ANSON’S LAW OF CONTRACT J. Beatson | A. Burrows | J. Cartwright OXFORDANSON’S LAW OF CONTRACT 30th Edition SIR JACK BEATSON DCL, LLD, FBA A Lord Justice of Appeal sometime Rouse Ball Professor of English Law, University of Cambridge ANDREW BURROWS DCL, MA, LLM (HARVARD), FBA, QC (HON) Professor of the Law of England and Fellow of All Souls College, University of Oxford JOHN CARTWRIGHT BCL, MA Professor of the Law of Contract, University of Oxford Professor of Anglo-American Private Law, University of Leiden OXFORD UNIVERSITY PRESSOXFORD UNIVERSITY PRESS Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Osxford University Press is a department of the University of Oxford Ie furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide, Oxford isa registered trade mark of (Oxford University Press in the UK and in certain other countries © J. Beatson, A, Burrows, and J. 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Oxford disclaims any responsiblity for the materials contained in any third parcy website referenced in this work.OUTLINE CONTENTS INTRODUCTION PART 1 FORMATION OF CONTRACT 2 THE AGREEMENT 31 3 FORM 79 4 CONSIDERATION AND PROMISSORY ESTOPPEL 96 PART 2 CONTENTS OF THE CONTRACT 5 THE TERMS OF THE CONTRACT ul 6 EXEMPTION CLAUSES AND UNFAIR TERMS 186 PART 3 FACTORS TENDING TO DEFEAT CONTRACTUAL LIABILITY 7 INCAPACITY 8 MISTAKE 269 9 MISREPRESENTATION AND NON-DISCLOSURE 318 10 DURESS, UNDUE INFLUENCE, AND UNCONSCIONABLE BARGAINS 374 11 ILLEGALITY 409 PART 4 PERFORMANCE AND DISCHARGE 12. PERFORMANCE 465 13. DISCHARGE BY AGREEMENT 483 14. DISCHARGE BY FRUSTRATION 497 15 DISCHARGE BY BREACH 533 16 BY OPERATION OF LAW 556OUTLINE CONTENTS, PART 5 REMEDIES FOR BREACH OF CONTRACT 17 DAMAGES 563 18 SPECIFIC REMEDIES 606 19 RESTITUTIONARY AWARDS 620 20 LIMITATION OF ACTIONS 638 PART 6 LIMITS OF THE CONTRACTUAL OBLIGATION 21 THIRD PARTIES 647 22 ASSIGNMENT 696 23 AGENCY ais IndexDETAILED CONTENTS Preface v Table of Statutes xxiii Table of Statutory Instruments xxxii Table of European Union Legislation xxxiv Table of International and Other National Legislation and Restatements xxxv Table of Cases xxxvi Some Abbreviations Used in Reference xciii 1 INTRODUCTION 1 1, The Nature and Function of Contract 1 (a) Promise or Agreement 1 (b) Functions of Contract 2 (©) Freedom of Contract 4 (@) Sanctity of Contracts 8 (©) ‘The Interest Protected by Contract, 9 2. ‘The History of Contractual Obligations in English Law 10 (@) ‘The Barly Actions u (b) Assumpsit 4 (©) Subsequent Developments 7 3. European and International Influences au 4, The Content of Contract Law 23 (@) A Lawof Contract or of Contracts 23 (b) Effect of Vitiating Factors 23 5. Contract as Part of the Law of Obligations 25 (@) Concurrence of Claims in Contract and ‘Tort 26 (b) Contract and Unjust Enrichment 26 6. Contract and Property 7 PART 1 FORMATION OF CONTRACT 2 THE AGREEMENT 31 1, Establishing an Agreement 31 (a) Offer and Acceptance 32 (b) ‘The Test of Intention 34 2. The Offer 35 (a) Offers and Invitations to Treat 35xii 3 4 DETAILED CONTENTS (b)_ General Offers (©) Communication of the Offer 3. The Acceptance (@)_ Offer and Acceptance Must Correspond (b) Communication of the Acceptance (© Acceptor Must Have Knowledge of Offer (d) Prescribed Mode of Acceptance (©). Revocation of the Acceptance 4, Termination of the Offer (a) Revocation of the Offer (b) Rejection of the Offer (©) Lapse of the Offer (4) Effect of Death 5, Uncertain and Incomplete Agreements (@) Certainty of Terms (b) Incomplete Agreement 6. Intention to Create Legal Relations (@) Social Engagements (b) Family Arrangements (©) Determining Intention FORM 1, Formal Requirements 2. Contracts by Deed (a) Howa Contract by Deed is Made (b) When itis Essential to Contract by Deed 3. Contracts for Which Writing is Required (a) Statutory Requirements of Writing (b) Contracts of Guarantee (©) Contracts for the Sale or Other Disposition of Land (A) Electronic Contracts CONSIDERATION AND PROMISSORY ESTOPPEL 1. Consideration (@)_ Consideration Defined (b)_ Necessity for Consideration (©) Executory and Executed Consideration (€) Past Consideration (©) Consideration Must Move from the Promisee (f) Consideration Need Not be Adequate (g) Consideration Must be Real (h) Performance of, or Promise to Perform, an Existing Duty (i) Discharge of a Debt ()) Letters of Credit 79. 79 80 80 82 82 82 84 88 om 96 96 96 98, 100 101 103 104 106 109 47 120DETAILED CONTENTS xiii 2. Promissory Estoppel 122 (@)_ Emergence of Promissory Estoppel 122 (b) Scope of Promissory Estoppel 125 (© Three Other Types of Estoppel 132 3. Appraisal of Consideration and Promissory Estoppel 136 PART 2 CONTENTS OF THE CONTRACT 5 THE TERMS OF THE CONTRACT Mn 1. Terms, Collateral Warranties, and Representations M1 (@) Terms and Representations 141 (b) Collateral Warranties 45 (©) Extrinsic Evidence 46 2. Conditions, Warranties, and Innominate Terms 48 (@) Introduction 148 (b) Conditions 149 (©) Warranties 152 (@) Evaluation of the Ab Initio Classification of Terms 153 (©) Innominate Terms 154 (f)_ Distinguishing Innominate Terms and Conditions 155 (g) Loss of the Right of Discharge 159 (b) Part 1 of the Consumer Rights Act 2015 160 3. Implied Terms 161 (@)_ Terms Implied by the Courts and by Statute 161 (b) ‘Terms Implied by the Courts 162 (©) Terms Implied by Statute 171 (A) Part 1 of the Consumer Rights Act 2015:’Terms Treated as Included 178 4, Interpretation of Terms 178 (@) ‘The Contextual Approach 179 (b) Particular Rules of Interpretation 183 6 EXEMPTION CLAUSES AND UNFAIR TERMS 186 1, Standard Forms of Contract 186 2. Incorporation 188 (@) Signature 188 (b) Notice 188 (©) Course of Dealing 192 3. Interpretation of Exemption Clauses 193 (@)_ Strict Interpretation 194 (b) ‘The ‘Contra Proferentem’ Rule 195 (©) Exclusion of Liability for Negligence 195 (@) Limitation Clauses 198 (©) ‘Fundamental’ Terms and Fundamental Breach’ 199xiv DETAILED CONTENTS 4. Other Common Law Rules Controlling Exemption Clauses 206 @)_ Express Undertakings 206 (b) Misrepresentation or Fraud 207 (© Reasonableness at Common Law? 207 5. Legislative Control of Exemption Clauses and Unfair Terms 208 (a) Exemption Clauses in Non-consumer Contracts: Unfair Contract Terms Act 1977 208 (0). Unfair Termsin Consumer Contracts: Consumer Rights Act 2015 2 (©) Other Legislative Controls on Exemption Clauses and Unfair Terms 232 PART 3 FACTORS TENDING TO DEFEAT CONTRACTUAL LIABILITY 7 INCAPACITY 237 1. Grounds of Contractual Incapacity 237 2. ‘The Crown and Public Authorities 238 (@) ‘The Crown 238 (b) Public Authorities 242 3. Corporations and Unincorporated Associations 247 (@) Corporations 247 (b)_ Unincorporated Associations 250 4. Minors 251 (@)_ Common Law: Introduction 252 (b) Contracts for Necessaries 252 (© Voidable Contracts 256 (A) Other Contracts: Unenforceable Unless Ratified 258 (©) The Nature of the Liability of Minors 258 () Liability of Minors in Tort 260 (g) Liability of Minors in Unjust Enrichment 261 (h) Restitution in Favour of Minors 265 (“Third Parties 265 5. Persons Lacking Mental Capacity and Drunken Persons 266 8 MISTAKE 269 1. Introduction 269 2. Categorizing Mistakes 27 3. Mistakes about the Terms of the Contract 272 (@) ‘Subjective’ and "Objective’ Agreement in the Formation of a Contract 272 (b) The ‘Objective Test’ 273 (©) Mistake in Relation to a Written Document 279 (€)_ Equitable Remedies for Mistakes about the Terms 287 4. Mistakes about the Identity of the Person with Whom the Contract is Made 289 (a) An Offer can be Accepted only by the Person to whom it is Addressed 290DETAILED CONTENTS. xv (b) ‘The Need foran Identifiable Third Person 292 (©) Written Contracts 295 (@) Transactions Concluded in the Parties’ Presence 295 (€) ‘The Current State of the Law; Critique 297 5. Mistakes of Fact or Law about the Subject-Matter of the Contract or the Surrounding Circumstances 298 (@)_ Unilateral Mistakes of Fact or Law 300 (b) Common Mistakes of Fact or Law 300 9 MISREPRESENTATION AND NON-DISCLOSURE 318 1, Introduction 318 2. Misrepresentation 319 (a) Pufls, Representations, and Terms 319 (b)_ Requirements for Relief for Misrepresentation 320 (©) Remedies for Misrepresentation: an Overview 327 (4) ‘Fraudulent’, ‘Negligent’, and “Innocent” Misrepresentations 330 (©). Rescission of the Contract 332 (£) Damages for Fraudulent Misrepresentation: the Tort of Deceit 342 (g) Damages for Negligent Misrepresentation: the Tort of Negligence or Section 2(1) Misrepresentation Act 1967 346 (h) Exclusion and Limitation of Liability 351 3. Consumers’ Rights to Redress under the Consumer Protection From Unfair Trading Regulations 2008 4, Non-disclosure 358 (@)_ No General Duty to Disclose 358 (b) Particular Duties of Disclosure 359 (©) Duties of Disclosure Giving Rise to Rescission 360 (€) Contracts Between Those in a Fiduciary Relationship. 364 (©) Liability in Tort for Non-Disclosure 367 (f) Statutory Duties of Disclosure 368 (5) ‘The Future 371 10 DURESS, UNDUE INFLUENCE, AND UNCONSCIONABLE BARGAINS 374 1, Introduction 374 2. Duress (@)_ Nature of Duress (b)_ Unlawful Pressure 377 (©) Duress Distinguished from Legitimate Renegotiation 380 (@ Threats of Lawful Action 382 (©) Rescission 384 3. Undue Influence 385 (@)_ Nature of Undue Influence 385 (b) Actual Undue Influence 387 (© Presumed Undue Influence 388 (@) Rescission 394 (©) Undue Influence by a Third Party to the Contract 397xvi DETAILED CONTENTS Unconscionable Bargains 400 Consumers’ Rights to Redress under the Consumer Protection from Unfair Trading Regulations 2008 403 6. Inequality of Bargaining Power? 404 IL TLLEGALITY 409 1. Introduction 409 2, Statutory Ilegality 410 (@)_ Express Prohibition: Contract Illegal 410 (b) Implied Prohibition: Contract Illegal aul (©) Illegal Performance 412 (@) Statute Only Imposes a Penalty 413 (©) Void Contracts 413 (£) Contract Unenforceable by One Party 4u4 (g) Contract Not Void or Unenforceable a4 3. Illegality at Common Law 415 (a) Agreements to Commit a Crime or Civil Wrong, or to Perpetratea Fraud 416 (b) Agreements which Injure the State in its Relations with Other States 