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FE1 CONTRACT LAW NIGHT BEFORE NOTES

General Points

Your contract paper is often one of the most formalised structures of any of the FE1 exams. You will have questions 1-4 being broad based problem questions, often spanning several topics (or at least different areas in two distinct contractual scenarios portrayed in different paragraphs of the question) and then questions 5-8 being very straight-forward and clear essay-style questions. Your examiner is often quite fair as well in asking one essay question as an ‘answer a or b’ option – effectively giving you greater choice. However, watch out carefully for the other questions where you must answer ‘a’ and ‘b’! Your study cannot be too limited, as practically the scoping of the paper means that all areas are examinable or could be considered under part of a problem question or in an essay question – but there are certain areas that are of far more regular appearance and focus than others. For example, I would always recommend study of Offer, Acceptance, Terms, Exclusion Clauses, Mistake, Misrepresentation, Termination and Damages – but whilst important, would also never suggest that is all that is needed! The recent March paper came across as a very straight-forward paper, with core areas examined and even problem questions not being as mixed as previously experienced. Whilst I would not expect the identical questions to reappear – you should not work on an assumption that they will not reappear in some format on this April paper – e.g. Offer / Mistake / Damages all were the focus of three problem questions, but all still liable to appear again in April. With this in mind and a good, case-law supported answer always being the key for contract law analysis, please see below a few abbreviated notes on core areas for attention and review:

Offer and Acceptance

Distinction between Offer and Invitation to Treat o Gibson –v- Manchester City Council (Requirement of Finality / Commitment) o Partridge –v- Crittendon (Advertisements generally only an invitation to treat) o Carlill –v- Carbolic Smokeball Company (Special position / possibility of unilateral

offer) o Pharmaceutical Society of Great Britain –v- Boots Cash Chemist ; Ministry for

Industry and Commerce –v- Pimm (Display of goods will amount generally to an invitation to treat)

o Harris –v- Nickerson (Auctions generally an invitation to treat – save if auction is ‘without reserve’ – see Warlow –v- Harrison ; Tully –v- Irish Land Commission)

o Similar approach vis-à-vis tenders – see generally Spencer –v- Harding o Harvey –v- Facey (Quotations shall be generally construed as invitations to treat)

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Termination of Offer o Dickinson –v- Dodds (Revocation – must be communicated to be effective) o If not revoked, acceptance is effective on communication – where / how effective

and communicated – Entores Ltd. –v- Miles Far East Corporation / Parkgrange Investments –v- Shandon Park Mills

o Errington –v- Errington (revocation not possible once performance commences) o Byrne –v- Van Tienhoven (revocation by post only effective once received) o Hyde –v- Wrench (counter offer amounts to a rejection) o Delay or lapse of time may also terminate (Commane –v- Walsh)

Acceptance o Must be a final and unequivocal expression of agreement to terms of an offer. Must

not vary terms, or will amount to a counter-offer. Can be implied through conduct (Brogden –v- Metropolitan Railway Co.)

o Silence will not be sufficient as to acceptance – Felthouse –v- Bindley. Unless express agreement / previous business dealings or cannot be returned.

o Communication must be sufficient to be effective – Entores –v- Far East Miles Corporation (when received for instant methods of communication); s.20 / 21 of the ECA 2000. The postal rule applies for letters of acceptance posted, effective when sent, Adams -v- Lindsell / Kelly –v- Cruise Catering. Exceptions if prescribed method, mainfest inconvenience or public policy.

Consideration

Something of tangible value that is given or forborne in exchange for a promise – Thomas –v- Thomas , Dunlop –v- Selfridge

Need not be adequate, but must be sufficient o Thomas , Chappell & Co. Ltd –v- Nestle (Adequacy) o Sufficiency – must be something of value in the eyes of the law

O’Neill –v- Murphy (prayers do not constitute sufficient consideration) Performance of existing public duty not sufficient unless something over and

above that public duty – Collins –v- Godefroy , Glasbrook Bros –v- Glamorgan County Council , Harris –v- Sheffield United , McKerring –v- Minister for Agriculture

Performance of existing contractual duty not sufficient – Stilk –v- Myrick , North Ocean Shipping –v- Hyundai

Part payment of a debt is insufficient – The Rule in Pinnel’s Case , Foakes –v- Beer. Confusion / criticism / unique nature thrown up by Williams –v –Roffey Bros & Nicholls (Contractors) Ltd

Forebearance may be sufficient consideration – O’Keeffe –v- Ryanair Holdings

Must not be ‘past’ consideration and must move from promisee: o Roscorla –v- Thomas , Reaffirmed in Provincial Bank of Ireland –v- O’Donnell and Law

Society –v- O’Malley. All demonstrate the rule against past consideration. o Exceptions – if implicit at the time that it was to be paid for, then may be sufficient –

Lampleigh –v- Braithwait / Bradford –v- Roulston o Pao On –v- Lau Yiu Long - must be done at promisor’s request, understood that was

to be paid for, type of payment or conferment is legally enforceable.

