Introduction to the terminology of contracts (part 3)

1. Introduction to the terminology of contracts (part 3) Anne Brunon-Ernst Lecturer in Legal English Paris 2 University

2. Outline of the lecture • Introductory note • Classification of contracts (I) • Doctrine of privity of contracts (II) • Statutorycontractual provisions (III)

3. Introductory note A contractis : • a promise (Eng Law) • e.g. seecontract =/= estoppel • an agreement (US Law) Terminology: Estoppel = a promise whichisenforceablebecauseit has been reliedupon by the promisee

4. (I) Classification of contracts

5. (I) Whyclassifycontracts? • Not for the meresake of defining and classifying • Defining a concept allows a bird’s-eyeview of the wholesubject • Introduction to the terminology =/= substance • 6 differentways of classifyingcontracts: • According to formation (A) • According to performance (B) • According to the nature of the contract (C) • Specific to English law (D) • According to itseffects (E) • Othercontracts (F)

6. I-A/Classification according to formation/mode of creation

7. I-A-1/Express contract A contract expressed in oral or written words Note: Contracts, no matter how important, maybe made withoutanywriting (i.e. word of mouth) Two exceptions (seecaselaw): • Contractcanbe made orally or by conduct, but canot beinforced by the courts, unlesswrittenevidence of it • Contractisrequired to be made in writing

8. I-A-2/Implied contract Definition: A contract which is isinferredfrom the acts or conducts of the parties or course of dealingsbetweenthem Distinction implied/express: • Intention of the parties expressed =/= intention inferred from conduct • No significant difference at law • But different method by which contract proved E.g: Coins inserted in slot machine

9. I-A-3/Quasi-Contract Definition: Thesecontracts do not arise by the virtue of any agreement, expressed or impliedbetween the parties but the lawinfers or recognizes a contractunder certain specialcircumstances Aim: A personshould not obtain a benefit or an unjustenrichement as againstanotherbecausethereis no obligation in contract Remedy: The courts imply a fictitious promise to account for the benefit. The promise forms the basis of an action in quasi-contract e.g.: A painter painting the wrong house, with the knowledge of the owner of the house. Terminology: In the pastalsoreferred to as implied-in-lawcontract =/= implied-in-factcontract (= genuinecontracts)

10. Quasi-Contract vs ImpliedContract • Belong to differentlegalcategory • Nothing in commonwithcontracts • for lack of a better option, the sameprocedureisused for actions in contract and actions in quasi-contracts • Nowconsidered as new branch of the law, independentfromcontractlaw, part of the law of restitution • Legal obligations do not arise from promise Terminology: The law of restitution covers cases where one personisheldobliged to restore or pay for somebenefitreceivedfromanother (or at the expense of another) in orderthatheshould not beunjustlyenriched. If he has promised or agreed to pay for the benefit, hisliabilityiscontractual, but if he has not doneso, hisliabilityisrestitutionary

11. I-B/Classification according to performance/extent of execution

12. I-B-1/Executed contract Definition: A contract that is fully performed on both sides e.g.: . If they do so immediately, the possession of the good and the right to the good are transferred together and the contract is executed • Chose in possession

13. I-B-2/Executory contract Definition: A contract that is not fully performed by one or both parties e.g.: A and B agree to exchange A’s pen for B’s notebook. If they do so the following day, the right to the good is transferred but not the possession and the contract is executory • Chose in action Terminology: To carry out an obligation = to do what the contractrequires

14. Rules and exceptions • Classicalcontractlaw: contractual obligations arise out of promises • Makes no difference if contractispartlyexecuted or whollyexecutory • Signs of change • Now an executorycontractis more likely to beheldvoid for uncertaintythan a contractwhichis part performed

15. I-C/Classification according to the nature of the contract

16. I-C-1/Bilateral contract As a result of the court’s inference of the intention of the parties (generally): a promise for a promise = > both parties are bound by the performance of their promises Courts have tended to construe transactions as bilateral

17. I-C-3/Unilateral contract A promise for an act = > only one party (promisor) is bound by the performance of his promise e.g.: estate agency case

