Professional Documents
Culture Documents
MBA 27
Display of goods
A display of goods in a shop window, or on the shelves of a self-service shop, is generally regarded as an invitation to treat rather than as an offer to sell.
This analysis of the transaction leaves both parties free to change their minds. The shopkeeper can refuse to sell to a customer whom he does not like (for example, one who is under age or drunk), and the customer having taken goods from a supermarket shelf can return them if he changes his mind before going to the till.
An advertisement is usually an invitation to treat but can be an offer, depending on its wording and on the circumstances.
Auction Sales
At an auction sale, s.57(2) of the Sale of Goods Act 1979 confirms the common law rule that a prospective buyer makes an offer by bidding, which the auctioneer accepts when he drops his hammer. Thus a buyer may withdraw his bid until the hammer falls, or an item may be withdrawn from the sale even after bidding has begun. The special rules for auctions, however, mean that the lot cannot legally be sold at the auction to anyone other than the highest bidder.
Internet Shopping
The growth of internet shopping has led to further developments in this area of law. Where a company advertises goods or services on its web site this is normally (depending on the wording used) an invitation to treat, and the customer makes an offer by sending in an order. So far, so good. If the company sets up an automatic e-mail reply system, this (again depending on its wording) may amount to an acceptance of the offer, and this may have unfortunate consequences for the company if there is any error (e.g. 100 as a misprint for 1000) in the published details.
Invitation to Tender
Public authorities are required by law to invite tenders for many services, and some other bodies do so even when not so required. The offer in such cases is clearly made by the tender or and accepted by the authority, but the situation is more complex than it might seem.
WITHDRAWL
WITHDRAWL As a general rule, an offer can be withdrawn at any time before it has been accepted; any purported acceptance after withdrawal is ineffective
Withdrawal
Withdrawal must normally be communicated to the offeree, and does not take effect until such communication is received: the special rule for postal acceptances (below) does not apply to withdrawals.
Acceptance by Conduct
Where an offer is to be accepted by conduct, then it is not clear what rules govern its withdrawal. This is particularly important to rewards and "challenges" (e.g. 10 000 to the first person to swim the Atlantic): although such offers can certainly be withdrawn - that is only reasonable - it is unfair if the offeror can withdraw his offer moments before the other party "accepts" by completing the task.
ACCEPTANCE
ACCEPTANCE
No contract comes into existence until an offer is accepted and, in most cases, that acceptance is communicated to the offeror.
Silence
Although the offeror cannot stipulate that the offeree's silence is to be taken as a sign of his acceptance of the offer, he can generally specify the method by which acceptance is to be communicated.
Acceptance by conduct can raise questions as to the acceptor's motives, since a person cannot be said to have accepted an offer of which he was not aware.
R v Clarke (1927)
R v Clarke (1927) 40 CLR 227, High Court (Australia) The Government of Western Australia offered a reward (and a pardon, where appropriate) to anyone giving information leading to the arrest and conviction of certain murderers. C, an accomplice, saw the advertisement and subsequently gave evidence leading to the conviction of the others. He admitted that his only motive was to clear himself of a charge of murder and that he had no thought of claiming the reward at the time. The High Court reversed a decision of the Full Court of Western Australia allowing his subsequent claim against the Crown, distinguishing Williams v Cawardine on the basis that Mrs Williams had at least had the offer in mind, even if it was not her primary motive. There cannot be assent without knowledge of an offer, said Higgins J, and ignorance is the same thing whether it comes from never having heard of the offer or having forgotten about it. Isaacs ACJ said there were many instances in which an act done with reference to an offer would be acceptance of the offer by performance, but the same act done with reference to a different object would not. An offer of 100 to the first person to swim 100 yards in the harbour on New Year's Day would not be satisfied by a person who fell overboard and swam the distance merely to save his life.
COUNTER OFFERS
A counter-offer is not an acceptance, and actually kills the original offer. The majority of the court in Tinn v Hoffman above thought this would be true even where the counter-offer contains exactly the same terms as the original offer, though a minority dictum of Honeyman J suggests the contrary.
Acceptance is normally effective and the contract complete when it is received by the offeror, but special rules have been devised to cover acceptance by post. Because of the time a letter spends in the postal system, there must inevitably be a period of uncertainty for one party or the other, and since the offeror can always protect himself by stipulating a different mode of acceptance the rule of default is one that protects the acceptor.
Postal Rule
This "postal rule" applies only to acceptances, not to withdrawals or other communications, but applies even if the letter is lost or delayed in the post unless the loss or delay is caused by the acceptor's error. It is a special principle limited to letters sent by ordinary post, however, and is restricted to situations in which the parties would reasonably have expected acceptance to be signified in that way.
Electronic Communication
The growth of electronic communication has raised new (and as yet unanswered) questions about the applicability of the postal rule to communications by e-mail and via the world-wide web. On the one hand, there are those who argue that e-mail is virtually simultaneous and that the postal rule should not apply, but this takes no account of the fact that e-mail messages are sometimes rejected by the server and that the recipient may not read the message immediately it arrives. The majority of academic commentators have therefore tended to the view that email should be treated as a form of mail to which the postal rule should normally apply (subject to its exclusion by the parties' clear intention).
CONSIDERATION
CONSIDERATION
CONSIDERATION A contract not made under seal must be supported by valuable consideration. In Currie v Misa (1875) LR 10 Exch 153 Lush J defined this as "some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other". Consideration must be of some value, but the courts have consistently refused to look at its adequacy.
Past Consideration
Consideration must be clearly associated with the promise, and past consideration is generally unacceptable.
Re McArdle [1951]
Re McArdle [1951] 1 All ER 905, CA The occupants of a house carried out various repairs and improvements, and after the work was completed the beneficial owners of the house promised to pay for this work. When they did not do so the occupants sued, but without success: the consideration for that promise was past and there was no contract.
Promissory Estoppel
The equitable principle of promissory estoppel provides a limited exception to the rule requiring consideration to be given in exchange for an undertaking not to enforce a debt.
PRIVITY
PRIVITY It is a fundamental principle of English law that no one can derive rights or obligations from a contract to which he has given no consideration and is hence not a party. This doctrine, known as privity of contract, is still substantially valid but has been modified in various ways.
It is not always obvious, of course, who should be regarded as the parties to a contract particularly where the contract itself is implied from conduct. If several people go to a restaurant and each orders a meal, then it is arguable that each of them individually has made a contract and undertaken to pay for the meal, even though at the end the bill is settled by just one of the party.
