Contract and Torts Notes PDF

INTRO TO CONTRACT AND TORTS 1. Definition of Contract Definition: A legally binding agreement, written or unwritten. Example: Booking a ride via an app implies agreement to pay. 2. Purposes of Contract Law Purpose Explanation B...

INTRO TO CONTRACT AND TORTS 1. Definition of Contract Definition: A legally binding agreement, written or unwritten. Example: Booking a ride via an app implies agreement to pay. 2. Purposes of Contract Law Purpose Explanation Binding Promises Ensures parties fulfill obligations and maintain trust. Limits Enforcement Gratuitous promises (no exchange) are not enforceable. Example: Gift promises without return value. Compensation Focus on compensating the innocent party, ensuring they are in the position they would have been. Encourages Penalizes breaches, encouraging compliance with contracts. Performance 3. Basic Terms Offer: A proposal by one party to another. Acceptance: Agreement to the offer's terms. Consideration: Exchange of value between parties. Bilateral Contract: Obligations for both parties. Unilateral Contract: Obligation only for one party. Breach: Failure to fulfill contractual obligations. Remedies: Compensation or enforcement methods. Void/Valid/Voidable Contracts: Classification based on enforceability and legality. 4. Types of Contracts Basis Types Explanation Formation Express, Implied Express: Stated terms (oral/written). Example: Signing a document. Implied: Arising from conduct. Example: Boarding a bus implies paying the fare. Nature Bilateral, Unilateral Bilateral: Both parties obligated (e.g., Sale). Unilateral: Obligation only for offeror (e.g., Reward for finding lost pet).  Validity Valid, Void, Valid: Legally enforceable. Voidable, Illegal Void: Missing essential elements. Voidable: Deficient in free consent. Illegal: Unlawful object (e.g., contract for illegal activities). Enforceability Unenforceable Deficient in formalities (e.g., insufficient stamp duty). Becomes enforceable upon rectification. 5. Elements of a Contract Agreement: Offer and acceptance. Intention: To create legal relations. Consideration: Value provided by both parties. Certainty: Clear terms. Capacity: Legal ability to contract. Highlighted Points for Revision Smith v. Hughes (1871): Intention judged by reasonable perception, not hidden intent. L’Estrange v. Graucob (1934): Signing binds, even without understanding the terms. Gratuitous promises are unenforceable (e.g., Gift without exchange). FORMATION OF A VALID CONTRACT - OFFER #1 1. What is an Offer? Definition: ○ A proposal indicating terms on which the offeror is prepared to contract. ○ Becomes binding upon acceptance. Requirements: ○ Intention to be bound. ○ Clear terms. Not open for interpretation or negotiation Forms of Offers: ○ Express: Explicitly stated (e.g., "Ann offers to sell her CD player for $200"). ○ Implied: Inferred from conduct (e.g., placing items at a checkout). 2. Types of Offers Type Details Example To Specific Bilateral contract; directed to a specific "Amy offers to sell her laptop to Person individual. Adam."  To the Public Unilateral contract; directed to everyone. "Reward offered for finding a lost pet." 3. Invitation to Treat (I.T.T.) Definition: ○ A preliminary step inviting others to make an offer. ○ Acceptance of an I.T.T. is an offer, not a contract. ○ Still open for negotiation → not conclusive Key Cases: ○ Grainger & Sons v. Gough (1896): Price list = I.T.T., not an offer. ○ Carlill v. Carbolic Smoke Ball Co. (1893): Ad for unilateral contract = offer. Distinguishing the difference Offer and ITT Distinguishing an Offer from an Invitation to Treat (I.T.T.) Criteria Offer Invitation to Treat (I.T.T.) Definition A clear, definitive proposal expressing A preliminary statement inviting others willingness to be bound upon to make offers, without intent to be acceptance. bound immediately. Legal Effect Acceptance creates a binding contract. Acceptance does not create a contract; it is merely an offer to the inviter, who may accept or reject it. Intention The offeror shows a firm intention to The inviter demonstrates a willingness enter into a contract upon acceptance. to negotiate or consider offers. Communication Specific terms are communicated, with Terms are presented for consideration, the intention to form a binding without a commitment to immediate agreement. acceptance. Examples "I will sell my car to you for $10,000." Displaying a car with a price tag in a shop window. Case Examples - Carlill v. Carbolic Smoke Ball Co. - Partridge v. Crittenden (1968): (1893): Advertisement for a unilateral Advertisement for bird sales was an contract was an offer. I.T.T. Scope of Audience Can be made to an individual or the Typically directed at a broader public at large. audience, inviting multiple responses or offers.  Ability to Revoke Can be revoked anytime before Cannot be accepted as is; invites acceptance unless consideration is further action (e.g., submission of an given to keep it open. offer). Examples in - Selling a car to a specific person.- - Display of goods in shops.- Practice Reward advertisements in unilateral Circulation of price lists.- Auction calls contracts. for bids. - if an offer is missing its key terms → becomes an invitation to treat 4. Types of Invitations to Treat Type Details Cases Advertisements - Unilateral ads = Offer (e.g., Carlill Carlill v. Carbolic Smoke Ball Co.; case).- Bilateral ads = I.T.T. (e.g., Partridge v. Crittenden (1968). Partridge case). Display of Goods Display = I.T.T., not an offer. Pharmaceutical Society v. Boots (1952); Fisher v. Bell (1961). Timetables/Tickets Legal position unclear; legislation No definitive case; relevant. context-dependent (e.g., Redbus app, e-hailing services). Auctions Auctioneer's call = I.T.T., bids = Offers. Payne v. Cave (1789). Types of Invitations to Treat (I.T.T.) An Invitation to Treat (I.T.T.) is a preliminary action inviting others to make offers. Here are the main types, with examples and case references: 1. Advertisements Definition: Advertisements are usually invitations to treat rather than offers, as they invite responses or negotiations rather than forming a binding contract immediately. Key Examples: 1. Advertisements for Bilateral Contracts: Ads for specified goods at specific prices (e.g., catalog or newspaper listings). Case: Partridge v. Crittenden (1968): A magazine advertisement for selling wild birds was deemed an I.T.T. because it lacked intent to form a binding contract and invited offers. 2. Advertisements for Unilateral Contracts: Ads that specify conditions for acceptance without further negotiation. Case: Carlill v. Carbolic Smoke Ball Co. (1893):  The ad promised £100 for anyone who used the product as directed and still contracted influenza. The court ruled this was an offer, not an I.T.T., as the conditions were explicit and binding. 2. Display of Goods in Shops Definition: Items displayed in a shop or on shelves are invitations to treat. The customer makes the offer to purchase when they take the item to the cashier, and the shopkeeper accepts it. Key Examples: ○ Pharmaceutical Society v. Boots (1952): Boots introduced a self-service shopping system. The court ruled that items on the shelves were an I.T.T., and the contract was formed at the cashier's approval. ○ Fisher v. Bell (1961): A shopkeeper displayed a flick knife with a price tag in the window. The court held this was an I.T.T., not an offer, as displaying items for sale is not a binding proposition. 