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L’Estrange v Graucob

L'Estrange

‘Reading the small print’ is a phrase familiar to discerning consumers, and in so this instance the value of careful reading served to remind that contracts of all shapes and sizes require careful attention, especially when the text is not readily visible.

In 1933 two travelling salesmen paid a visit to a small community café in Wales in order to sell them an automatic cigarette vending machine, and so having spent a number of hours discussing the user benefits and attached payment terms, the respondent duly agreed to sign the partially completed ‘sales agreement’ in expectation of a new and fully working product.

Upon payment of the deposit the appellants returned a signed ‘order confirmation’ and accompanying eighteen-month guarantee, at which point the contract was well underway and instalments were regularly paid, however after a period of less than a few days the machine began malfunctioning and several engineer visits were arranged before at the point of exhaustion, the respondent requested the item be returned in forfeit of her deposit.

In spite of this the appellants refused to terminate the transaction, whereupon the respondent commenced litigation for return of the monies paid on grounds that the product had been unfit for purpose and thus contrary to the contract and guarantee, while the appellants counter-claimed their remaining costs owed for the purchase of the machine before the respondent amended her claim to include repayment for failure to provide full consideration, breach of implied condition that the vending machine was functioning at point of sale, and/or damages for breach of implied warranty that the product was fit for purpose.

The argument cited by the appellants relied upon an absence of failed consideration and non-existence of implied conditions as per s.11(c) of the Sale of Goods Act 1893  which read that:

“Where a contract of sale is not severable, and the buyer has accepted the goods, or part thereof, or where the contract is for specific goods, the property in which as passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect.”

Thus no implied warranty existed on grounds that the signed sales agreement excluded both condition and warranty within the small print shown at the bottom, which read that:

“[T]his agreement contains all the terms and conditions under which I agree to purchase the machine specified above, and any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded…”

Whereupon the respondent contended that she had been induced to sign the agreement through misrepresentation on grounds of never having her attention drawn to the exclusion notice beforehand.

In the first instance the Carnarvonshire County Court awarded a sum of 70l for the respondent in light of a perceived breach of the warranty despite her signature and no evidence of misrepresentation, and further allowed the appellants the sum of 71l for the monies unpaid.

Having appealed in the Court of the Kings Bench the appellants argued again that no misrepresentation had occurred, and that at any point the respondent was free to note and enquire as to the limitations of the contract, but had waived that right when signing to the terms expressed.

Here the Court relied upon the principles used in Parker v South Eastern Railway Co, in which the Court of Appeal had held that:

“In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.”

Parker v South Eastern Railway Co

Which translated that despite recognition of the respondent’s misfortune the law could not enforce a claim for misrepresentation based upon the oversight of a party willing to contract, thus the court set aside the respondent’s award and upheld that of the appellants, while reminding both parties that:

“When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”

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Carlill v Carbolic Smoke Ball Co.

Carlill

The primary ingredients to a valid and enforceable contract are (i) offer (ii) acceptance (iii) consideration and (iv) performance; and so on this occasion, the sale of medicinal apparatus proved the undoing of what may have at first blush appeared to be a lucrative use of marketing and false pretence.

In 1891 an advertisement was placed in the Pall Mall Gazette boasting the remedial powers of carbolic smoke balls, that when used in accordance with the manufacturers instructions could prevent users from the effects of influenza, while the exact words used stated that:

“100l reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000l is deposited with the Alliance Bank, Regent Street shewing our sincerity in the matter.”

Having decided to take the challenge, the respondent in this appeal purchased and used the product in full observation of the terms of the advert and yet still caught the virus, whereupon she sued for breach of contract.

Following a general examination of  the nature of her claim, the court awarded in favour of the respondent, before the appellants sought to challenge the existence of a contract on grounds that (i) the advert did not constitute a contract, (ii) that non-specificity of persons prevented any binding effect on consumers, (iii) that no acceptance had been notified so as to bind them, and (iv) that no consideration had been made by the respondent so as to warrant a claim of right.

After addressing each point sequentially the Court of Appeal unanimously held that while the advert did not amount to a contract, it did represent an offer to the world entire, therefore those who chose to purchase and use the product as prescribed within the published text were through their participation, demonstrating full and unconditional acceptance of the offer.

Similarly the money spent and time invested when using the smoke balls (an unpleasant experience in itself) further indicated that consideration had been sufficient enough to allow a claim.