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o Must not be third party consideration – Tweddle –v- Atkinson , McCoubray –v- Thompson

Estoppel – may be possible to enforce in absence of consideration

o May only be used as defence – ‘as a shield, not as a sword’. Seen early in Hughes –v- Metropolitan Railway , Central London Property Limited –v- High Trees – more recently in Kenny –v- Kelly , Revenue Commissioners –v- Moroney

o Requirements – must be pre-existing legal relationship – Combe –v- Combe , must be an unambiguous representation - Folens –v- Minister for Education , must be reliance by the representee – Daly –v- Minister for Marine , Association of GPs –v- Minister for Health , Tool Metal Manufacturing –v- Tungsten Electric Co. Ltd – an unconscionability must exist – D&C Builders –v- Rees , Zurich Bank –v- McConnon

o Also Proprietary Estoppel – specific on property, where reliance on representation to persons detriment

Cullen –v- Cullen Smith –v- Halpin Re: Basham CD –v- JDF Thorner –v- Major

o Legitimate Expectation Abrahamson –v- Law Society of Ireland Triatic Limited –v- Cork County Council Daly –v- Minister for the Marine

Intention to Create Legal Relations

Final core requirement – would ordinary reasonable man have believed there was an intention to create legal relations – Edmonds –v- Lawson

Two main categories and presumptions – family, domestic or social (no intention) & commercial (intention exists). Both rebuttable on their facts

Family, Domestic or Social o Balfour –v- Balfour o Courtney –v- Courtney – Husband and Wife o Jones –v- Padavatton o Rogers –v- Smith – Parent and Child o Mackey –v- Jones o Hynes –v- Hynes o Leahy –v- Rawson All explore and demonstrate that the presumption, where existing, can be reubtted – as same is inevitably a question of fact to be determined on a case-by-case basis.

Commercial Arrangements o Presumption that intention is present, unless rebutted by clear evidence that no

such intention. The nature of facts in each instance are key o Esso Petroleum –v- Commissioner for Customs & Excise , Cadbury –v- Kerry Co-Op &

Dairy Disposal Co. Ltd o Application of ‘honour clause’ – Rose & Frank Co. –v- Crompton o Also – letters of comfort – depends on actually wording of letter as to whether

intention exists – Kleinwort Benson –v- Malaysia Mining Corporation o Lottery syndicates – Simpkins –v- Pays / Religious Arrangements – Zevevic –v-

Russian Orthodx Christ the Saviour Cathedral

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Collective Agreements o Ford –v- A.E.U.W. , Ardmore Studios –v- Lynch , O’Rourke –v- Talbot – the onus is on

the person who asserts no legal effect is intended. o The uncertain of terms may cause difficulty in enforcement. Note also the Industrial

Relations Act 1946.

Formal Requirements & Capacity & Privity

S.2, Statute of Frauds (Ireland) Act 1695 – applies to various contracts, requiring a formal note in writing and signed – main one being contracts for the sale of land

o Must contain the 3P’s – parties, property and price – Godley –v- Power o Guardian Builders –v- Patrick Kelly o Black –v- Grealy o Casey –v- Irish Intercontinental Bank – Signature is broad and can be headed

notepaper o Kelly –v- Ross and Ross / McQuaid –v- Lynam – joiner of documents possibility o Maloney v O'Connor 2015 IEHC 678 - the contract for sale, when coupled with the

note to file written by the Purchaser's solicitor and referred to above, between them comprised a note or memorandum in writing sufficient.

Subject to Contract o May invalidate a document constituting a valid memorandum o Kelly –v- Park Hall School , Irish Intercontinental Bank –v- Casey , Mulhall –v- Haren ,

Boyle –v- Lee (most recent SC decision, reaffirming the orthodox view), Jodifern –v- Fitzgerald

Part Performance Lowry –v- Reid Steadman –v –Steadman Mackie –v- Wilde Kingswood Estate –v- Anderson

Capacity o Minors – Necessaries & Beneficial Contracts of Service

Chapple –v- Cooper , Skrine –v- Gordon , Nash –v- Inman De Francesco –v- Barnum , Toronto Marlborough Hockey Club –v- Tonelli ,

Doyle –v- White City Stadium

Privity o Common law rule that ensures a contract is only enforceable by, and against, the

parties to it Tweddle –v- Atkinson , McCoubray –v- Thompson , Murphy –v- Bower ,

Mackey –v- Jones o Exceptions to principle – Trusts of Contractual Rights (Tomlinson –v- Gill , Drimmie –

v- Davies – an intention to create a trust seems to be necessary per Cadbury Ireland –v- Kerry Co-Op Creameries Ltd) / Agency (Adler –v- Dickinson , The Eurymedon Case [New Zealand Shipping –v- A.M. Satterthwaite] , Hearn and Matchroom Boxing –v- Collins

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Contractual Terms

Classification – warranty, condition, innominate terms (Hong Kong Fir Shipping Co. –v- Kawasaki, The Hansa Nord)

Express Terms – warranty –v- representation (part of contract –v- not part) o Key factors of determining include, when was the statement made (Routledge –

v- McKay), if person has special skill (Dick Bentley Productions –v- Harold Smith), importance of statement (Carey –v- Irish Independent Newspapers) and whether it is indicated that the statement can be relied upon and need not be verified (Schawl –v- Reade)

o In addition to those above, good examples of application of this test McGuinness –v- Hunter Hummingford Motors –v- Hobbs Oscar Chess –v- Williams Bank of Ireland –v- Smith

Parol Evidence Rule – Not capable of contradicting, varying, adding or subtracting from the terms of a written contract (Bank of Australasia –v- Palmer). Contract is bounded by its ‘four walls’ – Macklin & McDonald –v- Gregan.