3. Price Lists and Catalogues Definition: Price lists or catalogues circulated by sellers are invitations to treat, as they invite potential buyers to place orders that the seller can accept or reject. Key Examples: ○ Grainger & Sons v. Gough (1896): A wine merchant distributed a price list. The court ruled it was an I.T.T. since accepting orders depended on availability and seller discretion. 4. Auctions Definition: At auctions, the auctioneer’s call for bids is an I.T.T., and bids from participants are offers. The contract is formed when the auctioneer accepts the highest bid by striking the hammer. Key Example: ○ Payne v. Cave (1789): A bidder withdrew their bid before the hammer fell. The court held that bids are offers, and no contract is formed until the auctioneer accepts by striking the hammer. 5. Tenders Definition: Inviting tenders is an I.T.T. as it seeks offers from interested parties. Submitting a tender is considered an offer, which the inviter can accept or reject. Key Example: ○ Case law (not mentioned in the document): A typical example includes construction contracts where companies invite tenders for specific projects. 6. Timetables and Transport Tickets Definition: Bus or train timetables and tickets are usually considered I.T.T., though the point of contract formation can depend on the specific circumstances. Key Example: ○ No definitive ruling, but the situation is discussed under public transport legislation and real-world practices. For example, boarding a bus after paying the fare can be considered acceptance of an offer implied by the timetable. 7. Invitations to Negotiate or Bargain Definition: Any preliminary stage in negotiations where one party invites the other to discuss terms, with no intent for the statement to be binding. Key Example: ○ Gibson v. Manchester City Council (1979): A letter from the council stating they "may be prepared to sell" a house was deemed an I.T.T. as it lacked intent to form an immediate binding agreement. Importance of I.T.T. I.T.T. allows flexibility for businesses and individuals to present offers without immediate legal obligations. It ensures that agreements are deliberate and mutual, reducing the risk of unintended contractual liabilities. Let me know if you'd like to explore these further or focus on specific scenarios! 5. Communication of Offer Offer must be communicated to the offeree to be valid. Example: If an offeror sends a proposal but the offeree is unaware of it, no contract exists. 6. Termination of Offer Reason Explanation Rejection by Offeree Offer ends if the offeree declines. Revocation by Offeror Can be revoked before acceptance, provided it is communicated. Lapse of Time Ends after a specified time or after a reasonable period. Failure of Condition If a condition for the offer's validity is not met, the offer is terminated. Highlighted Points for Revision Key Cases: ○ Carlill v. Carbolic Smoke Ball Co. (1893): Unilateral contracts can be offers. ○ Partridge v. Crittenden (1968): Ads for bilateral contracts are I.T.T., not offers. ○ Payne v. Cave (1789): Bids in auctions are offers, auctioneer's call is I.T.T. Offers vs. I.T.T.: ○ Offers = Acceptance creates a contract. ○ I.T.T. = Encourages offers, not a contract upon acceptance. ELABORATION ON THE FACTS OF EACH CASE Very important to memorise 1. Carlill v. Carbolic Smoke Ball Co. (1893) Facts: ○ The Carbolic Smoke Ball Company advertised a product claiming it could prevent influenza. ○ The advertisement included a promise to pay £100 to anyone who used the smoke ball as instructed and still contracted influenza. ○ Mrs. Carlill followed the instructions but still got influenza. She claimed the £100 reward. ○ The company argued that the advertisement was not a contract but an invitation to treat (I.T.T.). Outcome: ○ The court held that the advertisement was a unilateral offer to the world at large, and Mrs. Carlill's use of the product as per the instructions constituted acceptance. 2. Grainger & Sons v. Gough (1896) Facts: ○ Grainger, a wine merchant, distributed price lists for wines. ○ Gough attempted to purchase wine based on the listed price, but Grainger did not fulfill the order. ○ Gough argued that the price list constituted an offer, which he had accepted by attempting to purchase. Outcome: ○ The court determined that the price list was an invitation to treat, not an offer. The final agreement would only be formed when Grainger accepted the order. 3. Partridge v. Crittenden (1968) Facts: ○ Partridge placed an advertisement for the sale of wild birds in a magazine. ○ Selling such birds without a license was illegal under the Protection of Birds Act. ○ He was charged for offering to sell wild birds, but he argued that the advertisement was an invitation to treat. Outcome:  ○ The court held that the advertisement was an invitation to treat, not an offer, as advertisements generally invite others to make offers. 4. Pharmaceutical Society v. Boots (1952) Facts: ○ Boots introduced a self-service system where customers could pick items from shelves and pay at the cashier. ○ The Pharmaceutical Society argued that the display of drugs constituted an offer, and taking items off the shelf amounted to acceptance, violating pharmacy laws. Outcome: ○ The court ruled that the display of goods was an invitation to treat, and the offer occurred when customers presented the items at the cashier. Acceptance took place at the cashier’s approval. 5. Fisher v. Bell (1961) Facts: ○ A shopkeeper displayed a flick knife in a shop window with a price tag. ○ Under the Restriction of Offensive Weapons Act, offering to sell such weapons was prohibited. ○ The shopkeeper was charged for offering to sell the knife. Outcome: ○ The court held that displaying an item in a shop window was an invitation to treat, not an offer. Therefore, the shopkeeper was not guilty. 6. Gibson v. Manchester City Council (1979) Facts: ○ Manchester City Council sent a letter stating they "may be prepared to sell" a house to Gibson. ○ Gibson completed an application to purchase but received no formal acceptance. ○ The council later refused to sell the house, and Gibson sued, claiming the letter was an offer. Outcome: ○ The House of Lords held that the letter was not an offer but an invitation to treat. No contract was formed. 7. Storer v. Manchester City Council (1974) clear agreement → offer was made Facts: ○ Unlike in Gibson, Storer received a clear communication from Manchester City Council stating, "If you sign the agreement and return it, we will sign it."  ○ Storer signed and returned the agreement, but the council later refused to complete the sale. Outcome: ○ The court held that the council’s letter constituted a valid offer, and Storer’s return of the signed agreement was acceptance, creating a binding contract. 