Contract Law: A brief overview

1 ) What are the differences between the philosophies of deceit and common jurisprudence error?

Both deceit and misidentify modulate the effects of trust in the formation of a contract upon false information. It is the character of the false information and the mode of and purpose behind its communicating that gives rise to different effects at jurisprudence. Due to three of the basic demands for the formation of a contract – offer, credence and certainty – where parties are truly at “cross purposes” in their dialogues, a contract can non come into being. This has been said [ 1 ] to be a species of error. However, there is a farther acknowledged class of error at common jurisprudence which occurs where the nature of the error is such as to invalidate consent. This has been referred to in earlier governments as “mutual mistake” and is by and large now known as “common mistake” . This occurs where both parties have reached understanding in trust upon an apprehension which is objectively shown to be false after understanding is concluded. However, the error by the parties must be “fundamental” to their several determinations to come in into the contract [ 2 ] . This may affecterror as to capable affairas inStrickland V Turner[ 3 ] in which a contract for an rente was held to be null because, unbeknown to the parties, the individual to whose life the rente related was already dead at the formation of the contract. Similarly,error as to ownershipof the capable affair as inCooper V Phibbs[ 4 ] resulted in a contract being held to be rescindable. In the taking instance on the 3rd class of common error – that oferror as to quality( which must be sufficiently cardinal ) –Bell v Lever Bros[ 5 ] Lord Atkin held that the contract should be regarded as nothingness and non simply rescindable.

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The mutualness required to set up error does non be in actionable deceit. This occurs where a party makes to the claimant an unambiguous statement of fact ( as opposed to sentiment or future purpose ) which induces the claimant to come in into the contract. The representation must be material [ 6 ] , known to the representee [ 7 ] , be intended to be acted upon [ 8 ] and really acted upon [ 9 ] . It is of import to separate betweenfraudulentdeceit in which a statement or a failure to unwrap information is calculated and dishonest andnegligentdeceit [ 10 ] . This differentiation has been historically of import since it was once the instance that the redresss of recission and amendss were merely both available in instances of fraud. Section 2 ( 1 ) of the Misrepresentation Act 1967 imposes a load upon the misrepresentor in confuting carelessness which requires him to show that the facts represented were true “up to the clip the contract was made” . Therefore, there is a cardinal difference between the philosophies of deceit and common jurisprudence error in that while both require trust upon false information, in the instance of error, the contract may go nothingness as a consequence of the entirely guiltless misinterpretation of both parties, deceit requires a determination of mistake on the portion of one party either in the signifier of straight-out fraud or, at the really least, in the signifier of a foolhardy or negligent attack in stand foring the facts upon which the other party relies with the misrepresentor being penalised by recission and in amendss.

2 ) How does the statutory government of the Unfair Contract Footings Act 1977 differ from the Unfair Footings in Consumer Contracts Regulations 1999?

Both the Act and the Regulations modulate freedom clauses and unjust footings in contracts. An freedom clause is one which seeks to except a parties liability in the event of a breach of contract or bound the effects of such a breach. The Act applies to liability for Acts of the Apostless done “in the class of a business” . Business is loosely defined and relates non merely to ordinary recognizable commercial activity but applies besides to the activities of local governments, authorities sections and the professions. The principle behind the Act appears to be to except occasional consumer contracts although these may be said to fall within “the class of a business” if performed with sufficient regularity. By contrast, the Regulations ( which give consequence to EC Directive 93/13 ) apply to “unfair footings in contracts concluded between a marketer or provider and a consumer” . The former is defined by reg.3 ( 1 ) as “any natural or legal individual who…is moving for intents associating to his trade, concern or profession” whereas a consumer every bit defined as a “natural person” moving outside such intents. Therefore, the Regulations are provably narrower than the Act since they apply merely to consumer contracts and can non use to contracts made between two companies. “Consumer” is defined more liberally in the Regulations than in the Act. InR & A ; B Customs Brokers Co Ltd V United Dominions Trust Ltd[ 11 ] , it was established that the mere fact that a party was a concern did non needfully intend that every contract entered into was “in the class of a business” . The Court of Appeal held that a dealing is merely made in the class of a concern if it is built-in by nature to the map of that concern or, if merely incidental to such a map, sufficiently regular that it should be regarded as built-in.

The Regulations are narrower than the Act in that they apply merely to footings which are “not separately negotiated” . By contrast, they may be said to be wider in that they apply to unjust footings in general. However, it should be noted that the Regulations expressly exclude those footings which define the chief subject-matter of the contract ( “core terms” ) . In the first instance on the predecessor Regulations to those of 1999,Director General of Fair Trading V First National Bank plc[ 12 ] , it was argued that a term in a consumer loan understanding which provided for involvement to be paid after any judgement on the debt was an incidental term covering with the effects of default and did non travel to the bosom of the understanding viz. the bank’s ability to gain wage in consideration of doing the loan. Consequently, it was held non to be a “core” term within the scope of the Regulations.

3 ) Why don’t the UK tribunals recognize a philosophy of “Inequality of Bargaining Power” ?

Despite the best attempts of Lord Denning, the UK tribunals have shied away from encompassing an American-style rule of “inadequate bargaining power” . This is partially because of the obviously unfair effects of the application of such a philosophy. For illustration, in the USA determination ofJones v Star Credit Corp[ 13 ] it was held that a consumer could maintain goods after paying lone portion of the monetary value on the footing that the seller’s net income was regarded as inordinate. English jurisprudence choruss from protecting parties who aresui jurisand covering at weaponries length from the effects of a bad deal. Partly it is a acknowledgment of the statutory protection that is in topographic point by virtuousness of statute law such as the Unfair Contract Footings Act 1977 and the Consumer Credit Act 1974. InLloyds Bank Ltd V Bundy[ 14 ] , Lord Denning attempted to propound a UK version of the philosophy:

“…English jurisprudence gives alleviation to one who, without independent advice, enters into a contract upon footings which are really unfair…when his bargaining power is grievously impaired…coupled with undue influence or force per unit areas brought to bear upon him by or for the benefit of the other.”

However, the other members of the Court of Appeal eschewed such an attack and relied entirely upon the just philosophy of undue influence. InPao On V Lau Yiu Long[ 15 ] , the Privy Council held that a contract was non rescindable for duress and went on to reject the statement that it was invalid because it had been procured by “an unjust usage of a dominant bargaining position” . Lord Scarman declined the invitation to handle such a rule as available and distinguishable from the alleviation already available under the rules associating to duress saying that this would be “unhelpful because it would render the jurisprudence uncertain.”

Similarly, inNational Westminster Bank plc Vs Morgan[ 16 ] Lord Scarman questioned “whether there is any demand in the modern jurisprudence to raise a general rule of alleviation against inequality of dickering power” . He pointed out that statute law such as that described above already dealt with certain specific state of affairss. In add-on to this statutory protection, contracts have been held rescindable on the land of duress in state of affairss in which a party has sought to work the exposure of a party to the commercial effects of a breach of contract to extort a decreased contract monetary value (D & A ; C Builders v Rees[ 17 ] ) or payment of an extra amount (B & A ; S Contracts and Designs Ltd V Victor Green Publications Ltd[ 18 ] ) . Thus it might be concluded that the ground why the United kingdom tribunals do non recognize a general common jurisprudence philosophy of inequality of dickering power is non due to a deficiency of understanding for the predicament of a commercially inferior party but instead because the bing battery of just alleviations and statutory redresss adequately embracings such state of affairss without the demand for the development of farther controls.


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Beatson, J. ,Anson’s Law of Contract, ( 28ThursdayEd. , 2002 )

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