Business Law: Historical Introduction to Contract Essay

Introduction

Lord Denning stated in Bishop Gattex Motor Finance Ltd.V. Transport Brake Ltd[1] asserting that:

“In the development of law two principles have striven for mastery. The first being the protection of property. No one can give a better title than he himself possesses. The second being the protection of commercial transactions.

The person who takes goods in good faith and for value without notice should get a good title.”

Sec.48 (1) of Sale of Goods Act (1896) establishes that an unpaid seller’s right of retention or stoppage in transit is not affected by any sales or other disposition of the goods which the buyer may have made unless; the seller has assented thereto. However, where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods that person transfers the document to a person who takes the document in good faith and for valuable consideration then if such last-mentioned transfer was by way of sale the unpaid seller’s right of retention or stoppage in transitu is defeated, and if such last-mentioned transfer was by way of pledge or other disposition for value, the unpaid sellers right of retention or stoppage in transitu can only be exercised subject to the rights of the transferee.

Main text

The preposition for starters in contract law is that a person cannot constitute himself a contracting party with one who he knows or ought to know has no intention of contracting with him. An offer can thus be accepted only by the person to whom it is addressed. (Boulton V. Jones; (1857) 2H. &N.564)[2]. It is worth noting that offer and acceptance must be interpreted in an objective way.

The test to be applied according to Anson Williams[3] is whether the offeror intended to contract with the person to whom the offer was made in consideration of how a reasonable person in the position of the offeree would have interpreted the offer.

Where the offeror makes an offer to a person whom he mistakes that person for person (b) and the former reasonably believing the offer is intended for him accepts such offer then the offeror is bound in such circumstance.[4] Similarly the same principle applying to persons contracting at a distance is similar to persons contracting face to face as established in PhilipsV. BrooksLtd[5] Lord Horridge J held that though the plaintiff believed the person to whom he sold the ring was Sir George Bullough, he in fact contracted to sell to the person who came into his shop. His intention was therefore to sell to the person present and identified by sight and hearing. The contract was therefore not void ab initio on grounds of mistake but only voidable on grounds of fraud and therefore the defendant had acquired a good title. Therefore, the transfer by John of the motor vehicle to the con-man was prima facie, a valid transaction.

As between John and the con man apart from the fraud as to the identity of the con-man the transfer of the motor vehicle to the con-man was prima fade valid transfer s far as an innocent purchaser for value is concerned. Hence when Stephen purchased the Motor vehicle from conman, he would have presumably sighted what appeared to be a valid transfer document from John to the conman, establishing the conman’s apparent title. Nor would Stephen necessarily have had any notice of any fraud or wrongdoing on the part of the conman. Hence it is arguable that Stephen was in the meaning of the Act, a person who takes the document in good faith and for valuable consideration and as such entitled to defeat the claim of John. John would be thus forced to pursue his right as against the Conman only unless one of the elements of S.48 did not exist, in which case he may also commence action as against Stephen for the recovering of the vehicle

However the foregoing rule will not apply in instances where the second party posses to be a different person and forges the signatures and document[6]. In Hardman V.Booth[7] it was held that the plaintiff was entitled to the goods as his intention was to contract with Gandell & Co not Edward Gandell. Thus if; the con-man posed as the Vice-chairperson and fraudulently acquired goods in that name, the contract would be held to be void ab initio as the offeror would have been taken to have contracted with the vice-chairperson.

(2) A promise according to Farnsworth A.E.[8] is a declaration or assurance made to another person stating that a certain state of affairs exists, or that the maker will do or refrain from some specified act, thus conferring on that other person a right to claim the fulfillment of such declaration? Such agreement thus confers rights in personal available only against a particular person. The intention of the parties must therefore be to create an obligation between them, which must be a legal obligation. A promise on the other hand is more than a mere offer to perform some particular act.

It must have been accepted by the promisee. A promise that has not been accepted therefore has any legal validity.

The essence of a contract revolves around the principle of consensus ad idem; that is the meeting of the wills of the parties. The essence of this principle is that apart from external phenomenon of agreements, the parties consent to be bound and that such consent is true, full and free. Reciprocity in contracts especially those that are not under seal is required and such requirement as observed by Pollock can only be maintained by the doctrine of consideration. The definition of consideration was established in the case of Currie V. Misa[9] consisting either in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility by the other. It can thus be concluded that consideration consists either in some benefit to the promisor at the detriment of the promisee. It is not worthy that the definition is not conclusive in itself but gives the constituents to be looked for in consideration.