8. Payne v. Cave (1789) Facts: ○ At an auction, Cave made the highest bid but withdrew it before the auctioneer’s hammer fell. ○ Payne, the seller, argued that Cave’s bid constituted an acceptance, creating a binding contract. Outcome: ○ The court ruled that a bid at an auction is an offer, which can be withdrawn anytime before the auctioneer accepts it by striking the hammer. FORMATION OF A VALID CONTRACT - OFFER #2 1. Communication of an Offer Key Points Case Examples An offer cannot be accepted unless the offeree Gibbons v. Proctor (1891): A police reward was is aware of its existence and terms. validly claimed despite initial lack of awareness. The communication is complete when the offer R v. Clarke (1927): A claimant could not accept comes to the knowledge of the offeree. an offer (reward) without being aware of it. Case Facts: 1. Gibbons v. Proctor (1891): ○ A reward was promised for information leading to a criminal's arrest. ○ A police officer provided the information before knowing about the reward. ○ Outcome: The court held that communication of the offer became effective once the officer became aware of it, making the claim valid. i. The court ruled that an offeree can claim an offer if they fulfill the terms after becoming aware of it. ii. Even though the police officer provided the information before knowing about the reward, the claim was valid because the communication became effective when the officer later learned of the offer. 2. R v. Clarke (1927): ○ Clarke gave information leading to the capture of criminals but later claimed he had forgotten about the reward offer at the time.  ○ Outcome: The court ruled he could not claim the reward because he acted without knowledge of the offer. i. The court held that acceptance of an offer requires the offeree to act with knowledge of the offer and its terms. ii. Clarke acted without remembering the offer’s existence, meaning he did not perform the act in reliance on the offer. Thus, he was not entitled to the reward. 2. Termination of an Offer Method Explanation Case Examples Rejection The offeree explicitly rejects the Example: If Lee offers to sell his car to Raj, offer. Cannot later be and Raj rejects it, the offer is terminated. reconsidered. Counter-Offer A counter-offer rejects the original Hyde v. Wrench (1840): A counter-offer offer and introduces new terms. terminated the original offer. However, merely asking for more information is not considered a Stevenson Jaques & Co. vs Mclean counter offer. (1880): An example of mere inquiry Lapse of Time Offers expire after the specified Ramsgate Victoria Hotel v. Montefiore time or a reasonable time if none is (1866): Delay caused the offer to lapse. stated. Dickson v. Dodds (1875): Case establishes indirect communication of revocation can be valid if the offeree knows the offer is no longer open Failure of If a precondition is unmet, the offer Financings Ltd v. Stimson (1962): Offer Precondition cannot be accepted. lapsed when the car's condition changed before acceptance. Death of a Party Death of the offeror or offeree Bradbury v. Morgan (1862): If offeree is terminates the offer under specific unaware of offeror's death, contract might conditions. still proceed. Carter v. Hyde (1923): death of party impacts the validity of an offer depending on the nature of the contract and knowledge of offeree.  Revocation The offeror withdraws the offer Byrne v. Van Tienhoven (1880): before acceptance. Revocation must be communicated before acceptance. Case Facts: 1. Hyde v. Wrench (1840): ○ Wrench offered to sell a farm for £1,000. Hyde counter-offered £950, which Wrench rejected. ○ Hyde later attempted to accept the original offer of £1,000. ○ Outcome: i. The court determined that a counter-offer amounts to a rejection of the original offer. ii. Hyde’s counter-offer of £950 terminated Wrench’s original offer of £1,000. Hyde could not later accept the original offer after Wrench rejected the counter-offer. 2. Stevenson Jaques & Co. vs Mclean (1880): ○ McLean offered to sell iron at a specific price, stating that the offer was open until Monday. ○ Stevenson Jaques & Co. sent a telegram inquiring whether they could defer payment terms. ○ McLean did not respond and instead sold the iron to someone else. Stevenson then attempted to accept the original offer but was informed the iron was sold. ○ McLean argued that the inquiry was a counter-offer that terminated the original offer. ○ Outcome: i. The court held that Stevenson’s telegram was a mere inquiry and not a counter-offer, meaning the original offer remained open. ii. McLean's failure to communicate the sale before Stevenson's acceptance meant McLean was in breach of contract. 3. Ramsgate Victoria Hotel v. Montefiore (1866): ○ Montefiore offered to buy shares in June, but the hotel accepted in November. ○ Outcome: i. The court ruled that an offer lapses after a reasonable period if no time frame is specified. ii. Montefiore’s offer to buy shares was delayed for months before being accepted, and the court held the delay unreasonable, causing the offer to lapse. 4. Dickson v. Dodds (1875): ○ Dodds offered to sell property to Dickinson and promised to keep the offer open until Friday. ○ Before Friday, Dodds sold the property to a third party and Dickinson learned of this sale through a mutual acquaintance. ○ Despite this, Dickinson attempted to accept the offer before the Friday deadline. ○ Outcome: i. The court held that the offer was effectively revoked when Dickinson learned of the sale to the third party, even though the revocation was not directly communicated by Dodds. ii. An offer can be revoked at any time before acceptance, provided the offeree becomes aware of the revocation. 5. Financings Ltd v. Stimson (1962): ○ An offer to sell a car was conditional on the car being in the same condition until acceptance.  ○The car was damaged before acceptance. ○Outcome: i. The court held that the offer lapsed because the condition precedent (car remaining in the same condition) was not met. ii. A valid contract could not be formed since the car was damaged before the acceptance of the offer. 6. Bradbury v. Morgan (1862): ○ An offer to provide credit continued even after the offeror's death, as the offeree was unaware of the death. ○ Outcome: i. The court ruled that an offer might remain open after the offeror’s death if the offeree is unaware of the death. ii. In this case, the executors of the deceased offeror were bound to fulfill the terms of the offer because acceptance occurred without knowledge of the death. 7. Carter v. Hyde (1923): ○ Carter attempted to accept an offer after Hyde, the offeror, had passed away. ○ The acceptance was made without Carter being aware of Hyde’s death. ○ Outcome: i. The court ruled that an offer lapses if it involves personal performance by the deceased or if the offeree knows of the offeror’s death. ii. However, in cases where the offeree is unaware of the offeror’s death and no personal performance is required, a valid contract may still be formed. iii. In this case, the acceptance was not valid as the offer could not continue due to the nature of the agreement. 8. Byrne v. Van Tienhoven (1880): ○ An offer was posted but revoked by a later letter before acceptance. ○ The acceptance reached before the revocation was communicated. ○ Outcome: i. The court held that revocation of an offer is only effective when it is communicated to the offeree. ii. Since the offeree accepted the offer before learning of its revocation, a valid contract was formed, and the revocation was ineffective. 9. Payne v. Cave (1789): ○ At an auction, Cave made the highest bid for an item but withdrew it before the auctioneer’s hammer fell. ○ The auctioneer attempted to enforce the sale, arguing that the highest bid created a binding contract. ○ Outcome: i. The court ruled that a bid at an auction is an offer, and no contract is formed until the auctioneer accepts it by striking the hammer. ii. Since Cave withdrew his bid before acceptance, no contract was formed. iii. This case establishes that offers can be revoked at any time before they are accepted. 