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English Contract Law Fundamental Principles Report


Introduction

In the context of English law, contract is defined as a promise or an array of promises for which contravention the law offers remedy or recognized as a duty by law when performed. From this definition it is apparent that contracts have three interconnected elements namely a promise, a legal duty as a result of the promise and a remedy for the breach of promise (Beatson, 2002, p. 3). According to the English laws, reference to the promise is always seen as ambiguous. English laws require tangible agreements that are binding and do not give significance to mere promise. For instance, a promise to take someone out for lunch has no legal obligation, whereas business contracts give rise to legal obligations (Halson, 2001, p. 6).

English law differentiate bilateral and unilateral contracts. Bilateral contracts bind both parties, for instance, buyer and the seller. The buyer has an obligation to pay the price and the seller is obligated to transfer ownership to the buyer. On the other hand, unilateral contracts give rise to obligation to only one party. Unilateral contracts normally arise in the sports arena where the organizers promise to give prizes to the participants, whilst the participants have no obligation to attend (Beatson, 2002, p. 8).

English contract laws bind both England and Wales. This law shares a heritage with the common wealth countries. To consider remedies for breach of contract under English law, you have to understand the distinction between common law and equity (Hill, 2001, p.151). Historically, England has had two legal systems working side by side and each have distinct rules. Common law was administered by the courts of common and King’s Bench, while equity administered in court of chancery presided over by Lord Chancellor. Nevertheless, these two set of laws nowadays are administered in the same court, even though they are still two different set of doctrines (Halson, 2001, p. 2).

Fundamental principles of English contract law

According to the English common law contracts have three fundamental elements and these are agreement, contractual intention and consideration. The first requirement is that parties must reach an agreement and these involve one party making an offer which must be accepted by the other party (Halson, 2001, p. 8). To establish whether an agreement was reached English courts normally applies objective test (Tetley, 2004, p.7).

The English common law defines an offer as willingness to contract on particular terms that binds two or more parties. The offer must show intent that is biding to be accepted by the other party evident in the case Bell v Lever Brothers Ltd. [2003] 119 L.Q.R. 625. The offer may be addressed to an individual, a group or a general public. An offer can be expressed or conducted. What distinguishes a statement as an offer or an invitation to treat is the intent with which it is made. Intentions to treat are normally not legally binding unless the individual to whom it is addressed to accepts the terms. Examples of invitation to treat include all the product promotional activities (Beatson, 2002, p. 3).

The most relevant case is the famous case of Carlill v Carbonic Smoke Ball Co [1892] 1 kb 532. The company advertised its new drug, carbonic smoke ball, as a cure for flue and any consumer who was dissatisfied with its results would be refunded £100. The company was sued for making an advertisement a legally binding offer, but it defended itself that the advertisement was a mere gimmick or invitation to treat. Nevertheless, the Court of Appeal established that the advertisement was not a mere invitation for treat but an offer. This was supported by the fact that the company had deposited some amount a thousand pounds for the cause.

Acceptance of the offer implies that there is an objective expression, by the recipient, of an intention to be bound by the terms of the offer. This must in accordance with exact terms in the case of agreement as exhibited in the case of Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 A.C. 349. However, the acceptance has no legal basis until it is conveyed to the sender or the one who issued an offer. In case of postal acceptance, it takes effect immediately the mail is posted. However, that are a number of offers which require acceptance to be conveyed in a particular manner and this must be adhered to. In the case of instantaneous medium, for instance, e-mail or SMS, this takes effect immediately the message is received (Halson, 2001, p. 18). There are cases of counter offer where the recipient may accept the offer but on his/her owns terms. The offeror may choose to reject or accept those terms. According to the Contract Act of 1999 revocation of counter offer must be communicated to the offeree. The revocation requires a third party who acts as a witness or else it is considered ineffective as evidenced in the case of. The parties are considered to be in agreement once the offer is accepted. This acts as a basis of a contract but is not enough to create a legal obligation.

According to the English common law, the contract is binding unless it is supported by consideration evident in the case of Stover v Manchester City Council [1974] 1 WLR 1403. A consideration is any valuable that is given as a promise or required to make the contract enforceable. This is normally detrimental to the one promising since on breach of contract he/she must part with a valuable. This supports the fact that informal unwarranted promise is a not legally binding/ contract. The considerations have to be sufficient, but not necessarily adequate since they do not interfere with bargain made by the parties (Halson, 2001, p. 12).