In addition the Court upheld the appeal on grounds while noting how unlike arms-length contracts, the all-encompassing design of advertisements were not such that required acceptance for reasons of practicality and that reasonable application of the promises made prevented revocation by the advertisers on grounds that when drafting the advert, they did so upon the risk that profit may, or may not, have become certain, while reminding the parties that:

“Inconvenience sustained by one party at the request of the other is enough to create a consideration.”

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Contract Law Moot

Law undergraduates often feel confused when drafting their debut law moots, which is why I have left mine here for those looking to draw reference or guidance from it when preparing themselves for their first public argument (albeit inside a university classroom).

For the record, I represented the respondents in a contract law ‘frustration’ claim and won by a clear margin, which instantly confirmed and validated my love for law and a deep desire to advocate professionally.

CONTRACT LAW MOOTDownload

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Moore v. Elmer

A promise to pay while absent of any consideration may at first blush appear to be enforceable, however the eyes of the law see things in quite a different light, as was found in this rather bizarre suit between a clairvoyant and the administrators of an estate.

For reasons best known to themselves, the plaintiff and former client had somehow entered into a bargain, whereby a written statement in January 1898 expressed that:

“In consideration of business and test sittings received from Madame Sesemore, the clairvoyant, otherwise known as Mrs. Josephene L. Moore on numerous occasions I the undersigned do hereby agree to give the above named Josephene or her heirs, if she is not alive, the balance of her mortgage note which is the Herman E. Bogardus mortgage note of Jan. 5, 1893, and the interest on same on or after the last day of Jan. 1900, if my death occurs before then which she has this day predicted and claims to be the truth, and which I the undersigned strongly doubt. 

Wherein if she is right I am willing to make a recompense to her as above stated, but not payable unless death occurs before 1900. Willard Elmer.”

And so upon his death, the plaintiff sued for recovery in the Hampden County Superior Court, while his various family members argued that the claim was void for want of consideration, after which the court dismissed the suit and the matter was argued again before the Massachusetts Supreme Court.

Here the court turned first to Chamberlain v. Whitford, wherein it had held that:

“An executed and past consideration is not sufficient to support a subsequent promise. It is not enough to show that a service has been rendered, and that it was beneficial to the party sought to be charged, unless it was rendered at his express request, or under such circumstances that the law would imply a request.”

Chamberlain v. Whitford

While in Dearborn v. Brown the court had earlier held that:

“[T]he past performance of services constitutes no consideration even for an express promise, unless they were performed at the express or implied request of the defendant, or unless they were done in performance of some duty or obligation resting on the defendant.”

Dearborn v. Brown

To which it had been evident that no money had been exchanged for the readings, nor any express terms set out during their meetings. And so when summarising the fruitlessness of the claim, the court finally relied upon Johnson v. Kimball in which it had later held that:

“An executed gift is neither consideration for an express contract nor a ground for implying one as a fiction of law.”

Johnson v. Kimball

Thus the claim was one without merit and so the suit was again dismissed to the relief of the surviving parties and the dismay of a wanton clairvoyant, although one might have expected her to learn of the outcome prior to any litigation.

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Greiner v. Greiner

Inducement of consideration on the part of a promisee to a contract, whether written or oral, is an action that while not seemingly of benefit to the promisor, requires completion of the gesture by lawful means should natural justice be seen to be done.

In 1926, the appellant inherited a substantial amount of land from one of her sons, after which she aimed to use it to make amends for her late husband’s death, whose own will had disinherited four of his children, while the remaining four became beneficiaries to portions of his estate.

By way of reparation, the appellant sought the counsel of a number of those children, while on a number of occasions, explaining that she intended for the respondent to relocate from his home in Logan County, to a plot estimated at around 80-97 acres in size. This became problematic for the respondent as he was indebted by way of mortgage and could not just ‘up sticks’ and move, at which point the appellant took steps to reassign the mortgage to herself, so as to allow the respondent to take up residence on the land set aside for him.

This was duly executed until around a year later, when the respondent was served with a notice to quit by one of his brothers, whereupon he sought remedy by way of a conveyance from the appellant to support his right to title. Given that the appellant was illiterate, it became apparent that she had not taken the steps needed to complete such a disposition, but had instead relied upon her own insistence that she would bequeath him the land by way of a will, which was yet to be drafted.

When heard at the district court, the judge ruled in favour of the respondent, whereupon the appellant contested it within the Supreme Court of Kansas. Here, reference was made to s.32 of the Restatement Law of Contracts which reads:

“In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.”

