fe1 contract law night before notes october · pdf filefe1 contract law night before notes...

© Tara Murphy, City Colleges www.citycolleges.ie 1850252740 [email protected]

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FE1 CONTRACT LAW NIGHT BEFORE NOTES

OCTOBER 2016

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 essay-style questions. The problem questions tend to be more predictable than the essay questions and, in the main, easier to ratchet up the points. The essays tend to be less predictable and often focus on very specific aspects (sometimes niche) areas of contract law. Having said that, there will generally be some straightforward questions and the examiner is often quite fair 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, Consideration/Estoppel, Contractual Terms, Exclusion Clauses, Consumer Contracts, Mistake, Misrepresentation, Discharge and Damages – but whilst important, would also never suggest that is all that is needed! The recent March paper was relatively straightforward. There were the usual contenders – consideration (executory promises), consumer contracts (in various contexts), exclusion clauses and damages all featured in the problem questions, while contractual terms (warranties/conditions/innominate terms), offers (as distinct from invitations to treat), mistake (unilateral mistake as to identity) and estoppel (vis-à-vis Pinnel’s case) featured in the essay questions. However, less prevalent topics also appeared – undue influence and statutory illegality in the problem questions, and intention to create legal relations and formal evidentiary requirements in the essay questions. While I would not expect identical questions to reappear in October, you should not work on an assumption that they will not reappear in some format. on this October 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:

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Offer and Acceptance

Distinction between Offer and Invitation to Treat (ITT) o Offer must be “clear and unambiguous” o Offer is a clear and unambiguous statement of the terms upon which the offeror is willing to

contract, should the person to whom the offer is directed decide to accept o Clifton v Palumbo (“prepared to offer”: not sufficiently definite/detailed to be an offer) o Gibson v Manchester City Council (“may be prepared to sell”: not sufficiently definite to be an

offer)

o Advertisements: o Grainger & Sons v Gough (Wine price list: advertisements generally an ITT) o Partridge v Crittendon (Advert re protected birds: advertisements generally an ITT) o CA Norgren Co v Technomarketing (Price list of copyrighted item: an ITT) o Leonard v Pepsi Co (Points for Harrier jet: humorous/no reasonable person would think it an

offer) o Carlill v Carbolic Smokeball Company (Lodgement of £1000: offer serious/possibility of

unilateral offer) o Kennedy v London Express newspapers (Registrants entitled to insurance: conceded that it

was a unilateral offer) o Wilson v Belfast Corporation (Unauthorised advert that Council to pay ½ salary to enlistees:

not an offer) o Billings v Arnott (Advert to pay ½ salary to enlistees: unilateral offer) o Lefkowitz v Great Minneapolis Surplus Store (Discount sale “first come, first served”: clear,

definite, explicit unilateral offer)

o Display of Goods: o Fisher v Bell (Display of flick knife: display generally an ITT) o Minister for Industry & Commerce v Pim (Display of coat w/o credit terms being set out:

display generally an ITT) o Pharmaceutical Society of Great Britain v Boots Cash Chemist (Display of goods an ITT/offer

to purchase when brought to cashier)

o Auctions: o Harris v Nickerson (Advert re auctions generally an ITT) o Warlow v Harrison (Advert re sale by auction an ITT / advert re T&Cs of auction, i.e. “without

reserve,” a unilateral offer) o Tully v Irish Land Commission (Irish courts: advert re sale by auction an ITT / advert re T&Cs

of auction, i.e. “without reserve,” a unilateral offer) o Barry v Davies (Cannot reject highest bidder / bidder entitled to recover damages from

auctioneer)

o Tenders: o Similar approach vis-à-vis tenders o Spencer v Harding (Advert re tenders generally an ITT / no obligation to sell to highest bidder

w/o specific undertaking) o Harvela Investments v Royal Trust Co of Canada (undertaking to accept highest bidder /

cannot accept referential bid) o Howberry Lane v Telecom Eireann (privilege clause / may accept referential bid / no

obligation to accept highest bidder) o Smart Telecom v RTE (Referential bid only valid where expressly permitted) o MJB Enterprises v Defence Construction (Canada: privilege clause / no obligation to accept

lowest bid / implied condition that only compliant bids accepted)

o Quotations, Requests for proposals/information o Harvey v Facey (“lowest cash price”: quotation generally an ITT) o Boyers v Duke (“lowest quotation”: quotation generally an ITT)




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o Dooley v Egan (quotation for immediate acceptance only: a unilateral offer)

Terminating an Offer o Revoking an offer: o Paye v Cave (revoke any time before acceptance / revocation must be communicated) o Routledge v Grant (offer open for 6 weeks: revoke any time before acceptance where no

consideration) o Walker v Glass (offer open until certain date, deposit required: revoke any time before

deposit paid where no consideration) o Dickinson v Dodds (Offer open until certain date: entitled to revoke before acceptance where

no consideration / revocation must be communicated / third party communication sufficient)

o Revoking a unilateral offer: o Daulia v Four Millbank Nominees (obiter: revocation not possible once performance

commences) o Errington v Errington (mortgage on house: revocation not possible once performance

commences) o The Brimnes / Byrne –v- Van Tienhoven (revocation by post only effective once received)

o Rejection of an offer / counter offer: o Hyde v Wrench (offer to sell for £1000, counteroffer of £950: counter offer amounts to a

rejection) o Stevenson, Jacques and Co v McLean (mere enquiry: not a counter offer / did not reject

original offer)

o Rejection of an offer / delay or lapse of time: o Parkgrange Investments v Shandon Park (offer may lapse if not accepted by time limit) o Commane v Walsh (sale of land dependent on earlier transaction) o Ramsgate Victoria Hotel v Montefiore (offer to buy shares: not accepted within reasonable

time) o Dooley v Egan (“immediate acceptance only”) o Lynch v Governors of St Vincent’s Hospital (offer of new employment contract) o Earn v Kohut (Offer to settle claim open 2 ½ years later)

o Death of an offeror/offeree: o See Re Whelan deceased; Coulthart v Clementson; Re Irvine; Reynolds v Atherton

o Failure of a precondition: o See Financings Ltd v Stimson

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.

