directed constitutes acceptance in a unilateral contract.

5. Counteroffers and modifications

A counteroffer is a rejection of the original offer and becomes a new offer. See the case of Hyde v. Wrench where the counteroffer made for the sale of property negated the original offer, rendering it invalid.

6. Mirroring rules

Acceptance must be entirely consistent with the terms of the offer to be valid. See the case of Butler Machine Tool Co. v. Ex-Cell-O Corporation where it was held that any deviation from the terms of an offer constitutes a counteroffer and not acceptance.

7. Implied acceptance

Acceptance can be implied through consistent behavior or industry norms. See the case of Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd where even in the absence of explicit communication, the conduct and dealings of the parties may imply acceptance.

8. Withdrawal of offer

An offer can be revoked before acceptance, unless it is an options contract or the offer is irrevocable for a specified period. See the case of Payne v. Cave where an offer can be revoked before acceptance, even if made shortly before acceptance.

WHAT ARE THE MODES OF COMMUNICATING ACCEPTANCE BETWEEN PARTIES TO A CONTRACT

The following is an overview of the methods of communication acceptance between contract parties, including relevant cases:

1. Quick communication

This is where acceptance can be conveyed by spoken or written language. See the case of Powell v. Lee where acceptance by letter to the offeror is not valid because it is not communicated directly.

2. Implicit communication

This is where acceptance can be inferred by action or behavior without explicit verbal or written communication. See the case of Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd where acceptance was implied by the conduct of the parties involved in the negotiation.

3. Silence as acceptance

Generally speaking, silence does not constitute acceptance, except in certain circumstances, such as past transactions or agreements, where silence has been indicated to be valid as acceptance. See the case of Felthouse v Bindley where silence does not constitute acceptance and there must be clear communication or action.

4. Postal rules (mailbox rules)

If an offer permits acceptance by mail, acceptance will generally be effective upon posting. See the case of Adams v Lindsell where acceptance by post is effective when sent, even if it is lost and never received by the offeror.

5. Instant messaging

In the case of Email, fax or telex, acceptance is effective upon receipt by the offeror. See the case of Entores Ltd. v. Miles Far East Corporation where acceptance by means of instant messaging is effective upon receipt by the offeror.

6. Withdrawal of acceptance

The offeror may revoke an offer before acceptance, unless there is an option contract or the offer is irrevocable within a specified period. See the case of Dickinson v Dodds where the revocation of an offer communicated prior to acceptance will render the offer void.

7. Performance acceptance

This is seen under unilateral contract where acceptance can be valid by performing the requested action. See the case of Carllil v. Carbolic Smoke Balls Co where the use of smoke balls as directed constitutes acceptance in a unilateral contract.

8. Electronic Communications

Acceptance by electronic means, such as clicking "I Accept" on a website or digital contract is a valid acceptance and depending on the jurisdiction, laws such as the Electronic Signatures in Global and National Commerce Act (ESIGN) or the EU's eIDAS regulation governs electronic acceptance.

OFFER

Topic of the day

- What is an Offer

- When is an Offer accepted

- When is an Offer terminated

WHAT IS AN OFFER

When understanding the concept of an offer in legal terms, it is important to break it down into its parts and look at relevant cases that helped shape its definition.

Definition of offer:

In legal terms, an offer is a clear and unequivocal proposal or expression of willingness to enter into a contract on specified terms. It is an essential element of contract law and must indicate an intention to be legally bound upon acceptance.

Key elements of an offer:

a. Clear intention: this is where the offeror must demonstrate a clear intention to be bound by the proposed terms.

b. Clarity: this is when the terms of the offer must be sufficiently specific and unambiguous to form the basis of an enforceable contract.

c. Communication: This required that the offer be communicated to the offeree either directly or by an acceptable means.