While s.90 of the same document reads:

“A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance, is binding if injustice can be avoided only by enforcement of the promise.”

Which translated that despite a failure to endorse her intentions through written expression, the appellant had by virtue of her repeated declarations, created an enforceable contract of disposition that by extension had led to the relocation of the respondent on the pretence that title was both implied and ultimately due through either deed or testamentary powers. It was this irreversible fact that led the Court to uphold the previous decision and dismiss the appeal outright on grounds that financial remedy would not be sufficient to the cause in hand.

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Alaska Packers Association v. Domenico

The legal enforcement of a binding contract requires consideration to both bargaining parties, and so on this occasion, the demands of an established labour force prove their undoing when overlooking the fundamental principles of any written agreement.

In 1900, a commercial fishing enterprise recruited the services of a number of seamen and deck hands for the purposes of catching salmon. Before departing San Francisco, the now appellants accepted and signed individual employment contracts, on grounds that they would be paid between $50-$60 per person, with two additional cents for every salmon caught.

After docking in Alaska a month later, the men ceased working and demanded that the ship’s superintendent pay them $100 each, or risk losing them entirely. With no means with which to replace them, and after failing to placate their objections, the superintendent agreed to pay the increased sums, after which duplicate contracts were printed and signed before the local Shipping Commissioner, despite the superintendent stressing that he was unauthorised to endorse the new contracts.

Upon return to San Francisco, the appellants demanded their increased payments, however the respondent employers refused to acknowledge anything other than the original contract, and so litigation was bought against them on grounds that the fishing nets supplied were defective, and therefore counter to their chances of earning extra money, as per the original agreement.

The Northern California District Court took issue with the principles of the appellants claims, as to provide defective nets would by effect, have reduced the employers profits and subsequent means of operation, therefore it was held that refusal to perform the contract was unlawful, however the court also held that:

“Under such circumstances, it would be strange, indeed, if the law would not permit the defendant to waive the damages caused by the libelants’ breach, and enter into the contract sued upon, a contract mutually beneficial to all the parties thereto, in that it gave to the libelants reasonable compensation for their labor, and enabled the defendant to employ to advantage the large capital it had invested in its canning and fishing plant.”

At which point judgment was made in favour of the appellants, despite glaring disparities of fact.

Upon further challenge, the court of appeals drew reference to the statements made by the superintendent, and noted that any contract entered into under duress, and without due consideration was, without question, unenforceable, as had been outlined in King v. Railway Co. where the court ruled that:

“No astute reasoning can change the plain fact that the party who refuses to perform, and thereby coerces a promise from the other party to the contract to pay him an increased compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the necessities of the other party.”

King v. Railway Co.

And so therefore:

“There can be no consideration for the promise of the other party, and there is no warrant for inferring that the parties have voluntarily rescinded or modified their contract. The promise cannot be legally enforced, although the other party has completed his contract in reliance upon it.”

King v. Railway Co.

Thus it was for this simple and perhaps obvious reason, that the appeal was dismissed and judgment reversed back in favour of the respondents.

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FA Tamplin Steamship Co Ltd v Anglo Mexican Petroleum Products Co Ltd

Rescission of contract under abnormal circumstances can often be cited as frustration, yet unless the parties bargaining are in agreement as to the essence of the contract, there is little a court can do to amend the terms to suit.

In winter of 1912, a ship owner agreed to let one of their fleet to a commercial entity for a period of five years, with no specific requirements as to its use, aside from which types of cargo were acceptable for carriage. Just over two years into the agreement, the vessel was requisitioned by the British Government under Royal Proclamation, an act which would result in full compensation payable to the affected parties upon its safe return.

Having planned to return the ship after only two months, the Admiralty Transport Service informed the respondents that they would in fact be extending their requisition indefinitely, thereby denying the respondents any future use of the ship until the end of its military use. This left the appellants under the assumption that by an alteration in the use of the vessel, the contract had now expired and so no further payments were due, and that when issuing compensation, the State was liable for the loss suffered only by the appellants, as they were legally the owners of the ship at the time of requisition, a position fiercely argued by the respondents.

Having failed to settle the matter through arbitration, the case went to trial, during which the judge held that the requisitioning of the ship did not constitute a termination of the contract, but instead served to suspend the contract until such time that the vessel was returned, which at the point of litigation, was looking unlikely to happen within the agreed five year period.