o Intention to accept: o See Brennan v Lockyer; Parkgrange Investments v Shandon Park Mills

o Counter offers: o Tansey v College of Occupational Therapists (“communication … which contains conditions

not previously agreed”) o Swan v Miller (Offer to sell for £4750, offer to buy for £4450: counter offer) o Tinn v Hoffman (Offer to sell 1200 tonnes, order for 800 tonnes: counter offer) o Hyde v Wrench (effect to render original offer incapable of acceptance) o Wheeler v Jeffrey (Letter indicating commencement date: counter offer) o Covington Marine Corp v Xiamen Shipbuilding (objective test)




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o Battle of the forms: o Butler Machine Tool Co v Ex-Cell-O Corp (Exchange of standard T&Cs: buyer’s order was offer

/ return of buyer’s slip acceptance / analyse each communication) o Chichester Joinery v John Mowlam (even where standard forms do not correspond,

acceptance may be inferred from conduct) o British Road Services v Crutchley (Plaintiff accepted noted stamped by Defendant:

Defendant’s terms) o Buchanan v Brook Walker (Defendant entitled to presume that Plaintiff had read the conract) o G Percy Trentham v Archital Luxfer (Defendant accepted contract by conduct)

o Implied acceptance and acceptance through conduct: o Brogden –v- Metropolitan Railway Co. (Tacit communication of assent by acting in

accordance with agreement) o Anglia Television v Cayton (Need (i) clear and unambiguous offer; (ii) conduct by way of

acceptance applicable exclusively to offer) o Western Electric Ltd v Welsh Development Agency (acceptance by going into occupation)

o Silence not acceptance: o Felthouse v Bindley (“if I hear no more”: silence not acceptance) o Russell & Baird v Hoban (“if sale note be retained beyond 3 days”: lack of response not

acceptance) o Re Selectmove (parties may agree that silence is acceptance) o Rust v Abbey Life Assurance (past dealings give rise to legitimate expectation that silence will

suffice) o Western Electric Ltd v Welsh Development Agency (Implied contract for services / service

cannot be returned)

o Communication of acceptance: o Embourg v Tyler (acceptance must be communicated to be effective) o Entores v Miles Far East (acceptance ineffective until it is received) o Carlill v Carbolic Smoke Ball (for unilateral offer acceptance through performance)

o Means of communication prescribed by offeror: o Tinn v Hoffman (“reply by return of post”: equally speedy method sufficient unless offeror

precluded other methods o Staunton v Minister for Health (verbal acceptance sufficient notwithstanding that offeror

specified signature of contract)

o Acceptance by telephone, telex etc: o Where the method of communication is instantaneous, the receipt rule applies. o Entores v Miles Far East (acceptance ineffective until it is received) o Parkgrange Investments v Shandon Park Mills (rule adopted in Ireland) o Brinkibon v Stahag Stahl and Stahlwarenhandelgesellschaft (cases must be resolved by

reference to intentions of the parties, sound business practice and judgment as to where the risks lie)

o Tenax Steamship v The Brimnes (Telex within office hours, communicated when received by machine, need not be read or understood)

o Mondial Shipping & Chartering v Astarte Shipping (Telex outside office hours, not communicated until the open of business the next working day)

o Acceptance by Post o The postal rule applies for letters of acceptance posted, effective when sent. o Adams v Lindsell (acceptance effective when letter posted) o Household Fire Insurance v Grant (contract complete upon posting acceptance)




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o Kelly v Cruise Catering (exceptions where rule might cause injustice or clear intention to exclude it)

o Exceptions: Holwell Securities v Hughes, Nunin Holdings v Tullamrine Estates Property (prescribed method of acceptance – receipt required); Entores Ltd v Miles Far East Corporation (instantaneous communications); Holwell Securities v Hughes (manifest absurdity); Apicella v Scala (public policy)

o Acceptance by email and the Electronic Commerce Act 2000 o Debate as to whether postal rule or receipt rule applies to email o See Thomas v BPE Solicitors; Chwee Kin Keong v Digilandmall.com; Greenclose v National

Westminster Bank o Brinkibon (consider intentions of the parties, sound business practice, where the risk lies);

Tenax Steamship Co v The Brimines (during work hours); Mondial Shipping (inside work hours)

o Electronic Commerce Act and Regulations (only apply to business to business, and business to consumer contracts)

Consideration

Something of tangible value that is given or forborne in exchange for a promise – o Thomas –v- Thomas (lease for £1 per year); o Chappell v Nestle (wrappers were good consideration).

Need not be adequate, but must be sufficient o Must be of a type recognised by law - O’Neill v Murphy; Pando v Fernandez (prayers not

sufficient consideration) o Performance of a duty imposed by the general law not sufficient unless something over and

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

o Performance of existing contractual duty not sufficient – Stilk v Myrick , North Ocean Shipping v Hyundai; Hartley v Ponsonby; Williams v Williams (outlier); McHugh v Kildare County Council

o Performing a duty owed to someone other than the promisor may be sufficient – Shadwell v Shadwell; The Eurymedon

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

o Forebearance may be sufficient consideration – Hamer v Sidway; O’Keeffe –v- Ryanair Holdings

o Must not be “past” consideration - Roscorla –v- Thomas; Re McArdle; Reaffirmed in Provincial Bank of Ireland v O’Donnell and Law Society v O’Malley. Exceptions – if implicit at the time that it was to be paid for, then may be sufficient (Lampleigh –v- Braithwait; Bradford –v- Roulston; Pao On –v- Lau Yiu Long)

o Consideration must move from promisee (not third party) – Tweddle –v- Atkinson , McCoubray –v- Thompson; Dunlop Pneumatic Tyre v Selfridge. Exception where promise made to two or more people – McEvoy v Belfast Banking Corporation

Estoppel – may be possible to enforce in absence of consideration

o Equitable estoppel may step in where there is insufficient consideration (e.g. past consideration)

o Main (i) unambiguous representation as to future intention; (ii) reliance by promisee; and (iii) some element of detriment/unconscionability if promisor goes back on promise

o Estoppel may only be used as defence (‘as a shield, not as a sword’) - Combe –v- Combe o Principles established and illustrated in leading case law: Hughes –v- Metropolitan Railway;

Tool Metal Manufacturing –v- Tungsten Electric Co. Ltd; Central London Property Limited –v- High Trees – more recently in Kenny –v- Kelly , Revenue Commissioners –v- Moroney




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o Only applies to voluntary promises (i.e. not under duress) – D&C Builders v Rees; o Does not generally apply to cases governed by Pinnel’s case: D&C Builders v Rees; Zurich Bank

v McConnon

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 Presumption that no intention between husband and wife ( Balfour –v- Balfour) unless

separating (Courtney –v- Courtney; Merritt v Merritt) o Presumption that no intention in relation to other family relationships e.g. parent and child

(Rogers –v- Smith; Jones –v- Padavatton); uncle and nephew (Mackey –v- Jones); o Irish courts may have limited presumption to spouses and parent/child relationships (Leahy –

v- Rawson) o Possible to rebut presumption - evidence that legal relations intended, degree of closeness;

extent of reliance etc.

