Law of Contract

ATTORNEYS-AT-LAW PRELIMINARY YEAR EXAMINATION

COMPILATION – RIKAZ RIFFARD

ATTORNEY-AT-LAW, LLB (HONS) (LONDON)
CONTACT - 0776601016
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SUBJECT AREAS

1. OFFER

2. ACCEPTANCE

3. CONSIDERATION & JUSTA CAUSA

4. MISREPRESENTATION

5. TERMS / CONDITIONS / WARRANTIES / UCTA / EXCLUSION CLAUSES

6. DAMAGES

7. INTENTION TO CREATE LEGAL RELATIONS

8. OBJECTIVE & SUBJECTIVE TEST

9. UNENFORCEABLE CONTRACTS (VOID / VOIDABLE / ILLEGALITY)

10. CAPACITY TO CONTRACT (MINORITY / LUNACY / PRODIGALITY /

DRUKENNESS)

11. MISTAKE

12. DURESS

13. UNDUE INFLUENCE

14. FORM

15. REMEDIES

16. QUANTUM MERUIT

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1. OFFER

Not all agreements are contracts but agreement is a necessary element for contractual obligations to arise.

According to Christopher Weeramantry “A contract is a promise, or promises mutually exchanged, setting

up, against the promisor or promisors, duties of performance, which the law will recognise or enforce at the
instance or for the benefit of the promisee or promisees, or of a third party intended to be benefitted”

The factor which distinguishes contractual obligations from other legal obligations is that they are based on
the agreement of the contracting parties.

For most types of contract, the offer and acceptance may be made orally or in writing, or they may be implied
from the conduct of the parties.

An offer is a definite promise to be bound under certain specific terms.

CONSTITUTING ELEMENTS OF A VALID OFFER:

1. Can be made orally, in writing or by conduct.

2. Not Vague

An offer cannot be vague as in Gunthing v Lynn where the offeror promised to pay a further sum for a
horse if it was lucky. However if a vague offer is capable of being made certain either by implying terms or
by reference to previous dealings between the parties, then it will be regarded as certain as in the case of
Hillas v Arocos where a contract for sale of timber of fair specification between persons well acquainted
with the timber trade was upheld.

3. May be made to a particular person, class or persons, or the public at large as in Carlill v Carbolic
Smoke Ball Co.
4. Not to be confused with the answer to a question or the supplying of information as in the case of
Harvey v Facey in which replying to a telegraph was an indication of what defendant would sell for
when he decided to sell rather than an offer for sale; a mere statement of price

INVITATION TO TREAT:

An invitation to another person to make an offer e.g.

1. Tenders:

Spencer v Harding – a statement that goods are to be sold by tender is not normally an offer, so that the
person making the statement is not bound to sell to the person making the highest tender

Harvela Investments Ltd. Royal Trust of Canada – it is difference where the person inviting the tender
states in the invitation that he binds himself to accept the highest offer to buy or the lowest offer to sell and
the contract is concluded as soon as the highest offer to buy or the lowest to sell etc... is communicated

Blackpool and Flyde Aero Club v Blackpool Borough Council – invitation to tender received before last
date specified by the Blackpool Council but not considered as it was not opened in time; held that it is
possible to have exceptions to the rule that invitations to tender are not contractual offers, applying where
tenders are invited from known persons and selected persons under a clear and prescribed procedure

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2. Display of goods for sale:

Fisher v Bell – shopkeeper displayed flick knife in window, police alleged that this offer for sale was contrary
to restrictions in Offensive Weapons Act; held that general rule is that a display of price marked goods in a
shop is not an offer to sell goods but is an invitation to customer to make an offer to buy

Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd – taking of articles from the shelves
constitutes an offer by the customer to buy and not the acceptance of an offer by the chemist to sell; the
sale was not completed until the customer’s offer to buy had been accepted by the defendants by their
acceptance of the purchase price; and, therefore, the transaction took place “under the supervision of a
registered pharmacist” as required by the Pharmacy and Poisons Act

3. Advertisements:

Grainger v Gough – advertisements that goods are for sale is not an offer therefore, the circulation of a
price list by a wine merchant was only an invitation to treat

However, in a situation where an advertisement offers a reward for the return of lost property it will be
considered to be an offer rather than an invitation to treat. If the finder returns the property knowing of the
reward offer, he is entitled to the reward.

A unilateral contract is a one sided contract in the sense that one party binds himself by a conditional promise
leaving the other party free to perform the condition for not, as he pleases. In an unilateral contract the
offeror will not know whether the contract is on until the other party has performed his part.

Carlill v Carbolic Smoke Ball Co. – defendants issued an advertisement in which they promised to pay
£100 to anyone who caught influenza after having used their product in the prescribed manner and that they
have deposited £1000 with their bankers for such purpose to show sincerity. Mrs. Carlill used the said
product and still caught influenza; it was held that unilateral contract was created and that it was not mere
puff because of the deposit made with the bank

Lallyett v Negris Co. – Defendants advertised hams for sale and plaintiff posted order from Nuwara Eliya
for 3 hams which were dispatched from Colombo and paid for by plaintiff. Hams allegedly unfit for human
consumption. Court held that the advertisement was an invitation to treat an not an offer, therefore the
contract was made in Colombo and the Nuwara Eliya court did not have jurisdiction.