18. I-D/Classification of contracts in English law

19. I-D-1/Formal contract A contract that requires a special form or method of creation

20. I-D-2/Informal contract A contract that requires no special form or mode of creation

21. I-D-1/Formal contract

22. I-D-1(a)/Contracts of records A contract of record iseither a judgment of court or Recognizance Contracts of records derivetheirbinding force from the authority of the court. Theylack the essential element consensus. They are enforced by court Note: Recognizanceis a writtenacknowledgement of debt due to the Crown. It isusually met with in connectionwithcriminalproceedings

23. I-D-1(b)/Contracts underseal It derivesitsbinding force fromitsformalone. It is in writing and issigned, sealed and delivered by the parties Contractswhich must be made underseal , includes: • Contracts made withoutconsideration • Contract made by corporations • SeeCompaniesAct 1985 • Conveyance in legalestate of land or anyinterest in land (lease more than 3 yrs) • SeeLaw of Property (Miscellaneous Provisions) Act 1989 Terminology: Contractunderseal = deed = convenant = specialitycontract Conveyance = transfer of property = agreement by the vendor of land to conveyhistitle or ownership and the agreement of the purchaser to takeit

24. I-D-1(b)/Seal vs attestation • When the deedisentreredinto by an individual • No requirement for sealing • Signature of individualwitnessed and attested • When the deedisenteredinto by a company • The companymayexecute documents by putting itscommonseal on it • Any document signed by the director and the secretary and said to beexecuted by the companywillberegarded as if the sealhad been put on it • Terminology: To attest = to make a statementthat the deed has been signed in the presence of a witness and makeclearthat the document intended to be a deed (e.g. ‘signed as a deed by A in the presence of B’) A seal = originallyrecognised wax seals. By the 20th century a smallcircle of red tape affixed to the document (contract for the sale of land), although the courts alsoheldthat a circlecontaining the letters "L.S." wasadequate

25. I-D-1(b)/deed vs simple contract A deedis a superior document to a contract e.g. mergers

26. I-D-3/Simple contracts

27. I-D-3/Simple contracts • All contractswhich are not made underseal are simple contracts • Simple contractsmaybe made orally or in writing • Needsvalidoffer, validacceptance and needs to besupported by consideration Terminology: Simple contract = parolcontract

28. I-D/Classification of contract according to effects • Valid contract – A contract that meets all of the essential elements to establish a contract • Void contract – No contract exists • Voidable contract – One or both of the parties has the option of voiding or enforcing the contract • Unenforceable contract – A contract that cannot be enforced in court, but can be used as a defence • Illegal contract – contravenes the criminal law, but not necessarily (contrary to the public interest) => often void Terminology: To void a contract = to set it aside To enforce a contract = to carry out one’s obligations under it

29. I-F/Other Contracts • An offeree can prevent the offeror from revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed-upon period of time • This payment is called an option contract • The offeror agrees not to sell the property to anyone but the offeree during the option period

30. Questions • Define a contract • Is a contract a promise or an agreement? • What do youmean by a voidcontract? • Whatis an illegalcontract? • Whatis an unenforceablecontract? • Whatis an impliedcontract? • What are quasi-contracts? • Watis an executorycontract? • What do youmean by an unilateralcontract? • What do youmean by a bilateralcontract? • Distinguishbetweenvoidcontracts and voidablecontracts • State whether all voidagreements are illegal • Distinguishbetweenexecuted and executorycontract • Distinguishbetween express and impliedcontract • Essayquestion: Discuss the followingstatement: ‘An agreement enforceable by lawis a contract’.

31. (II) Privity of contract • Origins • Problems • Contracts (Rights of Third Parties) Act 1999

32. Definition: Relationship between the parties to a contract, whichmakes the contractenforceable as betweenthem. • A third party cannot sue under the contract • Otherform of action: in the tort of negligence (seeDonoghue v Stevenson)

33. The doctrine: wheredoesit come from? The doctrine of consideration and the doctrine of privity You must have givenconsideration for a promise in order to be able to enforceit • Crompton J in Tweddle v Atkinson: ‘It wouldbe a monstruous proposition to saythat a personwas a party to the contract for the purpose of suinguponit for hisownadvantage, and not a party to it for the purpose of beingsued’

34. The doctrine: problems (1) How to evade the doctrine of privity (a) Beswick v Beswick • widowwas not entitled to sue in herownnamebecauseshewas not a party to the agreement • Wasentitled to sue in hercapacity of administratrixbecauseshewassuing on behalf of herlatehusband’sestate