Collateral Contract
Alternatively, an action may be based on a collateral contract, which may be implied rather than explicit
Chose in Action
A party to a contract may assign to a third party his right to enforce the contract and so obtain the benefits there under: the right thereby transferred is known as a "chose in action". Assignment takes place automatically when a person dies - the contracts to which he is party can (with a few exceptions) be enforced by or against his personal representatives - or when he becomes bankrupt and most of his contractual rights devolve upon his trustee in bankruptcy
Several cases have turned on the question of the validity or otherwise of a third party exclusion clause
FORM
FORM Although there are some exceptions (e.g. contracts relating to interests in land, of beneficial interests under a trust) the terms of a contract may be written, or oral, or a mixture. A written contract was traditionally regarded as complete in itself, but the modern tendency is to admit evidence of other oral terms where this is appropriate.
14(1) Where the time for the service to be carried out is not fixed by the contract, there is an implied term that the supplier will carry out the service within a reasonable time. 15(1) Where the consideration for the service is not determined by the contract or by the course of dealing there is an implied term that the party will pay a reasonable charge.
Contra proferentem
Contra proferentem Any ambiguity or uncertainty in the interpretation of an exclusion clause, however contrived the ambiguity might be, is normally construed contra proferentem - against the party seeking to rely on it.
Fundamental breach
Fundamental breach No exclusion clause can protect a party who is "in fundamental breach" of the contract. In consumer contracts this common-law rule has been strengthened by s.3(2) of the Unfair Contract Terms Act 1977 (below), but in purely commercial contracts the courts are inclined to take a broader view if they are satisfied that the clause represents the parties' true intentions.
Photo Production v Securicor [1980] 1 All ER 556, HL DD were engaged to provide security guards at PP's factory, with a provision that DD should not under any circumstances be responsible for any unforeseen act of an employee. A security guard M on night duty started a small fire, which got out of control and destroyed the factory. There was no evidence that DD had been negligent in employing M, and they relied on the exclusion clause. The House of Lords said they were entitled to do so; where the parties are of approximately equal bargaining power, said Lord Wilberforce, and when risks are normally borne by insurance, there is everything to be said for leaving the parties free to apportion the risks as they think fit and respecting their decisions.
STATUTORY RESTRICTIONS
STATUTORY RESTRICTIONS Various statutory provisions invalidate or limit purported exclusion clauses. The most important parts of the Unfair Contract Terms Act 1977 (which in spite of its name applies to tort as well as contract), apply only to business liability. This includes government departments and other public authorities, but international contracts, marine contracts, contracts for insurance, land, patents and copyrights, or for the formation of companies, is largely excluded. It deals with both exclusion and limitation clauses, including those which impose restrictive conditions such as clauses which deny liability unless notice of any complaint is given within a specified time. Much of the Act is concerned with the protection of consumers, and a consumer is defined in s.12 as amended as a legal person who does not make the contract in the course of business, nor purport to do so, while the other party does. In the case of an individual that is enough; where the buyer is a corporate body the goods must be of a type normally supplied for private consumption. The definition excludes a person (even an individual) buying second-hand goods at public auction, as well as a person who obtains goods (even for private use) by using a cash-and-carry card at a wholesale warehouse.
EUROPEAN LAW
EUROPEAN LAW The Directive on Unfair Terms in Consumer Contracts (Directive 93/13) came into effect on 1 January 1995, and the relevant UK regulations took effect six months later. However, it subsequently appeared that the original regulations had not properly implemented the Directive, and revised regulations (the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083) were made to replace them.
VITIATING FACTORS
VITIATING FACTORS IN CONTRACT Even when a contract has apparently been properly made, and its terms are clear, it may for various reasons be void or voidable or unenforceable. On this page we consider the reasons why such a thing might happen, and the consequences of any such occurrence.
Any contract prejudicial to the status of marriage, such as an agreement never to marry, is traditionally regarded as "simply void" at common law. A contract that purports to oust the jurisdiction of the courts is also generally regarded as void, although "arbitration-first" clauses have been upheld and "honour-only" agreements are treated as unenforceable.
RESTRAINT OF TRADE
RESTRAINT OF TRADE A contract is "in restraint of trade" if one party restricts his future liberty to carry on his trade, business or profession in such manner or with such persons as he may choose, and such a contract may be void under some circumstances. The most common examples of such contracts occur where a skilled employee undertakes not to set up his own business in competition with his former employers, and where the seller of a business undertakes not to compete with the buyer.
In determining whether a restraint is reasonable, the courts take into account the nature of the restriction, the interest to be protected, the extent of time and distance, and any special inducement given to the employee to accept the restriction.
A wider test of reasonableness is applied when A sells a business to B as a going concern and undertakes not to set up nor work in any directly competing business. The restraint must still be no more than is needed to protect B's legitimate business interests, however, and the factors listed above are again relevant. Moreover, the sale must be genuine: if the purported "business" in fact has no substantial goodwill then B has no legitimate interest to protect and the restraint is void.
In contrast to restraints imposed in employment contracts, restraints voluntarily accepted by members of trade associations will normally be upheld unless manifestly unreasonable, though the Restrictive Trade Practices Act 1976 requires all such agreements to be registered with the Director General of Fair Trading. They are initially presumed to be void, but become legitimate if they pass through one of eight public interest "gateways" specified in the Act and cause no undue detriment to third parties.
Tied-house and "solus" agreements, in which (for example) a garage agrees to sell only one brand of petrol, are a common feature of modern business. They are generally regarded as legitimate in principle, but their validity depends on circumstances
CONSEQUENCES OF ILLEGALITY
Where a contract is illegal from the beginning, because it requires one party to do an illegal act, or where both parties intend that it shall be performed in an illegal way or for an illegal purpose, then it is wholly illegal and void. Neither party can generally assert any right or remedy under such a contract - money paid cannot be recovered, for example, and the court will veto any attempt at enforcement even though the defendant may be just as guilty as the plaintiff.
CONSEQUENCES OF ILLEGALITY
Where a contract is prima facie lawful, however, and one party (unknown to the other) executes it for an illegal purpose or in an illegal way, the remedies of the innocent party are preserved. The guilty party loses any legal rights and remedies he might have sought under the contract, but the innocent party is protected in respect of anything he does before learning of the illegality. Even a guilty party may not always be wholly without remedies.
Even where a contract is illegal, recovery of money or goods transferred may be possible in any of four situations. First, where a party to an illegal executory contract repents before performance, he may recover what he has paid as long as he acts to repudiate the contract in good time. Second, where the illegality is only minor and can be severed from the rest of the contract as above, the party in whose favour the illegal clause would have operated may be allowed to enforce the rest of the contract. Third, where the two parties are not in pari delicto (e.g. because one was subject to duress, or because the illegality derives from a statute designed to protect him rather than the other) the less blameworthy may be allowed to recover anything he has transferred to the other. Finally, where a case can be made out for recovery without reference to the contract (e.g. through an action in tort), it will be considered on its merits.