Terms and conditions on delivery dockets - Noreside Construction Ltd v Irish Asphalt [2014] IESC 68. Delivery dockets were not contractual documents. In Noreside terms and conditions referred to, but not contained, in the delivery dockets were not incorporated in to the contract by reference or by custom and practice, so as to limit their liability to the costs of replacement of the defective goods. Dunne J noted that the authorities show that whilst a delivery docket can be a contractual document – "whether it is or not depends on the facts and circumstances in a particular case. The purpose for which the delivery docket was created may be of relevance". She stated that the crucial point is that the delivery docket or other document at issue must contain the relevant terms and conditions or at the very least contain a reference to terms and conditions well known in a particular industry.

Exceptions have basically abolished it though, so as to avoid considerable injustice o If written document does not reflect entire contract – Clayton Love –v- B&I

Steampacket o If needed to explain circumstances surrounding the agreement – Revenue

Commissioners –v- Maroney o If needed to explain the subject matter – Chambers –v- Kelly o To correct a mistake o If found that a collateral contract exists

Implied Terms – either implied as matter of fact, or matter of law – cannot simply do so because of reasonableness or fairness (see generally – Tradax Ireland –v- Irish Grain Board)

Matter of Law o Implied under the Constitution – Glover –v- BLN o Implied under Statute (many, but notably in contract law, those under Sale of

Goods and Sale of Services Act 1980) o Implied under Common Law – must be a defined type of contract and necessary

(Liverpool City Council –v- Irwin)

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Matter of Fact – utilisation of various tests to determine same o Officious Bystander Test

Shirlaw –v- Southern Foundaries (‘Oh, of course’) Corran Foods Ltd –v- Eagle Star (not implied where conflicts with

express terms) Horan –v- O’Reilly

o Business Efficacy Test Presumed that parties intended their agreement should be workable

and effective – The Moorcock , Butler –v- McAlpine Not implied because reasonable – due because necessary to give

business reality and efficacy – Dakota Packaging –v- Wyeth o Custom and Practice Test

O’Conaill –v- Gaelic Echo BP Refinery case

o Limitation period for agreements for the sale of goods

Murphy v Joe O'Toole & Sons Ltd & Anor [2014] IEHC 486, Baker J. held

that the limitation period for an agreement for the sale of goods ran from the date of delivery of the goods, rather than from the date of the contract was entered into by the parties.

Exemption Clauses

May be exclusion or limitation clause (viewed with less suspicion perhaps) – Alisa Craig Fishing –v- Malvern Fishing

Axa Sun Life Services Plc v Campbell Martin Ltd, 2015 UK Court of Appeal. Restrictive approach adopted by the Courts in construing such clauses, particularly in determining whether they exclude liability for pre-contractual misrepresentations. In business-to-business context likely such a clause regarded as ‘fair and reasonable’ – satisfies requirements under section 46(1) of the Irish Sale of Goods and Supply of Services Act 1980.

Must be incorporated into contract and construction will be carefully reviewed by courts to ensure it covers the circumstances in question

Incorporation o Signed (L’Estrange –v- Graucob , O’Connor –v- First National Building Society ,

Carroll –v- An Post National Lottery) o If not signed, but reasonable steps have been taken to bring clause to attention

of affected party – have they been taken? Parker –v- South Eastern Railway Co Ryan –v- Great Southern & Western Railway Co Shea –v- Great Southern Railway

o Was notice given in advance / at time of contract? Olley –v- Marlborough Court Ltd , Thornton –v- Shoelace Parking ,

Spurling –v- Bradshaw (by course of dealings) - Interpretation

o Narrow construction / interpretation – contra proferentum (White –v- Warwick / Canada Steamship Line –v- R). Does it extend to cover tortious breach/negligence?

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- Enforceablilty o May never be exempt from a fundamental breach? Resiled from this – possible

if clear enough – Photo Productions Ltd –v- Securicor Transport / Western Meats Ltd –v- National Ice and Cold Storage

o Overlap with consumer protection around legislative restriction on these types of clauses as well.

Consumer Protection

Sale of Goods Act 1893, Sale of Goods and Supply of Services Act 1980 – various details and nature of clauses – esp. on exclusion of same as well, to be known and capable of explanation, both briefly and in more detail (dependent on question)

o Section 12 – Title and implied warranties o Section 13 – Sale by Description – Moore & Co. –v- Landauer , Fogarty –v- Dickson /

Description –v- Quality – Oscar Chess –v- Williams o Section 14 – Quality of Goods – Merchantable Quality / Fitness for Purpose –

Bernstein –v- Pamson Motors , Rogers –v- Parish , Wallis –v- Russell o Protection against exclusion clauses unfairly prejudicing consumer

European Commission's online dispute resolution (ODR) o From 15 February 2016, traders established in the EU that sell or provide goods or

services online to consumers must provide a link on their websites to the European Commission's online dispute resolution (ODR) platform (Art.14).

o Traders who breach Article 14 of ODR Regulation will be guilty of an offence and liable on summary conviction to a class A fine up to(€5,000) and/or 12 months' imprisonment.

o Builds upon ADR Directive.

European Commission alternative dispute resolution directive (ADR). o Art.13 obliges Member State to ensure that traders established within the EU inform

consumers about an ADR entity which covers the trader where the trader has committed or is obliged to use the ADR entity to resolve disputes with consumers.

Other legislation o European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 –

key factor and analysis on test of unfairness – reg. 3(2) o Contracts negotiated away from Business Premises – 1989 Regulations o Distance Selling – EC (Protection of Consumers in Respect of Contracts made by

Means of Distance Communication) Regulations 2001Sale of Goods Act 1893, Sale of Goods and Supply of Services Act 1980

Be conscious being able to elaborate upon the imposition of EU consumer legislation, which has been a focus on essay questions more recently.

