The Law of Contract

529 Pages·2012·3.61 MB·English

by  Janet O'Sullivan

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The Law of
Contract
Fifth Edition
JANET O’SULLIVAN MA (CANTAB), PHD (CANTAB)
Fellow of Selwyn College, Cambridge, and Senior Lecturer in Law, University of Cambridge
JONATHAN HILLIARD MA (CANTAB), LLM (CANTAB)
Barrister, Wilberforce Chambers, London
Series Editor
NICOLA PADFIELD
Fitzwilliam College, Cambridge
1
3
Great Clarendon Street, Oxford OX2 6DP,
United Kingdom
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It furthers the University’s objective of excellence in research, scholarship,
and education by publishing worldwide. Oxford is a registered trade mark of
Oxford University Press in the UK and in certain other countries
© Janet O’Sullivan & Jonathan Hilliard 2012
Th e moral rights of the authors have been asserted
Second Edition copyright 2006
Th ird Edition copyright 2008
Fourth Edition copyright 2010
Impression: 1
All rights reserved. No part of this publication may be reproduced, stored in
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and you must impose this same condition on any acquirer
Public sector information reproduced under Open Government Licence v1.0
(http://www.nationalarchives.gov.uk/doc/open-government-licence/open-government-licence.htm)
Crown Copyright material reproduced with the permission of the
Controller, HMSO (under the terms of the Click Use licence)
British Library Cataloguing in Publication Data
Data available
Library of Congress Cataloging in Publication Data
Data available
ISBN 978–0–19–964480–3
Printed by Ashford Colour Press, Gosport, Hampshire
Preface to the fi fth edition
Th e preface to the fi rst edition of this book explained that its aim was to give students
as sound an understanding of the basics of contract law as possible and, equally impor-
tantly, of why the law is the way it is, in order that they might not only understand the
current state of the law but be stimulated to form their own views on whether it is justifi -
able. With that in mind, we made two choices when writing the fi rst edition. Th ese were,
fi rst, that the book would focus both on the fundamentals of contract law and the ration-
ales underlying them; second, that where the law was controversial in some respect, we
attempted to set out in detail our opinions, and the opinions of others, on whether the
rule in question is correct. In the second edition, we retained the basic ethos and struc-
ture of the fi rst edition, whilst at the same time tightening and distilling our treatment of
some areas of the law, creating a book of more manageable size. Th is structure seems to
have worked well and has been preserved in this latest edition, but we have also included
chapter overviews and a problem question at the end of each chapter, which we hope will
be helpful. Th e chapters on Incapacity and Illegality no longer appear in this edition (as
these topics do not generally form part of undergraduate courses on the law of Contract)
but are now available on the Online Resource Centre.
We hope that this book will be of use both to students wanting a clear picture of the ba-
sics of the subject, and to those eager to explore the law and its controversies in greater
depth. In particular, it remains our view that it is no longer feasible to study the ‘core’ of
a legal subject without reading and thinking about the academic contributions to it, so
we have tried to draw attention to academic writing that we think students would enjoy
and benefi t from reading.
Although there has been no obvious restructuring or dismantling of the law of contract
since the last edition, the law has continued to benefi t from ongoing maintenance and
repair by the courts. Th is edition includes important decisions of the Supreme Court in
Rainy Sky SA v Kookmin Bank and Oceanbulk Shipping & Trading SA v TMT Asia Ltd on
contractual interpretation, and RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH
& Co KG on partly performed contracts. Th e Court of Appeal has been productive in
contractual cases since the last edition, so this edition covers numerous new authori-
ties, including Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd, Maple Leaf
Macro Volatility Master Fund v Rouvroy and Grant v Bragg on formation; Whittle Movers
Ltd v Hollywood Express Ltd on contracts that fail to materialise; Durham Tees Valley
Airport Ltd v Bmibaby Ltd on certainty and quantifi cation of damages; Pink Floyd Music
Ltd v EMI Records Ltd on contractual interpretation; Röhlig (UK) Ltd v Rock Unique
Ltd on reasonableness under UCTA; Parabola Investments Ltd v Browallia Cal Ltd on
fraudulent misrepresentation; AXA Sun Life Services plc v Campbell Martin Ltd and JP
