Comparative Contract Law Part II: The law of contract

1. Comparative Contract LawPart II: The law of contract Comparative Law LLM Kuwait International Law School Spring 2013 Dr Myra Williamson

2. Introduction • What is a “contract”? • Here are 2 possible definitions: • “A legally binding agreement made between two or more parties, by which rights are acquired by one or more acts or forbearances on the part of the other or others” • Sir William Anson, Principles of the Law of Contracts • A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises as a duty • American Law Institute’s Restatement Second of the Law of Contracts • (‘forbearance’ means to restrain oneself from doing something)

3. Plain language – what is a contract? • An agreement… • Between two or more parties… • Which is intended to have legally enforceable consequences

4. Where did the idea of a contract come from? • It’s definitely an old idea • Comes from the Latin term pactasuntservandawhich means ‘agreements/pacts must be kept’ • Justinian defined an obligation as “a legal bond, with which we are bound by necessity of performing some act according to the laws of our state.” He further separated the law of obligations into contracts, delicts, semi-contracts, and semi-delicts. • Islamic definition? (see next slide…)

5. Islamic law and contracts • This is a new and emerging area of writing – we might come back to it towards the end of this section on Comparative Contract Law. • In the meantime, here are two interesting links: • A new book “Islamic law and contract” to be published by IB Tauris, by Hussein Hassan: http://www.ibtauris.com/Books/Law/Jurisprudence%20%20general%20issues/Systems%20of%20law/Islamic%20law/Contracts%20in%20Islamic%20Law.aspx?menuitem=%7BA0AF68D5-381A-44E8-95F6-0B51307F9D4E%7D • Article reviewing a book on Islamic contract law: http://www.ijbssnet.com/journals/Vol._1_No._2_November_2010/14.pdf

6. Contracts are part of our lives • People enter into contracts frequently • For example: • A contract of carriage (eg. to travel by bus, by plane, by taxi) • A contract for the sale of goods (eg. buying groceries at the supermarket) • A contract for hire • A contract for the supply of services (eg. having a haircut) • A contract for both the supply of goods and the supply of services (eg. Having a meal at a restaurant) There are many types of contracts including insurance (car, house, health etc), employment, construction, real estate, consumer goods and services etc.

7. Contract law and cases • Most of the cases do not involve simple day-to-day transactions. Most cases involve commercial transactions between business people and companies • There are some significant differences between civil and common law legal systems (eg civil law usually doesn’t have the requirement of ‘consideration’) • We will focus here on the law of contract in the UK (which is also the basic law of contract in most common law legal systems) – • Connections between British common law and Kuwait: see articles from Hein Online describing the British Jurisdiction that existed in Kuwait until 1961

8. Elements of a contract • There are some essential elements for a contract to exist • The elements of a contract are: • Offer and Acceptance • By competent persons who have legal capacity • Who exchange "consideration" • To create a "mutuality of obligation”.

9. Defences to the claim that a contract has been formed • Mistake • Duress • Incapacity • Undue Influence • Unconscionability • Misrepresentation/fraud • Frustration If any of these are present, the contract might be void or voidable (more on this later)

10. The elements of a contract: offer • The first element is the “offer” • An offer can be made to: • A definite person (or group of persons) – (see Boultonv Jones) OR • To the whole world, no one in particular (see Carlill v Carbolic Smoke Ball Co.) But • When an offer is made to one person (or a group), only that person (or group) can accept and • When an offer is made to the whole world, anyone can accept by complying with the terms of the offer See page 105 of Barker, Law Made Simple

11. Offers made to a definite person Boultonv Jones (1857) Facts: Jones made the “offer” to Brocklehurst Boulton “accepted” the offer and supplied the pipes to Jones Jones refused to pay Jones argued: there was no contract between him and Boulton

12. Boulton v Jones (1857) cont’d… • The decision: • The court found in favour of Jones (the defendant) • Jones did not have to pay for the pipes that he had been supplied with • Held: there was no contract between Boulton and Jones therefore Jones was not liable to Boulton for the cost of the pipes • This case is authority for the proposition that if you propose to make a contract with A, then B cannot substitute himself without your consent • In other words…when an offer is made to a definite person, only that person may accept the offer

13. Offers made to the world at large • Sometimes an offer is made to the whole world • Anyone can accept by complying with the terms of the offer • The classic case to show how this proposition came to be established in the common law is: • Carllilv Carbolic Smoke Ball Co (1893) • The facts: • The case concerned a ‘flu remedy called the “Carbolic Smoke Ball” • The manufacturer advertised that it would give £100 to anyone who used the smoke ball and then caught the flu.