Consideration may be executory, executed but it must not be past as it amounts to mere sentiments of gratitude or honor. In an executed consideration both the promise and the act which constitute the consideration correlate and are part of the same transaction, but in past consideration the promise is subsequent to the act and independent of it[10]. In the above view past consideration was considered ineffective. However exceptions lie to the rule established in the above case that a past consideration will support a subsequent promise if consideration is given at the request of the promisor[11]. Thus when a request is made which is in substance an offer of a promise upon terms to be afterward ascertained and services rendered in pursuance of that request a subsequent promise to pay a fixed sum may be regarded as part of the same transaction. Thus the courts have held that if the promisor was entitled to it would still hold as sufficient consideration for the promise to discharge. In Foakes V.

Beer[12], Dr. Foakes was indebted to Mrs. Beer for a sum of $2090. Upon agreement Foakes was to make payment of $500 in cash and the remaining balance in installment and Mrs. Beer accepted this as full satisfaction of the debt.

Foakes paid the money as required but Mrs. Beer later claimed an addition (360) as interest on the judgment debt Foakes refused and claimed his duty to pay interest had been discharged by the promise to release him. It was no consideration for the promise and as such she was bound to pay.

However, a different view was held in Central London Property Trust V. High Trees House Ltd[13] the plaintiff by a lease under seal let the defendant a block of flats for a term of ninety-nine years at a rent of $2,500 a year. On account of the war the defendants were unable to let many of the flats thus the plaintiff reduced the rent to $1,250. The situation returned to normal in due course and the flats were occupied.

A claim was brought for original rent.

Denning J. held that the prayer was enforceable as the intention of the parties was temporary reduction of rent during the war period during part of the year. The principle of estoppel was established was on the basis that a person who makes to another a representation intended to be acted upon and which is In fact acted upon to his detriment by the person to whom the representation is made will be prevented from acting in inconsistency with his previous statements.

References

Gibson A & Franser, D. Business Law (Bed) (2007) Pearson, French’s Forest.

Anson R.W. (1964) Principle of English Law of Contract and Agency (22ed) Oxford University Press, London.

Farnsworth A.E. (1969) The past of promise; Historical Introduction to contract, 69 Colence L. REV.576.

Richard C. (2001) Two economic Theories of Enforcing Promises in the Theory of Contract Law by Peter Benson (Ed) and Cambridge University Press

P.S. Atiyah (1990) Toward a General Law of Contract (O.C.U K.840. Z.916)

Foonotes

1. [1949] 1 K.B. 332.
2. Where Boulton had taken over the business of one Brocklehurst, with whom the defendant, Jones, had used to deal and against whom he had a set-off. Hones sent an order for goods to Brocklehurst, which Boulton supplied without informing him that the business had engaged hands. When Jones learned that the goods had not come form Brocklehurst, he refused to pay for them, and was sued. It was held that Jones was not liable on grounds that if he (Jones) intended to contract with A, B can not give himself any right under it.
3. Principles of English Law of Contract and Agency (22ed) (1964)).
4. Upton-on-Severn R.D.C.V. Powell (1942) All E.R. 220 where the defendant sent for Upton fire brigade in mistake for the pershore fire brigade an offer. The call was accepted in good faith by Upton brigade. It was held that the defendant was thus contractually bond to pay for such services.
5. (1919) 2.k.13. 243. Gee Also Edmunds V. Merchant Dispatch W. 1883). 135 Mass 283.
6. Ingram V. Little (1961) 1. Q. 13.31 Devlin echoed this to above decision where the plaintiffs advertised their car for sale.
7. A rogue who called himself Hutchinson visited them and offered to buy the car and gave out a cheque which was rejected for cash. But after checking the plaintiff traced the Hutchinson which was a favor person and accepted the cheque. He took the car and sold to the defendants who took it in good faith. The defendant was held to have not acquired good title to the goods.
8. (1863) 1 H & C. 803.
9. (1969) the past of promise: Historical Introduction to contract, 69 coluna L. Rev. 576.
10. [1875], L.R. 10 EX.153.
11. Roscona V. Thomas (1842) 3Q 234. The plaintiff purchased a horse from the defendant who afterwards in consideration of the previous sale warranted that the horse was sound and free from vice. It was in fact a vicious horse. The warrant was regarded to be independent of the sale and as an express promise based on previous transaction.
12. Lampleigh V. Brathwalt where the plaintiff to obtain for him a pardon from the King which he did but incurred some interest the defendant had however in the past stated that they would pay. The past consideration was held to be enforceable.
13. (1884) App. Cas.606.
14. (1947) K.B. 130.