10. Routledge v. Grant (1828): ○ Grant made an offer to sell his house, stating the offer would remain open for six weeks. ○ However, before the six weeks expired, Grant withdrew the offer, and Routledge later attempted to accept it. ○ Outcome: i. The court held that an offer can be revoked at any time before acceptance, even if the offeror specifies a time period during which the offer will remain open. ii. Since the revocation was communicated to Routledge before he accepted the offer, no contract was formed. iii. This case emphasizes that promises to keep an offer open are not binding unless supported by consideration. 3. Counter-Offer vs. Mere Inquiry Aspect Counter-Offer Mere Inquiry Definition Introduces new terms and rejects the Seeks clarification or further information original offer. without rejecting the original offer. Effect on Terminates the original offer. Keeps the original offer open. Offer Case Hyde v. Wrench (1840): Counter-offer Stevenson v. McLean (1880): Mere inquiry Example terminated the original offer. did not terminate the original offer. Case Facts: 1. Stevenson v. McLean (1880): ○ The offeror proposed to sell iron. The offeree asked if payment could be deferred, which the offeror did not respond to. ○ The offeree later accepted the original offer, but the offeror claimed the inquiry was a counter-offer. ○ Outcome: The court ruled the inquiry was not a counter-offer but a request for clarification, leaving the original offer open. 4. Revocation of an Offer Key Points Case Examples Revocation must be communicated before Byrne v. Van Tienhoven (1880): Revocation was acceptance to be effective. ineffective as it was received after acceptance. Once accepted, the offer cannot be Payne v. Cave (1789): An auction bid can be revoked revoked. before the hammer falls. Case Facts: 1. Payne v. Cave (1789): ○ A bidder withdrew a bid at an auction before the auctioneer's hammer fell. ○ Outcome: The court held that bids are offers that can be revoked anytime before acceptance by the auctioneer. 2. Routledge v. Grant (1828):  ○ Grant offered to sell a house and stated the offer was open for six weeks but revoked it within that period. ○ Outcome: The court ruled the revocation was valid, as it was communicated before acceptance. Highlighted Points for Revision Communication: An offer is valid only when communicated to the offeree. Termination: Offers terminate via rejection, counter-offer, lapse of time, failure of precondition, death, or revocation. Case Law: ○ Gibbons v. Proctor: Awareness of the offer needed for acceptance. ○ Hyde v. Wrench: Counter-offer terminates the original offer. ○ Ramsgate v. Montefiore: Unreasonable time lapse terminates an offer. ○ Byrne v. Van Tienhoven: Revocation must be communicated before acceptance. FORMATION OF A VALID CONTRACT - ACCEPTANCE What is Acceptance? Definition: ○ Elliot and Quinn: Unconditional agreement to all terms of an offer. ○ Stephen Graw: A final and unqualified assent to the offer's terms made as specified by the offeror (oral, written, or implied). ○ Merriam-Webster Dictionary: Agreeing expressly or by conduct to another's offer, forming a binding contract. Key Principles: ○ Must be unconditional and align with the precise terms of the offer. ○ Requires communication to the offeror to be valid. ○ Non-accepted offers do not remain open indefinitely. Methods of Acceptance Scenarios Situation Outcome Offer is countered Counter-offer; initial offer no longer valid. Neutral response Neither acceptance nor rejection, leaves the option to accept later open.  Negotiation Courts evaluate the entire negotiation process to determine agreement. Cases: 1. Hyde v. Wrench (1840): a. Wrench offered to sell a farm for £1,000. Hyde counter-offered £950, which Wrench rejected. b. Hyde later attempted to accept the original offer of £1,000. c. Outcome: i. The court determined that a counter-offer amounts to a rejection of the original offer. ii. Hyde’s counter-offer of £950 terminated Wrench’s original offer of £1,000. Hyde could not later accept the original offer after Wrench rejected the counter-offer. 2. Stevenson Jaques & Co. vs Mclean (1880): a. McLean offered to sell iron at a specific price, stating that the offer was open until Monday. b. Stevenson Jaques & Co. sent a telegram inquiring whether they could defer payment terms. c. McLean did not respond and instead sold the iron to someone else. Stevenson then attempted to accept the original offer but was informed the iron was sold. d. McLean argued that the inquiry was a counter-offer that terminated the original offer. e. Outcome: i. The court held that Stevenson’s telegram was a mere inquiry and not a counter-offer, meaning the original offer remained open. ii. McLean's failure to communicate the sale before Stevenson's acceptance meant McLean was in breach of contract. 1. Conditional Acceptance Definition: An acceptance that does not unconditionally agree to the terms of the offer but instead introduces new terms or conditions. Key Characteristics: Not a True Acceptance: ○ A conditional acceptance is effectively a counter-offer, and it terminates the original offer. ○ The original offeror must agree to the new terms for a contract to be formed. Neutral Effect: ○ If the conditions are not agreed upon, the original offer is neither accepted nor rejected outright. Case Examples: Hyde v Wrench (1844):  ○ Facts: Wrench offered to sell a farm for £1,000. Hyde responded with a counter-offer of £950, which Wrench rejected. Hyde later attempted to accept the original £1,000 offer. ○ Judgment: The court held that the counter-offer had terminated the original offer, and it could no longer be accepted. Key Points: 1. Conditional acceptance can be used in negotiations. 2. It allows the offeree to propose modifications to the contract terms. 2. Acceptance by Silence Definition: A situation where an offeror claims that the offeree's silence or inaction constitutes acceptance of the offer. Key Characteristics: General Rule: 1. Silence cannot constitute acceptance unless the offeree explicitly agrees that silence will signal their intent to accept. Offeror Cannot Impose Silence: 1. The offeror cannot make a stipulation like, “If I do not hear from you, I will assume acceptance.” Exceptions: 1. Implied Agreement: If both parties have an established relationship or prior agreement that silence signifies acceptance. 2. Unilateral Contracts: Performance (not silence) is required for acceptance. Case Example: Felthouse v Bindley (1863): ○ Facts: Felthouse wrote to his nephew, stating, “If I hear no more, I consider the horse mine.” The nephew didn’t reply but intended to sell the horse to Felthouse. The horse was mistakenly sold at auction. ○ Judgment: The court held that silence does not amount to acceptance. There was no binding contract as the nephew did not communicate acceptance. Illustration: An offeror writes, “If I don’t hear from you by Friday, I will assume you have accepted.” The offeree’s silence alone does not create a binding contract unless the offeree explicitly agreed to such terms. Key Points on Acceptance by Silence 1. Silent Acceptance is generally invalid. 