UNENFORCEABLE CONTRACTS
There are certain types of contract - principally third party guarantees, consumer credit agreements and contracts for the sale of land - which, even though they are quite valid and theoretically binding, will not be enforced by the courts unless in the proper form. All contracts for the sale of land (or interests in land) must be made in writing and signed by both parties, and following the Statute of Frauds 1677 as amended, a special promise to answer for the debt or default of another person - a "guarantee" in modern terms - must be supported by evidence in writing. A promise not thus supported is unenforceable rather than void, however, and even though it is itself unenforceable its validity may be important in some other case. Moreover, the contract itself need not normally be set down in writing as long as there is a written note or memorandum incorporating the essential details.
UNENFORCEABLE CONTRACTS
The Consumer Credit Act 1974 makes hire purchase and credit sale agreements generally unenforceable unless they are "properly executed", the consumer having signed and having received a copy together with notice of his rights to cancel. Once again the agreement not in due form is unenforceable rather than void - it can be enforced by a court order, but such is unlikely to be given unless the formal defect is trivial - but this time the agreement itself must be in writing and a mere memorandum is insufficient
UNENFORCEABLE CONTRACTS
All credit agreements must be in writing using approved forms; if not, the agreement is unenforceable. Where the agreement is signed outside trade premises (e.g. at the consumer's home), the consumer has a five-day "cooling-off period" within which he may change his mind and cancel the agreement. If the terms of a credit agreement are "grossly extortionate", the court has a discretionary power to amend the terms to what it considers fair.
UNENFORCEABLE CONTRACTS
If the consumer does not keep up the repayments, the lender must warn him and allow him seven days to make good the default before taking steps to repossess the goods; where one-third or more of the total amount has already been paid, the lender cannot repossess without a court order. If the consumer voluntarily returns the goods, he need not pay more than half the agreed total price.
CONTRACTS BY MINORS
A minor in law is a young person under the age of 18, but earlier case law dating from the time when legal infancy ended at 21 is still relevant. A contract made by a minor may be valid and enforceable, if it is for the supply of "necessary" goods or services or is a "beneficial contract of service", or may alternatively be voidable at the minor's option in any other case. The Infants' Relief Act 1874 made certain classes of contract "absolutely void", but this was repealed by the Minors' Contracts Act 1987 and such contracts are now merely voidable.
CONTRACTS BY MINORS
A contract made by a minor for the supply of necessary goods or services is binding on both parties, but under the Sale of Goods Act 1893 the minor need pay only a reasonable price and not necessarily the contracted price. "Necessary" is taken broadly; the Sale of Goods Act 1979 refers to "things which are suitable to the station in life of the infant and to his actual needs at the time of sale and delivery".
"necessary"
The decision as to whether particular goods are "necessary" is a mixture of law and fact, and depends on the particular circumstances. Even a contract for necessaries is void, however, if it contains terms which are unduly harsh and onerous to the minor.
contract of apprenticeship
A minor may bind himself by a contract of apprenticeship or service which is for his benefit on the whole, even though some terms of the contract may be to his disadvantage.
All other contracts entered into by a minor are valid initially (and can be enforced by either party), but may be repudiated by the minor (not by the other party) at any time during minority or "within a reasonable time" after attaining the age of 18. However, the minor may be ordered (if the court thinks it just and equitable) to restore any property acquired under the contract, or property representing it, and cannot recover any money he has paid over unless there has been a total failure of consideration by the other party.
MISREPRESENTATION
Statutes such as the Trade Descriptions Act 1968 and the Property Misdescriptions Act 1991 create offences relating to certain types of misrepresentation in the course of business, but our concern here is with the civil rather than the criminal consequences. A misrepresentation is a untrue statement of fact which induces a party to enter a contract, but which is not itself part of the contract. There must therefore be a statement of some kind, although a representation need not always be verbal: payment by cheque implies a representation that the bank will honour the cheque. Mere silence cannot constitute misrepresentation even when it is obvious that the other party is mistaken as to the facts, subject to three qualifications
MISREPRESENTATION
First, where the contract requires uberrima fides (utmost good faith) the party is bound to disclose all material facts. The best-known uberrima fides contracts are those of insurance, where the insured party is required to disclose all material facts whether or not he is asked about them. A company is in a similar position in respect of the sale of shares, and in potential "undue influence" cases (see below) similar good faith is required of the party supposed to be in the stronger position. Second, if a party makes any representation on a particular matter, it must be full and frank, and silence may not be used to distort a positive representation.
A representation must be a statement of fact and not of opinion. Where a statement of opinion is made by a supposed expert, however, or by a person supposed to have special knowledge of the facts, the courts have tended to bend the rule, saying that a statement made in such circumstances carries an implication of fact that there are reasonable grounds for holding that opinion.
MISREPRESENTATION
Third, there must have been reliance by the representee: misrepresentation does not affect the validity of a contract unless it induced the other party to enter the contract. A misrepresentation is quite irrelevant if the supposed representee did not know of it, did not believe it, or for any other reason was not influenced by it. The question of reliance is particularly important where the party to whom the statement is made is in a position to check its truth for himself
Under s.3 of the Misrepresentation Act 1967 as amended, a contract term purporting to exclude or limit liability for misrepresentation is void except insofar as it satisfies the reasonableness test in the Unfair Contract Terms Act 1977.
Types of misrepresentation
Types of misrepresentation Fraudulent misrepresentation occurs when a party makes a false statement without honestly believing it to be true: it may be a deliberate lie, or it may be a statement made recklessly. In such a case the innocent party may affirm the contract and claim damages for consequential loss, suing for the tort of deceit; or repudiate the contract and claim damages and/or rescission.
Negligent misrepresentation
Negligent misrepresentation may occur when a false statement is made by a person having a duty of care. It was thought at one time that the last phrase was redundant, and that everyone owed everyone else such a duty, but it is now clear that some proximity or relationship is needed. Such proximity is clearly present between the parties to a contract, so giving the aggrieved party two possible lines of action, but may exist in other cases too.
Innocent misrepresentation
Innocent misrepresentation occurs when neither of the other two applies and the misrepresentation was made without any fault
In general, a misrepresentation makes a contract voidable rather than void. On discovering the misrepresentation, no matter whether fraudulent, negligent or innocent, the other party may affirm or rescind the contract, explicitly or by his conduct, but this decision once made is irrevocable. A decision to rescind must be communicated to the other party within a reasonable time, and takes effect from that moment.
