tutorial ans-contract 2002

8/13/2019 Tutorial Ans-Contract 2002

1/21

LW 56-806-01 (21) C.P.E. (POST-GRADUATE DIPLOMA IN ENGLISH &

HONG KONG LAW) !EAR I" (2002#0$)

C%'*' T+'%, +/',%

1. Alan Pitchpond is a landscape gardener with his own TV series. He has recently

invented a self-propelling lawnmower. It cuts grass and disposes of the cuttings

automatically. At this stage, there is only one machine in existence and harlie

Hammoc!, the winner of the "ardener of the #ear $%%% competition, is !een to

ac&uire it in his effort to retain the title. harlie's main rival (asil )lowers is also

!een to o*tain the lawnmower to help him win his first "ardener of the #ear title.

+n onday, Alan places an advertisement in the "arden "aette-

/+riginal model, self propelling lawnmower, one only 01,%%% or nearest offer2.

3ater that day, harlie telephones Alan and says /the lawnmower for sale, I'll ta!e it

for 04,1%%2. Alan replies /I cannot accept less than 05,%%%, *ut I am an admirer of

your wor!, so I will not sell it to anyone else *efore 6aturday. 3et me !now if you

want it2. harlie is delighted to hear that Alan is a fan of his wor! and says /that is

!ind of you, I will send you a copy of my new *oo! 7reating Prie 8inning

"ardens'.2

+n 8ednesday, harlie telephones Alan and leaves a message on his answering

machine saying /I accept your offer2. 9nfortunately, the answering machine does nothave a tape in it and the message is not recorded. 3ater that day, Alan sells the

lawnmower to (asil )lowers for 05:1%.

+n Thursday, harlie is at the "reendale "arden show and he meets (asil's wife,

;osemary, who tells him that (asil is very excited at having ac&uired the only self-

propelling lawnmower in existence.

As soon as he gets home, he posts a letter to Alan confirming the message he had left

on the answering machine. +n the same day, Alan writes to harlie withdrawing the

offer.


2/21

approach GI3SON 4 MANCHESTER CIT! COUNCILand the technical rules of

offer and acceptance will *e applied.

To achieve a good answer, it is *est to adopt a chronological approach to the facts-

first find the offer and then the acceptance. It may *e that the facts will not *e clear

cut, so it is &uite legitimate to say 7if this statement is an offer, the followingconse&uences flow. (ut if it is an invitation to treat, then the following

conse&uences will follow.

The advertisement in the newspaper

Is this statement an offer or an invitation to treat>

+n the facts, it is li!ely that this will *e interpreted as an invitation to treat for the

following reasons


3/21

However, 7let me have a reply *y 6aturday' suggests that it is more li!ely to *e an

offer.

Alan's statement

Is the promise to !eep the offer open until 6aturday legally *inding on Alan> B no thisis not *inding on the offeror unless the offeree has provided consideration for it.

ROUTLEDGE 4 GRANT. The fact the harlie states that he will let Alan have a

copy of his *oo! is not consideration. The suggestion comes after Alan's promise and

therefore, it seems to *e past consideration ROSCORLA 4 THOMAS. The

exception to the past consideration rule does not apply, as there is no suggestion that

when Alan made the promise, he expected to *e paid RE CASE! PATENTS

harlie's telephone call

harlie appears to *e attempting to accept Alan's offer at 05%%%. However, to *e a

valid acceptance it must *e communicated to the offeror ENTORES 4 MILES AREAST CORPORATION. This is not the case here. There is a possi*le exception if

the offeror has not learned of the acceptance through his own default see

3RINKI3ONand on the facts, perhaps some *lame can *e attri*uted to Alan for

failing to ensure that the machine had a tape in it.

Alan sells to (asil for 05:1%

learly this means there is a contract *etween Alan and (asil. However, the fact that

Alan has sold to (asil does not destroy the offer to harlie. The revocation must *e

communicated to the offeree in order to *e effective. 3!RNE 4 AN TIENHOEN

harlie's meeting with ;osemary

Coes this destroy the offer to harlie> It is sufficient if the offeree learns of the

revocation of the offer from a relia*le source DICKINSON 4 DODDS. If it should

have *een clear to harlie that ;osemary was tal!ing a*out the lawnmower that

harlie wanted to *uy, then he now !nows that Alan no longer wants to sell it to him

and he cannot accept. This means that there is no contract *etween Alan and harlie.

harlie posts the letter to Alan

harlie attempts to accept *y post. As we have seen, he cannot do this if he !nows

that the lawnmower has *een sold elsewhere. It appears that he does !now, *y his

haste in rushing home to write the letter. However, if he does not !now, then he can

invo!e the postal rule which states that acceptance ta!es place when the letter is

validly posted even if not received ADAMS 4 LINDSELL. If this is the case, then

Alan's letter of revocation only ta!es effect when received and this is too late to

revo!e the offer 3!RNE 4 AN TIENHOEN

The postal rule does not apply where it is made clear that the letter of acceptance must

actually *e received *efore there is a contract HOLWELL SECURITIES 4

HUGHESor where it would *e unreasona*le to reply *y post B UENERDUANE 4COLEB do any of these restrictions apply here> It would not *e reasona*le to reply

4


4/21

*y post if the letter is posted at a time when there is no chance of it meeting the

6aturday deadline.