4. Auction:

In an auction, the auctioneer’s call for bids is an invitation to treat. The bids made by a person at the auction
are offers which the auctioneer can accept or reject as he chooses. Similarly the bidder may retract his bid
before it is accepted as in Payne v Cave

Counter Offers:

Hyde v Wrench – W offered to sell farm for £1000, H then offered to buy for £950 which W refused. H then
tried to accept the original offer. Court held that the counter offer was a rejection of original terms and the
original offer was put to an end thereby.

Stevenson v McLean – offeree asked for information as to terms of credit: not a counter offer; counter offer
should be distinguished from a mere request for information.

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2. ACCEPTANCE

An acceptance is the final and unqualified expression of assent to the terms of an offer. To make a binding
contract the acceptance must exactly match the offer. The offeree must accept all the terms of the offer.
Where there is continuous negotiation between the parties, the courts look at the whole course of the
negotiations and decide whether the parties ever did agree to the same terms.

CONSTITUING ELEMENTS OF A VALID ACCEPTANCE

1. Acceptance by Conduct: If X offers a reward for the return of his lost purse, then Y by taking the
purse to X, both accepts the offer of the reward and performs the act necessary to gain it.

Brogden v Metropolitan Railway Co. – Parties acted according to the agreement document's terms which
had not been validly accepted. Then some more serious disagreements arose, and Brogden argued that
there had been no formal contract actually established. House of Lords held that a contract had been created
by conduct and that it came into existence when the company ordered its first load of coal upon the terms
of the draft or at least when Brogden supplied it.

Muthukuda v Sumanawathie – held that an offer of marriage may be accepted by conduct which is
unequivocal and which indicates a definite understanding between the parties that a marriage is to take
place.

2. Acceptance Must Be Unqualified:

Acceptance must be unqualified; as in Jones v Daniel where in reply to an offer a contract for signature
accepting offer but containing new terms was returned, a counter offer has been made which the original
offeror may reject.

Tenders:- A tender is an offer, the acceptance of which leads to the formation of a contract e.g. Where X
advertises for offers to supply a specified quantity of goods, to be supplied at a specified time and Y offers
to supply, acceptance of Y’s tender creates a contract under which Y is bound to supply the goods and the
buyer X is bound to accept them and pay for them.

However, difficulties arise where tenders are invited for the periodical supply of goods e.g. Great Northern
Railway Co. v Witham where X advertises for offers to supply goods up to a stated maximum, during a
certain period, the goods to be supplied as and when demanded, acceptance by X of a tender received from
Y does not create a contract; instead, X’s acceptance converts Y’s tender into a standing offer to supply the
goods up the stated maximum at the stated price as and when requested to do so by X. The standing offer
is accepted each time X places an order, so that there are a series of separate contracts for the supply of
goods.

3. Acceptance must be communicated:

The General rule is that acceptance must be communicated to the offeror (declaration theory); until and
unless the acceptance is so communicated, no contract comes into existence as in the case of Entores v
Miles Far East Corporation

In the case of unilateral contracts the requirement of communication of acceptance is waived by the offeror.
Acceptance does not require communication in the ordinary sense but, of course, there is a kind of
communication in performing the task for which the reward is offered unilaterally by the offeror.

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It is important to talk about the Postal Rule when discussing the essential elements of a contract. In Adams
v Lindsell it was held that the postal acceptance dates from posting even if the letter is delayed. (University
of Ceylon v Fernando accepts this rule in Sri Lanka).

Postal rule applied even where letter is lost as in Household Fire Insurance Co. v Grant.

The postal rule will not apply where acceptance has not been properly posted as in the case of Re London
& Northern Bank

4. Silence does not amount to acceptance:

Offeror cannot impose a condition that silence shall constitute acceptance without the offeree’s consent e.g.
Felthouse v Bindley – F wrote to N saying that “if I hear no more about him I will consider the horse is mine
at £30 15s. N wrote to B, an auctioneer, in whose possession the horse was telling him not to sell the horse
but B sold by mistake. F sued B in conversion (tort alleging wrongful disposition of the plaintiff’s property by
the defendant). B’s defence succeeded on the basis that there was no valid contract between F and N
because the condition that silence constituted acceptance was ineffective.

5. Acceptance must be communicated by the offeree or by someone with his authority:

It is important that in the case of Powell v Lee it was decided by the managers of a school to appoint P as
head master and an un authorised manager notified P of appointment by telegram. When it was later
decided to reverse the decision, P sued for damages and it was held that no contract had been made due
to improper communication of acceptance.

