14. Misrepresentation

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. False statements of fact that induce a contract are known as actionable misrepresentations. In case of a misrepresentation, there are different legal remedies for breaches of contract. A misrepresentation renders the contract voidable (liable to be set aside using the remedy of rescission) so that the contract will be treated as if it had never been made, whereas a breach of contract will have no effect on the existence of the contract (in the absence of a repudiatory breach that will terminate the contract when future contractual obligations will be discharged). The chapter identifies actionable misrepresentations and, in particular, loss in instances where there is a duty of disclosure in English law. There are three types of actionable misrepresentations, dependent upon the state of mind of the one who makes the false statement: fraudulent, negligent, and innocent. This chapter looks at the legal remedies for actionable misrepresentations such as rescission, the availability of damages for different types of misrepresentations and the provisions of the Misrepresentation Act 1967. It also examines the effect of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) as amended on this area of law, the criminal offences and civil remedies for consumers, as well as the relationship of misrepresentation to other areas of law. Finally, it looks at clauses that seek to exclude or limit liability for misrepresentation or to deny any actionable misrepresentation, e.g. ‘non-reliance clauses’.

8. Breach of contract

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. There are four ways to discharge a contract: by performance, agreement, frustration, or breach. The standard of performance required in relation to each contractual obligation needs to be identified because a failure to perform to the required standard constitutes a breach. In the absence of lawful excuse, a breach of contract arises if a party either fails or refuses to perform a contractual obligation imposed on that party by the terms of the contract or performs a contractual obligation in a defective manner. While every breach of contract will give rise to a right to claim damages, the contract will remain in force unless the breach constitutes a repudiatory breach. The chapter examines the types of repudiatory breaches and the election to terminate or affirm, together with an assessment of the law governing the identification of a repudiatory breach and the consequences of terminating when the breach is not in fact repudiatory. It also examines the options available to the non-breaching party when an anticipatory breach occurs.

4. Enforceability of promises: consideration and promissory estoppel

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. Under English law, bargains and not gratuitous promises are enforced, thus a promise will not be enforceable if it is not contained in a deed (implying that any promise is taken seriously) or supported by consideration. Consideration refers to an act or a promise given in exchange for the promise (that is, the price for which the other’s promise was bought). The law does not recognize some acts or promises as good consideration, such as past consideration and performance of an existing legal duty. This chapter examines the general requirement in English law to provide consideration in order to enforce a contractual promise. The consideration requirement is relevant not only to the formation of a contract but also to the enforceability of promises altering the terms of an existing contract (alterations). An alteration promise that is not supported by consideration may still have some binding effect on the basis of the doctrine of promissory estoppel.

3. Agreement problems

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. This chapter examines principles that determine when an agreement can be enforced with sufficient certainty and whether liability will arise in the absence of agreement. An apparent contract will be void if the terms are considered too uncertain or where there is no context for gap filling. But this must be balanced with the need to prevent the parties from using allegations of uncertainty to escape from bad bargains. This chapter therefore considers how the courts deal with the difficult question over agreements to agree. This chapter also considers mistakes that prevent agreement (mutual or cross-purposes mistakes and unilateral mistake as to terms, particularly identity mistakes). It also examines the availability of the remedy of rectification when the contract that does not accurately reflect what the parties agreed. The chapter also considers the defence of non est factum (this is not my deed).

13. Non-agreement mistake

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. This chapter focuses on the legal treatment of mistakes that are presumed to nullify consent if both parties entered into the contract under the same fundamental mistake, assuming the absence of a provision of the contract allocating the risk of this initial impossibility. The doctrine of common mistake in English law is designed to protect the interests of third parties and to ensure certainty in transactions. A fundamental common mistake arises in cases where there is true impossibility or failure of consideration. Under these circumstances, the contract is automatically void and any money or property involved has to be returned. Fine distinctions can arise in terms of the legal treatment of impossibility depending upon whether the impossibility is initial (common mistake) or subsequent (frustration doctrine). Categories of common mistake at common law include mistake as to subject matter (res extincta) and mistake as to ownership (res sua). A mistake as to quality will very rarely be sufficiently fundamental to render the contract void since impossibility of the contractual adventure is required. This chapter also discusses Lord Denning’s attempts to introduce an equitable jurisdiction to set aside on terms in cases of mistakes as to quality which were rejected in Great Peace Shipping Ltd v Tsavliris (International) Ltd and the fact that this means there is no remedial flexibility in such instances.