2. Exceptions Exist in cases of: ○ Implied agreement through a pattern of conduct. ○ Situations where prior dealings suggest that silence is an acceptable method of acceptance. Acceptance by Express Communication Definition: Acceptance is explicitly communicated to the offeror either orally or in writing. Key Features: 1. Clear and Explicit: ○ The offeree directly communicates their agreement to the offeror's terms. 2. Examples: ○ Saying, “I accept your offer.” ○ Sending a signed contract document. ○ Writing an email or letter of acceptance. 3. Importance of Communication: ○ The acceptance must reach the offeror (exceptions: postal rule for written communication). Case Example: Entores Ltd v Miles Far East Corporation (1955): ○ A telex message of acceptance was deemed effective only when received by the offeror. Instant methods of communication require receipt for the contract to be valid. When Used: Typically employed in formal contracts or negotiations where clarity and certainty are essential. Acceptance by Conduct Definition: Acceptance is implied through actions that indicate agreement to the offer, without direct verbal or written communication. Key Features: 1. Implied Agreement: ○ The offeree performs an act consistent with the offer's terms, showing intent to accept. 2. Examples: ○ Paying for goods or services. ○ Using a product (e.g., in unilateral contracts). ○ Continuing a long-standing business relationship under agreed terms. 3. Key Requirement:  ○ The conduct must unequivocally demonstrate acceptance; mere silence or inaction typically doesn’t suffice unless explicitly agreed upon. Case Examples: Louisa Carlill v Carbolic Smoke Ball Co. (1893): ○ Mrs. Carlill's use of the smoke ball as directed constituted acceptance of the company's unilateral offer. Brogden v Metropolitan Railway Co. (1877): ○ Conduct (supplying and accepting coal) demonstrated acceptance of the draft contract terms, making it binding. When Used: Often found in: ○ Unilateral contracts where performance signifies acceptance. ○ Long-standing business arrangements where conduct reflects agreement. Key Differences Aspect Acceptance by Express Acceptance by Conduct Communication Method Verbal or written communication. Performance or actions consistent with the offer. Requirement of Requires explicit notification to the Notification is not required; conduct Notification offeror. suffices. Clarity Provides clear and direct Agreement inferred from actions. agreement. Example Signing a contract, saying, “I Using a service or performing a task. accept.” Typical Use Formal agreements and bilateral Unilateral contracts and recurring contracts. dealings. Communication of Acceptance General Rule:  ○ Must be effectively communicated to the offeror. ○ Silent responses do not constitute acceptance unless explicitly agreed. ○ Acceptance must be from the offeree or an authorized agent. Key Exceptions: 1.Unilateral Contracts Definition: A contract in which one party (offeror) makes a promise in exchange for the other party’s (offeree’s) performance. Acceptance is completed by the act of performance, not by communication of acceptance. Key Characteristics: 1. Offer to the World: ○ The offeror promises a benefit to anyone who fulfills the specified conditions (e.g., finding a lost item, performing a service). ○ No obligation for others to perform; only those who accept by action are involved. 2. No Need for Prior Communication: ○ Offeree doesn’t need to notify the offeror of their intention to perform; the act itself is sufficient. Example: Annie offers RM500 to anyone who finds her lost cat. The act of finding the cat constitutes acceptance and creates a binding contract. Case: Louisa Carlill v Carbolic Smoke Ball Co. (1893): ○ Facts: The Carbolic Smoke Ball Company advertised a product claiming a £100 reward for anyone who contracted the flu after using it as directed. Mrs. Carlill used the product but contracted the flu and claimed the reward. ○ Judgment: The court held that the advertisement was a unilateral offer accepted by performance (using the product as directed). Mrs. Carlill was entitled to the reward. 2.Course of Conduct Definition: Acceptance of an offer may be inferred from the consistent behavior of the parties involved, especially in recurring transactions. Key Principles: 1. Implied Acceptance: ○ When parties have a history of transactions or behaviors, their consistent actions may indicate agreement even if explicit communication is absent. 2. Fault of the Offeror: ○ If the offeror fails to notice or acknowledge acceptance (e.g., fax received but unread), they may still be bound by the contract if the offeree acted in good faith. Examples:  Implied Method: Parties regularly accepting offers through performance without explicit communication (e.g., delivering goods). Offeror’s Fault: An offer accepted via fax during business hours is valid even if the offeror fails to notice the fax. Case: Brogden v Metropolitan Railway Co. (1877): ○ Facts: Brogden supplied coal to the Metropolitan Railway Company. Both parties agreed to formalize the arrangement in writing, but the signed contract was never exchanged. Business continued as usual based on the draft terms. ○ Judgment: The court held that the conduct of the parties (delivering and accepting coal) implied acceptance of the contract terms, making it binding. 3. Postal Rule Definition: When acceptance is communicated by post, it becomes effective once the letter is properly posted, not when it is received by the offeror. Key Features: 1. When Applicable: ○ The rule applies if the parties expect postal communication (e.g., distance negotiations). 2. Exceptions: ○ Instant communication methods (telephone, email) do not follow the postal rule. ○ Lost/misdirected acceptance due to offeree’s fault negates the rule. 3. Risk Allocation: ○ The offeror assumes the risk of delays or non-receipt of acceptance once the offeree posts it correctly. Case: Adams v Lindsell (1818): ○ Facts: The defendant offered to sell wool and requested a reply via post. Due to a delay, the defendant assumed the plaintiff wasn’t interested and sold the wool to a third party. The plaintiff’s acceptance letter was later received, and the plaintiff sued. ○ Judgment: The contract was binding the moment the acceptance letter was posted. The defendant breached the contract by selling the wool to another party. Instant Communication Methods: Postal rule does not apply for emails, faxes, or texts where delivery is immediate. Delegation Example: A family member accepting a delivery completes acceptance for an online purchase. Exceptions to Postal Rule  Scenario Impact Instant methods (e.g., email) Postal rule does not apply → offeror must be aware of the acceptance Lost/misdirected acceptance If caused by the offeree’s error, no contract is formed. I.e → offeror did not receive letter due to the offeree putting the wrong address Revocation of Acceptance Principles: ○ Acceptance can be revoked before communication reaches the offeror. ○ Once the offeror receives acceptance, it cannot be revoked. Illustration: Scenario Key Point Offeror revokes before offeree posts Revocation valid. acceptance Offeree revokes before acceptance is Revocation valid until acceptance reaches offeror. delivered Acceptance by post Cannot be revoked once the offeror receives the acceptance letter. Case Examples: Entores Ltd v Miles Far East Corp (1955): Effective communication required. Powell v Lee (1908): Unauthorized third-party acceptance invalid. Highlighted Case Details Case Details and Facts 1. Felthouse v Bindley 142 ER 1037, Exch Ch Facts: ○ A man (plaintiff) discussed purchasing a horse from his nephew and offered to buy it, stating, "If I hear no more about it, I consider the horse mine at £30 15s." ○ The nephew intended to sell the horse but did not explicitly communicate acceptance of the offer. ○ Later, at an auction conducted by Bindley (defendant), the horse was mistakenly sold despite instructions to withhold it. ○ The plaintiff sued for the horse, arguing it was his due to the implied acceptance through silence. Legal Principle: ○ Silence cannot constitute acceptance unless both parties clearly agree that silence will be treated as such. ○ Held: The court ruled there was no binding contract as the nephew's silence did not amount to acceptance. 