6. Acceptance should be made in the prescribed form according to the offer:

The offeror may expressly or impliedly prescribe the method of communicating acceptance. In such case,
the acceptance should be made in the way prescribed by the offeror. If it is not mentioned an equally
acceptable way of communication can be chosen.

Quener Duaine v Cole – an offer by telegram is evidence of a desire for a prompt reply, so that acceptance
sent by post may be treated as ineffective.

Tinn v Hoffman – D offered to sell P iron requesting reply ‘by return of post’ (not made clear that no other
method would suffice); does acceptance have to be by post? Hoenyman J: an equally expeditious method
would suffice.

Yates Building Co. Pulleyn Ltd - D gave P option to purchase land, stating notice of acceptance should
be returned ‘by registered or recorded delivery. P returned notice by ordinary post, D refused notice stating:
‘the option agreement provides for notice to be sent by registered or recorded delivery post, Your letter was
not sent so...’. No enforceable contract as precise method of acceptance was prescribed.

7. Acceptance is not effective is communicated in ignorance of the offer:

R v Clarke - The claimant wanted to compel the Crown to pay a reward it had offered for information leading
to the conviction of a murderer. The claimant gave the information. But he gave it while he was under
investigation himself for murder. He told the police "exclusively in order to clear himself". It was uncertain
whether he was thinking about the reward at the time he provided the information. The Court held it was
necessary to act in "reliance on" an offer in order to accept it, and therefore create a contract and therefore
there was no contract in this instance.

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However, where the existence of the offer plays some part, however small, in inducing a person to do the
required act, there is a valid acceptance of the offer as in Williams v Carwardine. Walter Carwardine was
murdered in Hereford. The plaintiff, Mrs Williams, gave evidence at the Hereford assizes against two
suspects, but did not say all she knew. The suspects were acquitted. On April 25, 1831, the victim's brother
and defendant, Mr Carwardine, published a handbill, stating there would be a £20 for ‘whoever would give
such information as would lead to the discovery of the murder of Walter Carwardine.’ Mrs Williams gave
more information which led to the conviction of two men (including a Mr John Williams, the plaintiff's
husband). She claimed the reward. Mr Carwardine refused to pay. At the trial her motives were examined.
It was found that she knew about the reward, but that she did not give information specifically to get the
reward. It was apparent that after the first murder trial, Mrs Williams had been savagely beaten by Mr
Williams. The advertisement amounted to a general promise or contract to pay the offered reward to any
person who performed the condition mentioned in it, namely, who gave the information. Two judges clearly
stated that motives were irrelevant. Littledale J said, "If the person knows of the handbill and does the thing,
that is quite enough." Patteson J said "We cannot go into the plaintiff's motives."

Tinn v Hoffman – Cross-offers i.e. two identical offers exchanged between the parties, does not form and
agreement but rather two separate offers which require acceptance to form a contract.

TERMINATION OF OFFER

An offer may be terminated in the following circumstances:-

(i) Acceptance: once an offer has been accepted, a binding contract is made and the offer ends.
(ii) Rejection or counter offer: If the offeree rejects the offer or makes a counter offer that is the end
of it.
(iii) Revocation: The offer may be revoked by the offeror at any time until it is accepted. However the
revocation of the offer must be communicated to the offeree(s). Unless and until the revocation
is so communicated, it is ineffective.

Byrne v Van Tienhoven – expedition theory which applies in the case of the postal rule will not apply in the
case of postal revocation of offers: there is a more stringent rule for revocation than offers.

Dickinson v Dodds: revocation need not be in communicated by the offeror personally, it is sufficient if it
is done through a reliable third party

Boyd v Nel – an option offer is an offer to keep open for a definite or indefinite period an offer that has
already been made.

An option offer cannot be terminated during the term specified in such contract or if no term is specified, the
offer must be kept open for a reasonable time (Roman Dutch law position which does not recognise the
English law doctrine of consideration). In English law however, a promise to keep an offer open for a fixed
period does not prevent its revocation within that period. However a person by giving consideration may buy
a promise to keep an offer open for a fixed period.

Shuey v U.S. – held that an offer made by advertisement in newspaper could be revoked by a similar
advertisement even though second advertisement was not read by some offerees – revoked by reasonable
steps.

Errington v Errington and Woods – once the offeree has commenced performance of an unilateral offer,
the offerror may not revoke the offer

Weeramantry – in a system governed by Roman Dutch law where absence of consideration has no effect,
the doctrine of causa would be flexible enough to include sufficient part performance of a unilateral contract

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as sufficient causa whereby the offeror would be bound not to revoke the offer even before completion of
the act or performance.

(iv) Lapse of time: where an offer is stated to be open for a specific length of time, then the offer
automatically terminates when that time limit expires. Where there is no express time limit, an
offer is normally open only for a reasonable time.

Ramsgate Victoria Hotel v Montefiore – defendant’s delay in allotting the shares caused the lapse of the
plaintiff’s offer to buy the same.

(v) Failure of a condition subject to which the offer was made: an offer may be made subject to
conditions. Such a condition may be stated expressly by the offeror or implied by the courts from
the circumstances. If the condition is not satisfied, the offer is not capable of being accepted.

