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Introduction to the terminology of contracts (part 3)

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1 Introduction to the terminology of contracts (part 3)
Anne Brunon-Ernst Lecturer in Legal English Paris 2 University

2 Outline of the lecture Introductory note
Classification of contracts (I) Doctrine of privity of contracts (II) Statutory contractual provisions (III)

3 Introductory note A contract is : a promise (Eng Law)
e.g. see contract =/= estoppel an agreement (US Law) Terminology: Estoppel = a promise which is enforceable because it has been relied upon by the promisee

4 (I) Classification of contracts

5 (I) Why classify contracts?
Not for the mere sake of defining and classifying Defining a concept allows a bird’s-eye view of the whole subject Introduction to the terminology =/= substance 6 different ways of classifying contracts: According to formation (A) According to performance (B) According to the nature of the contract (C) Specific to English law (D) According to its effects (E) Other contracts (F)

6 I-A/Classification according to formation/mode of creation
(A)Contract (1) Expressed (2) Implied (3) Quasi

7 I-A-1/Express contract
A contract expressed in oral or written words Note: Contracts, no matter how important, may be made without any writing (i.e. word of mouth) Two exceptions (see caselaw): Contract can be made orally or by conduct, but canot be inforced by the courts, unless written evidence of it Contract is required to be made in writing

8 I-A-2/Implied contract
Definition: A contract which is is inferred from the acts or conducts of the parties or course of dealings between them Distinction implied/express: Intention of the parties expressed =/= intention inferred from conduct No significant difference at law But different method by which contract proved E.g: Coins inserted in slot machine

9 I-A-3/Quasi-Contract Definition: These contracts do not arise by the virtue of any agreement, expressed or implied between the parties but the law infers or recognizes a contract under certain special circumstances Aim: A person should not obtain a benefit or an unjust enrichement as against another because there is no obligation in contract Remedy: The courts imply a fictitious promise to account for the benefit. The promise forms the basis of an action in quasi-contract e.g.: A painter painting the wrong house, with the knowledge of the owner of the house. Terminology: In the past also referred to as implied-in-law contract =/= implied-in-fact contract (= genuine contracts)

10 Quasi-Contract vs Implied Contract
Belong to different legal category Nothing in common with contracts for lack of a better option, the same procedure is used for actions in contract and actions in quasi-contracts Now considered as new branch of the law, independent from contract law, part of the law of restitution Legal obligations do not arise from promise Terminology: The law of restitution covers cases where one person is held obliged to restore or pay for some benefit received from another (or at the expense of another) in order that he should not be unjustly enriched. If he has promised or agreed to pay for the benefit, his liability is contractual, but if he has not done so, his liability is restitutionary

11 I-B/Classification according to performance/extent of execution
(B)Contract (1)Executed (2)Executory

12 I-B-1/Executed contract
Definition: A contract that is fully performed on both sides e.g.: . If they do so immediately, the possession of the good and the right to the good are transferred together and the contract is executed Chose in possession

13 I-B-2/Executory contract
Definition: A contract that is not fully performed by one or both parties e.g.: A and B agree to exchange A’s pen for B’s notebook. If they do so the following day, the right to the good is transferred but not the possession and the contract is executory Chose in action Terminology: To carry out an obligation = to do what the contract requires

14 Rules and exceptions Classical contract law: contractual obligations arise out of promises Makes no difference if contract is partly executed or wholly executory Signs of change Now an executory contract is more likely to be held void for uncertainty than a contract which is part performed

15 I-C/Classification according to the nature of the contract
(1) Unilateral (2) Bilateral

16 I-C-1/Bilateral contract
As a result of the court’s inference of the intention of the parties (generally): a promise for a promise = > both parties are bound by the performance of their promises Courts have tended to construe transactions as bilateral

17 I-C-3/Unilateral contract
A promise for an act = > only one party (promisor) is bound by the performance of his promise e.g.: estate agency case