Relevant cases of offer:

a. Carlill v. Carbolic Smoke Ball Co. (1893): in this case, a carbolic smoke ball company advertises a reward for anyone who uses its product and still gets the flu. Mrs. Carlill used the product and became ill. The company argued it was not a valid offer. The court held that the advertisement constituted a unilateral offer. The offer is clear, specific and made to the public, and when someone fulfills the conditions outlined in the offer, a binding contract is formed.

b. Gibbons v. Proctor (1891): this is the case where Gibbons offers to sell Proctor an iron for a certain price. Proctor responded with a revised offer, but before Gibbons could accept it, Proctor sold the iron to another party. The court held that Proctor's counteroffer terminated the original offer. An offer can be terminated by a counteroffer, effectively rejecting the original terms.

c. R v Clark (1927): in this case, Inmate Clark provided police with information about a crime in exchange for a reduced sentence but the police already knew the information but did not notify Clark. The courts held that an offer must be communicated to the offeree to be valid and because the police knew this information before the offer was made, the offer made by Clark was not valid.

WHEN IS AN OFFER ACCEPTED

Acceptance is a key element in contract law that underpins the formation of a legally binding agreement. Below is a summary of when an offer is deemed accepted, along with relevant case and legal sections.

Acceptance of an offer:

Acceptance is an expression of the offeree's agreement to the terms of the offer. In order to form a contract, acceptance must be clear and reflect the terms of the offer.

Key elements for acceptance:

a. Mirror Rule: in this rule, the acceptance must reflect the terms of the offer as any changes will constitute a counter-offer.

b. Communication: Acceptance must be communicated to the offeror unless the offer specifies a specific mode of acceptance.

Relevant cases on acceptance:

a. Felthouse v. Bindley (1862): in this case, Felthouse offered to buy a horse from Bindley, stating that if he heard nothing he would consider the horse his and the nephew mistakenly sold the horse at auction. The court held that silence cannot constitute acceptance. The offeree must engage in positive conduct or communication in order to accept the offer.

b. Entores Ltd v Miles Far East Corp (1955): this is a case where Entores while in the UK sent a letter of acceptance via telex to Miles Far East Corp in the Netherlands for the sale of goods. The court held that acceptance is valid both at the time and place of communication. In this case, receipt of the telex in the Netherlands would constitute acceptance, making the contract binding in England.

c. R v Clark (1927): (also relevant to an offer) in this case, Inmate Clark provided police with information about a crime in exchange for a reduced sentence but the police already knew the information but did not notify Clark. The courts held that an offer must be communicated to the offeree to be valid and because the police knew this information before the offer was made, the offer made by Clark was not valid.

WHEN IS AN OFFER TERMINATED

An offer terminates when certain actions or circumstances invalidate the offer, making it no longer acceptable. Below are details of when an offer may be terminated, along with relevant legal terms and cases.

Methods of terminating the offer:

a. Where there is revocation by the offeror: this is where the offeror may revoke an offer at any time before acceptance, as long as the revocation is effectively communicated to the offeree.

b. Where the offeree refuses or makes a counter-offer: Any rejection or counteroffer by the offeree terminates the original offer. In the case of a counteroffer, the offeree becomes the offeror.

c. Where time passes: If an offer specifies a period for acceptance, the offer terminates if the offer is not accepted within this period. If no time limit is specified, the offer will expire after a reasonable period of time.

d. In the case of death or incapacitation: An offer terminates if the offeror or the offeree dies or becomes incapacitated before acceptance.

Relevant cases on offer termination:

a. Routledge v Grant (1828): in this case, Grant offered to sell a property to Routledge and said the offer would remain open until Friday but on Thursday, Grant sold the property to someone else. Routledge then tried to accept the offer on Friday. The court ruled that the offer effectively terminated when Grant sold the property to someone else before the stated closing date. Routledge was unable to accept the offer as the property was no longer available.

b. Ramsgate Victoria Hotel Co. v. Montefiore (1866): this is a case where Montefiore offered to buy stock in a hotel company. The offer was made in June, but he didn't hear back until the company accepted it in November. Montefiore refused to continue. The court held that the offer had expired due to unreasonable delay in accepting it. Because the offer has expired, Montefiore is under no obligation to purchase the shares.

c. Shreve v. Franklin (1815): in this case, Shreve made an offer to Franklin before setting off on his trip. Before receiving the admission letter, Shreve learned of the unfavorable conditions and withdrew the admission letter upon his return. Franklin accepted after Shreve returned but after revocation. The court held that when Shreve revoked the offer, the offer effectively terminated prior to acceptance. Acceptance after revocation does not bind Shreve to the Agreement.