Misrepresentation

May be classified as fraudulent, innocent or negligent o Fraudulent – Derry –v- Peek o Negligent – Hedley Byrne –v- Heller

Must be as to Fact, not intention or opinion o Wales –v- Wadham o But opinion may be actionable, if exceptional statement reasonable of being relied

upon by representee – depends on circumstances Esso Petroleum –v- Marsden (yes) Bissett –v- Wilkinson (no)

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Must induce the other party into the contract o Smith –v- Chadwick o Attwood –v- Small o Darlington Properties Ltd –v- Meath County Council

Silence generally insufficient as a misrepresnetation – but where capable of interpretation as active misrepresentation, it may be used / relied upon

o Gill –v- McDowell o Walters –v- Morgan

Special Position of Contracts made in uberrimae fides and notion of materiality to same o Rozanes –v –Bowen o Chariot Inns Ltd –v- Assicurazioni SPA o Pan Atlantic Insurance Co –v- Pine Top Insurance o Aro Road & Land Vehicles –v- Insurance Corporation of Ireland o Kelleher –v- Irish Life Assurance Company o Keating –v- New Ireland Assurance Test has evolved to that of the ‘reasonable proposer’ from the ‘prudent insurer. Proposer in full disclosure is just expected to be honest, not omniscient. ‘Basis of contract’ clauses will be interpreted harshly and strictly in a contra-proferentum manner

Continuing misrepresentations can be acted upon by the ultimate contracting party o Cramaso LLP v Ogilvie-Grant [2014] UKSC 9, the UK Supreme Court held that a

contracting entity would be entitled to sue for rescission and damages even though the negligent misrepresentation was not actually made to it in circumstances where the representation is made the person is addressed becomes the agent of the person by whom the contract is concluded.

Key remedy in this event is that of rescission – remember always that equitable remedy o Consider whether contract affirmed - Re: Hop and Malt Exchange o Consider where too long a delay in bringing claim – Leaf –v- International Galleries o Consider doctrine in Seddon –v- North Eastern Salt – rught to rescission lost once

executed o Consider whether restittio in integram remains possible, If not – rescission may be

refused – Clarke –v- Dickson – or where to grant same would unduly prejudice the position of third parties – Anderson –v- Ryan

Mistake

Must be one of fact and not of law – ignorance of the law is no defence o O’Loughlan –v- O’Callaghan , Cooper –v- Phibbes (abolished in England in Kleinworth

Benson –v- Lincoln City Council)

Common Mistake o Mistake as to existence of subject matter (res extincta)

Courturier –v- Hastie Strickland –v- Turner Galloway –v- Galloway s.7, Sale of Goods Act 1893

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o Mistake as to underlying assumption, fundamental to contract Bell –v- Lever Bros Leaf –v- International Galleries (must go to root of contract, not sufficient if

just one of quality) Fitzsimons –v- O’Hanlon

o More flexible remedy in equity – Solle –v- Butcher / Great Peace Shipping Ltd –v- Tsavliris Salvage (seeks to clarify the common law /equity distinction)

o Irish courts continue to follow the Bell and Solle approach and reasoning though.

Mutual Mistake o No meeting of mind / no consensus ad idem

Smith –v- Hughes Wood –v- Scarth (what would a reasonable man presume) Raffles –v- Wichelhaus Mespil –v- Capaldi

Unilateral Mistake o If one party is aware, or should be aware of the other’s mistake

Webster –v- Cecil Hartog –v- Colin and Shields

o Mistake as to identity Cundy –v- Lindsay Phillips –v- Brooks Ltd Ingram –v- Little Lewis –v- Avery

Remedies may vary – damages, should be considered – though only if a warranty, or fraudulent / negligent misrepresentation was made – must also consider rectification

o Equitable remedy allowing correction – Nolan –v-Graves and Hamilton , Lucy –v- Laurel Construction – effectively to correct terms to basis of oral contract already reached

o Also note other associated remedy – for purposes of certainty – of non est factum – operating to vitiate / void the contract for mistake – strictly limited and applied – Bank of Ireland –v- McMenamy , Saunders –v- Anglia Building Society

Duress and Undue Influence

Duress involves protection against forcing into contract through threats – whether or personal harm, or other grounds as the doctrine has developed

o Barton –v- Armstrong – threats of violence sufficient for duress o Griffith –v- Griffith – even lesser forms of duress sufficient o D&C Builders –v- Ress – economic duress acknowledged o Fine line though – must go beyond normal bargaining – nature of pressure and

unreasonableness of demand accompanying the pressure are two key factors – R –v- AG for England and Wales

o Stage when this tips over into illegitimacy can be a difficult one to draw, but some cases are illustrative – The Universe Sentinel , Atlas Express Ltd. –v- Kafco Ltd.

