Contract Law

Notes, cases, and materials on contract law

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Charles Stross

"Contract law is essentially a defensive scorched-earth battleground where the constant question is, 'if my business partner was possessed by a brain-eating monster from beyond spacetime tomorrow, what is the worst thing they could do to me?'"

Sam Goldwyn

"A verbal contract isn't worth the paper it's printed on."

Past Papers & Questions

Essay Questions:

Essay Questions

1. There is in my view a real danger that if a general principle of good faith were established it would be invoked as often to undermine as to support the terms in which the parties have reached agreement’, per LJ Moore-Bick in MSC Mediterranean Shipping Co v Cottonex Anstalt [2016] EWCA Civ 789, at [45]. Critically discuss

2. ‘The foundation of consideration is unconscionability and promissory/proprietary estoppel is the best example of this. It would be better to just call the beast by its name and allow the courts to assess whether the deal was unconscionable or not.’ Critically discuss.

3. “The English courts’ approach to the doctrine of consideration is artificial since it has very little to do with the parties’ agreement. A change in the law is imperative to ensure clarity in the law and to stop a slavish adherence to the neo-classical theory of contract law.” Critically discuss.

4. To what extent is “business common sense” the fundamental approach of the courts in resolving ambiguities and ascertaining the meaning of contractual terms and statements?

5. Critically discuss the impact of the Consumer Rights Act 2015 on the regulation of ‘unfair terms’ in contracts.

Problem Question 1

The University of Retexe owns a painting titled ‘the scales out of balance’ which was given to it by a grateful graduate in 1955. The University has decided that nobody really looks at the piece and therefore wants to sell it. They contact a former student, Stefan, by letter:

‘We are considering selling the painting you knew and loved when you were a student here, ‘the scales out of balance’, as long as you are willing to pay £2m for it. The sale must be within the next two months. As you will remember it was included in the BBC television series ‘the art of Hogarth’ and they considered it to be one of his best pieces. Would you be interested in purchasing this Hogarth?’

Stefan immediately replies that the gallery he owns would be happy to pay that price for the Hogarth.

The University does not reply but the accountant removes the Hogarth from the list of art pieces to be insured. Shortly after Stefan succeeds in selling the painting on to an American art gallery for £5m. He contacts the University and leaves a message:

‘I hope you don’t mind but I have managed to sell the painting to a fantastic gallery.’ A few days later the university representative, Tammy, calls Stefan back and comments that she is glad they have found a good home for the painting and asks when Stefan would like the painting to be delivered.

Stefan is about to call back when he finds out from another dealer that the Hogarth, due to the time when it was donated, must have been a forgery. The discovery was made by accident last week when a gallery moved other Hogarths to a new building.

Advise Stefan, who does not want the painting anymore.

Problem Question 2

Ugo, an architect, earns a little extra money as a self-employed author of fiction. He has previously used an accountant in his town who has recently retired.

For this year’s tax return, due in January 2018, Ugo decides to use Valentina’s online tax return service. The website offers ‘a complete preparation and filing service for your income tax’. The website offers ‘complete peace of mind’. The first page of the website asks for the income. The page states that the customer ‘must submit all statements by post’ and, provided that she pays the £200 fee, they will then send her the completed tax return back.

On the very first page of the website there is a button titled ‘what we promise’. If the customer clicks on this it takes the customer to another website with terms and conditions, which include the following:

  1. What we promise: We undertake to calculate the tax you must pay from the figures you give us when you tell us your income. We take no responsibility for checking that you have entered the amounts correctly
  2. Liability. We are not responsible for any penalty imposed on you because your income is incorrectly stated; or because your return is not submitted on time unless we are shown to have acted intentionally or with gross negligence.

This button only appears on the first page. Ugo does not see or read the terms and conditions before sending in the requested information. Ugo does not notice that he has entered the amount he has earned as £2,500 rather than £25,000. The correct amount is clearly visible from the statements but Valentina does not notice the mistake. She sends the tax return back to Ugo, who signs it without checking.

The tax authorities notice the mistake and fine Ugo a total of £500.