2. Entores Ltd. v Miles Far East Corporation 3 WLR 48 Facts: ○ The plaintiff (Entores Ltd.), a London-based company, sent an offer to the defendant (Miles Far East Corp.), based in Amsterdam, via telex. ○ The defendant communicated their acceptance of the offer through telex. ○ A dispute arose, questioning where the contract was formed: in London (plaintiff’s location) or Amsterdam (defendant’s location). Legal Principle: ○ Communication of acceptance must be received to form a valid contract in instantaneous communication methods (e.g., telex, email, or phone). ○ Held: The contract was formed in London, where the acceptance was received, emphasizing the need for acceptance to be effectively communicated. 3. Powell v Lee 99 LT 284 Facts: ○ Powell applied for a position as a headmaster and was informed unofficially by a manager (not authorized to communicate decisions) that his application was successful. ○ Later, the board chose another candidate, leading Powell to sue, arguing that a valid contract of employment had been formed. Legal Principle: ○ Acceptance of an offer must be communicated by the offeror or their authorized agent. ○ Held: The court ruled there was no valid contract because the manager who communicated acceptance was not authorized to do so. 4. Louisa Carlill v Carbolic Smoke Ball Company 1 QB 256 Facts: ○ The Carbolic Smoke Ball Company advertised that it would pay £100 to anyone who contracted influenza after using their smoke ball as directed. ○ Louisa Carlill followed the directions, used the smoke ball, and still contracted influenza. She claimed the reward. ○ The company argued that the advertisement was not a binding contract and that she had not communicated her acceptance. Legal Principle: ○ A unilateral offer can be accepted by performance without requiring prior notification of acceptance. ○ Held: The court ruled in Carlill’s favor, stating that the advertisement constituted a unilateral offer, and her actions formed a binding contract. 5. Brogden v Metropolitan Railway Co 2 AC 666 Facts: ○ Brogden, a supplier, had been delivering coal to the Metropolitan Railway Company without a formal written contract. ○ To formalize the relationship, Brogden proposed terms in a draft agreement, which the company’s representative modified but did not formally communicate back to Brogden. ○ Both parties continued their business based on the terms of the agreement. Legal Principle: ○ A contract can be implied through conduct, even without formal acceptance. ○ Held: The court concluded that the contract was valid, as both parties had acted in accordance with the agreement's terms. FORMATION OF A VALID CONTRACT - INTENTION TO CREATE LEGAL RELATION 1. What is Intention to Create Legal Relations? Definition: ○ Intention to create legal relations refers to parties’ intent to enter a legally binding agreement enforceable by law. ○ An offer followed by acceptance isn’t sufficient to conclude a contract without an intention to create legal relations.  Key Considerations: ○ Agreements must have legal significance. ○ Courts examine facts and conduct to assess intent. ○ Writing out terms clearly helps avoid disputes. 2. How to Determine Intention? Tests Used Test Description Objective Test Presumes intention if a reasonable person believes intention existed to bind the promisor. - The place is very important as it can be the the line between whether there is intention or not - Ie. - two people discussing a joint venue in a pub → not appropriate→ no intention - Two people discussing in the toilet → not appropriate → no intention - Office - Rebuttable Assesses evidence to refute or establish intention based on the nature of Presumption the agreement. Presumptions: ○ Domestic/Social Agreements: Presumed not to be legally binding unless rebutted by evidence. ○ Commercial Agreements: Presumed legally binding unless evidence proves otherwise. 3. Types of Agreements A. Social and Domestic Agreements Agreement Type Presumption Rebuttal  Agreements Between No intention to create legal relations If clearly commercial or outside the Spouses in day-to-day domestic norms of the relationship, may be arrangements. binding. Agreements Between Not intended to be binding; based on Consequences of reliance on the Family Members mutual trust and affection. agreement may indicate intent. Purely Social Presumed not legally binding If agreement involves serious Agreements between unrelated people. consequences, intent is presumed. Case Summaries for Social and Domestic Agreements 1. Balfour v Balfour 2 KB 571 Facts: Husband promised wife £30/month as maintenance but failed after their separation. Judgment: Court held no legal intention as the agreement was a domestic arrangement. Principle: Agreements between spouses in domestic contexts lack legal intent. 2. Merritt v Merritt 1 WLR 1211 Facts: Husband and wife separated; husband promised the house upon her repaying the mortgage. Judgment: Court found legal intention due to the separation context. Principle: Agreements during separation can have legal intent. 3. Jones v Padavatton 1 WLR 328 Facts: Mother promised maintenance to daughter for studying law; dispute arose over the house. Judgment: Court found no legal intention; agreement was a family arrangement. Principle: Family arrangements are presumed not legally binding unless clearly stated. 4. Parker v Clark 1 WLR 286 Facts: Elderly couple promised their house inheritance to relatives who sold their own house to move in. Judgment: Legal intention found due to reliance and written communication. Principle: Significant reliance on agreements can indicate intent. 5. Simpkins v Pays 1 WLR 975 Facts: Informal agreement to share competition winnings. Judgment: Court found legal intention due to mutual agreement. Principle: Informal arrangements involving mutual reliance can be binding. B. Commercial Agreements Presumption: Commercial agreements are presumed to have legal intention. Exceptions: ○ Extravagant claims or vague promises (e.g., "mere puffs") are not binding. ○ Agreements "subject to contract" indicate negotiations are ongoing. Key Case: Carlill v Carbolic Smoke Ball Facts: Advertisement promised reward for using the product. Judgment: Court found legal intention as the defendant deposited £1000, showing seriousness. Principle: Clear actions demonstrating intent can rebut claims of "mere puff." Key Case: Esso Petroleum Ltd v Commissioners of Customs and Excise Facts: Coins distributed with petrol purchases were claimed as taxable goods. Judgment: Coins weren’t intended for sale; no legal intention in this part of the transaction. Principle: Courts assess commercial agreements’ specific aspects for intent. 