Actual Under Influence o O’Flanagan –v- Ray-Ger Limited

Presumed Undue Influence

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o Automatic presumption based on confidential relationship, or when facts demonstrate a relationship similar in nature to same and such common categories

1st Part – Solicitor, client / Parent, child / Doctor, Patient – White –v- Meade , McMackin –v- Hibernian Bank

2nd Part – must be proven that relationship was of trust and confident and that ultimate transaction was of manifest disadvantage

Royal Bank of Scotland –v- Etridge

R –v- Hutton

McGonigle –v- Black (placing of trust is key) o Special position and case-law regarding married couples. Not falling into first

category above, but variety of case-law on point (new developments now with Irish courts following Etridge more recently)

Barclays Bank –v- O’Brien Bank of Ireland –v- Smyth Bank of Nova Scotia –v- Hogan Royal British Bank –v- Etridge

Unconscionable Bargain o Equitable doctrine closely related – four elements to be established (Boustaney –v-

Piggott): Bargaining impairment – Grealish –v- Murphy Exploitation – Rae –v- Joyce Manifestly Improvident – Rooney –v- Conway Lack of Adequate Advice

Illegal and Void Contracts • Effects of Illegality

o Unlawful on its face – void ab initio • Grey –v- Cathcart • Murphy –v- Crean • Hayden –v- Sean Quinn Properties

o Performed illegally • Marles –v- Philip Trant & Sons • Kavanagh –v- Caulfield • Ashmore –v- Dawson

o Recovery of property passed under illegal contract • Collins –v- Blanton • St. John Shipping –v- Rank • Hughes –v- Liverpool Victoria Friendly Society

• May be illegality under statute, but also under various grounds at common law

o Contracts to commit a crime or tort Everett –v- Williams , Beresford –v- Royal Insurance Company , Gray –v- Barr)

o Contracts to defraud the revenue – Starling Securities –v- Woods o Contracts which break foreign laws o Contracts trading with enemies of the state – Ross –v- Shaw o Contracts that attempt to corrupt public officials o Contracts promoting immorality – Pearce –v- Brooks

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o Contracts tending to prejudice the administration of justice (Nolan –v- Shiels , Keir –v- Leeman) – includes maintenance and champerty – Re: Trepca Mines , Fraser –v- Buckle

• Void Contracts o Distinct from illegal contracts, as basis of public policy determining that certain

provisions should be deemed repugnant and potentially carved from the remainder of a ‘saveable’ contract

o Contracts ousting the jurisdiction of the courts (Lee –v- Showman’s Guild of GB , Scott –v- Avery)

o Contracts subverting the sanctity of marriage (MacMahon –v- MacMahon , Ennis –v- Butterly)

o Contracts in Restraint of Trade – though may be viable if reasonable and in protection of a legitimate proprietary interest – application of the various case-law is key

• Esso Petroleum –v- Harper’s Garage • John Orr Ltd –v- Orr • Faccenda Chicken –v- Fowler • Murgitroyd –v- Purdy • Nordenfelt –v- Maxim Nordenfelt (can be worldwide) • McEllistrem –v- Ballymacelligott Co-Op (reasonableness of extent of

restraint treated individually on its merits)

• Serverance o Main distinction between illegal and void contracts, the latter may be saved by

severing the repugnant part out – the so-called ‘blue pencil’ test – leaving the rest enforceable

o John Orr Ltd –v- Orr o Cannot be used to rewrite the contract, used only where a line can be drawn,

without changing the overall agreement substantially. • Mason –v- Provident Clothing and Supply Company Ltd • Marion White –v- Francis

Discharge of Contracts

Agreement o Must be mutual agreement, accord and satisfaction present.

Performance o Entire Contract – very harsh, but matter of construction whether formed or not

Nash –v- Hartland , Cutter –v- Powell , Coughlan –v- Moroney o Substantial Performance – exception at equity

Hoenig –v- Issacs , Bolton –v- Mahadeva , Kincora Builders –v- Cronin If voluntarily acceded to some level of part / incomplete performance,

that can be binding – Sumpter –v- Hedges Payment for part performance can also be due if contract is a divisible

contract (Taylor –v- Laird , Brown –v- Wood) – or if complete performance is prevented by the other party (Planche –v- Colburn)

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Breach o Repudiatory – Athlone Rural DC –v- Campbell & Son , Hochester –v- De La Tour

Eminence Property Developments Ltd v Heaney - vendor of land had not acted in repudiatory breach of contract where, by mistake, he served notices of rescission on the purchaser before the final date for complying with notices to complete had been reached.

o Fundamental – Dundalk Shopping Centre Ltd –v- Roof Spray Limited. Key identifying features – seriousness and effect of breach and likelihood of recurrence in contracts with future obligations to be performed

o Leopardstown Club Ltd v Templeville Developments Ltd and Philip Smyth [2013] IEHC 526.

o Breach of Condition

Frustration o Doctrine has evolved to deal with scenarios where obligations can no longer

be performed as a result of circumstances outside the control of either party Paradine –v- Jane Gamble –v- The Accident Insurance Company Taylor –v- Caldwell (somewhat a relaxation to avoid harsh results)

o Difference between impossibility and mere difficulty - Davis Contractors –v- Fareham UDC , Zuphen –v- Kelly

o Frustration of purpose – Krell –v- Henry ,Herne Bay Steam Boat –v- Hutton , National Carriers Ltd –v- Panalpina

o Whether event of frustration was foreseeable or not – Mulligan –v- Brown , McGuill –v- Aer Lingus and United Airways , Neville & Sons Ltd –v- Guardian Builders Ltd

o Self-induced frustration shall not suffice to enable a discharge of contract (Herman –v- Owners of SS Vicio , Maritime Fish Ltd –v- Ocean Trawlers)

Remedies • Damages

• Question of causation and remoteness of damages must be considered – Hadley –v- Baxendale . Victoria Laundry –v- Newman Industries – that which flows naturally, plus that which is ‘reasonably foreseeable’ from the knowledge of the party in breach, are damages capable of recovery

• Wilson and Dunville (1st limb) • Waller –v- Great Western Railway , The Heron II , Kemp –v- Instasun Holidays

Ltd (2nd limb) • AB v CD [2014] EWCA Civ 229 - injunction should not be granted where

damages would be an adequate remedy.