vi Preface to the fi fth edition
Morgan Chase Bank v Springwell Navigation Corpn on excluding liability for misrepre-
sentation; Force India Formula One Team Ltd v Etihad Airways PJSC on repudiation;
Law Debenture Trust Corpn plc v Elektrim SA on loss of a chance; Supershield Ltd v
Siemens Building Technologies FE Ltd on remoteness of damage; and Araci v Fallon on
injunctions. We have tried where possible to incorporate new authorities decided before
1 October 2011. In addition, this edition includes for the fi rst time discussion of EU and
international developments in the law of contract, and more detail on contracting in the
electronic, virtual world.
When citing case law in this book, we have retained the style used in previous editions;
that is we have adopted the terminology introduced by the Civil Procedure Rules, call-
ing the party bringing proceedings the ‘claimant’ not the ‘plaintiff ’ (unless reproducing
a quotation using the label ‘plaintiff ’), even where the relevant case pre-dates the in-
troduction of the Rules. We can only apologise to those readers who fi nd this a grating
anachronism (like spotting a digital watch in a costume drama), but it seemed to us the
best solution to the problem.
We would both like to off er our sincere thanks to the Contract ‘team’, past and present,
in the Cambridge Law Faculty for their inspiration, particularly Neil Andrews, Jack
Beatson, Paul Davies, Steve Hedley, Jonathan Morgan and Roderick Munday, as well
as many other colleagues, including David Fox, Cherry Hopkins, Gareth Jones, John
Spencer and Graham Virgo. We are particularly indebted to the professionalism and
helpfulness of David Wills and all his staff in the Squire Law Library. We would like to
thank our past and present supervision students, whose Contract supervisions road-
tested the ideas in this book and whose thought-provoking questions inspired many a
re-write. In addition, we are extremely grateful to many other students, from Cambridge
and elsewhere, who have taken the time and trouble to provide feedback on previous
editions of this book, as well as pointing out to us errors and infelicities. We urge you to
let us know of any that remain!
On a personal note, Janet O’Sullivan would like to off er heartfelt thanks to her husband
Michael, her parents Anne and Rob and sisters Helen and Gill, to her old friend Jeff
Twentyman for advice and encouragement, and fi nally to her precious Robert, Amy and
Hannah for putting everything into perspective. Jonathan Hilliard would like to thank
all those who have helped him in the writing of this book, not least his (long-suff ering)
family.
Janet O’Sullivan Jonathan Hilliard
Selwyn College, Cambridge Wilberforce Chambers
New to this edition
Th e fi ft h edition of Th e Law of Contract (Core Text) has been thoroughly revised to
refl ect all recent developments in the law since the publication of the fourth edition,
including:
• Important new cases, for example: Oceanbulk Shipping & Trading SA v TMT Asia Ltd
and others (2010) and Rainy Sky SA and others v Kookmin Bank (2010) (contractual
construction); Durham Tees Valley Airport Ltd v Bmibaby Ltd (2010) (certainty and
damages); Supershield Ltd v Siemens Building Technologies FE Ltd (2010) (remoteness
of damage); Springwell Navigation Corpn v JP Morgan Chase Bank (2010) and AXA
Sun Life Services plc v Campbell Martin Ltd (2011) (exclusion of liability for misrep-
resentation); RTS Flexible Systems Ltd v Molkerei Alois Müller GmBH (2010) (‘subject
to contract’ wording and contracts that fail to materialise), Vercoe v Rutland Fund
Management (2010) and Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd (2009)
(restitutionary and reasonable fee remedies for breach of contract).
• Signifi cant EU-inspired developments in the law of contract are now introduced in
the fi rst chapter.
• C ontract formation and other contractual issues in the modern world of electronic
and online transactions are dealt with in more detail throughout the new edition.
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Contents
Table of legislation xv
Table of cases xvii
1 General themes and issues 1
FURTHER READING 10
2 Offer and acceptance I: general principles 11
Two preliminary points 13
Is there an off er? 16
Acceptance 26
Contracting in an electronic world 38
Battle of the forms 40
OVERVIEW 42
FURTHER READING 45
SELF-TEST QUESTIONS 45
3 Offer and acceptance II: three applications of the general principles 47
Intention to create legal relations 47
Signature: the rule in L’Estrange v Graucob 52
Unilateral mistake 54
OVERVIEW 67
FURTHER READING 69
SELF-TEST QUESTIONS 69
4 Certainty 71
General principles 73
Some thorny issues 75
OVERVIEW 82
FURTHER READING 83
SELF-TEST QUESTIONS 84