4. Comparison: Intention vs. Consideration Aspect Intention Consideration Definition Genuine intention to create legal Exchange of value between parties. obligations. Nature Subjective; focuses on parties’ state of Objective; evaluates tangible exchange of mind. promises. Presumptions Varies between social and commercial Presumed to exist in valid contracts. contexts. 5. Importance of Intention Ensures clarity and seriousness in contracts. Prevents disputes due to lack of enforceability. Protects parties’ rights to sue in case of breach. Differentiates enforceable contracts from mere promises. 6. Exceptions in Commercial Agreements Agreements not intended to be taken seriously: ○ Extravagant advertisements (e.g., "mere puff"). ○ Statements made during ongoing negotiations ("subject to contract"). Reliance and conduct post-agreement may show intent. FORMATION OF A VALID CONTRACT: CONSIDERATION Definition of Consideration Aspect Details Meaning Each party must give something in return for what is gained from the other party. Legal Principle Something representing a benefit to the promisor or detriment to the promisee. Example Ally enforces Ellen’s promise by proving he gave something in return for the promise. Case Dunlop v Selfridge (1915): Consideration as purchase and sale—plaintiff must "buy" the promise. Gratuitous Promise: A promise unsupported by consideration is not enforceable (e.g., A promises to give B a car without requiring anything in return). Types of Consideration 1. Executory Consideration ○ Definition: When a promise to do something or provide something is made, but the act or service will occur in the future, this is referred to as executory consideration. Both parties are bound to perform their respective promises at a later time. Common in bilateral contracts, where both parties exchange promises. ○ Key Characteristics: Future obligation: The consideration involves actions or performance in the future. Both parties have mutual obligations.  ○ Example: Mimi enters into a contract with Lana where Mimi promises to supply goods, and Lana promises to pay upon their delivery. ○ Legal Principle: A promise for a promise forms a valid contract if both parties fulfill their respective obligations in the future. 2. Executed Consideration ○ Definition: This occurs when one party has already fulfilled their obligation at the time of the contract formation. Executed consideration is typically seen in unilateral contracts where one party makes a promise in exchange for the other party's act. ○ Key Characteristics: Immediate performance: The consideration is performed at the same time or before the promise is made. Only one party has a remaining obligation after the consideration is executed. ○ Example: A person loses their handbag and offers a $200 reward to anyone who returns it. The return of the handbag constitutes executed consideration for the promise to pay the reward. ○ Legal Principle: Executed consideration is sufficient to bind the promisor to their promise if the consideration fulfills their terms. Key Distinctions Aspect Executory Consideration Executed Consideration Timing Performance is due in the future. Performance has already been completed. Type of Typically part of bilateral contracts. Common in unilateral contracts. Contract Example Promise to deliver goods in exchange for Returning a lost handbag in exchange payment. for a reward. Rules of Consideration 1. Consideration Must Not Be Past Meaning: 1. Consideration cannot consist of an action or performance that occurred before the promise was made. 2. A promise made after the act has been performed is considered a gratuitous promise and is unenforceable. Examples: 1. Amy looks after Sally's cat for 10 days while Sally is on holiday. Upon her return, Sally promises to pay Amy $200 for the service. This promise is unenforceable because Amy's performance was not done in exchange for the promise; it was past consideration. Exceptions: In certain situations, past consideration may still be valid: 1. The act was performed at the promisor's request. 2. The parties understood that payment or benefit would follow the act. 3. The benefit (e.g., payment) would have been legally recoverable if promised in advance. Key Cases: 1. Roscorla v. Thomas (1842) Facts: A seller promised that a horse already sold was free from vice. Judgment: The promise was unenforceable as it was made after the sale, i.e., past consideration. 2. Re McArdle (1951) Facts: A family member made improvements to a property, and the other family members later promised to reimburse her. Judgment: The promise to pay was unenforceable because the work was completed before the promise. 3. Re Casey’s Patents (1892) Facts: A manager worked on patents, and the owners later promised him a share of the profits. Judgment: The court upheld the promise because the work had been done at the owners’ request and payment was implied. 2. Consideration Need Not Benefit the Promisor Meaning: ○ Consideration can exist even if the promisor does not directly benefit from it. ○ It is sufficient if the promisee suffers a detriment or gives up something valuable. Examples: ○ Zoey promises to pay Isaac if he gives her daughter driving lessons. Isaac’s time and effort constitute a detriment, even though Zoey gains no direct benefit.  Key Case: ○ Jones v. Padavatton (1969) Facts: A mother promised to support her daughter financially if she gave up her job to study law. Judgment: The daughter's act of giving up her job was sufficient consideration, even though the mother did not gain any direct benefit. 3. Consideration Must Be Sufficient Meaning: 1. The law requires consideration to have some tangible value, but it does not need to be adequate (equal or fair in value). 2. The courts respect the parties' freedom to make their own agreements, regardless of whether the exchange seems unfair. Examples: 1. A sells a car to B for $1. The court will not question the adequacy of the price as long as it has tangible value. Key Cases: 1. Thomas v. Thomas (1842) Facts: After a man’s death, his executors allowed his widow to live in a house for £1 annually. Judgment: The £1 was sufficient consideration to support the contract. 2. Chappell & Co Ltd v. Nestlé Co Ltd (1960) Facts: Nestlé offered records in exchange for a small sum and three chocolate wrappers. Judgment: The wrappers had value to Nestlé as part of their marketing strategy, making them valid consideration. 3. White v. Bluett (1853) Facts: A son promised to stop complaining in exchange for his father forgiving a debt. Judgment: Emotional or sentimental promises are not sufficient consideration. 4. Consideration Must Have Economic Value Meaning: ○ Consideration must be measurable in economic or physical terms. ○ Emotional or sentimental value is insufficient. Example: ○ A promise to not cry or complain is not valid consideration because it lacks economic value (White v. Bluett). 5. Consideration Can Be a Promise Not to Sue Meaning: 1. A promise not to enforce a legal claim can be valid consideration if it is given in exchange for another promise or act. Example: 1. Ann crashes into Ben's car. Ben agrees not to sue if Ann pays for the damages. Ben’s forbearance is valid consideration for Ann’s promise to pay. Key Cases: 1. Alliance Bank Ltd v. Broom (1864) Facts: A debtor promised to provide security for a loan in exchange for the bank refraining from taking legal action. Judgment: The bank’s forbearance was valid consideration for the debtor’s promise. 