Financings Ltd. v Stimson – D who wished to purchase a car signed a hire purchase form (offer – becomes
binding once the finance company signed the form). Car was stolen before signing by finance company and
it was held that D was not bound to take the car as there was an implied condition that the car would be in
substantially the same condition as when the offer was made when it was accepted.

(vi) Death: the offeree cannot accept an offer after notice of the offeror’s death. However, if the
offeree does not know of the offeror’s death and there is no personal element involved, then he
may accept the offer – Bradbury v Morgan

3. CONSIDERATION AND JUSTA CAUSA

“In the Roman Dutch law and in most continental systems based on the civil law the simple requirement of
justa causa is used to satisfy the requirement that the promise must be serious and deliberate while English
law employs the test of consideration to ensure the presence of the bargain element it deems so essential
in contract.”
- Weeramantry

JUSTA CAUSA:

Causa conveys the following meanings: “seriousness or deliberateness of intention, the motive or reason
for a transaction; the reasonableness objectively judged of the causa for a transaction; and even the nature
of the particular transaction fell within the scope of causa as explained by Dutch jurists.
- Weeramantry

Lipton v Buchanan – Wendt J defined justa causa as “denoting the ground, reason or object of a promise
giving such promise a binding effect in law. It has a much wider meaning than the English term consideration
and comprises the motive or reason for a promise and also purely moral consideration”

Attempts have been made to equate the concepts of Causa and Consideration by South African jurists
headed by Lord de Villiers. However, the concept of cuasa as a distinct and different concept from that of
English consideration was firmly established after the judgement of the Privy Council in the Sri Lankan case
of Jayawickrama v Amarasuriya and the South African case of Robinson v Randfotein Estates [Link].

Jayawickrama v Amarasuriya – Privy Council held that the defendant’s promise to pay the plaintiff Rs.
150,000/- was enforceable inasmuch as it was made deliberately in discharge of a moral obligation resting
upon the defendant

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Public Trustee v Udurawana – an employee instituted legal action to enforce a promise made by his
employer to pay him a pension or gratuity in consideration of past faithful services. Dias J observed “since
the decision of the Privy Council in Jayawickreme v Amarasuriya, it is settled law that a lawful promise
deliberately made to discharge a moral duty or to do an act of generosity or benevolence can be enforced
under the Roman Dutch law”

CONSIDERATION:

Despite our common law being Roman Dutch law, the requirement of causa is an essential element for the
formation of a legally binding contract in Sri Lanka. However the presence of consideration is necessary for
the formation of a valid contract governed by English law in our country e.g. consideration is an essential
element in a contract for sale of goods under the Sale of Goods Ordinance No. 11 of 1896 (Attorney-
General v Abraham Saibo & Co.); the same position prevails with regard to a contract governed by the
Bills of Exchange Ordinance.

Under English law, both parties to a contract must provide consideration if they wish to sue on the contract.

Definitions:

Currie v Misa – Lush J referred to consideration as consisting of a detriment to the promisee or a benefit
to the promisor: “some interest, profit or benefit accruing to one party, or some forbearance, detriment, loss
or responsibility given, suffered or undertaken by the other”.

Dunlop v Selfridge Ltd – “an act or forbearance of one party, or the promise thereof, is the price for which
the promise of the other is bought and the promise thus given for value is enforceable”

RULES GOVERNING CONSIDERATION:

1. Consideration can be excecutory or excecuted but not in the past

a) Executory Consideration

Where there is an exchange of promises to perform acts in the future e.g. a bilateral contract for the
supply of goods whereby A promises to deliver goods to B at a future date and B promises to pay on
delivery. If A does not deliver, B can sue and if A delivers the goods, then his consideration becomes
executed.

b) Executed consideration

If one party makes a promise in exchange for an act by the other party, when that act is completed, it is
executed consideration e.g. in an unilateral contract where A offers £50 reward for the return of her lost
handbag, if B finds the bag and returns it, B’s consideration is executed. Note that when B made his
claim his act was in the past, but it was not in the past when A made his promise.

If a person suing to enforce a promise has only provided past consideration, he will not succeed in his
action. In Re McArdle a lady and her three grown up children lived together in a house. The wife of one
of the children did some decorating and later the children promised to pay her £488 and they signed a
document to this effect; held that the promise was unenforceable as all the work had been done before
the promise was made and was therefore past consideration.

Salman v Obias (Sri Lankan case) – ‘valuable consideration’ as used in section 17 of the Registration
of Documents Ordinance was subject of interpretation by the courts – deed of transfer to appellant by
grandmother alleged that consideration was attending to her and covering her medical costs – no
consideration as alleged consideration was past consideration.

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Exceptions to the rule that past consideration is no consideration:-

(i) Bills of Exchange Ordinance 1927 section 27 provides that any antecedent debt or liability
is valid consideration for a bill of exchange

(ii) A past act is saved from the rule that past consideration is no consideration if two conditions
are satisfied:-

a. That the act was done at the request of the promisor; and

b. That the parties all along contemplated that payment would be made.