Commercial Arrangements o Presumption that intention is present, unless rebutted by clear evidence: Esso Petroleum –v-

Commissioner for Customs & Excise , Cadbury –v- Kerry Co-Op & Dairy Disposal Co. Ltd o Honour clause may exclude presumption – Rose & Frank Co. v Crompton o Agreements to negotiate attract presumption but lack certainty – Pagnan v Feed Products;

Walford v Miles; Cadbury v Kerry Co-op & Dairy Disposal. Lock-out agreements may be a way around it. Different approach evident in other jurisdictions (Coal Cliff Colleries v Sijehama; Con Killergis v Calshonie etc.)

o Letters of comfort – effect depends on wording of letter as to whether intention exists: Kleinwort Benson –v- Malaysia Mining Corporation; Banque Brussels Lambert v Australian National Industries;

o Letters of intent indicating that there is an intention to enter contractual relations in due course

o Subject to contract clauses (current arrangements conditional on final contract being concluded) – Thompson v The King; Mulhall v Haren

o Lottery syndicates – Simpkins –v- Pays / Religious Arrangements – Zevevic –v- Russian Orthodox Christ the Saviour Cathedral / Agreements with Government / Educational Agreements – Edmonds v Lawson.

Collective Agreements o English courts take approach that there is no intention to create legal relations (Ford –v-

A.E.U.W.) o Irish courts lean towards view that there is intention (Ardmore Studios –v- Lynch; Goulding

Chemicals v Bolger; O’Rourke –v- Talbot). o The uncertainty of terms may cause difficulty in enforcement. o Note also the Industrial Relations Act 1946.

Formal Requirements & Capacity & Privity

S.2, Statute of Frauds (Ireland) Act 1695 o Certain contracts must be evidenced in writing, otherwise they are unenforceable (not void) o Main examples include contracts for sale of land and contracts for sale of goods over €12 o Sale of Land - Guardian Builders –v- Sleecon (indirect connections with land need not be

evidenced in writing)




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o Contracts for sale of goods – see s.4 Sale of Goods Act 1893: contract enforceable where there is a memo; part acceptance of goods; buyer has given something in earnest or part payment.

o Memo may be contract, letters, emails, cheques etc. (Tradax v Irish Grain Board; Maloney v O’Connor; Doherty v Gallagher);

o Memo must contain 3 P’s (parties, property, price) and other term the parties consider essential (Godley v Power) - distinction between inadequacy of memo and uncertainty of terms (Supermacs Ireland and McDonagh v Katesan and Sweeney);

o Memo must be signed by party to be charged – headed note paper may be sufficient (Casey –v- Irish Intercontinental Bank)

o Joinder of documents possible - Kelly –v- Ross and Ross ; Maloney v O’Connor

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 o Significant exception – equity will not allow a party to rely on Statute where to do so would

allow the party to gain unfair advantage Lowry –v- Reid; o Mackie –v- Wilde (concluded contract; showed intention to perform; performance induced

or acquiesced in; unconscionable to allow reliance on Statute); Steadman –v –Steadman; Hope v Lord Cloncurry;

o A number of different acts may constitute part performance - WP McCarter v Roughan; Rawlinson v Ames; Kingswood Estate –v- Anderson

o Statute may not be used as an engine of fraud (Doherty v Gallagher) and waiver of terms (Healy v Healy)

Capacity o Minors – Contracts that are binding i.e. contracts for necessaries and beneficial services o Contracts for necessary goods: Ryder v Wombwell; Chapple –v- Cooper , Skrine –v- Gordon,

Nash –v- Inman; Prokopetz v Richardsons Marina; First Charter v Musclow; Soon v Wilson; o Contracts or necessary services: Chapple v Cooper; Helps v Clayton; Fawcett v Smethurst; o Contracts for beneficial services: Doyle –v- White City Stadium; De Francesco –v- Barnum ,

Shears v Mendeloff; Chaplin v Leslie Frewen; Proform Sports Management v Proactive Sports Management;

Privity o Common law rule that a person who is not a party to a contract cannot enforce the terms of

htat contract, nor can those terms be enforced against that person. o Tweddle –v- Atkinson , McCoubray –v- Thompson , Dunlop v Selfridge, Murphy –v- Bower ,

Mackey –v- Jones o Exceptions to principle – Agency (Midlands Silicones v Scruttons; The Eurymedon; Hearn v

Matchroom Boxing v Collins); Contractual trusts(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); Tort (Wall v Hegarty; Ward v McMaster; Woodar v Wimpey; Panatown v Alfred McAlpine Construction); Covenants running with the land (Tulk v Moxhay; London Co Co v Allen); Collateral contracts (Shanklin Pier v Detel Products)

o Statutory intervention (Road Traffic Act 1961; Package Holidays Act 1995; Mararied Women’s Status Act 1957 and Jackson v Horizon Holidays)

Contractual Terms

Express Terms o Sales puff (no legal effect), mere representations (no contractual effect), warranties

(contractual term) - objective test to determine (Oscar Chess v Williams)




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o Key factors – what stage of the transaction (Routledge v McKay; Schawel v Reade); is it included in written contract (Routledge v McKay); special knowledge or skill of representor (Oscar Chess v Williams; Dick Bentley v Harold Smith Motors; Hummingbird Motors v Hobbs; Bank of Ireland v Smith); importance of statement (Carey v Irish Independent Newspapers); indication that statement could be relied on (Schawel v Reade); specificity of statement;