18 I-D/Classification of contracts in English law
(D)Contract (1) Formal (2)Informal

19 I-D-1/Formal contract A contract that requires a special form or method of creation

20 I-D-2/Informal contract
A contract that requires no special form or mode of creation

21 I-D-1/Formal contract (1) Formal contract (a) Contracts of records
(b) Contracts under seal

22 I-D-1(a)/Contracts of records
A contract of record is either a judgment of court or Recognizance Contracts of records derive their binding force from the authority of the court. They lack the essential element consensus. They are enforced by court Note: Recognizance is a written acknowledgement of debt due to the Crown. It is usually met with in connection with criminal proceedings

23 I-D-1(b)/Contracts under seal
It derives its binding force from its form alone. It is in writing and is signed, sealed and delivered by the parties Contracts which must be made under seal , includes: Contracts made without consideration Contract made by corporations See Companies Act 1985 Conveyance in legal estate of land or any interest in land (lease more than 3 yrs) See Law of Property (Miscellaneous Provisions) Act 1989 Terminology: Contract under seal = deed = convenant = speciality contract Conveyance = transfer of property = agreement by the vendor of land to convey his title or ownership and the agreement of the purchaser to take it

24 I-D-1(b)/Seal vs attestation
When the deed is entrered into by an individual No requirement for sealing Signature of individual witnessed and attested When the deed is entered into by a company The company may execute documents by putting its common seal on it Any document signed by the director and the secretary and said to be executed by the company will be regarded as if the seal had been put on it Terminology: To attest = to make a statement that the deed has been signed in the presence of a witness and make clear that the document intended to be a deed (e.g. ‘signed as a deed by A in the presence of B’) A seal = originally recognised wax seals. By the 20th century a small circle of red tape affixed to the document (contract for the sale of land), although the courts also held that a circle containing the letters "L.S." was adequate

25 I-D-1(b)/deed vs simple contract
A deed is a superior document to a contract e.g. mergers

26 I-D-3/Simple contracts
Written Oral

27 I-D-3/Simple contracts
All contracts which are not made under seal are simple contracts Simple contracts may be made orally or in writing Needs valid offer, valid acceptance and needs to be supported by consideration Terminology: Simple contract = parol contract

28 I-D/Classification of contract according to effects
Valid contract – A contract that meets all of the essential elements to establish a contract Void contract – No contract exists Voidable contract – One or both of the parties has the option of voiding or enforcing the contract Unenforceable contract – A contract that cannot be enforced in court, but can be used as a defence Illegal contract – contravenes the criminal law, but not necessarily (contrary to the public interest) => often void Terminology: To void a contract = to set it aside To enforce a contract = to carry out one’s obligations under it

29 I-F/Other Contracts An offeree can prevent the offeror from revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed-upon period of time This payment is called an option contract The offeror agrees not to sell the property to anyone but the offeree during the option period

30 Questions Define a contract Is a contract a promise or an agreement?
What do you mean by a void contract? What is an illegal contract? What is an unenforceable contract? What is an implied contract? What are quasi-contracts? Wat is an executory contract? What do you mean by an unilateral contract? What do you mean by a bilateral contract? Distinguish between void contracts and voidable contracts State whether all void agreements are illegal Distinguish between executed and executory contract Distinguish between express and implied contract Essay question: Discuss the following statement: ‘An agreement enforceable by law is a contract’.

31 (II) Privity of contract
Origins Problems Contracts (Rights of Third Parties) Act 1999

32 Definition: Relationship between the parties to a contract, which makes the contract enforceable as between them. A third party cannot sue under the contract Other form of action: in the tort of negligence (see Donoghue v Stevenson)

33 The doctrine: where does it come from?
The doctrine of consideration and the doctrine of privity You must have given consideration for a promise in order to be able to enforce it Crompton J in Tweddle v Atkinson: ‘It would be a monstruous proposition to say that a person was a party to the contract for the purpose of suing upon it for his own advantage, and not a party to it for the purpose of being sued’