14. Carllilv Carbolic Smoke Ball cont’d… The advertisement was placed in the Pall Mall Gazette of 13 November 1891

15. Carllilv Carbolic Smoke Ball cont’d… • The plaintiff (MrsCarllil) bought the smoke ball. She used it as directed and then she contracted the ‘flu. • She used it three times daily from Nov 20 1891 to Jan 17 1892 • She claimed the reward of £100 when she caught the ‘flu. • Carbolic Smoke Ball company refused to pay out • She sued them for breach of contract

16. What was the decision in this case? At first instance, Hawkins J held: MrsCarllil is entitled to the 100 pounds Carbolic Smoke Ball appealed that decision Court of Appeal held: MrsCarllil was entitled to the 100 (It upheld the lower court’s decision)

17. What was the reasoning? • Court of Appeal held that: • There was an offer that was made to the whole world • Anyone could accept the offer by complying with the conditions • The plaintiff complied with the offer using the smoke ball as directed • It did not matter that she did not communicate the acceptance of the offer to the company • In this type of situation, notification of compliance is not generally necessary – compliance is enough

18. Carllil v Carbolic Smoke Ball: summary What does this case stand for? This case is authority for the proposition that when an offer is made to the whole world, anyone can accept by complying with the terms of the offer The offeree does not need to tell anyone that they have complied with the offer

19. The offer must be communicated to the offeree • What is an offeree? • The person to whom the offer is made • The rule: an offer must be communicated to the offeree before it can be accepted: Taylor v Laird • In other words… • If you don’t know about the offer, you can’t be said to have accepted it

20. Taylor v Laird (1856) • The facts: • Taylor was engaged to command Laird’s ship • He was to conduct some explorers on an expedition up the River Niger

21. Taylor v Laird continued… At a certain point during the trip, he refused to go any further and he gave up command of the ship However, he helped the ship home and then claimed payment for that work. Held: Taylor could not recover because he did not communicate his offer (to work the ship home) to the owner, Laird Since the offer was not communicated, Laird never had the chance to accept or refuse the offer What is this case authority for? It is authority for the proposition that for an offer to be valid, it must be communicated to the offeree

22. Taylor v Laird continued • One final point… • The judge also said: • “Suppose I clean your property without your knowledge, have I a claim on you for payment? How can you help it? One cleans another shoes; what can one do but put them on?” • Reasoning by analogy • Think of examples where this rule applies in day-to-day life • Think of Kuwaiti law – is this the same rule? • Think of Islamic law – is this the same rule?

23. offer v an invitation to treat • An offer is different from a mere “invitation to treat” • An “invitation to treat” is an offer to make offers • For example, at an auction: the auctioneer is inviting the people to make offers • Where goods are displayed in a shop window, that is an invitation to customers to make offers – its “an invitation to treat”

24. The invitation to treat: example • Placing the item on the shelf = invitation to treat • You, picking it up and taking it to the cashier = an offer • The cashier accepts the offer and takes your cash = the acceptance

25. Fisher v Bell (1960) • The flick knife on display in a shop window • Owner was charged with offering for sale a flick knife – (a violation of the Offensive Weapons Act) • Held: the display of items in a shop window is not an offer – it is a mere invitation to treat (Parker LCJ)

26. Harris v Nickerson (1873) • Offer v invitation to treat • Facts: Nickerson advertised an auction; Harris traveled to participate in the auction; the furniture was withdrawn • H sued N for the costs he incurred • Held: • There was no contract • The advertisement was a mere invitation to treat • H could not recover, ie. he lost the case

27. A statement of price is not necessarily an offer • See Harvey v Facey (1893) • The facts: • Some telegraph messages were exchanged between the parties over a pen. Harvey wanted to buy a fancy pen from Facey. • 1st telegram: • H: “Will you sell us a Bumper Hall pen? Telegraph your lowest price” • 2nd telegram: • F: “Lowest price for bumper Hall pen is 900 pounds” • 3rd telegram: • H: “We agree to buy Bumper Hall pen for 900 pounds” • F: didn’t reply

28. Harvey v Facey (1893) continued… • Held: • There was no contract between the parties • The second telegram was just an invitation to treat • The third telegram was the ‘offer’ to buy • There was no ‘acceptance’ of that offer

29. Summary • So far, we have seen that for a contract to exist under the English common law, there must be an offer and there must be acceptance • Many cases have come before the courts over the years which have helped to clarify what an “offer” is. • Those cases are used in later cases – and are applied over and over again, building up a body of case law • There have also been cases explaining how an offer can be taken back or ‘revoked’. The next slide show will begin with that area and continue into examining ‘acceptance’.