418 (©) Agreements which Tend to Injure Good Government, 419 (@) Agreements which Tend to Pervert the Course of Justice 420 (©) Agreements which Tend to Abuse the Legal Process 421 (f) Agreements which are Contrary to Good Morals 42 (g) Agreements which Affect the Freedom or Security of Marriage or the Due Discharge of Parental Duty 425 (h)_ Agreements which Oust the Jurisdiction of the Courts 427 (i) Agreements in Restraint of Trade 428 A, ‘The Effect of Illegality 435 @) The Fundamental Principle of Policy 435 (b) ‘The Intention of the Parties and Enforceability of the Contract 439 (© Contracts Unlawful ‘per se” 442 (A) Benefit from Illegal Contracts 443 (©) Recovery of Money Paid or Property Transferred 444 (f) Collateral Transactions 454 5, Severance 455 (a) Introduction 455 (b) Public Policy 455 (©) Requirements 457 (A) Effect of Severance 460 PART 4 PERFORMANCE AND DISCHARGE 12, PERFORMANCE 465 1. Performance Must be Precise and Exact 465 (@)_ Standards of Contractual Duty 465DETAILED CONTENTS. xvii (b) Deviation from Contractual Terms 466 2. Time of Performance 466 (a), Stipulations asto Time at Common Law 466 (b) Stipulations as to Time in Equity 467 (©) Lawof Property Act 1925, section 41 467 (@) Mercantile Contracts 468 3. Place of Performance 469 4, Order of Performance 469 5. Payment 470 (a) Introduction 470 (b) Interbank Transfers 470 (6) Payment by Negotiable Instrument or Documentary Credit 471 (a) Payment by Credit or Charge Card 472 6. Vicarious Performance 472 7. Alternative Modes of Performance 473 (a) Contract Option 473 (b) Performance Option 474 8. Right of Party in Breach to Cure Bad or Incomplete Performance 474 9. Tender 475 (a) Tender of Acts 475 (b) Tender of Payment (©) Early Tender 476 10. Partial Performance 476 (@)_ Entire and Divisible Obligations 476 (b) Doctrine of Substantial Performance’ 479 (6) Acceptance of Partial Performance by Innocent Party 481 (d) Incontrovertible Benefit 482 13. DISCHARGE BY AGREEMENT 483 1. Introduction 483 (a) Consideration Applies to Discharge 483 (b) Contracts Evidenced by Writing 484 2. Forms of Discharge by Agreement 484 (a) Release 484 (b) Accord and Satisfaction 485 (©). Rescission 486 (@) Variation 488 (©) Waiver 490 (f), Provisions for Discharge Contained in the Contract Itself 494 14 DISCHARGE BY FRUSTRATION 497 1. Introduction 497 2. Emergence of the Doctrine 498 3. Instances of Frustration 501xviii DETAILED CONTENTS. 15, (a) Destruction of Subject-Matter of Contract, (b) Non-Occurrence ofa Particular Event (© Death, or Incapacity for Personal Service (4) Requisitioning of Ships and Interferences with Charterparties (©) Sale and Carriage of Goods (f) Building Contracts (g) Change in the Law (h) Performance of Only One Party Affected 4, The Theoretical Basis of Frustration (@)_ Implied Term (b) Just and Reasonable Result” (©) Foundation of the Contract, (4) Radical Change in the Obligation 5. Incidence of Risk (a) Express Provision (b) Foreseen Events (©). Prevention of Performance in Manner Intended by One Party (@) Delay (©) Inflation 6. Self-Induced Frustration @)_ Choosing Between Different Contracts (b)_ Negligent Acts 7. Leases and Contracts for the Sale of Land 8. Effects of Frustration (@) Common Law (b) Law Reform (Frustrated Contracts) Act 1943 DISCHARGE BY BREACH 1. Discharge at Option of the Injured Party (@)_ Effect of Unaccepted