CLASSIFICATION OF CONTRACTS

Topic of the day

- The classification of contract

- The difference between the various classes of contract

THE CLASSIFICATION OF CONTRACT

Contracts can be classified into various categories based on their nature, formation, performance, enforceability, etc. Here's a breakdown:

1. Classification by form:

a. Express Contract: this are contracts clearly stated orally or in writing.

b. Implied contract: this are contracts created by the conduct or actions of the parties involved.

c. Quasi Contract: this is not an actual contract, but a legal remedy to prevent unjust enrichment.

2. Classification according to implementation status:

a. Executed Contract: this is the contract that has been fully performed by both parties.

b. Enforceable Contract: this is the contract where there are still obligations that has not yet been performed by one or both parties.

3. Classification by performance:

a. Unilateral Contract: this is the type of contract where a promise is made by one party in exchange for an action by another party.

b. Bilateral Contract: this is the type of contract where both parties make a commitment to each other.

4. Classification based on enforceability:

a. Valid Contract: this is type of contract to at meets all legal requirements and is legally enforceable.

b. Void Contract: this is the type of contract that lacks essential elements and is unenforceable from the outset.

c. Voidable Contract: this is the type of contract where due to a legal defect, a party has the option of enforcing or rescinding a contract.

d. Unenforceable Contract: this is the type of contract that may be valid but unenforceable due to legal technicalities or statute of limitations.

Case:

1. Carlill v Carbolic Smoke Ball Company (1892): this case demonstrated the concept of a unilateral contract where performance (which is the use of the product as directed) constitutes acceptance and creates a binding contract.

2. Williams v. Walker-Thomas Furniture Co. (1965): this case emphasized the concept of an unconscionable contract, whereby a unilateral term that heavily favors one party may render the contract unenforceable as unfair.

3. Lucy v. Zehmer (1954): this case showed that even in a joking or informal setting, if the parties objectively intended to establish a legal relationship, it could be considered a valid contract.

THE DIFFERENCE BETWEEN THE VARIOUS CLASSES OF CONTRACT

The differences between the different categories of contracts can be summarized based on their main characteristics and famous legal cases:

1. Express contract and implied contract:

a. Express contract: this is a clearly stated contract, written or oral, with clear terms and conditions.

See the case of Raffles v. Wichelhaus (1864), where conflicting interpretations of a contractual term (“Peerless” ship) led to a lack of consensus, illustrating the importance of clear language in express contracts.

b. Implied contract: this is a contract formed by actions, conduct, or circumstances other than an express oral or written agreement.

See the case of Merritt v. Merritt (1970) which illustrates the transition from an implied to an express contract, whereby an initially implied separation agreement between spouses becomes legally binding upon the fulfillment of certain conditions contract.

2. Executed contracts and enforceable contracts:

a. Executed contract: this is a contract in which all parties have fully performed their obligations.

See the case of Lampleigh v Braithwait (1615), where the court enforced the agreement even though it was made before a formal contract because one party had performed its obligations.

b. Enforceable contract: this is a contract in which one or both parties have not performed some or all of their obligations.

See the case of White and Carter (Councils) Ltd v. McGregor (1962) which emphasized the enforceability of a contract even if one party attempts to terminate the contract early, as long as the other party is willing to perform its obligations.

3. Void contracts and voidable contracts:

a. Void contract: this is a contract that lacks essential elements (e.g. legality, capacity) from the outset and is therefore deemed unenforceable.