MISTAKE
Various mistakes may occur in the negotiations leading to the formation of a contract, and they are not all treated the same. We distinguish three kinds of mistake, though different writers use different names and different classifications. A common mistake, we shall say, occurs when both parties make the same mistake (eg as to the existence, ownership or nature of the subject-matter of the contract). A mutual mistake occurs when each party is mistaken as to the intentions of the other in respect of the contract, and a unilateral mistake occurs when just one party is mistaken as to the identity or intention of the other, or as to the nature of a document being signed.
Common Mistake
Two kinds of common mistake render the contract void. If the contract concerns res extincta - that is, subject matter which at the time of the contract no longer exists, or which never existed at all - the contract is void.
Res Sua
A contract involving a common mistake as to res sua, where the subject matter already belongs to the supposed buyer, is also void. The "seller" is giving no value for the consideration given by the "buyer".
In general, any other common mistake - as to the quality of goods sold, for example - will not invalidate a contract even if it relates to a matter of fundamental importance.
It was formerly thought that the courts' equitable discretion might be called into play to relieve the hardship of the common law in cases where a common mistake is not enough to invalidate the contract. Specific performance might be refused, for example, or rescission ordered on such terms as the court considers just. However, a recent decision of the Court of Appeal casts grave doubt on this.
Mutual mistake
Where each party is mistaken as to the intentions of the other, there is no consensus ad idem and hence no contract: a mutual mistake of this kind may be distinguished from a unilateral mistake (below) by the absence of any objective right answer.
Unilateral mistake
A unilateral mistake occurs when just one party is mistaken as to some aspect of the contract, and the other is or is presumed to be aware of this mistake. Such a mistake may be the result of misrepresentation or may be a mere error by the mistaken party. At common law, in the absence of any misrepresentation, a unilateral mistake does not generally invalidate a contract, but the courts have increasing used equity to set aside a contract where the other party took unfair advantage.
Mistaken identity
A special situation arises where one party makes a unilateral mistake as to the identity of the other because of a deliberate deception. Although remedies for misrepresentation may then be available, the law has imposed a fairly stringent test in order to protect an innocent third party to whom the goods in question may have been resold. A party seeking to avoid a contract on grounds of mistaken identity, even as a misrepresentation, must therefore show that he intended to contract with some particular person other than the one with whom he contracted in fact - a mere false name is not sufficient; that the other was aware of this intention, although in cases of deception this is usually fairly obvious; that at the time of the contract he regarded this matter of identity as being of crucial importance; and that he took reasonable steps to verify the other's identity.
Mistaken identity
It is in respect of the third requirement that avoidance most often fails. Where the contract is one involving some particular skill (eg ability as a painter) then it is fairly easy to show that it was considered important to contract with Picasso and no one else, but in most contracts for the sale of goods the seller will sell happily to anyone who is prepared to pay the price. Five cases show the difficulties the courts have encountered in this area.
As Lord Denning MR pointed out in Lewis v Averay, frauds of this sort almost always result in a conflict between two quite innocent parties, and there will always be hard cases. Sedley LJ (dissenting in Shogun v Hudson) said the law is still unclear: this is evidently true, and it is wrong that the courts should resort to very technical distinctions to decide essentially similar cases in different ways. The law should be clear one way or the other, and that cannot happen unless the doctrine of stare decisis is properly applied
The equitable counterpart of duress is undue influence, allowing the weaker party to avoid the contract as long as he does so without prior affirmation or undue delay. Undue influence is not precisely defined - like most equitable doctrines, it leaves a broad discretion to the court to do what is just and reasonable in the circumstances - but is best described as improper pressure short of duress.
Even given a manifestly disadvantageous contract, the weaker party must show that the other did in fact exert undue influence upon him. The burden of proof is generally on him, but he is powerfully assisted by a rebuttable presumption of undue influence in cases where a confidential relationship exists in which the other party is clearly dominant. Once given the manifest disadvantage, for example, it may be presumed subject to contrary evidence that a religious leader has exercised undue influence over his disciple (Allcard v Skinner (1887) LR 36 ChD 145, CA), a parent over his child (Powell v Powell [1900] 1 Ch 243), a solicitor over his client (Wright v Carter [1903] 1 Ch 27, CA), and perhaps also a husband over his wife (Barclays Bank v O'Brien [1993] 4 All ER 417, HL) or a banker over his customer (Lloyds Bank v Bundy [1974] 3 All ER 757, CA).
The rule therefore appears to be that a contract will be set aside for undue influence where actual undue influence can be proved, or where undue influence is rebuttably presumed because of a relationship such as solicitor/client or doctor/patient, or because of a demonstrable relationship of actual trust and confidence.
DISCHARGE OF A CONTRACT
A contract may provide or imply that performance is due from each party at a certain time. In the case of an executed contract, of course, one party has already performed his obligations and it only remains for the other to reciprocate, but with an executory contract there may be room for manoeuvre. In a contract of employment, for example, the employer's obligation to provide safe working conditions comes before the employee's duty to do the work, which in turn precedes the employer's duty to pay wages.
DISCHARGE OF A CONTRACT
Where a party fails to perform his obligations, he may offer one of a number of excuses which will prevent his being in breach of contract. He may claim, for example, that the contract has been discharged or varied by agreement between the parties, or that it has been frustrated, or has become impossible to perform in circumstances falling short of frustration (e.g. when an employee is temporarily too sick to attend work), or that there is an express contractual provision allowing non-performance, or that he has exercised his right to terminate the contract in view of the other party's prior or anticipated breach
PERFORMANCE
The old common-law rule is that one party to a contract is entitled to insist on the other's performing his obligations to the letter.
If the promisee prevents the promisor from completing performance, the situation changes and the promisor can generally sue for breach of contract if the court is ready to imply a term that he would not be so prevented. [Note the distinction between this and the "offer of reward" cases: here there is a completed contract, not an open offer that can be withdrawn prior to its full acceptance.]
Note, however, that s.29(5) of the Sale of Goods Act 1979 provides that tender of delivery, to be effective, must be made at "a reasonable hour", what is reasonable being a matter of fact.
Partial performance
It may be, of course, that a party performs part of his obligation but fails to complete it. Once again, the common-law rule in such cases is that he cannot claim any payment or performance from the other party.