Parol Evidence Rule – o Not capable of contradicting, varying, adding or subtracting from the terms of a written

contract (Bank of Australasia –v- Palmer; Macklin & McDonald –v- Gregan). o Exceptions – agreement part written/part oral (Howden Bros v Ulster Bank; Clayton Love

v B&I); custom and practice (Wilson Strain v Pinkerton; Page v Myer); interpretation (Chambers v Kelly; Revenue Commissioners v Moroney); oral/collateral contract (City and Westminster Properties v Mudd); equitable relief sought; consideration (Black v Grealy); document not a contract (Pym v Campbell); oral promise contradicts standard contract (Evans v Merzario; BCT Software Solutions v Arnold Laver)

Implied Terms – o Terms implied in fact (presumed intention of parties) and terms implied in law o Custom and practice test (notorious; certain; reasonable; clear and convincing evidence;

consistent with express terms) – O’Reilly v Irish Press; O’Connail v Gaelic Echo; Les Affréteurs Réunis Société Anonyme v Walford

o Business efficacy test (necessary to make contract work) – The Moorcock; Butler v McAlpine; Karim Aga Khan; Tett v Phoenix Property; Murphy Buckley & Keogh v Pye; Ward v Spivack

o Officious Bystander Test – Shirlaw v Southern Foundries; Kavanagh v Gilbert; Carna Foods v Eagle Star Insurance; Tradax Ireland v Irish Grain Board; Horan v O’Reilly; Dakota Packaging v Wyeth Medica

o Terms implied by the common law (Liverpool City Council v Irwin; Siney v Dublin Corporation; Hivac v Park Royal Scientific Instruments; Carvill v Irish Industrial Bank; Yam Seng v ITC; Boots v Hansard); terms implied by Statute (Sale of Goods legislation; Employment legislation); terms implied by the Constitution (Glover v BLN; Meskell v CIE; G v An Bord Uchtála)

Relative importance of terms – o Conditions (damages/repudiation), warranties (damages) and innominate terms

(depends on how serious the breach is; o Hong Kong Fir Shipping Co. –v- Kawasaki, The Hansa Nord Questions (does contract

expressly/impliedly confer right of termination; does statute/stare decisis point in direction of condition or warranty; has breach gone to root of contract); Federal Commerce & Navigation v Molena Alpha; Laird Bros v Dublin Steampacket; Irish Telephone Rentals v Irish Civil Service Building Society)

Exemption Clauses

Effect of Exemption, Exclusion and Limitation clauses – (Roche v Cork, Blackrock and Passage Railway; Leonard v Great Northern Railway)

Incorporation o Was notice given before contract concluded - Olley –v- Marlborough Court Ltd , Sproule

v Triumph Cycle; Thornton –v- Shoe Lane Parking , o Was the notice adequate – Parker v SE Railway; Ryan v Great Southern and Western

Railway; Early v Great Southern Railway Company; Interfoto Picture Library v Stilletto Visual Programmes (particularly onerous term) endorsed by Carroll v An Post National Lottery; Western Meats v National Ice and Cold Storage (businessman offering a




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specialist service but accepting no responsibility); James Elliott Construction v Irish Asphalt (notice to accounts department to correct payment errors not adequate)

o Bound by signature regardless of whether there was notice or notice was adequate – Duff v Great Northern Railway; L’Estrange –v- Graucob , Tilden Rent-o-Car v Clendenning (different treatment of signature on standard contract); James Elliott Construction v Irish Asphalt (signature on delivery docket did not count as docket was not a contractual document);

o Course of dealing may give rise to notice - Spurling –v- Bradshaw; Hollier v Rambler Motors; James Elliott Construction v Irish Asphalt (despite extensive course of dealing, only 3 notes set out T&Cs)

Interpretation o Narrow construction / interpretation – contra proferentem (Walls, Son & Wells v Pratt

and Haynes; Andrews v Singer); does it extend to tortious liability (Ronan v Midland Railway Company; Canada Steamship Line v The King; White v Warwick); it will not be permitted to defeat main purpose of the contract (Glynn v Margetson); limitation clauses tend to be more acceptable than exclusion/exemption clauses (Ailsa Craig Fishing v Malvern Fishing; Westcoast Transmission v Cullen Detroit Diesel Allison)

o 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.

Enforceablilty – fundamental breach and consumer legislation o English position seems to be that an exemption clause may apply to fundamental

breaches (Suisse Atlantique v Rodderdamsche; Harbutts Plasticine v Wayne Tank Corporation; Photo Production v Securicor Transport)

o Irish position less clear but seems to be that exemption clauses cannot apply to fundamental breaches (Clayton Love v B&I Steampacket; Western Meats v National Ice and Cold Storage; Fitzpatrick & Harty v Ballsbridge International Bloodstock Sales; Regan v The Irish Automobile Club;)

o The Sale of Goods and Supply of Services Act contains important provisions regarding the validity of exemption clauses in contracts for the sale of goods and supply of services. The Unfair Terms in Consumer Contracts regulations contains relevant provisions in relation to consumer contracts.

Other bars – misrepresentation; collateral undertakings and unconscionable bargains.

Consumer Protection

Sale of Goods Act 1893, Sale of Goods and Supply of Services Act 1980 –

Implied Conditions (and Warranties) in Contracts for Sale of Goods: o Section 12 – implied condition re title and warranties re free from encumbrances / quiet

possession; o Section 13 – implied condition re correspondence with description (Moore & Co. v Landauer ,

Fogarty v Dickson; O’Connor v Donnelly; Oscar Chess v Williams (description v quality)); o Section 14 – where goods are sold in the course of business, implied conditions re

merchantable quality (Bernstein –v- Pamson Motors , Rogers –v- Parish , Lutton v Saville Tractors) and re reasonably fit for purpose, where buyer specifies particular use, (Wallis –v- Russell; Stokes and McKiernan v Lixnaw Co-op); buyer must rely on seller’s skill (Draper v Rubenstein);




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o Section 15 – implied conditions re correspondence with sample, re reasonable opportunity of comparing and re goods being free from defect rendering them unmerchantable;

Implied Terms (not specified as conditions or warranties) in Contracts for Supply of Services: o Section 39 – supplier has necessary skill; due skill, care and diligence will be used; materials

will be sound and reasonably fit for purpose; goods will be of merchantable quality

Exclusion clauses: o Contracts for the sale of goods (s.55): o any attempt to exclude s.12 void; o cannot exclude s.13, s.14, s.15 in consumer contract; exclusion in non-consumer contract

must be fair and reasonable; o Fair and reasonable test set out in Schedule (George Mitchell (Chesterhall) v Finney Lock

