Contract law Lectures: Intention

Certainty in offer + acceptance
Clarity so that a 3rd party (like a Judge) will be able to identify it as a contract.

Scammell v Ouston (1941)
2 parties discussing the trade of motor vehicles
Person wanted a certain van, price agreed.
Said he would take it on “the usual HP terms” à v. vague…
Buyer refused to carry out the transaction
Litigation carried out à court said that this was not a contract, there was too much uncertainty in the terms.

‘On our usual terms’ is not necessarily vague if the court is able to go back to previous transactions which are clear/ then the agreement can be enforced.

-Service contract
accountants cannot give a final cost of work until the job is finished. How much might a taxi journey cost? à Does the contract fail because of lack of certainty?
However, s.8 (2) Sale of Goods act 1979 states that a reasonable price based on a set formula would be acceptable for a contract.

-Meaningless phrases
Nicolene v Simmonds (1953) 1 All ER 82
The court will strike out meaningless phrases

Incomplete Agreements
British Steel v Cleveland
Bridge Eng

Cleveland British Steel
Request ----------------------------------->
(109 steel nodes)
---------------------------------------------> Estimate

Letter of intent--------------------------->
‘We intend to go into
formal negotiations with
you, could you please start
production of these steel nodes’

---------------------------------------------Commence work

Change in Specs.-------------------------->
Delivery in sequence---------------------->
-------------------------------------------->Formal Quotation

MEETING (nothing resolved)
---------------------------------->All but one node delivered

NATIONAL STEEL STRIKE

Cleveland Bridge suffered
Huge penalty clauses ------------------->Final Steel Delivery is late
From local authority they
Had been building for


Litigation followed
-No penalty clause against British Steel because there no contract
No agreement was made. Technically, title of the steel had never been lost by British Steel
-Court decided that a Quasi-contract had existed.
BS entitled to reimbursement for raw materials only in building the nodes.

Intention (to create Legal Relations)
Court is only giving an agreement the status of contract if the court is convinced that their agreement could be controversial.
Domestic agreements à no presumed intent to create legal relations therefore no contract.

Balfour v Balfour (1919)
Civil servant husband sent to live in Ceylon
Wife did not go with and was supposed to be receiving maintenance from her husband.
Husband did not pay. Wife sued for breach of contract
Goes to Court of Appeal à Still a domestic agreement (Common law obligation from husband to support the wife), no legal relations established.

Meritt v Meritt (1970)
Separated couple planning their divorce.
Husband signed an agreement with the wife to pay the mortgage.
Husband didn’t pay à wife had to pay the arrears.
Wife said he was in breach of contract and was therefore not entitled to half the equity of the house. Husband said they were not using the law of contract, but the law of property.

Lord Denning argued that although it started off as a domestic agreement, it became intent to create legal relations given the financial arrangements being made for divorce.

Jones v. Padavatton (1969)
Daughter lived in the US, mother lived in the UK.
Mother said that if daughter began reading for the Bar and gave up her job in London she would pay her maintenance and rent in London.
-Agreements never signed.
Daughter took 5 years to pass her year I Bar exams and pocketed the rent for the house.
Mother went to Court to evict her daughter after a dispute.
Court ruled
-Lack of intention.
-Lack of certainty.

Commercial agreements
Pendagron plc v Jackson (No.2)
(E.A.T.)
-Share intention scheme –contract clearly in place.
-employers didn’t need to contribute
-lock-in period for executives. They receive share reward after years.
-Not part of the original agreement and nothing had to be given in return (gift?)
One of the executives fell out with the directors and having served the requisite number of years (5 years) he left and demanded his shares (about £13,000 worth).

Court said that despite the company describing the share scheme as ‘non-binding gratituty’ this was irrelevant. In commercial terms, the executive had served the 5 years and could have gone elsewhere and therefore a contractual agreement existed.

Noble Enterprises v Lieberum
- incentive scheme to hit target
-conducted outside the law of contract, no individual consultation.
Signals had been given out by the company that this was not a regular contractual agreement.

Capacity
Doesn’t usually tend to be the main problems in commercial terms e.g. someone under 18.

Illegality –Overview
Sources of illegality
-illegal under statute
-illegal at common law
(don’t worry about the headings, worry about the principles)

A contract that is contaminated because there is some illegal element, may not be enforced.

Consequences of illegality
‘void contract’ – it never happened or came into being. No rights could possibly have passed to anyone.

Contract is ‘voidable’ – contract did happen, but somewhere along the line illegality set in. We will count the contract up to that point and then draw the line.

Statutory Illegality
a) express prohibition
Re. Mahmoud and Ispahas (1921)
No one will be able to sell stocks and shares in London without a licence
Broker was unlicensed and the other party refused to pay commission
-The Broker had to come to litigate on an action that was in itseld illegal. Didn’t get anywhere

b) Implied illegal in formation (dependant on arm of the legislature)
Arhbolds (freightage) v. Spaghetti. Ltd (1961) fictitious case

Highways act regulates road use. Class A licence required for carrying spirits. They were carrying some whisky, which was stolen from them on route à no Class A licence.
Owner could have sued for breach of contract as goods has not been delivered, but the action of the carriers was illegal.

What did each side know?

It could be argued that, in accordance with the mischief rule, the contract is still valid because the illegality was not relevant to the innocent cargo owner. (If he didn’t know about the lack of licence.

b) Illegal in performance
St. John Shipping v J. Rank limited (1956)
Overloaded ship.
Contract became enforceable because of the way it was carried out.

Where there is a contamination in the contract, you may be able to avoid this by recourse to statute rather than contract law.

Acts illegal at Common Law
-Contracts to Commit a Crime/ Civil wrong
Alexander v Rayson (1936)
-Contracts prejudicial to the Administration of Justice
Harmony shipping Co. v Davis (1979)
-Contracts to Oust the jurisdiction of the Courts
Williams v Williams (1957)
-Contracts corrupting Public service;
-Contracts prejudicial to marriage/family
-Sexually Immoral Contracts.

The Effects of Illegibility
-Saunders v Edmunds (1987) 2 AFR 651
Saunders and Edwards involved selling someone a flat. They gave a description of the flat to the estate agents who wrote it down exactly as they had described it.
-They claimed to have a roof garden. However, they failed to mention that the ladder connecting this roof garden was illegal and they had no rights to use the roof.
They had induced someone to come and but the property à buyers became victims of misrepresentation.

However, the parties had decided to attempt to defraud the Inland Revenue by saying that the value of the house was lower than the Stamp duty threshold.
Contaminated contract makes it v. difficult for you to pursue what claims you do have.

-They decided to sue in the tort of misrepresentation and won £7,500 worth of damages. Judge then reported them to the Inland Revenue and both sets of solicitors to the law society.