When presented to the Court of Appeal, the Court affirmed the original judgment, at which point the matter was placed again before the House of Lords, who first examined the statement by Lord Blackburn in Dahl v Nelson, Donkin & Co, in which he stressed:

“[A] delay in carrying out a charterparty, caused by something for which neither party was responsible, if so great and long as to make it unreasonable to require the parties to go on with the adventure, entitled either of them, at least while the contract was executory, to consider it at an end.”

Dahl v Nelson, Donkin & Co

However, art.20 of the charterparty agreement also noted that:

“[T]he act of God, perils of the sea, fire, barratry of the master and crew, enemies, pirates and thieves, arrests and restraints of princes, rulers, and peoples, collisions, stranding and other accidents of navigation always excepted, even when occasioned by negligence, default or error in judgment of the pilot, master, mariners or other servants of the shipowner.”

Were exceptions to any rule that might provide for the end of the contract through unforeseen events, therefore the respondents argument that the contract was merely suspended was in fact validated by the imposition by the State during a time of war, and that despite implications forwarded by the appellants, the Court was in no position to argue against an express term of a contract, no matter how inconvenient that might be to those involved. It was for that simple reason that the House ruled by majority in favour of the Appeal Court judgment and dismissed the appeal with costs, while holding that:

“When a lawful contract has been made and there is no default, a Court of law has no power to discharge either party from the performance of it unless either the rights of someone else or some Act of Parliament give the necessary jurisdiction.”

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Krell v Henry

Performance of a contract since frustrated through unexpected events, lies at the heart of a matter between a landlord and potential tenant, who having secured a room for the purposes of viewing a landmark event, was left unable to realise it when those plans were thwarted through a sudden cancellation.

In 1902, the appellant had negotiated the private use of a room within a property owned by the respondent, who for reasons of convenience, had recently offered the whole property for rent for a six-month period. Having been aware that the King’s Coronation procession was expected to pass along the Pall Mall, the appellant read that the respondent was offering a single room for a fixed time and sum to those wishing to take advantage of the view afforded. By means of letter, the two parties agreed upon the arrangement, after which the appellant paid by cheque, a sum of 25l with a further 50l outstanding.

Unfortunately, the date of the procession was put back, at which point the appellant refused to pay the outstanding 50l, thereby prompting the respondent to seek recovery of the balance owed, while the appellant counter-claimed for the 25l on grounds that the contract was unenforceable and the deposit due for return.

In the fist hearing, the court awarded in favour of the respondent on both counts, relying upon the principle that the contact rested upon the presence of the Coronation procession, which for the reasons stated had not occurred, and so therefore the contract was unable to be completed to the satisfaction of both parties.

Taken to the Court of Appeal, the facts were revisited, along with the earlier facts of Taylor v Caldwell, in which it was remarked:

“[W]here, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfilment of the contract arrived, some particular specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be considered a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.”

Taylor v Caldwell

It was this approach that gave effect to the cancellation of the Coronation procession as being an event that was, as stated in Baily v De Crespigny:

“[O]f such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, and that they are not to be held bound by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened.”

Baily v De Crespigny

While in ‘Taylor on Evidence’ (vol II) it was also stressed that:

“It may be laid down as a broad and distinct rule of law that extrinsic evidence of every material fact which will enable the Court to ascertain the nature and qualities of the subject-matter of the instrument, or, in other words, to identify the persons and things to which the instrument refers, must of necessity be received.”

So it was for these fundamental reasons that the Court agreed with the previous decision, and ruled again in favour of the respondent, while reminding the court that:

“[W]hatever is the suggested implication – be it condition, as in this case, or warranty or representation – one must, in judging whether the implication ought to be made, look not only at the words of the contract, but also at the surrounding facts and the knowledge of the parties of those facts.”

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Grant v Bragg

Sadly as can sometimes happen, the mediation by a solicitor can prove the undoing of bargaining between parties, when for one reason or another, the third party attempts to manipulate matters to the detriment of those he was initially employed to serve.

On this occasion, a shareholder sale agreement was drafted by two company co-directors, who upon his retirement, the respondent had decided to relinquish his stake holding for a sum of around £347,000. During the preliminary stages of the contract, numerous oral agreements were made with little to no conflict, however as time progressed, the matter became complicated through the construction of a draft agreement, which had been worded by a second firm of solicitors.