Seeds)

o Contracts for supply of services (s.40): o Possible in consumer and non-consumer contracts with express agreement of parties; course

of dealing; or common in relevant trade and fact known to both parties; o In a consumer contract exclusion must be fair and reasonable, and consumer must have been

made aware of the exclusion.

o Unfair terms in consumer contracts: o Regulations apply to consumer contracts, where they are standard form contracts o Clause will be unfair (and not binding) if there is an absence of good faith and causes a

significant imbalance in the parties’ rights and obligations o Schedule 3 lists examples

Consumer Rights Regulations 2013: o Replaces previous directives on distance selling and doorstep sales o Certain information requirements regarding on-premises, off-premises and distance

contracts o 14 days to cancel contracts for the sale of goods/supply of services where it is an off-

premises or distance contract

Contracts of Adhesion Regulations 2011: o Requirements including requirement service providers give users 1 month’s notice of any

modification and user’s right to withdraw without penalty.

Alternative Dispute Resolution Initiatives: o Alternative Dispute Resolution (ADR) Regulations 2015: aim to ensure that consumers have

access to ADR for resolving contractual disputes with traders established in the EU; Competition and Consumer Protection Commission must keep a list of ADR entities

o Online Dispute Resolution (ODR) Regulations: traders established in the EU that sell goods/services online must provide a link on their websites to the European Commission’s online dispute resolution platform

Misrepresentation

Key elements: o Representation – oral, written or conduct (Spice Girls v Aprilia); silence not actionable unless

it is an active misrepresentation (Walters v Morgan; Gil McDowell); o Representation must be false – includes half truths (Dimmock v Hallett) and changes in

circumstances (With v O’Flanagan; Spice Girls v Aprilia); o Representation must be a statement of fact – not statement of intention (Wales v Wadham)

or statement of opinion, unless representor has specialist knowledge (Esso Petroleum v Marsden; Bissett v Wilkinson; Hummingbird Motors v Hobbs); and




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o Representation must induce other party into contract – representee must rely on it (Smith v Chadwick; Edgington v Fitzmaurice); offer to verify it will not cure it (Redgrave v Hurd); independent inspection suggests no reliance (Attwood v Small; Intrum Justitia BV v Legal and Trade Financial Services);

o Misrepresentation renders contract voidable

May be classified as fraudulent, innocent or negligent o Fraudulent – Derry –v- Peek o Negligent – Hedley Byrne –v- Heller; Thomas Witter v TBP Industries o Innocent – O’Brien v Kearney

Key remedy is that of rescission – remember always that equitable remedy o Damages only available for fraudulent or negligent misrepresentation (calculated using tort

measure i.e. put the parties in the position they were in before the tort occurred) o Equitable remedy of rescission (unpicks contract from the start) – not entitled to it as of right

and court may take equitable factors into account o Consider whether contract affirmed - Re: Hop and Malt Exchange o Doctrine in Seddon –v- North Eastern Salt – right to rescission lost once executed (unless

there is fraud) and special provision in Sale of Goods and Supply of Services Act 1980 (William Sindall v Cambridgeshire Co Co)

o Consider where too long a delay in bringing claim – Leaf –v- International Galleries; O’Kelly v Glenny;

o Consider whether there are any third party rights (White v Garden; s.23(1) of the Sale of Goods Act);

o Consider whether restitutio in integram remains possible, If not – rescission may be refused (Vigers v Pike)

Special Position of Contracts made in uberrimae fides and notion of materiality to same o Rozanes –v –Bowen (person seeking insurance has all relevant facts) o Chariot Inns Ltd –v- Assicurazioni SPA (objective test of prudent insurer for materiality) o Aro Road & Land Vehicles –v- Insurance Corporation of Ireland (lower standard for over the

counter contracts; insured should not have to seek out insurer) o Kelleher –v- Irish Life Assurance Company (form asked for some information, implied that

other information not required) o Keating –v- New Ireland Assurance (disclosure of facts known to insured) 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-proferentem 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 and the person is addressed becomes the agent of the person by whom the contract is concluded.

Mistake

Key elements: o Must be one of fact and not of law – ignorance of the law is no defence - O’Loghlen v-

O’Callaghan, Cooper –v- Phibbs (may be mistake as tot private law – distinction abolished in England in Kleinworth Benson –v- Lincoln City Council)

May be classified as common, mutual or unilateral mistake:

Common Mistake (both parties make same mistake, not at cross purposes):



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o Mistake as to existence of subject matter (res extincta) – Courturier –v- Hastie; Strickland –v- Turner; Pritchard v Merchants and Tradesmen’s Mutual Life Assurance; Galloway –v- Galloway; s.7, Sale of Goods Act 1893; McRae v Commonwealth Disposals Commission;

o Mistake as to underlying assumption – must be fundamental to the contract (Bell –v- Lever Bros; Solle v Butcher; Leaf –v- International Galleries; John Walker v Amalgamated Investments; Great Peace Shipping v Tsavliris Salvage (International); Western Potato Co-op v Durnan; Associated Japanes Bank v Credit du Nord); even if not void at common law, may be voidable in equity (Solle v Butcher; Cooper v Phibbs; Grist v Bailey; Great Peace Shipping (move away by English Courts); O’Neill v Ryan (principle still good in Ireland));

Mutual Mistake (parties make different mistake, cross purposes) o Objective test as to whether contract, in fact, exists – Smith –v- Hughes; Wood –v- Scarth;

Clayton Love v B&I Steampacket; Raffles –v- Wichelhaus; Scriven Bros v Hindley; Mespil –v- Capaldi

Unilateral Mistake (one party is aware of other party’s mistake, cross purposes) o If one party does not know of other party’s mistake, contract is formed (Wood v Scarth) o If one party is aware of mistake, contract is not formed (Webster –v- Cecil; Hartog –v- Colin

and Shields (standard of reasonable man); Chwee Kin Keong v Digilandmall.com (snapping up); mistake must relate to terms rather than motives)

o Special case of mistaken identity (possible to take an action for fraudulent misrepresentation (voidable, title passes) or mistake (void, no title passes)) - Cundy –v- Lindsay ; Phillips –v- Brooks Ltd (for mistake, must establish that want to deal with specific person and nobody else); Ingram –v- Little; Lewis –v- Avery (where person present, presumption of intention to delay with that person i.e. voidable for misrepresentation); Shogun Finance v Hudson;

