Contract Law

1. Contract Law Review Workshop 2

2. Topics to be covered • Remedies for breach • Doctrine of complete performance • Frustration • Misrepresentation • Duress (including link with consideration) • Undue influence • Revision

3. Damages • Assessment • Type of loss (eg profit, injury and disappointment) • Remoteness • Mitigation • Agreed/specified damages cf penalty

4. Assessment of damages • Normal aim of contract damages - expectation loss - Robinson v Harman. • Cost of cure; difference in value; or …… • Ruxley - damages for loss of amenity/consumer surplus. • Reliance loss - Anglia TV v Reed • “Restitutionary” – Wrotham Park v Parkside; Experience Hendrix v PPX (see Aspects of Damages in Contract; advanced i-tutorial)

5. Remoteness rule • Basic rule - Hadley v Baxendale • Victoria Laundry - loss of profit. • Parsons - if type of loss within parties’ contemplation then all loss of that type recoverable even though more serious/extensive than contemplated. • Can Victoria Laundryand Parsons be reconciled? • Brown v KMR Services.

6. TERMINATION - to end future performance of the contract. For breach of condition. For breach of innominate term when effect of breach is serious. • AGREED SUM - recover money for work done or goods supplied when you have performed your contractual obligations and date for payment has arisen. • RESTITUTION - to recover money paid when there has been a total failure of consideration.

7. Specific performance and injunctions • Equitable remedies at discretion of court. • Not granted where an award of damages is an adequate remedy. • Not granted if effect is to order X to work for Y.

8. Doctrine of complete performance • Basic rule - performance must be precise/exact. • Exceptions: • divisible obligations; • substantial performance; • wrongful prevention; • voluntary acceptance of part performance.

9. Frustration • Contract impossible/radically different to perform. • Relate to categories established by precedent. • Without fault. • Unforeseen.

10. Effect of frustration: common law • The contract ends but no breach. • Both parties are discharged from future obligations. • Identify each party’s future obligations. • Advance payments recoverable only if a total failure of consideration – i.e. a restitutionary claim.

11. LR(FC)A 1943 S1(2) - 3 key points: • money paid before frustrating event can be recovered. • money due and payable before frustrating event need not be paid. BUT

12. S1(2) • if payee has incurred expenses in performing contract before frustrating event then court may allow him to recover these but only out of money paid and/or payable before the frustrating event. • NB - expenses at discretion of court - Gamerco.

13. Section 1(3) - valuable benefit • Identify and value the benefit. • Decide on a just sum. • Look at all the circumstances including effect frustration has had on the benefit, expenses of the payer and any money paid under s1(2) - BP Exploration v Hunt.

14. Misrepresentation • Identify false statements • Terms or reps? • Test = intention of the parties • Guidelines • Term - damages; termination? • Rep - define misrep. and apply definition to facts.

15. Key remedies for misrep • Rescission - explain - check for bars. • Damages - tort of deceit. • Damages - tort basis but can recover for all direct loss. • Burden of proof.

16. S2(1) Misrep. Act • Damages under s2(1) - same as for tort of deceit. • Burden of proof: • Claimant must establish misrepresentation and loss. • Defendant must establish reasonable (not just honest) grounds for belief up to time of entering into contract.

17. Duress • Violence/threats of violence - Barton • Economic duress - illegitimate threat/pressure – e.g. a threat to break a contract • Normal commercial pressure is not duress.

18. Ingredients for economic duress Carillion Construction Ltd v Felix 2001. • Illegitimate threat. • No practical choice for claimant. • Pressure must be significant cause inducing claimant to enter contract.

19. Remedy for duress and link with consideration • Williams v Roffey - promise to pay more cases. • May be good consideration if practical benefit. • Duress makes otherwise binding variation voidable. Only remedy is rescission. Check for bars.

20. Williams v Roffey and a promise to accept a lower payment • Can you argue that paying less confers a practical benefit and so creditor is bound? • No - Re Selectmove.

21. Undue influence • Actual or presumed • Presumed if there is a fiduciary relationship (by its nature or in fact) AND a transaction which calls for an explanation. Rebuttable. • Undue influence makes a contract voidable. Is rescission barred?

22. Typical undue influence scenario • H wants a loan • Creditor will only lend if it has security for loan repayment e.g. second mortgage over matrimonial home • W signs security documents because of undue influence by H • H defaults on the loan & creditor seeks to enforce security • W alleges undue influence by H (NOT by the creditor who is the other contracting party to security contract)

23. Debtor Surety undue influence security contract loan contract Bank

24. Notice - constructive - Etridge • Was the lender put on inquiry ? In all cases where the relationship between the third party debtor and the surety is non-commercial. • If so, the lender must take reasonable steps to ensure that the surety understood the risks and implications?

25. Reasonable Steps? • Two options • Bank has private meeting with surety to explain/warn about the implications and to advise taking independent legal advice OR • Letter of confirmation from surety’s solicitor.

26. Exam • Identify links between topics eg formation and agency; breach and misrep; breach and frustration; duress and consideration. • Use suggested structures. • Workshop materials, tests, i-tutorials, T & F and specimen exams.