FRUSTRATION
The old common law, as illustrated in Paradine v Jane (1647) 82 ER 897, had a doctrine of absolute contract under which contractual obligations were binding no matter what might occur. The fact that land was occupied by a foreign army during the English Civil War did not excuse the tenant from his obligation to pay rent for the land. The doctrine of frustration was developed as a way of easing the hardship this rule might cause in cases where the contract could not be properly fulfilled through no fault of either party. The original theory was that frustration discharged the contract through an implied term to that effect, but the modern view is that the parties' actual intentions are irrelevant and that it is up to the courts to impose a just and reasonable solution.
There is no frustration (and the contract remains in force) where supervening events do not render the contract impossible but merely cause extra expense or inconvenience.
BREACH OF CONTRACT
An innocent party has the right to terminate a contract if the other is in fundamental breach - that is, either a breach of a condition or a breach of an innominate term causing very serious consequences. The innocent party can choose to treat the contract as still in force (in which case its terms remain binding on both sides) and sue for damages, or can treat the contract as terminated from the moment he communicates that fact to the other. In the latter case, all future obligations are then annulled, but past obligations remain in force and past transactions are not reversed.
BREACH OF CONTRACT
In contracts for the sale or supply of goods, the buyer has the right to reject the goods and terminate the contract if the goods supplied are not up to standard. If he accepts the goods, however, the right to reject is lost and the buyer is limited to damages. Acceptance is deemed to take place when the buyer intimates to the seller that he has accepted the goods, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that he has rejected them. Deemed acceptance does not occur, however, unless the buyer has had a reasonable opportunity to examine the goods or (if the contract is for sale by sample) to compare the bulk with the sample
Acceptance is not deemed merely because the buyer has asked for or agreed to the repairing of the goods by or under an arrangement with the seller. Moreover, since 1995 the buyer can reject just part of a consignment and accept the rest: specifically, he can reject all the goods, or accept those which conform with the contract and reject the rest, or accept those which conform and some of those which do not, and reject the rest, or accept all the goods.
Most commentators have found it hard to explain these two contrasting decisions. One possibility is that in Woodar the other party relied on an express term of the contract while in Molena Alpha the claim was that there was nothing to prevent their action; another is that in Woodar (and not in Molena Alpha) there was time for the disputed legal question to be settled in court before the contract was due to be completed
The innocent party's decision to terminate for anticipatory breach must be clear, and must be communicated to the other party, though this communication may be by conduct.
Where a contract is terminated for fundamental breach or repudiation, neither side need perform any further obligations, but the contract remains effective as regards past transactions and, in particular, the party in default cannot generally recover any money he may have paid to the other.
Equity may intervene where prompt payment of instalments is made a condition of the contract: if most of the instalments are paid on time before one is late, it would often be inequitable for the seller to be allowed to keep all the earlier instalments and the goods as well.
DAMAGES
Where an innocent party has suffered financial loss following another's breach of contract, the court must decide whether the breach actually caused the loss, whether the party at fault is legally liable for it (which is not the same thing), and how much compensation is payable. Causation is largely a matter of fact, and the rules in contract are similar (but not identical) to those in tort.
Even with causation, a party in breach of contract is not always legally liable for the entire loss.
Hadley v Baxendale
Hadley v Baxendale (1854) 156 ER 145, Alderson B PP were a firm of millers who contracted with carriers DD to take a broken mill-shaft to a foundry for repair. The shaft was delayed in transit through DD's negligence and the mill lost five days' production. PP claimed damages for their lost profits. Alderson B said in the Court of Exchequer that the damages allowable were such as may fairly and reasonably be considered to arise naturally (i.e. in the ordinary course of things) from the breach of contract, or such as might reasonably be supposed to have been in the contemplation of both parties at the time of the contract as a probable result of the breach. In this case, the total stoppage of production was not a natural consequence of delay - the mill might well have had a spare shaft in stock - and the carriers had not been aware of the special circumstances, so that in this respect the claim failed.
If the kind of damage is within reasonable contemplation, however, then it is immaterial that the resulting damage is far more serious than was anticipated.
Once D's liability for P's losses has been established, the court must then consider an appropriate measure of damages. Three possible measures are applicable: expectation damages putting P in the position he would have been had the contract been completed, reliance damages restoring P to the position he would have been in had the contract never been made, or restitution damages compelling D to restore any benefits he may have received from P.
Contract law generally awards damages for P's loss of expectation. If P pays 100 for a painting worth 200, and D fails to deliver it, he is liable in damages for the value of the painting rather than for the amount paid; the same is true if the painting is found to be worth only 50. In cases such as this, the valuation normally applied is the open market price at the time of the breach, or a previously agreed resale price if there is no open market. But where an expected profit is incalculable, or in any case where it seems just and reasonable, the judge may award reliance damages instead. Restitution damages are not generally awarded in contract.
Hayes v Dodd
Hayes v Dodd [1990] 2 All ER 815, CA PP planned to buy new premises for a garage business, but satisfactory rear access was essential to the its success. The vendors VV said the right of way was secure, although in fact the owner of the adjoining land disputed the supposed right of way. PP made the purchase, and a few days later the owner quite lawfully blocked off the access road. PP sued their own solicitors for breaching an implied contractual term promising reasonable care and skill by not having made adequate enquiries, and won. The Court of Appeal said that had PP been properly advised they would not have gone ahead with the purchase at all, the damages were assessed on a reliance basis to restore PP to the position they would have been in had there been no transaction.
East v Maurer
East v Maurer [1991] 2 All ER 733, CA The owner of two hairdressing salons sold one of them on the fraudulent misrepresentation that the sale included all the goodwill of the business, but then lured many customers away to the other salon. The Court of Appeal said damages for loss of profit should be calculated not "as if the representation had been true", but rather "as if the contract had never been made" and the plaintiffs had opened a similar business elsewhere in the area.
Lloyd v Stanbury
Lloyd v Stanbury [1971] 2 All ER 267, Brightman J D agreed to sell P a piece of land including D's farmhouse; the contract said that P would build a bungalow to be occupied by D, and would provide a caravan for D's use until the bungalow was completed. P obtained a caravan and had it parked on the land; contracts were then exchanged, but D subsequently refused to complete. The judge said P could recover the expenses of having the caravan installed and removed (as well as the legal costs of preparing the contract &c), even though it had been obtained in anticipation of the contract.
Anglia TV v Reed
Anglia TV v Reed [1971] 3 All ER 690, CA A television company PP incurred various expenses in preparing a TV play, and contracted with Oliver Reed to play the leading role. D then repudiated the contract, and PP were unable to find a suitable substitute and so cancelled the play. The Court of Appeal said PP could recover all their prior wasted costs, because it must have been within D's contemplation that there would have been such costs and that repudiation might lead to abandonment. These were reliance damages; any calculation of expectation damages would of course have been highly speculative. Lord Denning MR made it clear, however, that an injured party cannot have both expectation and reliance damages - that would compensate him twice for the same loss.