At the point of litigation, communication had deteriorated to a quick succession of emails between the respondent and the solicitor alleged to be acting for both parties. Within these exchanges were a number of comments and misinterpretations that ultimately derailed the negotiations, however for the purposes of the clarification the timeline was as follows:

(1) A draft agreement was made on behalf of both parties, subject to mutual consent to document wording.

(2) The respondent’s solicitors suggested an amendment to the terms of the agreement.

(3) The suggestion was construed by the appellant as a rejection of the agreement.

(4) The mediating solicitor construed from a telephone conversation, that the respondent was refusing to sign the agreement without knowledge of the appellant’s future plans.

(5) The respondent expressed that he perceived the appellant to be contractually obliged to purchase the shares.

(6) The respondent denied he had any interest in the future of the company or the appellant.

(7) The mediating solicitor imposed a time restriction for acceptance of the draft agreement.

(8) The mediating solicitor withdrew his services upon expiration of the time restriction.

(9) The respondent later agreed to sign the agreement, despite his earlier reservations.

In the first hearing, the judge found that the discussions within the first and last email were tantamount to a binding contract, and so awarded accordingly. However, at the Court of Appeal, a reexamination of the facts and the chronology of events, painted quite a different picture.

Here, it was held that while the contract itself was not subject to time penalties, the position adopted by the ‘mediating’ solicitor was one that implied how all terms of the bargain were now defined through his presence, therefore by the imposition of a threshold upon which to contract, the eventual acceptance by the respondent was both after the fact and thereby null in effect, thus it was for that reason (and perhaps unnecessary element of the negotiation), that the appeal was upheld and judgment awarded to the appellant, while holding that:

“[T]here is a distinction between a counter-offer or a refusal, which does put an end to an offer, and a request for further information which does not amount to a new offer but is to an investigation of the offering party’s position.”

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Specific Performance

Under the law of contract there are times when two parties can no longer honour their agreement and at which point one of them is left wanting, while in some instances the award of monetary damages is enough to provide remedy, however there are also those where the loss is irreplaceable.

On those occasions, the court can legally impose a duty on those no longer willing (or seemingly able) to perform the task they originally contracted to undertake. While in certain cases the source of non-performance can also stem from frustration the criteria here is one of general breakdown of communication or even unresolvable conflict that while perhaps entirely warranted on the part of the negator, leaves the claimant with no other option than to sue.

Once agreed upon, an order for specific performance will comprise two elements (i) declaration of the order and (ii) provision of consequential directions to that effect.

It is also important to note that where a contractual breach is only anticipated the court can still require specific performance or provide injunctive measures, as was outlined by Lord Tucker in Hasham v Zenab:

“In equity all that is required is to show circumstances which will justify the intervention by a court of equity. The purchaser has an equitable interest in the land and could get an injunction to prevent the vendor disposing of the property.”

Hasham v Zenab

In this instance, the potential vendor immediately tore up a signed contract for sale of land after learning that the acreage was greater in the conveyance than as she had orally agreed.

The language barrier between the two parties thus prevented clear understanding of what was at stake; and so left with a collapsed purchase the buyer sought specific performance prior to the completion date, upon which the court pondered its feasibility before dismissing the claim upon grounds of falsified evidence on both sides.

A positive example of specific performance can however be found in Rosesilver v Paton where a purchaser entered into a contract to acquire residential property, after which the vendor argued that the terms of the agreement relied on reimbursement of the part-purchase payments upon winning their two pending litigation cases, therefore the intention to sell was implied at the outset. Having examined the inconsistency of the vendor’s argument the judge dismissed additional claims of fiduciary breach and undue influence on a lack of cohesive evidence before ruling that the sale must now be completed.

When reaching summary judgement Mann J concluded:

“I do not consider that Mr Paton has advanced a sufficiently clear and plausible case for saying that there was any form of binding (in any sense) arrangement, contemporaneously with the contract and its variation, which would restrict or restrain the enforcement of the contract.”

Rosesilver v Paton

There are of course a number of factors that can hinder the ability to undertake a contract of engagement and these can range from disability and illness, personal conflict, mistrust based upon recent behaviour and costly supervision to enforce the performance.

Likewise, a failure to seek remedy for a protracted period can also work against a claimant as the negator could claim estoppel under the doctrine of laches.

Ultimately though the choice to pursue specific performance will always run with an attached risk of further complications, as the inherent trust between contracting parties will have been irreversibly eroded once litigation commences, therefore financial damages should never be ruled out unless all other options have been exhausted.