2. Combe v. Combe (1951) Facts: A wife claimed her husband promised her financial support after their separation. Judgment: The wife’s inaction (not suing) was not considered valid consideration because it was not requested by the husband. 6. Performance of an Existing Duty Will Not Amount to Valid Consideration Meaning: 1. Performing a duty that one is already legally obligated to do cannot be used as new consideration for a promise. Examples: 1. A police officer promises to provide extra protection for a fee. This is not valid consideration because they are already obligated to protect the public. Exceptions: 1. If the promisee goes beyond their legal duty or provides something extra, it may count as valid consideration. Key Cases: 1. Collins v. Godefroy (1831) Facts: A witness was promised payment for appearing in court, which was already a legal duty. Judgment: The promise was unenforceable because the witness was already obligated to appear. 2. Glasbrook Bros Ltd v. Glamorgan CC (1925) Facts: A mining company promised to pay police for additional protection during a strike. Judgment: The extra services provided by the police went beyond their legal duty and constituted valid consideration. Summary Table of Rules Rule Explanation Key Cases Consideration must not be Past actions cannot support a future Roscorla v. Thomas, Re past promise unless exceptions apply. McArdle, Re Casey's Patents Consideration need not A detriment to the promisee is enough, Jones v. Padavatton benefit the promisor even if the promisor gains nothing directly. Consideration must be Must have tangible value but need not be Thomas v. Thomas, sufficient adequate. Chappell v. Nestlé, White v. Bluett Consideration must have Emotional or sentimental value is White v. Bluett economic value insufficient. Promise not to sue as Forbearance from enforcing a legal claim Alliance Bank v. Broom, consideration can be valid consideration. Combe v. Combe Performance of an existing Existing legal duties do not count as new Collins v. Godefroy, duty is insufficient consideration unless extra effort is Glasbrook Bros v. provided. Glamorgan CC Highlighted Key Points Definition: Consideration requires giving or promising something in return. Gratuitous Promises: Not enforceable without consideration. Types: ○ Executory: Promises for the future. ○ Executed: Actions already completed. Rules: ○ Must not be past (unless exceptions apply). ○ Need not benefit the promisor. ○ Must have some tangible value.  ○ Forbearance or extra duties can be valid under specific circumstances. REMEDIES FOR BREACH OF CONTRACT Definition of a Remedy General Definition: A remedy is a redress for a wrong, typically provided by a court of law. Legal Context: ○ A remedy upholds a person's rights or addresses a breach of the law. ○ When one party breaches a contract, the other party can seek remedies through the court. ○ Remedies may involve monetary compensation, specific actions, or other forms of relief as provided by law. 1. Types of Remedies for Breach of Contract Type Description Legal/Common Law Court-ordered compensation aimed at addressing financial losses Remedies caused by a breach. Equitable Remedies Court-ordered actions to ensure fairness when legal remedies are inadequate. Agreed Remedies May be provided for in the contract itself 2. Common Law Remedies A. Damages Definition: Monetary compensation awarded to the injured party to address losses caused by a breach of contract. Requirements to claim: ○ The injured party must prove actual loss. ○ Loss must be recognized under law as compensable. ○ Loss must not be too remote (doctrine of remoteness). Types: ○ Nominal Damages: Awarded when no significant loss has occurred. ○ Substantial Damages: Awarded for significant financial or other losses. Limitations:  ○ Causation: Loss must be a direct result of the breach. ○ Remoteness: Only foreseeable losses can be compensated. ○ Mitigation: The injured party must take reasonable steps to reduce further losses. Example Case: Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (2007) You can claim more than one damages as long as you have proof to prove it Case Details: Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (2007) 1. Plaintiff: Golden Strait Corporation 2. Defendant: Nippon Yusen Kubishika Kaisha 3. Facts of the Case: ○ Golden Strait leased a ship to Nippon Yusen for seven years. ○ The defendants terminated the contract prematurely, citing concerns about a potential war in the Middle East. ○ A contract clause allowed termination if war broke out, but this occurred 15 months after the breach. 4. Court Ruling: ○ Compensation should place the injured party in the position they would have been if the contract was performed. ○ Damages were limited to losses incurred during the 15 months before the war began. ○ No compensation was awarded for the remaining contract period as the termination clause would have been invoked legally. 5. Legal Principles: ○ Compensation is tied to actual losses. ○ Future hypothetical losses are not compensable if legal grounds for termination existed. B. Restitution Definition: Restores benefits unjustly gained by the breaching party. Key Principles: 1. Prevents unjust enrichment. 2. Focuses on the defendant's gain, not the plaintiff's loss. 3. Claimant must show: The defendant was enriched. The enrichment was unjust. It occurred at the claimant's expense. Example Case: Kelly v Solari (1841) Case Details: Kelly v Solari (1841) 1. Plaintiff: Insurers 2. Defendant: Widow of Mr. Solari 3. Facts of the Case: ○ Mr. Solari died, and his widow claimed life insurance proceeds. ○ The insurers paid the claim without verifying if the premiums were up-to-date. ○ They later discovered the policy had lapsed. 4. Court Ruling: ○ The widow was required to return the payment. ○ Mistaken payments, even if due to negligence, can be recovered.  ○ Fault or lack of diligence by the payer does not negate the requirement for repayment. 5. Legal Principles: ○ Mistaken payments made under a false assumption of fact are recoverable. ○ Unjust enrichment must be reversed. C. Quantum Meruit Definition: "As much as earned"; compensates for the value of work done when the contract is incomplete. Applicability: ○ When a contract is terminated before completion. ○ Where one party prevents the other from completing their obligations. Example Case: British Steel Corporation v Cleveland Bridge & Engineering Co Ltd (1984) 3. Equitable Remedies A. Specific Performance Definition: Court orders the breaching party to fulfill their contractual obligations. Applicability: 1. Compensation in money is inadequate. 2. The contract involves unique items (e.g., artwork, rare goods). 3. Monetary damages are challenging to quantify. Example Case: Patel v Ali (1984) Case Details: Patel v Ali (1984) 1. Plaintiff: Patel 2. Defendant: Ali 3. Facts of the Case: ○ Patel agreed to sell a property to Ali. ○ Ali delayed completing the purchase due to personal difficulties. ○ Patel sought specific performance to compel the sale. 4. Court Ruling: ○ Specific performance was denied due to hardship faced by Ali. ○ The court considered fairness and practical feasibility. ○ Monetary damages were deemed sufficient. 5. Legal Principles: ○ Specific performance is discretionary and not automatic. ○ Courts balance fairness and hardship when granting this remedy.