Attorney-General v Blake
Attorney-General v Blake [1998] 1 All ER 833, CA George Blake, who escaped after being imprisoned as a Soviet spy and now lived in Moscow, wrote an autobiography (in breach of his contract of employment and in clear violation of the Official Secrets Act), describing inter alia his work as a member of the British intelligence services. The Court of Appeal granted an injunction restraining B from receiving or authorising anyone to receive on his behalf any profits resulting from the sale of the book, and ordered that formal notice of this be given to B's publishers. Lord Woolf MR said obiter that although in general damages for breach of contract are compensatory, the law is now sufficiently mature to recognise in exceptional cases a restitutionary claim for loss of profits where compensatory damage would be inadequate. The fact that D's breach of contract is deliberate and cynical, or has enabled him to make a more profitable contract with someone else, is not in itself a good reason for departing from the normal basis in which contract damages are awarded. But where there is "skimped performance", or where (as here) D has obtained his profit by doing the very thing he contracted not to do, his profit flows directly from the breach and restitutionary damages may be needed to defend P's legitimate interest in having the contract properly performed.
If P agrees to sell his car for 500 to a buyer who then refuses to go through with the deal, P's damages are usually limited to the difference between 500 and the market price of the car (if that is lower), since he is presumed to be able to sell to another buyer and has a duty to try to do so. If the market price is 500 or above, P has lost nothing except perhaps his out-of-pocket expenses and will be awarded very little. If P is a dealer who relies on trade for his living, the situation may be a little different.
Thompson v Robinson
Thompson v Robinson [1955] 1 All ER 154, Upjohn J D agreed to buy from a dealer P a certain model of Vanguard car, but then refused to go through with the deal. P claimed damages for his lost profit and succeeded: the supply of Vanguard cars at that time exceeded the demand, so D's repudiation represented a lost sale.
Charter v Sullivan
Charter v Sullivan [1957] 1 All ER 809, CA The facts were almost identical except that the car was a Hillman, the demand for which was well in excess of the supply. Since P would have had no difficulty in selling the car to another customer and had not in fact lost a sale, the Court of Appeal said he was entitled to nominal damages only.
Naughton v O'Callahan
Naughton v O'Callahan [1990] 3 All ER 191, Waller J PP bought a colt for 27300 and entered it in a number of races; it did poorly and its value fell to 1500. They found its pedigree had been misrepresented at the time of the sale, and the judge decided that had the colt been correctly described its value at that time would have been 24700. PP claimed rescission of the contract together with all expenses incurred in the care and training of the horse; DD offered only the difference between the actual and proper sale prices. The judge said the animal sold was "altogether different" from that contracted for, and awarded damages equal to the difference between the original price and the horse's present value.
In matters other than direct financial loss, a valuation must often be little more than a shot in the dark, though now contract claims are no longer tried by juries there is greater chance of consistency.
Chaplin v Hicks
Chaplin v Hicks [1911] 2 KB 786, CA A newspaper advertisement promised three-year acting engagements to twelve women, to be chosen by the promoters D from the fifty winners of regional competitions. P won her regional competition, but was not then given a reasonable chance to audition for a place in the last twelve. The jury estimated the value of P's loss at 100 and the Court of Appeal refused to interfere with this award. The right to be one of a limited group of competitors, they said, was something of value that had been taken away, and since its value could not be determined exactly the jury had arrived at a reasonable figure.
The general rule is that contract damages cannot be awarded for any mental distress associated with the breach of contract, and the exceptions to this rule are limited.
Addis v Gramophone Co
Addis v Gramophone Co [1909] AC 488, HL P was employed by DD as a manager on salary and commission, and was dismissed in circumstances making clear DD's lack of confidence in him. In the High Court he was awarded damages for his lost salary, together with 340 estimated to be the value of his lost commission and 600 for the humiliation and distress of his wrongful dismissal. The House of Lords allowed an appeal against the final element of this award: Lord Atkinson said damages in contract are meant to compensate, not to punish, and could not be given merely for mental distress in circumstances such as these.
Cook v Swinfen
Cook v Swinfen [1967] 1 All ER 299, CA A woman P was sued for divorce by her husband; her solicitor D negligently failed to enter a defence or cross-petition, or to ask for maintenance. P consequently suffered an anxiety neurosis and was unable to work. Upholding the judge's award of damages without a "nervous shock" element, Lord Denning MR said damages for reasonably foreseeable psychiatric illness could be recovered just as in tort for breach of a contractual duty to use due care, but on the facts of this case the damage was too remote.
Heywood v Wellers
Heywood v Wellers [1976] 1 All ER 300, CA A young woman P who was being persistently harassed by a man asked her solicitors DD to obtain an injunction against him. The solicitors were negligent in not obtaining and enforcing such an injunction, and P suffered further harassment. The trial judge said P's remedy against DD was limited to the return of her costs, but the Court of Appeal said she was also entitled to 150 for mental distress. The whole point of her contract was that she should be free of such distress, and it was right that she should be compensated for DD's failure to deliver.
Watts v Morrow
Watts v Morrow [1991] 4 All ER 937, CA P bought a house on the strength of a negligent survey, and subsequently had to undergo some inconvenience while defects were remedied. The Court of Appeal said he was not entitled to damages (claimed at 4000) for inconvenience as such, nor anything for mental distress other than that caused directly by the physical discomfort, but allowed 750 (in addition to other quantifiable damages) for the discomfort he had suffered.
Malik v BCCI
Malik v BCCI [1997] 3 All ER 1, HL A former employee P of a bank DD which had gone into liquidation in suspicious circumstances claimed damages for inter alia the stigma attached to his having worked there, which had made it hard for him to find other employment commensurate with his ability and experience. In preliminary proceedings the judge struck out this claim as disclosing no reasonable cause of action, but the House of Lords (reversing the Court of Appeal) distinguished Addis and restored it. Employers had an implied duty not to conduct their business in such a manner as to seriously damage the relationship of confidence and trust between employer and employee, said Lord Nicholls, and an employee who learns that his employer is fundamentally corrupt is entitled to treat that as a repudiation of his contract. Addis was decided before this implied term was recognised as such, and while it is still authority on injury to feelings and damage to reputation per se, it does not exclude damages for financial loss where these flow directly from the breach.