Lampleigh v Braithwait – B killed an man and asked L to obtain an royal pardon. L did so
and B then promised to pay him £100. B broke promise and L sued him. L succeeded in
action because B’s request was regarded as containing an implied promise to pay and the
subsequent promise to pay £100 was simply fixing the amount

2. Consideration must be sufficient but need not be adequate

Consideration has to have some value. Where consideration is recognised by the law as having some value,
it is described as “real” or “sufficient” consideration.

Chappell & Co Ltd v Nestle Co Ltd – Nestle were running a special offer whereby members of the public
could obtain a music record by sending off three wrappers from Nestle’s chocolate bars plus some money:
the wrappers were held to be “sufficient” consideration.

Thomas v Thomas – £1 rent per year and promise to keep the house in good repair was “sufficient”
consideration for the conveyance of a house.

3. Consideration must move from the promisee

The person who wishes to enforce the contract must show that he provided consideration; it is not enough
to show that someone else provided consideration.

Tweddle v Atkinson – an agreement was made between William Guy and John Tweddle whereby each
promised the other that he would pay a sum of money to William Tweddle, who was the son of John Tweddle
and the prospective son-in-law of William Guy who died without having paid this sum. William Tweddle was
unable to sue the executors for the sum as he was a “stranger to the consideration”.

4. Forbearance to sue

If one person has a valid claim against another (in contract or tort) but promises to forebear from enforcing
it, that will constitute valid consideration if made in return for a promise by the other side to settle the claim
as in Alliance Bank v Broom

5. Existing public duty

If someone is under a public duty to do a particular task, the agreeing to do that task is not sufficient
consideration for a contract

Collins v Godefroy – G promised to pay C if C would attend court to give evidence. C was served with a
summons and therefore he was unable to sue G for payment as he was already under a duty to attend court

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Glassbrooke Bros v Glamorgan County Council – if someone exceeds their public duty, then this may
be valid consideration

6. Existing contractual duty

If someone promises to do something they are already bound to do under a contract that is not valid
consideration.

Stilk v Myrick – Two out of eleven sailors deserted ship. The captain promised to pay remaining sailors
extra money of they sailed the ship back but then refused to pay: held that sailors were already bound to
sail back and promising to sail back was not valid consideration for the promise of extra payment.

Hartley v Ponsonby – nineteen out of thirty six crew deserted ship and captain promised to pay extra to
remainder. Here promise to sail back in dangerous and seriously undermanned conditions discharged the
sailors from their existing contract and left them free to enter into a new contract for the rest of the voyage.

Stilk v Mryick principle is amended by the following case. Now if the performance of an existing contractual
duty confers a practical benefit on the other party, this can constitute valid consideration.

Williams v Roffey Bros Ltd - The defendants were building contractors who entered an agreement with
Shepherds Bush Housing Association to refurbish a block of 27 flats. This contract was subject to a
liquidated damages clause if they did not complete the contract on time. The defendants engaged the
claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the
claimant realised he had priced the job too low and would be unable to complete at the originally agreed
price. He approached the defendant who had recognised that the price was particularly low and was
concerned about completing the contract on time. The defendant agreed to pay the claimant an additional
£575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional
£500. He then ran out of money and refused to continue unless payment was made. The defendant engaged
another carpenter to complete the contract and refused to pay the claimant the further sums promised
arguing that the claimant had not provided any consideration as he was already under an existing
contractual duty to complete the work. Consideration was provided by the claimant conferring a benefit on
the defendant by helping them to avoid the penalty clause. Therefore the defendant was liable to make the
extra payments promised.

7. Existing contractual duty to a third party

If a party promises to do something for a second party, but is already bound by a contract to do this for a
third party, this is good consideration.

In Scotson v Pegg it was held that Scotson’s delivery of coal (the performance of an existing contractual
duty to a third party, X) was a benefit to Pegg and was valid consideration. It could also be seen as a
detriment to Scotson as they could have broken their contract with X and paid damages.

8. Part payment of a debt:-

If one person owes a sum of money to another and agrees to pay part of this in full settlement, the rule at
common law (the rule in Pinnel’s case) is that part payment of a debt is not good consideration for a promise
to forego the balance.

Pinnel’s case – at Pinnel’s request Cole paid Pinnel £5 on £8 owed in full settlement. Pinnel subsequently
sued Cole for the balance. It was held that part payment was not in itself valid consideration. However, it
was held that the agreement to accept part consideration would be binding if the debtor, at the creditor’s

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request, provided some fresh consideration e.g. early part-payment, chattel instead of money, part-payment
in a different place.

Foakes v Beer – B obtained a judgement against F for a debt owed. F asked for time to pay and B agreed
to take no further action provided that F pays £500 immediately and the remainder by half-yearly payments
of £150. F kept to the payment plan but was liable to pay interest accrued because such interest payment
was the consideration for which F had bought B’s promise to take no further action.