If harlie has an email address or fax num*er for Alan, would it have *een *etter to

use these methods>

Also, is Alan's statement let me have a reply *y 6aturday similar to the case of

HOLWELL SECURITES 4 HUGHESin that it as!s for notice in writing> In that

case, the offeror was ma!ing it clear that he must actually receive the reply *efore the

contract existed. If the postal rule does not apply, then there is no contract *ecause

harlie learns of Alan's revocation *efore Alan learns of harlie's acceptance.

+D396I+D

+n the facts, there seems to *e an offer *y Alan to sell the lawnmower for 05%%%. If

harlie reads Alan's letter of revocation, there can only *e a contract if harlie has

accepted *efore then. The only time this can have occurred is on Thursday whenharlie posted his letter of acceptance. If the postal rule applies, acceptance would

ta!e place as soon as the letter is posted. There are two points to ma!e in relation to

this


5/21



C%'*' T+'%, +/',%

$.


6/21

However, G months later, the financial security of "oggins (an! is threatened when

one of their Cirectors is involved in a ma?or fraud scandal and the (an! advises ilo

that he must pay the missed payment of 0@%,%%% at once together with interest.

Advise ilo.

2. O+',/ A/

CONSIDERATION

() The central issue here is sufficiency of consideration in relation to the performance of

existing contractual duties. 8e are as!ed to advise Tony as to whether he can enforce

promises made to him *y Elia*eth and Fohn to ma!e payments of money. This

involves a discussion of consideration - define consideration and then examine the

individual agreements.

Tony and Elia*eth

The agreement to do the wor! for 0@$,%%% is an enforcea*le agreement consideration

is executory on *oth sides. The fact that the agreed price is *elow the commercial

rate is irrelevant for two reasons

If Tony

is only doing what he is contractually *ound to do, then the consideration may *e said

to *e insufficient STILK 4 M!RICK. HARTLE! 4 PONSON3!pro*a*ly would

not apply here despite Tony's difficulties with the hard ground. If STILK 4

M!RIC applies, then Tony would not *e a*le to recover the extra payment.

However, the case of WILLIAMS 4 ROE!must *e examined.

If Elia*eth has promised a further sum in order that the contract may *e performed

on time and she o*tains a practical *enefit as a result of giving the promise, then the

performance of the existing contractual duties on Tony's part may amount tosufficient consideration. This would *e su*?ect to the re&uirement that the promise

was not given as a result of economic duress or fraud.

In this scenario, Elia*eth does o*tain a practical *enefit in that she has her studio

finished in time for the exhi*ition. an this *e reconciled with STILK 4 M!RICK>

- The outcome of that case was ?ustified on the *asis that parties to a contract should

not *e permitted to threaten *reach in order to secure an extra payment. +*taining

payments in this way is now addressed *y the concept of economic duress and the

courts appear more willing to uphold a genuine commercial renegotiation as long as

economic duress is a*sent.

G


7/21

The answer should explain the nature of economic duress and in particular address

whether any illegitimate pressure was applied to Elia*eth and if so, did she have any

reasona*le practical alternative *ut to agree> ATLAS E9PRESS 4 KACO Here it

does not appear that Tony exerted any improper pressure upon Elia*eth to induce her

to ma!e the new promise. Thus, the promise of Elia*eth may *e enforcea*le *y

Tony.

Tony v Fohn.

Fohn promised to pay 01%% to Tony. Is there consideration provided *y Tony doing

what he was *ound to do in his contract with Elia*eth The cases suggest that this is sufficient consideration PAO ON 4 LAU

!UI LONG: THE EUR!MEDON. It is not li!ely that this would *e an agreement

which the law would hesitate to enforce and Fohn does *enefit. It is li!ely that the

promise to pay Tony 01%% will *e enforcea*le.

(7) The original contract is for the 01%,%%% to *e repaid at 0@%,%%% over 1 years plusinterest.

The (an! then promises to postpone the payment of the next 0@%,%%% for one year and

to give up the interest on this sum. 6ix months later it now wishes to go *ac! on this

promise. an the (an! do so>

ilo should *e advised that the rules concerning offer, acceptance and consideration

should *e complied with in relation to a variation of an existing contract in much the

same way as for esta*lishing a contract in the first place.