Advise Ugo of any rights he may have against Valentina.

Problem Question 3

Trista and Kevin have been business partners of a local garage since 2010 valued at about £200,000, with Trista owning a 25% share in the business (worth approximately £50,000). In March 2015, Trista approached Kevin about the possibility of buying her out of the business to enable Trista sort out her own personal problems. When Kevin refused, Trista threatened to do such shoddy work at the garage that the business would lose clients and eventually become financially unviable.

Initially, Kevin refused Trista’s proposal and told her that, while sympathetic with her plight, he just did not have access to the necessary funds. During the next several months, Trista did as she threatened and her work was so slow and sloppy that the business began to lose customers.

Fearing that he would lose the business completely, Kevin approached his new husband, Gamu, about the possibly of putting up their jointly-owned £100,000 home as security on a £50,000 bank loan, so that Kevin could buy Trista out of the business. Kevin told Gamu that he felt he had no choice but to get the loan if his business were to survive. Gamu agreed and signed the necessary documents at the bank in the presence of Kevin. Kevin, in turn, entered into contract with Trista in October 2015 to buy her out of the business for £50,000.

By February 2016, as a result of the damage to the business’ reputation after Trista’s behaviour, Kevin had lost customers and was struggling to pay his bills, including the payments on the bank loan. In May 2016, Kevin was informed that the bank now intended to take possession of his and Gamu’s house.

Advise Kevin and Gamu on whether they have any rights against Trista and the bank.

Problem Question 4

Phoebe, who won £1 million from a lottery, decided to take her parents, Monica and Chandler, and her best friends, Jahangir and Ramona, on “luxury cruising” to thank them for being there for her. Phoebe remembered seeing the following Facebook advertisement by Superb Ltd:

“Get the experience of a lifetime via our two weeks cruise; Our luxury ship will be stopping at exotic places; Enjoy five-star hotels; Fine dining all the time; Our crew and passengers are special and the nicest; £1000 per person; Discounts for groups of five or more.”

Phoebe phoned Superb’s office and asked whether “that Facebook deal is still on” and got a confirmation. She later went to Superb’s office and signed a contract after paying a discounted price of £4000 for five persons.

Phoebe, her parents and her friends left the ship after two days due to the following facts:

  1. The ship, Konkordium, was an ugly-looking converted fishing boat lacking some basic facilities normally seen in cruise ships. Konkordium was only going round the southeast coast of England.
  2. Fine dining was not available on Konkordium and passengers were often given sandwiches. The food made Phoebe’s parents quite ill and Phoebe, Jahangir and Ramona suffered varying levels of discomfort from the food.
  3. Konkordium’s crew were swearing and shouting at passengers at will. One pushed Jahangir for no reason.
  4. Other passengers on Konkordium were groups of students who were always drunk, swearing, shouting and playing loud music. Some students whistled whenever they saw Ramona. The students paid £100 per person and £80 for groups of five.

Advise Phoebe, Monica, Chandler, Jahangir and Ramona on whether they have any legal claims in contract law.

Problem Question 5

Tara wanted to extend her house. Accordingly she engaged an architect to draw up some plans. Subsequently she placed a notice in her local newspaper requesting tenders in respect of the work to be undertaken. The notice stated that the deadline for the submission of tenders was noon on 4 March and the contract would be awarded to the person submitting the lowest tender. The notice also stated that further details, including plans, could be obtained from Tara at an address provided but did not state the method for submitting tenders.

Eoin, Belinda, Siobhan and David all requested further information and subsequently submitted tenders. Eoin submitted a tender of £20,000 by e-mail. Belinda submitted a tender of £15,000 by post. Siobhan submitted a tender of “£100 lower than any other tender received” by post. David submitted a tender of £10,000 by e-mail. Tara decided not to accept David’s tender as she had heard worrying rumours about the standard of David’s work. Instead she decided to accept Siobhan’s tender. David and Belinda are very angry about this and are threatening legal action. Moreover it appears that Tara did not consider Eoin’s tender at all as there was a problem with her computer server.

Advise the parties.