Re Selectmove – arrears in tax put Inland Revenue in a position to put Selectmove in liquidation.
Selectmove tried to rely on the agreement made with collector of taxes that they would pay arrears in
instalments when they were put in liquidation and it was held that they had not provided consideration for
the promise not to put into liquidation.

Exceptions to the rule in Pinnel’s case

A. Third party part-payment of the debt

Hirachand Punamchand v Temple – father paid smaller sum to money lender which was accepted as
full payment of son’s debts. Held to be valid consideration.

B. Composition Agreements

An agreement between a debtor and a group of creditors agree to accept a percentage of their debts in
full consideration. Despite the absence of consideration, the courts will not allow an individual creditor
to sue the debtor for the balance (Wood v Robarts). The reason is that allowing an individual creditor
to claim the balance would amount to fraud on the other creditors who all agreed to the percentage.

C. Promissory Estoppel

Strict application of the rule in Pinnel’s case causes hardship to a person who relies on a promise of the
other party that a debt will not be enforced in full. Thus to mitigate the harshness of this rule, the doctrine
of promissory estoppel was propounded in equity (which is founded on fairness) and does not look with
favour on a man who promises relief to another and then goes back on his promise.

Central Property Trust v High Trees House Ltd (High Trees Case) – In 1937, High Trees House Ltd
leased a block of flats in Clapham, London, for a rate £2500/year from Central London Property Trust
Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower
than normal. In January 1940, to ameliorate the situation the parties made an agreement in writing to
reduce rent by half. However, neither party stipulated the period for which this reduced rental was to
apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill, and by
1945, the flats were back at full occupancy. Central London sued for payment of the full rental costs
from June 1945 onwards (i.e. for last two quarters of 1945) and succeeded in such claim.

The court considered whether the plaintiff would have succeeded if he had claimed the full rent back to
the date of the commencement of the war. Denning J stated that he would not have been successful
because he would have been stopped in equity from going back on his promise. It should be noted that
equitable estoppel is suspensory i.e. when circumstances change so as to remove the reasons for the
promise, the original rights of the promisor become enforceable again. Further as Birkett and Asquith LJ
stated in the High Trees case, the principle acts as a shield and not a sword i.e. it only prevents the
promisor from insisting on his strict legal rights when it would be unjust to allow him to do so and it does
not enable the promisee to sue on an action unless he has given consideration.

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4. MISREPRESENTATION

A misrepresentation is a false statement of fact made by one party to another, which, whilst not being a term
of the contract, induces the other party to enter into the contract. The effect of a misrepresentation is to
make the contract voidable, giving the innocent party the right to rescind the contract and/or any claim
damages.

A misrepresentation must be a false statement of fact, not opinion or future intention or law or silence.

1. Statements of opinion

Bissett v Wilkinson – the vendor of the land in New Zealand stated that it would support 2000 sheep.
It was found that this was not so but the vendor was not liable because the land had not previously been
used for sheep rearing and the purchaser knew of this fact. The statement was therefore held to be one
of opinion, not fact. However, a statement of opinion, may by implication involve a statement of fact.

Smith v Land and House Property Corp – vendor of a hotel described it as ‘let to Mr. Frederick Fleck
(a most desirable tenant)’. The tenant was in fact in arrears with rent. It was held to be a statement of
fact since the vendor was impliedly stating that he knew the fact the supported his opinion that the tenant
was ‘deireable’.

Dimmock v Hallet – some expressions of opinion are mere puffs e.g. land described as ‘fertile and
improvable’ not a representation.

2. Statements as to the future

A false statement by a person as to what he will do in the future is not a misrepresentation and will not
be binding on a person unless the statement is incorporated into the contract.

Edington v Fitzmaurice – P was induced to lend money to a company because the directors said they
intended to use the money to finance expansion. In fact, this intention never existed since the directors
needed the money to pay off debts. Their statement of intention was also held to be a statement of fact
i.e. if a person knows that his promise which has induced another person to enter into a contract will not
be carried out then he will be liable.

Esso Petroleum v Mardon – forecast as to petrol throughput fell short. Esso, in making the forecast
had special knowledge and skill (more so than Mardon) therefore the forecast was found to be negligent
misrepresentation

3. Statements of the law

A false statement as to the law is not actionable misrepresentation because everyone is presumed to
know the law.

Solle v Butcher – In 1931 a dwelling house had been converted into five flats. In 1938 Flat No. 1 was
let for three years at an annual rent of £140. In 1947 the defendant took a long lease of the building,
intending to repair bomb damage and do substantial alterations. The plaintiff and defendant discussed
the rents to be charged after the work had been completed. The plaintiff told the defendant that he could
charge £250 for Flat 1. The plaintiff paid rent at £250 per year for some time and then took proceedings
for a declaration that the standard rent was £140. The defendant contended that the flat had become a
new and separate dwelling by reason of change of identity, and therefore not subject to the Rent
Restriction Acts. This was held to be a statement of fact.