Dunnachie v Hull CC
Dunnachie v Hull CC [2004] 3 All ER 1011, HL The House of Lords, reversing the Court of Appeal and restoring the decision of the Employment Appeal Tribunal, held that in cases of unfair dismissal an Employment Tribunal has no jurisdiction to award damages for nonpecuniary losses such as hurt feelings. In Norton Tool Co v Tewson [1973] 1 All ER 183 the National Industrial Relations Court had applied the common-law rule in Addis to the new statutory framework, and this decision had been followed for the past thirty years. Lord Hoffmann's comments in Johnson v Unisys, where he doubted the correctness of this rule, were obiter and should not be followed.
Where D is in breach of contract, the law expects P to take reasonable steps to mitigate any loss resulting from the breach, and although this is not a positive duty he is unlikely to be awarded damages in respect of additional loss resulting from his failure to mitigate. In particular, if a seller fails to deliver goods as promised the purchaser should try to obtain similar goods at a reasonable price elsewhere, and if a purchaser refuses to accept delivery the vendor should try to sell it to someone else at the market price. This is the basis on which damages are normally calculated, as already discussed
Contributory negligence is not a defence in contract. In Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852, Hobhouse J suggested that D's liability might arise from a strict contractual provision, from a contractual duty of care not corresponding to any tortious duty of care, or from a duty of care which would exist in tort independently of the contract, and said there could be apportionment under the Law Reform (Contributory Negligence) Act 1945 only in the third of these situations
The Law Commission have proposed extending the rules of contributory negligence to all contractual duties to take reasonable care or exercise reasonable skill, with an option to exclude any such provision by an express term to that effect, subject to the usual limits on exclusion clauses.
A contract may provide for payments in the event of a breach, and such a provision is prima facie a valid and enforceable term of the contract. Insofar as such payments represent a genuine estimate at the date of the contract of the loss likely to be suffered by the innocent party, they are treated as liquidated damages and will be enforced irrespective of the actual loss suffered. Where they are clearly in excess of the actual loss, however, they are treated as a penalty and the court has an equitable jurisdiction to reduce them if it thinks it desirable.
EQUITABLE REMEDIES
EQUITABLE REMEDIES Specific performance Rectification Rescission
Specific performance
There are a limited number of cases in which a breach of contract cannot adequately be compensated by purely monetary damages. It is in such cases that the equitable decree of specific performance comes into play, whereby the offending party is ordered (on pain of imprisonment) to fulfil his part of the bargain
Beswick v Beswick
Beswick v Beswick [1967] 2 All ER 1197, HL The elderly owner of a small business agreed to transfer the business to his nephew, in return for which the nephew promised to pay an annuity to the man's widow after his death. The man died and the nephew refused to pay. The widow could not sue in her own right, because she was not privy to the contract, so she sued as the executrix of her husband's estate. Damages would not have been a satisfactory remedy, because the loss to the estate was negligible, so she was granted an order directing the nephew to perform his part of the contract.
Specific performance is discretionary, like all equitable remedies, and the exercise of discretion is governed by a principle of mutuality which operates in several ways. For example, since the buyer of land can claim specific performance, the courts have held it to be equitable to give the same relief to the seller, even though he could have been awarded damages instead. And again, a decree of specific performance will not be granted to a minor, since such a decree could not be enforced against him if the roles were reversed.
Flight v Bolland
Flight v Bolland (1828) 38 ER 817, Leach MR An infant P (i.e. a person under 21) sought specific performance of a contract. Dismissing his application, the Master of the Rolls said it is a general principle of courts of equity to interpose only where the remedy is mutual. Since specific performance cannot be granted against an infant, it follows that it cannot be granted in favour of an infant against another.
Patel v Ali
Patel v Ali [1984] 1 All ER 978, CA D and her husband were co-owners of a house which they agreed to sell to P. D's husband became bankrupt, and D herself contracted bone cancer and had to have a leg amputated; these events coincided with the births of two more children. D spoke little English and relied heavily on the support of her friends and relatives. The Court of Appeal set aside an order for specific performance and awarded damages instead, saying that in all the circumstances such a decree would cause undue hardship, even though this did not relate directly to the subject matter of the contract.
An alternative to specific performance in some cases may be an ordinary injunction, also an equitable remedy and therefore discretionary. It may be prohibitory (to enforce a contract not to sell beer brewed by any other firm, for example) or mandatory (to knock down a wall built in breach of a restrictive covenant), but the court will consider what is reasonable in the circumstances.
Neither an order for specific performance nor an injunction will normally be granted where damages would be an adequate remedy; nor in employment contracts or other contracts for personal services (though an injunction may be granted forbidding similar performance for a competitor); nor for the delivery of goods bought, unless they are unique objects of special value; nor where P gave no consideration for a contract under seal, since "equity will not assist a volunteer".
Rectification
Where it can be shown clearly that a document such as a will or a contract does not reflect the true intentions of the parties (or where one party to a contract took unfair advantage of a mistake made by the other) the court has power to rectify the document to make it show the true position.
Re Posner
Re Posner [1953] 1 All ER 1123, Karminski J A testator T left most of his property to "my wife Rose Posner", though in fact the woman concerned, with whom T lived, was married to someone else and was not T's legal wife. In interlocutory proceedings the judge said that unless fraud could be proved the words "my wife" could be deleted so that T's intentions could be carried out.
Peffer v Rigg
Peffer v Rigg [1978] 3 All ER 745, Graham J D1 was the registered owner of a house subject to an unregistered trust in favour of D1 and P. D1 sold the house for 1 to his wife D2, who knew of the trust but who (since the trust was not registered) claimed to take free of P's interest. The court rejected this claim and ordered that the register be rectified to show the house held on trust for P and D2.
Rescission
If a contract is rescinded, then it is as if it had never existed, and the parties are restored to their original positions. A party discovering a relevant mistake, or the victim of a misrepresentation, may affirm or rescind the contract, explicitly or by his conduct, but this decision once made is irrevocable.
Redgrave v Hurd
Redgrave v Hurd (1881) LR 20 ChD 1, CA A solicitor P advertised for a partner, giving an exaggerated account of the firm's profitability. D answered the advertisement and (after negotiations) agreed to join the firm, but retracted when he discovered the true position. P sued for specific performance; D defended and counterclaimed for rescission and damages. The court refused damages but said D was entitled to rescission of the contract, which had been entered into because of P's misrepresentations.
Since the effect of rescission is to nullify the contract, it is available only where restitutio in integrum is possible and the parties can be restored to their original positions. The courts interpret this fairly widely, however, as is appropriate in matters of equity, and are prepared to make consequential orders as necessary. The right to rescind for misrepresentation is lost if the representee has affirmed the contract, if restitutio in integrum is impossible, if too much time has elapsed (though what is "too much" will depend on the circumstances), or if rescission would unfairly damage an innocent third party.