The first &uestion here is whether ilo provides consideration for the (an!'s promise

to defer payment of 0@%,%%% and give up their right to interest.

Applying the rule in Pinnel's case the answer is clearly 2no2. This decision which

was approved of *y the House of 3ords in OAKES 4 3EEResta*lishes that it is not

good consideration in return for the discharge of a de*t to agree to pay part of the

de*t. The facts here are similar to OAKES 4 3EERagreeing to pay 0@%,%%% less

interest is not good consideration when the greater sum of 0@%,%%% ;+ interest is

owed. In the a*sence of ilo agreeing to do something different from what was

contracted for such as paying a lesser sum at an earlier date there is no consideration

as in doing less than he had contracted to do ilo is not suffering any detriment.

ould WILLIAMS 4 ROE! 3ROS*e applied to this decision> Applying the

rule in that case a promise to perform an existing duty


8/21

more for the provision of services and the rule that part payment of a de*t is not good

consideration was decided in a House of 3ords case OAKES 4 3EER. 9nder the

system of precedent the ourt of Appeal in WILLIAMS 4 ROE! 3ROShad no

choice *ut to follow the House of 3ords decision.

Alternatively could ilo raise the principle of promissory estoppel as a defence>ould ilo argue applying the decision in the HIGH TREES case that "oggins

made a promise to him it would not insist on its strict contractual rights and it is

therefore estopped from going *ac! on this promise.

There are two difficulties for ilo to overcome.

ilo would argue no. 9nli!e D & C 3UILDERS 4 REEShe put no great

pressure on the (an! to accept the lesser sum. He merely told them he had a

financial pro*lem and the (an!, who at the time were under no financialpressure


9/21

the same services


10/21



C%'*' T+'%, +/',%

4.


11/21


12/21

If *oth parties have insurance cover against this loss the courts are

more li!ely to let the loss lie where it falls *ut if for example (yte

could have o*tained cheap insurance cover against this loss *ut Acme

could not


13/21

Fohn is also a consumer and therefore unli!e


14/21



C%'*' T+'%, +/',%

RUSTRATION

5.


15/21

paya*le2 *efore the frustrating event occurred. Here 01%% was the sum paya*le and

this figure represents the ceiling A can claim under 6@


16/21

Again if there is no frustration T would *e in *reach of contract and Hotel would *e

entitled to receive its loss of profit su*?ect to the re&uirement that it must mitigate its

loss *y finding another reception for this day


17/21



C%'*' T+'%, +/',%

1.


18/21

It is unli!ely the court would ta!e this view. The courts are reluctant to allow

a party to end a contract for a minorOtrivial *reach. Fudges much prefer the

/wait and see2 approach adopted in the HONG KONG IR SHIPPING CO

case. 9nder this approach rather than classify the term in advance as *eing a

condition


19/21


20/21

+ne argument would *e that it is analogous to ICTORIA LAUNDR! 4

NEWMAN. In that case while normal loss of profit was recovera*le under

the first *ranch of HADLE! 4 3A9ENDALEthe exceptional loss of profit

was classified as falling under the second *ranch /!nowledge of special

circumstances2 category. As the engineers had no !nowledge at the time of

the contract was made of the fact that if the *oiler was not delivered on timethe laundry would lose their very lucrative contract with the inistry of

6upply it was held to *e too remote. 6imilarly here if "erry is unaware when

ma!ing the contract of the fact regarding paying 1 times the normal rates for

exclusive use of all 1% rooms this loss would *e too remote.

An alternative argument could *e *ased on PARSONS 4 UTTLE!

INGHAMsu*se&uently applied in 3ROWN 4 KMR SERICES.

9nder this approach B ta!ing from tort the principle of HUGHES 4 LORD

ADOCATEif a particular loss is a serious possi*ility that fact that its extent

is more severe than could have *een anticipated is irrelevant.

Applying this B if the loss of profit from the availa*ility on time of the @%

extra *edrooms is not too remote the fact that this loss is greater than would

normally have *een anticipated *ecause of the American connection is not

relevant and the full loss of profit can *e recovered.

learly everything depends on how the ?udge will classify this loss B if he

classifies it as a separate type of loss from the ordinary *usiness profits as the

?udge did in the ICTORIA LAUNDR!case it will *e too remote if "erry

had no !nowledge of this special American agreement when he made his

contract with ing Hotel.

There is however no easy outcome to the &uestion B as long as you put

forward the different arguments that could *e used and emphasise that

everything depends on how the ?udge categorises the loss no more could *e

expected of youJ


21/21

Therefore while ing Hotel cannot ma!e a general claim for loss of reputation

if they can produce evidence that *ecause of the delay *y "erry they have lost

the profits claimed in

tutorial ans-contract 2002

Documents