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Beattie v Edbury – directors of a company represented that they had the power under the private Act
incorporating the company to issue new preference shares ranking pari passu with an existing issue.
This was held to be a representation of law, not fact.

Cherry v Colonial Bank of Australia – the directors who had power to borrow with consent of the
shareholders borrowed without such consent. It was held that they ahd impliedly made a statement of
fact viz, that they had obtained the shareholders’ consent.

4. Silence

Generally, silence is not a misrepresentation. The effect of the maximum caveat emptor is that the other
party has no duty to disclose problems voluntarily. Thus if only one party is labouring under a
misapprehension there is no duty on the other party to correct it.

Smith v Hughes – The plaintiff farmer asked the manager of the defendant, who was a trainer of
racehorses, if he would like to buy some oats, and showed him a sample. The manager wrote to say
that he would take the whole quantity. The plaintiff delivered a portion of them. The defendant
complained that the oats were new oats, whereas he thought he was buying old oats, new oats being
useless to him. The plaintiff, who knew that the oats were new, refused to take them back and sued for
the price. There was a conflict of evidence as to what took place between the plaintiff and the manager.
The court ordered a new trial. Black burn J stated that “A mere abstinence from disabusing the
purchaser of that impression is not fraud or deceit, for, whatever may be the case in a court of
morals, there is no legal obligation on the vendor to inform the purchaser that he is under a
mistake which has not been induced by the act of the vendor”.

Fletcher v Krell – a woman applied for the post of governess without disclosing that she was divorced.
It was held that this non disclosure did not amount to a misrepresentation

Exceptions to the rule that silence is not a misrepresentation:-

(i) When silence distorts a literally true statement

Nottingham Brick & Tile Co. v Butler – a purchase of a land asked vendor’s solicitor whether the
land subject to restrictive covenants. The solicitor replied that he was not aware of any but failed to
add that this was because he had not troubled to read the relevant documents. The solicitor’s reply,
though literally true, amounted to a misrepresentation entitling the purchaser to rescind.

(ii) Statements which become false

With v O’Flanagan – negotiations for the sale of a medical practice were begun in January, when
the practice was said to be worth £2000 which was considered to be its value at the time. A contract
for sale was made on 1st May by which time the practice had become virtually worthless because of
intervening illness of the vendor. The contract was set aside on the ground that the vendor ought to
have communicated this change of circumstances to the purchasers and his silence in the face of
this development amounted to a misrepresentation.

(iii) Contracts Uberrimae Fidei

Contracts Uberrimae Fiei (contracts of utmost good faith) impose a duty of disclosure of all material
facts because one party is in a strong position to know the truth. Examples would include contracts
of insurance and family settlements.

Lambert v Co-Operative Insurance - When Mrs Lambert insured her family’s jewellery the insurer
did not ask about her husband’s previous convictions and she did not mention them. When Mrs
Lambert claimed £311 for lost jewellery, the insurer avoided the policy. The Court of Appeal held
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that the insurer was entitled to do so under the rules of law set out in the 1906 Act. The conviction
was a material circumstance, which would have influenced a prudent insurer. It did not matter that a
person in Mrs Lambert’s position would not have realised this. The law was clear, though not
necessarily fair.

When there is a fiduciary relationship between the parties a duty of disclosure may arise therefrom.

The false statement must have induced the representee to enter into the contrat. The requirements here
are that (a) the misrepresentation must be material, and (b) it must have been relied on:-

(a) Materiality

Museprime Properties v Adhill Properties –Here the plaintiffs had established their claim to rescission
of the contract on the ground of material misrepresentation because the inaccurate statements had
induced them to buy the properties. They would therefore be awarded the return of their deposit,
damages in respect of lost conveyancing expenses and interest.

(b) Reliance

Horsfall v Thomas – The buyer of a gun did not examine it prior to purchase. It was held that the
concealment of a defect in the gun did not affect his decision to purchase as, since he was unaware of
the misrepresentation, he could not have been induced into the contract by it. His action thus failed.

Attwood v Small – The purchasers of a mine were told exaggerated statements as to its earning
capacity by the vendors. The purchasers had these statements checked by their own expert agents,
who in error reported them as correct. Six months after the sale was complete the plaintiffs found the
defendant's statement had been inaccurate and they sought to rescind on the ground of
misrepresentation. It was held in the House of Lords that there was no misrepresentation, and that the
purchaser did not rely on the representations.