Non est factum (contract void) – Bank of Ireland v McManamy; Saunders v Anglia Building Society (must be mistake as nature of document rather than legal effect; must have taken all reasonable precautions to ascertain); United Dominions Trust v Western BS Romany; Ted Castle v McCrystal (radical/fundamental difference with what he thought document was; mistake re document rather than legal effect; lack of negligence); ACC Bank v Kelly; Danske Bank v Walsh;

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

o Declaration that contract is void (common, mutual mistake) o Rescission (common, mutual, unilateral) – equitable remedy o Rectification (equitable remedy allowing correction) – Nolan –v-Graves and Hamilton , Irish

Life v Dublin Land Securities; Lucy –v- Laurel Construction; Swainland Builders v Freehold Propertes (amend document not transaction); Hennigan v Roadstone Wood

o Not necessarily a defence to claim for specific performance

Duress

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

o Barton –v- Armstrong (threats of violence); Lessee of Blackwood v Gregg (abduction); threat to invoke legal process (Griffith –v- Griffith; Kaufman v Gerson); economic duress (Stott v Merit; D&C Builders –v- Rees; North Ocean Shipping v Hyundai Construction; Smelter Corporation of Ireland v O’Driscoll; The Universe Sentinel (pressure must be illegitimate/unreasonable; lack of alternative course of action); Atlas Express v Kafco; Walmsley v Christchurch; ACC Bank v Dillon (consent must be wrongfully obtained); Alec Lobb (Garages) v Total Oil (coercion by third party).

o Contract voidable – remedy: rescission

Undue Influence




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Protection of one party where the other party exercises a position of power over them

Actual Undue Influence (evidence that undue influence was in fact exerted) o O’Flanagan –v- Ray-Ger Limited

Presumed Undue Influence (special relationship where undue influence is presumed – possible to rebut presumption)

o First category - automatic presumption based on confidential relationship (Lawless v Mansfield (solicitor/client); Mulhallen v Marum (guardian/ward); White v Meade, Allcard v Skinner (religious order/devotee); McMackin v Hibernian Bank (parent/child));

o Second category – complainant establishes that there is a relationship similar in nature to same (R v Hutton; RBS v Etridge; Armstrong v Armstrong (siblings); Tolhurst v Smith (members of pop group); McGonigle v Black (uncle/nephew - placing of trust is key); Gregg v Kidd (siblings); Lloyd’s Bank v Bundy (bank/customer); Credit Lyonnais Bank Nederland v Burch (employer/employee);

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 (leading English case – set out steps to be taken); Bank of Ireland –v- Smyth (leading Irish case adopts O’Brien); Bank of Nova Scotia –v- Hogan; Royal British Bank –v- Etridge (modified law in England– bank on notice any time wife guarantees husband’s debts); Ulster Bank v Fitzgerald; Ulster Bank v Roche (seemed to adopt Etridge but did not set out steps to be taken); GE Capital Woodchester Home Loans v Reade)

o Possible to rebut presumption – independent legal advice etc (McMackin v Hibernian Bank; Inche Noriah v Shaik Allie Bin Omar; Provincial Bank v McKeever)

o Contract voidable – remedy of rescission

Unconscionable Bargain (no threats, no undue influence, but unfair advantage) four elements to be established (Boustaney –v- Piggott): Bargaining impairment (Grealish –v- Murphy); Exploitation (Rae –v- Joyce); Manifestly Improvident (Rooney v Conway; Slator v Nolan); Lack of Adequate Advice (Grealish v Murphy)

Illegal and Void Contracts • Illegality:

o Illegality at common law – o Contracts to commit a crime or tort (exchange controls – Namlooze Venootschap D Faam v

Dorset Manufacturing; Westpac Banking Corporation v Dempsey; benefitting from wrong – Beresford v Royal Insurance Co; Gray v Barr;)

o Contracts promoting immorality – Pearce v Brooks; note that societal mores may change (Armhouse Lee v Chappel)

o Contracts tending to prejudice the administration of justice, including maintenance and champerty (discontinue criminal legal proceedings – Nolan v Sheils; Keir v Leeman; promise not to instigate legal proceedings – Rourke v Mealy; maintenance – Re Trepca Mines (No. 2); Martell v Consett Iron; Hill v Archbold; champerty – Fraser v Buckle);

o contracts which breach foreign law (Stanhope v Hospitals Trust; Foster v Driscoll); o contracts trading with enemies of the state (Furtado v Rogers; Ross v Shaw); o contracts to defraud Revenue e.g. employment situation (position in England - Tomlinson v

Dick Evans U Drive; position in Ireland re unfair dismissal/wrongful dismissal – Lewis v Squash Ireland; Unfair Dismissals (Amendment) Act; Hayden v Sean Quinn Properties; Red Sail Ltd (In Receivership); Hall v Woolsten Hall Leisure; Wheeler v Quality Deep;)

o contracts to corrupt public officials (Lord Mayor of Dublin v Hayes)

o Illegality under statute o matter of construction – does statute intend to render contract illegal (Archbolds v

Spanglett; Hortensius v Durack)




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• Consequences of Illegality o Unlawful on its face – void ab initio and severance not available (Gray –v- Cathcart; Murphy

–v- Crean; Hayden –v- Sean Quinn Properties; Re Mahmoud and Hispani) o Performed illegally – party who intends to perform contract illegally cannot sue on contract;

if party who performs contract lacks requisite intention, they may be able to sue (St John Shipping v Joseph Rank); if other party is unaware of illegality, they may have remedies (Marles –v- Philip Trant & Sons; Whitecross Potatoes v Coyle); where both parties intend to perform the contract illegally, the contract will be illegal and unenforceable (Ashmore v Dawson)

o Recovery of property passed under illegal contract – general rule no recovery (Collins –v- Blanton; Poteliakhoff v Teakle; Brady v Flood; St John Shipping v Joseph Rank); some exceptions – lack of culpability (Deutsche Ruckversicherung v Walbrook Insurance); rights independent of illegal transaction (Euro-Diam v Bathurst; McIlvenna v Ferris and Green); sometimes even rights originating in illegal transaction (Singh v Ali); repentance (Tribe v Tribe)