• Assessment • Acre 1127 Ltd (In Liquidation) formerly known as Castle Galleries Limited (In

Liquidation) v De Montfort Fine Art Ltd (1), the Court found that proof of a settled intention not to perform an agreement is material in the assessment of damages recoverable for repudiatory breach.

• Requirement on plaintiff to mitigate his loss – otherwise may prejudice claim:

• Brace –v- Calder , Cullen –v- Horgan • Lennon –v- Talbot (Ireland) – does not extend to accepting prejudicial terms

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• Losses may be categorised – expectation, reliance (Anglia Television –v- Reed), restitution (Hickey –v- Roches Stores)

• Consequential loss may also be recovered, if not too remote, per earlier tests - Stoney –v- Foley , Leahy –v- Revenue Commissioners , Malik –v- BCCI (whilst rare – damage for loss of reputation may be possible)

• Damages for non-financial loss, inconvenience and emotional distress? • Hobbs –v- London South Western Railway • Kelly –v- Crowley • Jarvis –v- Swan Tours

• Penalty Clauses / Liquidated Damages / Acceleration Clauses

• Dunlop Pneumatic Tyre –v- New Garage & Motor Co. • O’Donnell & Co. Ltd –v- Truck and Machinery Sales Ltd • Angelic Star • Talal El Makdessi v Cavendish Square Holdings BV (currently being appealed

to SC). A clause which requires the transfer of property (such as shares) rather than the payment or forfeit of cash can constitute a penalty.

• Edgeworth Capital (Luxembourg) S.A.R.L. and another v Ramblas Investments B.V.[2015] EWHC 150 - the rule against penalties only applies in the event of a breach of a contractual duty owed to the other party.

Two lines of case law have emerged which provide exceptions to this general rule: (i) where there has been a genuine pre-estimate of loss; and (ii) where there is commercial justification. Focus of preparation on the foregoing listed would be to prepare same for an essay approach – with parts thereof called out for a multi-part essay question. Scope of recovery for ‘disproportionate’ damages – even if within strict assessment scope of expectation loss has also been more a point of consideration in recent problem questions.

• Other Remedies (several seen above on specific areas) • Specific Performance - be alive to principles of restriction, not where damages are

an adequate remedy / not where involving personal contract of service / where the courts would need a continual involvement or oversight

• Restitution • Rectification • Rescission • Injunctions • Quantum Meruit

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Recent Developments in Contract Law

European Commission's online dispute resolution (ODR) Directive From 15 February 2016, traders established in the EU that sell or provide goods or services online to consumers must provide a link on their websites to the European Commission's online dispute resolution (ODR) platform. Such traders must also include their email address on their website so that consumers have a first point of contact in the event of a dispute. This obligation is set out in Article 14 of EU Regulation No. 524/2013 (the ODR Regulation) and by virtue of the EU (Online Dispute Resolution for Consumer Disputes) Regulations 2015 (S.I. 500/2015) contravention of Article 14 of the EU ODR Regulation is an offence under Irish law. The obligation applied from 9 January 2016 but the ODR platform will not be fully opened for use by consumers and traders until 15 February 2016. Article 14 of the ODR Regulation builds on Article 13 of EU Directive No. 2013/11 (the ADR Directive) which obliges Member State to ensure that traders established within the EU inform consumers about an ADR entity which covers the trader where the trader has committed or is obliged to use the ADR entity to resolve disputes with consumers. Article 13 of ADR Directive was implemented in Ireland by Regulation 18 of the EU (Alternative Dispute Resolution for Consumer Disputes) Regulations (S.I. 343/2015). Both the ADR Directive and the ODR Regulation are intended to contribute to consumer protection by providing for simple, efficient, fast and low cost ways of resolving domestic and cross border disputes which arise from sales or services contracts. What do online traders need to do to comply? Article 14(1) of the ODR Regulation requires all traders established in the EU, who engage in online sale or services contracts, and all online marketplaces established within the EU to provide: (i) an electronic link to the ODR platform on their website, which is easily accessible; and (ii) their email address on their website. Article 14 (2) further requires traders established in the EU who engage in online sales or service contracts and are committed or obliged to use an ADR entity to resolve disputes with consumers to provide: (i) an electronic link to the ODR platform in an email, if a commercial offer is made to a

consumer via email; and (ii) information as to the existence of the ODR platform in the general terms and conditions

applicable to online sales and service contracts. Traders who breach Article 14 of ODR Regulation will be guilty of an offence and liable on summary conviction to a class A fine up to(€5,000) and/or 12 months' imprisonment. Penalty clauses Generally speaking, the Courts are reluctant to strike down penalty clauses as this constitutes a "blatant interference with freedom of contract" which is a key principle of the law. Nevertheless, when the courts do intervene and determine a clause to constitute a 'penalty' it is typically unenforceable. Two lines of case law have emerged which provide exceptions to this general rule: (i) where there has been a genuine pre-estimate of loss; and (ii) where there is commercial justification. Talal El Makdessi v Cavendish Square Holdings BV and another ("Makdessi") currently represents the most authoritative statement of the law, although it should be noted that it has been appealed to