34 The doctrine: problems (1)
How to evade the doctrine of privity (a) Beswick v Beswick widow was not entitled to sue in her own name because she was not a party to the agreement Was entitled to sue in her capacity of administratrix because she was suing on behalf of her late husband’s estate

35 The doctrine: problems (2)
(b) Collateral contracts: i.e. the courts act as if there were two related contracts Shanklin Pier Ltd v Detel Products Ltd Facts: SP owned a pier and wanted to get it painted. DP were paint manufacurers and told SP that if their paint was used to paint the pier, the paint would last 7 yrs. SP told the contractors who were to paint the pier to buy the paint from DP. The contractors did so, but the paint only lasted 3 mths Decision: the court decided there was a collateral contract btw SP and DP. It was related to the main contract btw DP and the contractors for the sale of the paint

36 The doctrine: problems (3)
Contractors Shalklin Pier Detel products Contract of sale Painting contract Collateral contract

37 The doctrine: problems (4)
But for DP’s assurance that their paint would last seven years, SP would not have told the painting contractors to buy it Artificial approach to analysing the situation

38 Contracts (Rights of Third Parties) Act 1999
Under s. 1, a third party may enforce a term of the contract in his own right if he is expressly identified in the contract by name, as a member of a class or answering a particular description Under s. 1(3) the third party does not have to be in existence at the time the contract is made The Act affects the contracting parties’ rights to vary or cancel the contract if reliance on the term by the third party s. 5 protects the promissor from double liability

39 (III) Statutory provisions
Sale of Goods Act 1979 Supply of Goods and Services Act 1982

40 Sale of Goods Act (1979) Sale of goods by description
=> e.g. when buying a good in a mail order catalogue Sale of goods by sample => e.g. a washing machine from a shop

41 Sale of Goods Act (1979) The Statute implies terms into contracts for sale of goods S14(2): Goods are of satisfactory quality S14(3):Goods are fit for the purpose Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002 (SI 2002 No. 3045)

42 Sale of Goods Act (1979) Other relevant provisions:
S. 8: the buyer must pay a reasonable price S. 13: implied term that the goods will correspond the description given S. 14 (see above) S. 15A: when the breach is so slight, if the buyer does not deal as consumer, the breach is not to be treated as a breach of condition but may be treated as a breach of warranty. S. 48A: if goods do not conform with the contract within 6 months, rebuttable presumption of non-conformity S. 48B: replace or repair within reasonable time and free of charge S. 48C: appropriate price reduction

43 Supply of Goods and Services Act 1982
Applies when provides you with a service (i.e. someone works for you in the course of business) Applies when someone provides you with goods and does work for you in the course of their business under the same contract

44 Supply of Goods and Services Act 1982
S.13: implies that service should be provided with reasonable skill and care S.4: implies that goods have to be of a satisfactory quality and reasonably fit for purpose Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002

45 Supply of Goods and Services Act 1982
Other relevant provisions: s. 2: implies a term about title s. 3: the goods correspond to the description s. 4(2): the goods will be of satisfactory quality s. 4(5): the goods are fit for any particular purpose which the buyer makes known s. 13: reasonable skill and care s. 14: implied term that the service will be carried out within a reasonable time and for a reasonable charge (When they are not fixed by the contracts, left to be fixed in a manner agreed by the contract or determined by parties)

46 Bibliography P. S. ATIYAH, An Introduction to the Law of Contract, 5th edn, Oxford, OUP, 1995. Adrian Chandler & Ian Brown, Law of Contract, 7th edn, Oxford, OUP, 2009. Dictionary of Law, 3rd edn, London, Peter Collin Publishing, 2000. Denis Keenan, Smith & Keenan’s English Law, 14th edn, Harlow, Longman, 2004. C. Draycott, W. Laws, H. Revenko, A. Smith, Law: agreements, rights & responsibilities, 2nd edn, Oxford: OUP, 2007. JS Smith, Smith & Thomas: A Casebook on Contract, 11th edn, London, Sweet & Maxwell, 2000.

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