16. Illegality

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. This chapter examines contracts that are tainted by illegality or otherwise contrary to public policy, and how illegality affects the parties’ positions following the hugely influential Supreme Court decision of Patel v Mirza. A contract may be illegal from the beginning or illegality may arise as a result of statute (for example, express statutory prohibitions). Examples of illegal contracts are those intended to commit crimes or contracts prejudicial to sexual morality. As a general principle, illegal contracts cannot be enforced and benefits conferred in the performance of an illegal contract cannot be recovered. There are some exceptions, however, such as where the parties are not in pari delicto (not equally guilty), or where the claimant can establish his right to the money or property transferred without having to rely upon the illegal contract. This chapter also examine the law’s treatment of contracts in restraint of trade, including exclusive dealing and exclusive service agreements.

11. Privity of contract and third party rights

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. According to the doctrine of privity of contract, only the parties to the contract are bound by, or can enforce the obligations under the contract. A person who is not a party to a contract does not have any rights under that contract and is not subject to any of its obligations (or burdens). This chapter considers the rules of contract law, and related rules, that are applicable to contracts which stipulate third party rights. It considers the relevant provisions of the Contracts (Rights of Third Parties) Act 1999, the scope of the legislative reform, the test for third party enforceability and how the doctrine of privity of contract is related to the consideration requirement. It also looks at means of circumventing the privity doctrine such as assignment, and exceptions to the privity doctrine such as agency principles as employed in The Eurymedon. The chapter then examines remedies available to the promisee which have the effect of enforcing any promise in favour of a third party beneficiary or enabling substantial damages to be recovered to cover the third party’s loss. Finally, the means by which contractual burdens may bind third parties are examined.

10. Remedies providing for specific relief and restitutionary remedies

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. Equitable remedies that provide for specific relief refer to remedies for breach of contract which compel actual performance rather than simply compensating for loss caused by breach. Compulsion of performance may take the form of claiming an agreed sum, a claim seeking specific performance, or a claim seeking an injunction. The claim or action for an agreed sum gives effect to the claimant’s performance interest by ordering the party in breach to pay the liquidated sum (debt), his agreed performance under the contract. The chapter examines the remedy of specific performance as a court order that compels actual performance of agreed obligations (other than payment of the price). As an equitable remedy it is available at the discretion of the court but only when damages would be an inadequate remedy. This chapter also examines remedies providing for specific relief and restitutionary remedies, the latter of which refer to recovery based on failure of consideration and quantum meruit. Finally, the chapter examines the availability of specific compensatory remedies in instances where there is no financial loss, namely the exceptional remedy of an account of profit or the remedy of ‘negotiating damages’ - and their relationship.

7. Exemption clauses and unfair contract terms

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. A clause which seeks either to exclude a party’s liability for breach or to limit that liability to a specified amount is known as an exemption clause. It is also possible for exemption clauses to seek to exclude or limit the remedies which would otherwise be available for breach or seek to deny that any breach of contract or breach of a duty of care has occurred. Although such clauses can allocate risks between the parties and prevent duplicate insurance cover, both the courts and the Parliament in the UK have sought to control their use. An exemption clause is enforceable if the clause in question is incorporated as a term, covers the loss that has occurred in the circumstances in which it arose, and is not rendered unenforceable by either the Unfair Contract Terms Act 1977 (B2B contracts) or Part 2 of the Consumer Rights Act 2015 (B2C contracts). This chapter examines the construction of exemption clauses as well as the legislative regulation of exemption clauses and, in the consumer context, unfair terms.

12. Discharge by frustration: subsequent impossibility

Course-focused and comprehensive, the Textbook on series provides an accessible overview of the key areas on the law curriculum. In general terms non-performance constitutes a breach of contract. The contract may have expressly allocated the risk of certain external events which occur after the contract is made to one of the parties by means of a force majeure clause. The terms of this clause will determine the parties’ positions if the event in question occurs. In the absence of an express allocation of the risk, the frustration doctrine is a residual doctrine that governs when such frustrating events intervene, without the fault of either party. These frustrating events relate to impossibility, illegality or frustration of the common purpose of both parties. This chapter examines the legal basis of the frustration doctrine, when it applies, when it does not apply and the legal consequences of frustration on the parties’ positions. Frustration automatically terminates the contract for the future and, where it applies, the provisions of the Law Reform (Frustrated Contracts) Act 1943 govern the parties’ pre-existing legal position.