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the Supreme Court. In that case, the Court of Appeal overturned a previous High Court decision on whether a discounted price provision in an M&A context amounted to an unenforceable penalty under English law. Whilst acknowledging the trend in recent cases to focus on whether a clause is commercially justifiable in the circumstances of the transaction when determining whether its primary purpose was to deter the other party from breaching the agreement, the Court of Appeal decided that the commercial justification argument did not apply here. Hence the mere fact that provisions are inserted for commercial reasons (in the case of leaver provisions, to effect a "clean break" or to provide suitable incentives to employees) does not guarantee that the provision will escape being struck down as a penalty. Using the reasoning applied by the Court of Appel in Makdessi: it is settled law that a clause which requires the transfer of property (such as shares) rather than the payment or forfeit of cash can constitute a penalty; Damages / misrepresentation In Hennigan v Roadstone Wood Ltd [2015] IEHC 326, the High Court awarded a Plaintiff damages for breach of contract and misrepresentation despite the fact that the contract was not recorded in writing. The case illustrates the importance of producing strong corroborative evidence in proving the existence of an oral agreement.

When is a Breach of Contract Serious Enough to Warrant Repudiation? In the recent case of Leopardstown Club Ltd v Templeville Developments Ltd and Philip Smyth [2013] IEHC 526, Charleton J. at the High Court dealt with a key practical issue in relation to termination of a contract, namely, how serious must a breach of contract be to warrant repudiation? The decision shows that the ability to terminate a contract for what is perceived by one party to be a breach, even a serious one, should never be taken for granted. The decision also usefully considers what constitutes a "mistake" giving rise to a right of termination; the enforceability of "no set-off" clauses; when adverse inferences may be drawn by the court for failure to call relevant witnesses; the circumstances warranting forfeiture of a lease; and the importance of proper corporate governance. Significance This case confirms the approach of the High Court in regard to how serious a breach of contract must be to justify an innocent party bringing it to an end and seeking damages. It also highlights the relevance of the conduct of the parties when considering this question. The decision confirms that the starting-point, when considering whether a party may terminate a contract for breach by the other party, is the terms of the particular contract. In many cases, there will be an express right to terminate for breach of contract. In some cases, the contract will spell out what circumstances will give rise to a right for one or both parties to terminate. However, as Charleton J. highlighted, no matter how scrupulous the parties and their lawyers are, it is unlikely that they will think of every foreseeable event and provide for what is to happen should one come to pass. Therefore, when an event occurs, the occurrence of which neither party has expressly stated will discharge one of the parties from further performance of his undertakings, it will be for the court to decide whether the right of termination may be exercised. In considering whether or not a party may terminate the agreement, the question for the court will be: "Does the occurrence of the event

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deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?" Continuing misrepresentations can be acted upon by the ultimate contracting party As a matter of general principle, a representation made during contractual negotiations for the purpose of inducing a contract will ordinarily be regarded as continuing until the contract is actually concluded because it will generally be reasonable for the representee to continue to rely on it. In Cramaso LLP v Ogilvie-Grant [2014] UKSC 9, the UK Supreme Court held that a negligent misrepresentation is capable of having a continuing effect up until the time when the contract is concluded, where the person to whom the representation is addressed becomes the agent of the person by whom the contract is concluded. In principle, this means that a contracting entity would be entitled to sue for rescission and damages, even though the negligent misrepresentation was not actually made to it. This case is likely to be of persuasive authority before the Irish Courts. Whilst there is nothing new in the concept of a continuing misrepresentation, what is new is the ruling that the misrepresentation can be acted upon by a legal person to whom no such representation was made and which was not even in existence at the time the representation was made. Liability for pre-contractual or other misrepresentation may be excluded or limited in the agreement ultimately signed, but in circumstances where it is not, this decision will undoubtedly be of significance. Entire agreement clauses / exclusion clause / misrepresentation The UK Court of Appeal recently considered in Axa Sun Life Services Plc v Campbell Martin Ltd (1) whether an "entire agreement" clause prevented claims for misrepresentation, breach of collateral warranties and/or implied terms. Entire Agreement clauses are increasingly used in standard form commercial contracts. Such clauses can operate as an effective exclusion clause. They are intended to limit any claim to the four corners of the written contract (2) regardless of what may have been said in negotiations. A typical clause will stipulate that the agreement is the entire agreement between the parties, to the exclusion of any other terms or representations prior to its execution. Such clauses are often seen as "boiler plate" but their scope may be more limited than parties appreciate. The Axa case is the latest example of the restrictive approach adopted by the Courts in construing such clauses, particularly in determining whether they exclude liability for pre-contractual misrepresentations. The Axa decision indicates that in a business-to-business context, where there is relative equality of bargaining power and the clause has been negotiated (7), a carefully drafted entire agreement clause is likely to be regarded as "fair and reasonable", thereby satisfying the statutory reasonableness requirements of the UCTA, and similarly section 46(1) of the Irish Sale of Goods and Supply of Services Act 1980. 1980 Act. The Irish courts could well adopt a similar approach to the interpretation of such provisions. The reasonableness of any such provision could also be an issue in respect of many types of contracts under Irish law.