A contractual agreement, even if supported by a consideration, is not legally binding unless there is a legal intention. In other words, the parties must intend the agreement to be legally binding. For instance, in the case of Balfour versus Balfour, the husband who was employed overseas promised his wife, who was based in England, an allowance of £30 on a monthly basis. The wife’s attempt to enforce the promise was unsuccessful since they did not intend to legally bind the arrangement (Allen and Overy, 2003, p. 4).

Contracts can be made formally or informally. Informal contracts include those formed by word of mouth and in some cases there is no oral or written communication. These informal contracts can still be legally binding under the English law similar to written contracts. Nonetheless, most contracts are made formally through writing or by deed. The terms of a contract can either be express or implied. Express terms are the ones that the parties lay down their agreement. Implied terms are not specifically stated but implied and this can be as a result of the law or intention of the parties or through custom.

Remedy/ Damages

Breach of contract takes place when a party fails or refuses to honor the terms on the contract without legal excuse. Breach of contract also includes defective performance or deliberate incapacitation to avoid performing what is due under the contract (Halson, 2001, p. 21). The English law lay down remedies for breach of contract and is intended to compensate the party injured or who has incurred the loss. However, before the injured party is compensated, he/she has to show that the actual loss is the result of the breach, the type of loss is recognized and entitled to compensation and lastly, the loss is not excessively remote (Allen and Overy, 2003, p. 4).

According to the Sale of Goods Act 1979, the fundamental principle behind the remedy is to place the injured party, to as close as possible, in the position he/she would have been had the contract been fulfilled. However, damages can sometimes be insufficient remedy. There are numerous equitable remedies, which are unrestricted, directed at making sure that the injured parties are not unfairly treated by being restricted to the remedies of the common law (Allen and Overy, 2003, p. 5).

The common law allows the court to grant specific performance or injunction as a remedy to breach of contract. Specific performance obliges the party in breach to fulfill the terms of the contract and is only granted if it is equitable to do so. However, it may be rejected if the claimant is unjust or unfair according to equity. Injunctions are normally aimed at regulating the position of the parties pending the hearing (interlocutory injunction). However, prohibitory injunction requires the defendant to reverse the effects of the existing breach. An injunction is usually granted when specific performance is unobtainable (Halson, 2001, p. 22).

Conclusion

Contracts are part and parcel of our everyday’s life. Employment, insurance and consumer services among others are all governed by contract laws. Even though the above three situations have specific laws, they are all governed by an array of fundamental principles usually known as general law of contract. However, although in the current legal environment there are no cases that involve pure contractual principles, it should be noted that the basic rules are still essential in understanding more complex situations. There are two sets of English laws-common law (generally referred as law) and equity. It should be noted that equity was developed to mitigate and correct the rigidity of the common law. In the case of Simon and Beyonce, Simon must make sure that the contract adheres to the principles of English law- agreement, contractual intention and consideration. In the event that Beyonce breaches the contract Simon can seek for specific performance or injunction from the court. But he must prove to the court that he suffered losses as a result of the breach, he is entitled to compensation or the loss is not too remote.

References

Allen, G. and Overy, T., 2003. Basic principles of English contract law. London: Oxford Press.

Beatson, J., 2002. Law of Contract (28th ed). Oxford: Oxford University Press.

Bell v Lever Brothers Ltd. [2003] 119 L.Q.R. 625.

Carlill v Carbonic Smoke Ball Co [1892] 1 kb 532.

Contracts (Rights of Third Parties) Act 1999. (c.31), London: Stationary Office Ltd.

Halson, R., 2001. Contract Law. London: Pearson Education.

Hill, S., 2001. Flogging a Dead Horse-The Postal Acceptance Rules in Contract. Journal of Contract Law, 17, pp.151.

Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 A.C. 349.

Sale of Goods Act 1979, U.K. 1979. (c. 54), London: HMSO.

Stover v Manchester City Council [1974] 1 WLR 1403.

Tetley, W., 2004. Good Faith in Contract Particularly in the Contracts of Arbitration and Chartering. Montreal: McGill University press.

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IvyPanda. "English Contract Law Fundamental Principles." May 28, 2020. https://ivypanda.com/essays/english-contract-law-fundamental-principles/.

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IvyPanda. 2020. "English Contract Law Fundamental Principles." May 28, 2020. https://ivypanda.com/essays/english-contract-law-fundamental-principles/.

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IvyPanda. (2020) 'English Contract Law Fundamental Principles'. 28 May.

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