See the case of Jones v. Star Credit Corporation (1969) which highlighted the fact that a contract is void due to illegal terms, making it unenforceable.

b. Voidable contract: this is a contract in which a defect allows a party to void the contract at its sole discretion.

See the case of Smith v. Hughes (1871), where the court held that a misunderstanding of a term did not invalidate a contract because the seller was aware of the misunderstanding and failed to correct it.

4. Unilateral contracts and bilateral contracts:

a. Unilateral contract: this is a contract in which one party promises to perform a certain act in exchange for performance by another party.

See the case of Carlill v. Carbolic Smoke Ball Co. (1892) which illustrates the acceptance of performance in a unilateral contract scenario.

b. Bilateral contract: this is a contract involving mutual promises between parties.

See the case of Merritt v. Merritt (1970) which changed the nature of the agreement between the parties by converting it from an implied contract to a bilateral contract when certain conditions were met.

THE CONCEPT OF BARGAIN

Topic of the day

- The meaning of bargain

- The importance of bargain

THE MEANING OF BARGAIN

The concept of "bargain" in legal terms generally refers to a mutual agreement or contract between two parties in which each party provides something of value to the other.

We can also say bargain is a legally binding agreement between two parties for the exchange of goods, services, promises, or considerations.

So, what are bargain elements? We have;

1. Proposal: this is when one party proposes the terms of an agreement.

2. Acceptance: This is when the other party agrees to the terms offered.

3. Consideration: This is when the parties must exchange something of value, such as money, services, or goods.

4. Intent to create legal relations: This is when the parties must intend that the agreement be legally binding.

Below are some of bargaining cases that we can see quickly:

1. Carlill v. Carbolic Smoke Ball Co. (1892): In this case, the company offered a reward to anyone who used its product and still contracted the flu. Mrs. Khalil fell ill after using it. The court held that the company's advertising constituted a unilateral offer and its use of the product as instructed constituted acceptance. It shows a clear offer, acceptance and consideration, forming a valid contract.

2 Hammer v. Sidway (1891): In this case, an uncle promised his nephew money if he refrained from drinking, smoking, and gambling until he was 21 years old. The nephew fulfilled this promise and the court held that the nephew provided consideration by giving up his legal right to engage in these activities, thus forming a valid contract.

3. Johnson v. Johnson (1876): A husband promised his wife a sum of money in exchange for her agreeing to separate and not interfere in his affairs. The court found that the agreement lacked consideration because the wife did not give up any legal rights or do anything that she was not entitled to do. Therefore, the contract was not a valid contract.

THE IMPORTANCE OF BARGAIN

The concept of "bargaining" has great significance in contract law because it forms the cornerstone of contract law and it provides the basis for a legally binding agreement between the parties.

Elements and validity of the contract:

1. Offer and Acceptance: A valid contract requires a clear offer by one party and acceptance by the other party, indicating that both parties agree to the terms.

2. Consideration: Bargaining requires two parties to exchange something of value (consideration), which may be goods, services, money, or promises.

3. Intention to create legal relations: The parties must intend that the agreement be legally binding, showing serious and sincere commitment.

Here are some cases demonstrating importance:

1. Williams v. Roffey Bros & Nicholls (Contractors) Ltd (1990): This case established the concept of substantial benefit or the principle of substantial benefit. The court held that if one party obtains actual benefits or avoids damage by modifying the contract, it can be regarded as valid consideration, thus strengthening the importance of consideration in contract law.

2. Balfour v Balfour (1919): In this case, the husband promised his wife a monthly allowance while they were separated for health reasons. The court held that the agreement had no legal effect because the parties had no intention of establishing a legal relationship. It emphasizes the importance of intention when entering into a contract.

3. Currie v. Misa (1875): This case emphasized that consideration is a key element in making a contract. It defines consideration as “certain rights, benefits, profits or benefits received by one party, or certain forbearances, damages, losses or liabilities given, suffered or assumed by another party”. This case helps to understand the nature of valid considerations.