Long v Lloyd
Long v Lloyd [1958] 2 All ER 402, CA D innocently advertised a lorry as being in good condition, and sold it to P on that basis. Two days later various defects appeared; D offered to pay half the cost of replacing the dynamo, and P accepted. The next day, further defects appeared and the lorry broke down completely. The Court of Appeal said it was too late for P to rescind the contract: he had affirmed it by his acceptance of D's offer of payment after he had become aware of the misrepresentation. [Before the 1967 Act, there was no alternative award of damages for innocent misrepresentation.]
Clarke v Dickson
Clarke v Dickson (1858) 120 ER 463, Crompton J P bought a share in a partnership on the strength of D's misrepresentations. By the time P discovered the misrepresentation, the partnership had been turned into a limited company. The judge said P's shares in a limited company were quite different in their nature and status from a share in a partnership; it was impossible to put the parties back into the position they had been in before the contract, so P's claim to rescind was denied.
Lewis v Averay
Lewis v Averay [1971] 3 All ER 907, CA P advertised a car and sold it to X in exchange for a cheque. X sold the car to D, who bought it in good faith, but when X's cheque bounced P sought to rescind the first sale and recover the car. The Court of Appeal said a contract based on misrepresentation is voidable rather than void ab initio; X had acquired a voidable title and D's title was thus established before the purported rescission. It would be unfair to disturb D's title now, and P's claim against D must be denied. (P would, of course, have a good claim for damages against X, always supposing that X could be traced and had assets worth suing for.)
Whittington v Seale-Hayne
Whittington v Seale-Hayne (1900) 82 LT 49, Farwell J PP took a lease on premises to be used for poultrybreeding, relying on DD's representation that the premises were sanitary and in a good state of repair. This turned out not to be so, and PP sought an indemnity for the loss of valuable stock and the medical expenses of the manager and his family, resulting from the state of the premises. The judge said their claim must fail: it was really a claim for damages, which were not then available except in cases of fraud. However, PP could claim expenses such as rent, rates and repairs incurred as a requirement of the contract.
Section 2(1) of the Misrepresentation Act 1967 now provides for an award of damages for loss resulting from a misrepresentation made not fraudulently but without reasonable grounds for belief in its truth. The burden of proving the existence of "reasonable grounds" is on the representor. A plaintiff party to the relevant contract is therefore usually well advised to follow this line rather than seek damages in tort, where he would have the burden of showing negligence.
Under s.2(2) of the Misrepresentation Act 1967 the courts have a further power in cases of non-fraudulent misrepresentation to award damages in lieu of rescission if it would be equitable to do so, and may refuse rescission unless it can be shown to be fair and equitable. This may include even cases of innocent misrepresentation, where damages would not otherwise be available. It is not absolutely clear whether damages can be awarded where rescission would be impossible: a dictum of Mustill J in Atlantic Lines v Hallam, The Lucy [1983] 1 Lloyds Rep 188 suggests not, but there are some writers who disagree.
In any event, damages are strictly an alternative in respect of innocent misrepresentation, and can be claimed as well as rescission only in tort, where fraud or negligence can be shown.
RIGHT TO REJECT
In contracts for the sale or supply of goods, the buyer has the right to reject the goods and terminate the contract if the goods supplied are not up to standard. If he accepts the goods, however, the right to reject is lost and the buyer is limited to damages. Acceptance is deemed to take place when the buyer intimates to the seller that he has accepted the goods, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he has rejected them. Deemed acceptance does not occur, however, unless the buyer has had a reasonable opportunity to examine the goods or (if the contract is for sale by sample) to compare the bulk with the sample.
Rogers v Parish
Rogers v Parish [1987] 2 All ER 232, CA PP bought a new Range Rover; after a few weeks it proved unsatisfactory and was replaced. The replacement was equally unsatisfactory, and attempts to repair various faults were unsuccessful. After five months PP purported to reject the car on the grounds that it was not of merchantable quality and the court of Appeal said they were entitled to do so: the expectations of the purchaser of a Range Rover were higher than those of the purchaser of an ordinary car.
Acceptance is not deemed merely because the buyer has asked for or agreed to the repairing of the goods by or under an arrangement with the seller. Moreover, since 1995 the buyer can reject just part of a consignment and accept the rest: specifically, he can reject all the goods, or accept those which conform with the contract and reject the rest, or accept those which conform and some of those which do not, and reject the rest, or accept all the goods. But the buyer must still reject within "a reasonable time", the duration of which is a matter
Jones v Gallagher
Jones v Gallagher [2004] EWCA Civ 10 The claimant had a kitchen supplied and installed by the defendant. A week after completion of the work, the claimant wrote complaining that the colour of the cupboard doors did not match that of the existing furniture, as had been promised. The defendants replied a week later, and there was some further correspondence about other matters, but nothing more was said about the colour until the claimants began legal proceedings some five months after installation, rejecting the kitchen for this reason and claiming repayment and other expenses. The trial judge found that there had been a breach of contract in respect of the colour, but decided on the facts that more than "a reasonable time" had elapsed and dismissed the claim to reject. This finding was upheld on appeal.
Regulations made in 2002 add significantly to the buyer's remedies in consumer contracts by inserting a new section 48A into the Sale of Goods Act 1979. Where the buyer deals as consumer, and the goods do not conform to the contract of sale (particularly, but not only, in relation to the terms implied by the Act), the buyer generally has the right to require the seller to repair or replace (at the buyer's choice) the goods within a reasonable time. If this would be impossible or disproportionately difficult or expensive, or if the seller fails to repair or replace within a reasonable time as required, the buyer may require the seller to reduce the purchase price by an appropriate amount, or may rescind the contract and claim repayment of the purchase price subject to an appropriate deduction for the use he may have had of the goods in the mean time. These remedies are additional to the right of rejection already discussed (and, of course, to the ordinary right to seek damages), but a buyer who asks for repair or replacement must give the seller a reasonable time to comply before exercising his right to reject.
EXTINCTION OF REMEDIES
The remedies for breach of contract are extinguished by accord and satisfaction, where one party agrees (for valuable consideration) not to enforce his rights against the other; or by a release under seal; or by lapse of time.
EXTINCTION OF REMEDIES
Limitation Act 1980 s.5 An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued. Limitation Act 1980 s.11 (1) This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently) where the damages claimed by the plaintiff include damages in respect of personal injuries to the plaintiff or any other person. (2) None of the time limits given in the preceding provisions of this Act shall apply to an action to which this section applies. (3) An action to which this section applies shall not be brought after the expiration of [three years].