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Merchantable quality / implied terms Terms and conditions on delivery dockets not incorporated into contract by reference (20 January 2015) The Supreme Court has dismissed an appeal by Irish Asphalt in Noreside Construction Ltd v Irish Asphalt [2014] IESC 68. Dunne J. (O'Donnell J, and MacMenamin J. concurring) found there was one "master" contract for sale agreed at senior management level between the parties. She rejected Irish Asphalt's claims that the terms and conditions referred to, but not contained, in the delivery dockets were incorporated in to the contract by reference or by custom and practice, so as to limit their liability to the costs of replacement of the defective goods. The Court found that there was a "master" contract, and on every subsequent occasion when an order was placed and a delivery of aggregate was made, a separate and distinct contract was made in respect of each such delivery which incorporated the terms and conditions of the "master" agreement. Status of the delivery dockets The Supreme Court concluded that the delivery dockets were not contractual documents. Dunne J noted that the authorities show that whilst a delivery docket can be a contractual document – "whether it is or not depends on the facts and circumstances in a particular case. The purpose for which the delivery docket was created may be of relevance". She stated that the crucial point is that the delivery docket or other document at issue must contain the relevant terms and conditions or at the very least contain a reference to terms and conditions well known in a particular industry. The phrase "The material is sold subject to our terms and conditions available on request" on the delivery dockets was not sufficient for the purpose of making or varying a contract. Requirements for a binding contract for sale of land Considered in Maloney v O'Connor 2015 IEHC 678 (24 November 2015) In this unusual case the High Court considered the enforceability of a contract for the sale of land to a construction company now in receivership, with much of the argument surrounding whether there was in fact a sufficient note or memorandum in writing. The contract for sale dated 9 April 2003, when coupled with the note to file written by the

Purchaser's solicitor and referred to above, between them comprised a note or memorandum in writing sufficient for the Vendors to rely upon for the purposes of section 2 of the Statute of Frauds (Ireland) 1695 (since replaced by section 51(1) of the Land and Conveyancing Law Reform Act, 2006) – the two documents together clearly record or acknowledge a concluded agreement.

Consistent with the contract for sale of 9 April 2003 which (i) was agreed for good

consideration and (ii) is an adequate "note or memorandum" in writing of what was agreed between the parties, there had been an agreement between the parties that:

(a) the consideration for the sale of the Property was to be the cash consideration

plus the Split Benefit; (b) absent the combined consideration there would have been no sale; and

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(c) what subsists between the parties is a single contract with the consideration split into two elements, rather than a main contract with a collateral contract with regard to the Split Benefit.

Even if the Split Benefit arrangement was construed as a collateral contract, the

Receiver was estopped from acting inconsistently with it and the main contract. The equitable maxim of "he who seeks equity must do equity" could be relied upon

by the Vendors to defeat the Receiver's application. The Court held that the order sought was effectively one of specific performance and that a claimant will not be granted specific performance of a contract unless he can establish that he is willing and able to carry out his own contractual obligations. Barrett J. held that the Purchaser / Receiver had not so satisfied the Purchaser's contractual obligations as a central obligation under the contract, namely the discharge of an element of the consideration, remained outstanding.

Rule against penalty clauses In the recent English case of Edgeworth Capital (Luxembourg) S.A.R.L. and another v Ramblas Investments B.V.[2015] EWHC 150 the UK High Court held that the rule against penalties did not apply to a fee payable for the provision of financing, because the fee was payable in various circumstances, not just in the event of a breach. The decision demonstrates that the rule against penalties only applies in the event of a breach of a contractual duty owed to the other party. The Court noted that this restriction of the rule has been criticised over the years, on the grounds that it may lead to the rule being avoided by skilful drafting. Limitation period for agreements for the sale of goods Murphy v Joe O'Toole & Sons Ltd & Anor [2014] IEHC 486, Baker J. held that the limitation period for an agreement for the sale of goods ran from the date of delivery of the goods, rather than from the date of the contract was entered into by the parties. The decision clarifies when time begins to run in actions for breach of contract for agreements for the sale of goods, which are to be delivered at a later date. Baker J. noted in her judgment that there was no direct authority on point as to the running of the limitation period in the case of an agreement for sale. Damages an adequate remedy? AB v CD [2014] EWCA Civ 229

SummaryThe English Court of Appeal has held that a claimant seeking an injunction to prevent an alleged wrongful termination of a contract was entitled to argue that damages could not be an adequate remedy for a breach of contract because recoverable damages were limited by a clause in that contract. The Court found that the rule that an injunction should not be granted where damages would be an adequate remedy, should be applicable only where it is just and in the present circumstances it was just to grant an injunction, as the loss caused by the threatened breach would not be recoverable in damages.

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Repudiatory breach and damages In a recent English Court of Appeal case, Acre 1127 Ltd (In Liquidation) formerly known as Castle Galleries Limited (In Liquidation) v De Montfort Fine Art Ltd (1), the Court found that proof of a settled intention not to perform an agreement is material in the assessment of damages recoverable for repudiatory breach. Usually, when a repudiatory breach is accepted, the innocent party is relieved from performance of his obligation under the contract. The innocent party is also relieved from proving that he was ready and willing at the date of the renunciation to perform the contract in accordance with its terms (2). However, the English Court of Appeal has held that proof of an intention by the innocent party not to perform is relevant in the assessment of damages. When is a rescission not a breach? The Court of Appeal clarifies the test for repudiatory breach in Eminence Property Developments Ltd v Heaney (21 December 2010) A repudiatory breach occurs where one party makes clear his intention no longer to perform his side of the bargain. In a recent English Court of Appeal case, Eminence Property Developments Ltd v Heaney (1), the Court clarified the test for repudiatory breach of contract. The Court overturned the High Court's decision and found that a vendor of land had not acted in repudiatory breach of contract where, by mistake, he served notices of rescission on the purchaser before the final date for complying with notices to complete had been reached.

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