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

certain provisions should be deemed repugnant and potentially carved from the remainder of a ‘saveable’ contract (Goodison v Goodison)

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

o Contracts subverting the sanctity of marriage (Lowe v Peers (agreements to marry/not marry); Hermann v Charlesworth (matchmaker agreements); Marquess of Westmeath v Marquess of Salisbury (future separations); MacMahon –v- MacMahon (distinction where separation has already happened); Ennis –v- Butterly (contracts of cohabitation); Dalton v Dalton, Gaffney v Gaffney (foreign divorces)

o Contracts in Restraint of Trade – must be reasonable and proportionate (Esso Petroleum –v- Harper’s Garage; John Orr Ltd –v- Orr); must pursue legitimate interest (Vancouver Malt and Sake Brewing Co v Vancouver Breweries) e.g. trade secrets (Forster & Sons v Suggett; Faccenda Chicken v Fowler; Marshall (Thomas) Exports v Guinle) or connections/contacts (Herbert Morris v Saxelby, Murgitroyd –v- Purdy;) must be proportionate in terms of geography and location (Nordenfelt –v- Maxim Nordenfelt (can be worldwide); McEllistrem –v- Ballymacelligott Co-Op (reasonableness of extent of restraint treated individually on its merits); Office Angels v Rainer Thomas; Mulligan v Corr; Societa Esplosivi Industriali v Ordnance Technologies;) must be in public interest (Fitch v Dewes);

• Severance (blue pencil test) 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 (Attwood v Lamont; John Orr Ltd –v- Orr; Skerry, Wynne & Skerry’s College v Moles; Cussen v O’Connor; Mason v Provident Clothing and Supply Co – cannot rewrite contract)

Discharge of Contracts

Four ways in which a contract may be discharged: agreement; performance; frustration and certain breaches of contract (i.e. repudiatory, fundamental, breach of condition)

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; Re Moore v Landauer; Collen v Marum)




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o Substantial Performance – exception at equity (Boone v Eyre; Hoenig –v- Issacs , Bolton –v- Mahadeva , Kincora Builders –v- Cronin)

o If voluntarily acceded to some level of part / incomplete performance, that can be binding – Sumpter –v- Hedges

o Payment for part performance can also be due if contract is a divisible contract (Taylor –v- Laird , Brown –v- Wood); if complete performance is prevented by the other party (Planche –v- Colburn; Arterial Drainage v Rathangan River Drainage Board); if an attempt has been made to perform (Startup v MacDonald)

Breach o Repudiatory (other party indicates intention not to perform contract) – Athlone Rural

DC –v- Campbell & Son; breach must be serious (Decro Wall International v Practitioners in Marketing); breach must be deliberate (Nottingham BS v Eurodynamics; Woodar Investment v Wimpey Construction; Continental Oil v Moynihan; Eminence Property Developments Ltd v Heaney (reasonable person would have realised mistake); can bring contract to an end immediately or wait until breach (Hochster v De La Tour; Leeson v North British Oil);

o Fundamental – Union Eagle v Golden Achievement (would not be reasonable to expect other party to continue with contract); Dundalk Shopping Centre Ltd –v- Roof Spray Limited (seriousness and likelihood of recurrence); Leopardstown Club v Templeville Developments and Philip Smyth

o Breach of Condition - Union Eagle v Golden Achievement (time was of the essence; no prejudice need be caused); Sepia Ltd v M&P Hanlon (time can become of the essence e.g. notice to complete)

o Consequences – innocent party may choose to discharge the contract (prospective effect), may affirm the contract or may lose the right to treat the contract as discharged where there is delay

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 o Traditional position - Paradine –v- Jane; Gamble –v- The Accident Insurance Company o Doctrine developed - Taylor –v- Caldwell (somewhat a relaxation to avoid harsh results) o Difference between impossibility and mere difficulty - Tsakirooglou v Noblee and Thorl;

Davis Contractors –v- Fareham UDC, Zuphen –v- Kelly; National Carriers Ltd v Panalpina (Northern) Ltd (must be substantial re entirety of contract)

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

o Intervening illegality – Reilly v R; Rally Bros v Compania Naviera Soto y Aznar; Fibrosa Spalk Akeyjna v Fairbarin Lawson Combe Barbour; Ross v Shaw; Ó Cruadhlaoich v Minister for Finance

o Whether event of frustration was foreseeable or not/provided for in contract – Brown v Mulligan , McGuill –v- Aer Lingus and United Airways , Ocean Tramp tankers Corp v V/O Sovfracht, The Eugenia; Neville & Sons Ltd –v- Guardian Builders Ltd (risk obvious to both parties but not provided for in contract); Jackson v Union Marine Insurance; Metropolitan Water Board v Dick Kerr

o Self-induced frustration shall not suffice to enable a discharge of contract - Constantine Line v Imperial Smelting Co; Herman v SS Vicia; FC Shepherd v Jerrom (outlier)

o Effect of frustration – discharges parties from future obligations (Krell v Henry; Chandler v Webster; Appelby v Myers (unfair results re entire contract); Fibrosa (exception where no tangible benefit))

Remedies • Damages




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o Causation – injured party must prove that party in breach wholly/partially caused damage; s.2 of the Civil Liability Act 1961 re reduction in damages where injured party is partially responsible

o Remoteness – Hadley –v- Baxendale (damages flow naturally from breach, or damages in contemplation parties to be probable result of breach); 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); first limb - Wilson and Dunville; Lee and Donoghue v Rowan; second limb - Waller –v- Great Western Railway , Victoria Laundry v Newman Industries; The Heron II , Kemp –v- Instasun Holidays Ltd; Transfield Shipping v Mercator Shipping, The Achilleas (overrun or lost profits);

o Requirement on plaintiff to mitigate his loss – Brace –v- Calder , Cullen –v- Horgan; Payzu v Saunders; Lennon –v- Talbot (Ireland) (courts will not impose unrealistic standards); Beechwood Birmingham v Hoyer Group;

o Heads of loss: expectation loss – Afton v Film Studios of Ireland; Hawkins v Rogers; Blackpool and Flyde Aero Club v Blackpool; as an alternative to expectation, reliance loss – Anglia Television –v- Reed; Bowlay Logging v Domtar (breach averted loss); Hennigan v Roadstone Wood (damages for misrepresentation and reliance loss); restitution loss - Hickey –v- Roches Stores; consequential loss – Stoney v Foley; Leahy v Rawson (cost of cure); Ruxley Electronics v Forsyth; loss of reputation – Malik v BCCI

o Estimating damages: nominal (O’Keeffe v Kilcullen; ESL Consulting Services v Verizon); contemptuous (Grealey v Casey); General and special (Raticliffe v Evans); Punitive/exemplary (Conway v INTO; Rookes v Barnard; Francis Shortt v Commissioner of An Garda Síochána); speculative (Grafton Court v Wadson Sales); aggravated (Francis Shortt); compensatory

o Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (damages reduced as charterers would have exercised an option to cancel the contract in the event of war)

o 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.