35. The doctrine: problems (2) (b) Collateralcontracts: i.e. the courts act as if thereweretworelatedcontracts Shanklin Pier Ltd v DetelProducts Ltd Facts: SP owned a pier and wanted to getitpainted. DP werepaintmanufacurers and told SP that if theirpaintwasused to paint the pier, the paintwould last 7 yrs. SP told the contractorswhowere to paint the pier to buy the paintfrom DP. The contractorsdidso, but the paintonlylasted 3 mths Decision: the court decidedtherewas a collateralcontractbtw SP and DP. It wasrelated to the main contractbtw DP and the contractors for the sale of the paint

36. The doctrine: problems (3) Contract of sale Painting contract Collateralcontract

37. The doctrine: problems (4) • But for DP’s assurance thattheirpaintwould last sevenyears, SP would not have told the painting contractors to buyit • Artificialapproach to analysing the situation

38. Contracts (Rights of Third Parties) Act 1999 • Under s. 1, a third party mayenforce a term of the contract in hisown right if heisexpresslyidentified in the contract by name, as a member of a class or answering a particular description • Under s. 1(3) the third party does not have to be in existence at the time the contractis made • The Act affects the contracting parties’ rights to vary or cancel the contract if reliance on the term by the third party • s. 5 protects the promissorfrom double liability

39. (III) Statutory provisions • Sale of GoodsAct 1979 • Supply of Goods and Services Act 1982

40. Sale of GoodsAct (1979) • Sale of goods by description => e.g. whenbuying a good in a mail order catalogue • Sale of goods by sample => e.g. a washing machine from a shop

41. Sale of GoodsAct (1979) The Statuteimpliestermsintocontracts for sale of goods • S14(2): Goods are of satisfactoryquality • S14(3):Goods are fit for the purpose Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002 (SI 2002 No. 3045)

42. Sale of GoodsAct (1979) • Other relevant provisions: • S. 8: the buyer must pay a reasonableprice • S. 13: impliedtermthat the goodswill correspond the description given • S. 14 (seeabove) • S. 15A: when the breachissoslight, if the buyerdoes not deal as consumer, the breachis not to betreated as a breach of condition but maybetreated as a breach of warranty. • S. 48A: if goods do not conformwith the contractwithin 6 months, rebuttablepresumption of non-conformity • S. 48B: replace or repairwithinreasonable time and free of charge • S. 48C: appropriatepricereduction

43. Supply of Goods and Services Act 1982 Applieswhenprovidesyouwith a service (i.e. someoneworks for you in the course of business) Applieswhensomeoneprovidesyouwithgoods and doeswork for you in the course of their business under the samecontract

44. Supply of Goods and Services Act 1982 • S.13: impliesthat service shouldbeprovidedwithreasonableskill and care • S.4: impliesthatgoods have to be of a satisfactoryquality and reasonably fit for purpose • Note: Amended by the Sale and Supply of Goods and Consumer Regulations 2002

45. Supply of Goods and Services Act 1982 Other relevant provisions: • s. 2: implies a term about title • s. 3: the goods correspond to the description • s. 4(2): the goodswillbe of satisfactoryquality • s. 4(5): the goods are fit for anyparticularpurposewhich the buyermakesknown • s. 13: reasonableskill and care • s. 14: impliedtermthat the service willbecarried out within a reasonable time and for a reasonablecharge (Whenthey are not fixed by the contracts, left to befixed in a manneragreed by the contract or determinedby parties)

46. Bibliography • P. S. ATIYAH, An Introduction to the Law of Contract, 5th edn, Oxford, OUP, 1995. • Adrian Chandler & Ian Brown, Law of Contract, 7th edn, Oxford, OUP, 2009. • Dictionary of Law, 3rd edn, London, Peter CollinPublishing, 2000. • Denis Keenan, Smith & Keenan’s English Law, 14th edn, Harlow, Longman, 2004. • C. Draycott, W. Laws, H. Revenko, A. Smith, Law: agreements, rights & responsibilities, 2ndedn, Oxford: OUP, 2007. • JS Smith, Smith & Thomas: A Casebook on Contract, 11th edn, London, Sweet & Maxwell, 2000.