Repudiation (b) Failure of Performance (©) Affirmation of Contract (@) Effect of Election to Accept Breach (©) No Reason or Bad Reason for Claiming to be Discharged (f) Consumer Sale and Supply Contracts: Interaction with Other Remedies 2. Forms of Breach which Justify Discharge (@)_ Renunciation (©) Impossibility Created by One Party (©) Failure of Performance 3. Consequences of Discharge (@)_ Release from Future Obligations (b) Contract Not Rescinded Ab Initio (© Accrued Obligations Remain (@) Restitutionary Claims 4. Loss of the Right of DischargeDETAILED CONTENTS xix 16 DISCHARGE BY OPERATION OF LAW 556 1. Merger 556 (@) Acceptance of Higher Security 556 (b) Rights Vesting in Same Person 557 2. Discharge by Judgment of a Court 557 @) Effect of Bringing Action 557 (b) Effect of Judgment for Claimant 557 (©) Effect of Judgment for Defendant 558 3. Alteration or Cancellation of a Written Instrument 558 @) Ruleasto Alteration 558 (b) Bills of Exchange 559 (© Cancellation and Loss 559 4, Bankruptey 560 PART 5 REMEDIES FOR BREACH OF CONTRACT 17 DAMAGES 563 1. Damages and Other Remedies for Breach of Contract 563 2. Compensatory Nature of Damages 564 (@)_ Compensation for Loss 564 (b) Damages are Not Punitive 564 (© Difficulty of Assessment No Bar 565 (€) The Date for Assessment 566 (©) Compensation for Inconvenience or Mental Distress 566 ( Lossof Reputation 568 3. Basis of Assessment of Damages 570 (@) The ‘Performance’ or ‘Expectation’ Measure 570 (b) ‘Ihe Reliance Measure 572 4, Causation 574 5, Remoteness 575 (@) The Basic Two-Branched Rule 375 (b) The Impact of The Achilleas 578 (© Should there bea Difference Between the Tests of Remoteness in Contract and Tort? ssi (@) Type of Damage 582 (©) Damage Arising in the Usual Course of Things 582 (Damage Reasonably Supposed to be in the Contemplation of the Parties 585 6. Mitigation 587 @) Acting Reasonably 587 (b) Compensating Advantages may Reduce Damages 588 7. Assessment of Damages in Contracts for the Sale of Goods 589 (@)_Non-Delivery 589 (b) Late Delivery 590Xx 18, 19 DETAILED CONTENTS (©) Non-Acceptance (@)_ Breach of Warranty 8. Claimant's Contributory Negligence (@)_No Apportionment at Common Law (b) Law Reform (Contributory Negligence) Act 1945, 9, "The Tax Element in Damages 10. Interest I. Agreed Damages Clauses (a) Liquidated Damages and Penalties (b) Application ofthe Traditional Test (©) Necessity for Breach (@ Amounts Recoverable SPECIFIC REMEDIES 1. Actions for the Agreed Sum 2. Specific Performance (@) Adequacy of Damages (b) Want of Mutuality (6) Contracts of Personal Service (@ Uncertainty (© Constant Supervision by the Court (9 Conduct and Hardship (g) Miscellaneous 3. Injunctions (@)_ Prohibitory Injunctions (b) Mandatory Injunctions 4. Equitable Damages RESTITUTIONARY AWARDS 1. The Recovery of Money Paid (a), Recovery by the Innocent Party (b)_ Recovery by the Party in Breach 2. Restitution in Respect of Services or Goods (@) Introduction (b) Restitutionary Claims by the Innocent Party (©) Quantum Meruit Compared with Damages (@ Restitutionary Claims by the Party in Breach 3. An Account of Profits or Damages Measured by Benefit to Contract-Breaker @) Introduction (b) Attorney-General v Blake (© Developments Since Attorney-General v Blake 606 606 608 609 oul 612 613 613 out 615 615 615, 618 619 620 621 621 624 627 27 628 628 630 630 630 632 633