o Damages for intangible loss (“loss of chance”) o McRae v Commonwealth Disposals Commission (no parameters to evaluate); Hawkins v

Rodgers (potential value discounted by probability); Hickey v Roches Stores (potential loss of profit over 2 years)

o Damages for emotional distress and related situations o Not recoverable in general (Hobbs –v- London South Western Railway; Phelan Holdings v Poe

Kiely Hogan; Kelly v Crowley) unless purpose of contract is to provide entertainment or enjoyment (Jarvis –v- Swan Tours; Dinnegan and Dinnegan v Ryan)

o Penalty Clauses / Liquidated Damages / Acceleration Clauses o Liquidated damages clause attempts to assess damages likely to be suffered and is

permissible, whereas penalty clause seeks to punish and is not permissible o Test established in Dunlop Pneumatic Tyre –v- New Garage & Motor Co (amount

disproportionate to all possible consequences of breach; amount is the same regardless of nature and extent of damage; clause requiring larger sum to be paid on failure to pay lesser sum) – recently modified by Cavendish v El Makdessi; ParkingEye v Beavis (new test is whether the clause is a secondary obligation which imposes a detriment which is out of proportion to the legitimate interest of the innocent party; legitimate interest can include enforcing performance beyond being compensated for loss)

o Dunlop Pneumatic Tyre applied in Ford Motor v Armstrong; Jobson v Johnson; Schiesser International v Gallagher; O’Donnell & Co. Ltd –v- Truck and Machinery Sales Ltd

o Acceleration clauses (default triggers requirement for immediate payment in full) – Protector Loan v Grice; The Angelic Star; UDT v Patterson

Two lines of case law have emerged which provide exceptions to this general rule: (i) where there has




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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) o Specific Performance - be alive to principles of restriction, not where damages are an

adequate remedy (Bagnell v Edwards; Sky Petroleum v VIP Petroleum (unique nature); Swift v Swift (difficulty quantifying); Beswick v Beswick (nominal damages)); not for contracts of personal service (Lumley v Wagner; Warren v Mendy); contracts not where contract requires court supervision (Ryan v Mutual Tontine Association); not where it may be refused on equitable grounds e.g. hardship (Denne v Light; Patel v Ali)

o Injunctive relief – prevent someone from doing something they contracted not to do rather than force someone to do what they contracted to do (Lumley v Wagner, Page One Records v Britton) and not where damages adequate (AB v CD)

o Restitution – where there has been complete failure of consideration o Quantum Meruit – British Steele v Cleveland Engineering; Folens v Minister for Education;

Gilbert & Partners v Knight; Callinan v VHI; ERDC Group v Brunel University o Rectification – where written document does not reflect prior agreement o Rescission – available in a limited number of circumstances e.g. mistake and

misrepresentation




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Recent Developments in Contract Law

European Commission's online dispute resolution (ODR) Directive Since 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. There have been recent developments in relation to this rule with the UK Supreme Court decision in Cavendish El Makdessi ; ParkingEye v Beavis [2015] UKSC 67, which concerned an appeal from a Court of Appeal decision: The Supreme Court was unanimous that the doctrine of penalties should not be abolished, but their lordships rejected the traditional test set down in Dunlop v Matthew Tyre Co Limited v New Garage Motor Co Limited that a clause will be a penalty if it is not a genuine pre-estimate of loss and is extravagant or unconscionable, or if its purpose is to deter a breach of contract. The majority of the Supreme Court held that the correct approach in commercial cases was to have regard to the nature and extent of the innocent party’s (e.g. the employer’s) interest in the performance of the obligation that was breached as a matter of construction of the contract.



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The test, formulated by the majority, is whether the clause in question is:

“…a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance. In the case of a straightforward damages clause, that interest will rarely extend beyond compensation for the breach, and we therefore expect that Lord Dunedin’s four tests would usually be perfectly adequate to determine its validity. But compensation is not necessarily the only legitimate interest that the innocent party may have in the performance of the defaulter’s primary obligations.”

The Supreme Court went on to explain the practical application of the test in terms that a penalty clause whose purpose is to punish the contract breaker is likely to be an unenforceable penalty clause. On the other hand, a clause that is intended to deter a breach of contract is less likely to be a penalty clause, even if it does not represent a genuine pre-estimate of loss. In order to determine whether or not a clause is a penalty, the key is to consider whether the liquidated damages clause is out of all proportion to the employer’s legitimate interest in enforcing the contractor’s obligations under the contract. If it is, it will be penal and unenforceable. Significance The decision of the UK Supreme Court in Cavendish Square Holdings BV (Appellant) v Tatal El Makdessi (Respondent) has replaced the century-old test in Dunlop v Matthew Tyre Co Limited v New Garage Motor Co Limited with a modern test that reflects the fact that in some circumstances, parties have a legitimate commercial interest in enforcing the performance of contractual obligations which go above and beyond compensation for any identifiable commercial losses they may suffer as a result of the breach, or the deterrence of a breach of contract. In the construction context, this new test requires a consideration of the commercial justification for the liquidated damages clause at the time the contract was entered into, and whether it is out of all proportion to the employer’s legitimate commercial interest in the works completing on time. Whilst the new test is ultimately to be welcomed, there is plenty of scope for satellite litigation as to what might amount to a “legitimate” commercial interest which will no doubt be played out in the courts in the years to come. 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



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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 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



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reasonableness of any such provision could also be an issue in respect of many types of contracts under Irish law. 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 (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



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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. 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 , 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.



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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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Dublin City Centre (Dublin 2) and Online Website: www.citycolleges.ie Phone: 1850 252740 Email: [email protected] Head of Law: Philip Burke, LLB, BL (087 7679 576) The next course commences 7

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