Redgrave v Hurd – The plaintiff solicitor advertised for a partner who would also purchase his
residence. The Defendant replied and during two interviews, the plaintiff represented that his business
was bringing in either about £300 a year, or from £300-£400 a year. At a third interview the plaintiff
produced summaries of business done, which showed gross receipts below £200 a year. The defendant
asked how the difference was made up and the plaintiff produced a quantity of letters and papers which,
he stated, related to other business which he had done. The defendant did not examine the books and
papers thus produced, but only looked cursorily at them, and ultimately agreed to purchase the house
and take a share in the business for £1,600. The trial judge came to the conclusion that the letters and
papers, if examined, would have shown business of only £5 or £6 a year. Finding that the practice was
utterly worthless, the defendant refused to complete the contract, and the plaintiff brought an action for
specific performance. The Court of Appeal gave judgment for the defendant. Lord Jessel MR stated:"If
a man is induced to enter into a contract by a false representation it is not a sufficient answer to him to
say, "If you had used due diligence you would have found out that the statement was untrue. You had
a means afforded to you of discovering its falsity, and did not choose to avail yourself of them." I take it
to be a settled doctrine of equity, not only as regards specific performance but also as regards rescission
that this is not an answer unless there is such delay as constitutes a defence under the Statute of
Limitations. That, of course, is quite a different thing."

TYPES OF MISREPRESENTATION:

Once misrepresentation has been established it is necessary to consider what type of misrepresentation
has been made. There are three types of misrepresentation (i) fraudulent, (ii) negligent and (iii) innocent.
The importance of the distinction lies in the remedies available for each type.

(i) Fraudulent Misrepresentation

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False statement made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless as to
whether it be true or false. Therefore if one makes a statement which they honestly think to be true, it
cannot be fraudulent.
Derry v Peek – A special Act incorporating a tramway company provided that the carriages might be
moved by animal power and, with the consent of the Board of Trade, by steam power. The directors
issued a prospectus containing a statement that by this special Act the company had the right to use
steam instead of horses. The plaintiff bought shares on the strength of this statement. The Board of
Trade refused to consent to the use of steam and the company was wound up. The plaintiff brought an
action for deceit. The defendants were not fraudulent in this case. They made a careless statement but
they honestly believed in its truth.

Weeramantry – Although there is a similarity between English and Roman Dutch law approach to the
question of fraud, in one important respect the two systems differ. Lord Herschell’s observation in Derry
v Peek that the absence of intention to cheat or injure is immaterial if fraud be proved is inconsistent
with the Roman Dutch law which requires a fraudulent intention. The courts would adopt an objective
approach and conclude that if a man conducts himself in a way as to lead the reasonable inference that
he had a particular intention that intention would be attributed to him.

(ii) Negligent Misrepresentation

This is a false statement made by a person who had no reasonable grounds for believing it to be true.

Hedley Byrne v Heller – Hedley Byrne were a firm of advertising agents. They intended to advertise on
behalf of Easypower Ltd. They wanted to know if Easypower were creditworthy, and asked their bank,
the national Provincial, to find out. The National Provincial got in touch with Easypower's bankers, Heller
& Partners. Heller told the National Provincial, "in confidence and without responsibility on our part," that
Easypower were good for £100,000 per annum on advertising contracts. Hedley Byrne relied on this
statement in placing orders on behalf of Easypower and, as a result, lost more than £17,000 when
Easypower went into liquidation. They sought to recover this loss as damages. Was there such a special
relationship in the present case as to impose on Heller a duty of care to Hedley Byrne as the undisclosed
principals for whom National Provincial was making the inquiry? The answer to that question depends
on the circumstances of the transaction. A most important circumstance is the form of the inquiry and of
the answer. Both were plainly stated to be without liability. The words clearly prevented a special
relationship from arising.

Esso v Mardon (above) – duty can arise where the representor has some special skill or knowledge
and knows that the representee will rely on the representation.

Misrepresentation Act 1967 Section 2 (1) – Where a person has entered into a contract after a
misrepresentation has been made to him by another party thereto and as a result thereof he has suffered
loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had
the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the
misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to
believe and did believe up to the time the contract was made the facts represented were true. (Burden
of proof is on the defendant to show that he had reasonable grounds for believing the facts he
represented were true)

(iii) Innocent Misrepresentation

This is a false statement which the person makes honestly believing it to be true.

REMEDIES FOR MISREPRESENTATION:

(A) Rescission
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Rescission i.e. setting aside the contract, is possible in all cases of misrepresentation. The aim of
rescission is to put the parties back in their original position, as though the contract had not been made

Car & Universal Finance v Caldwell – Caldwell sold his car to Norris. The cheque was dishonoured
when it was presented the next day. He immediately informed the police and the Automoblie Association
of the fraudulent transaction. Subsequently Norris sold the car to X who sold it to Y who sold it to Z who
sold it to the plaintiffs. In interpleader proceedings one of the issues to be tried was whether the
defendant's conduct and representations amounted to a rescission of the contract of sale. It was held
that the contract was voidable because of the fraudulent misrepresentation and the owner had done
everything he could in the circumstances to avoid the contract. As it had been avoided before the sale
to the third party, no title was passed to them and the owner could reclaim the car.

Bars to rescission – rescission is an equitable remedy and is awarded at the discretion of the court. The
injured party may lose the right to rescind in the following circumstances:-

(1) Affirmation of the contract

Long v Lloyd – The defendant advertised for sale a lorry as being in 'exceptional condition' and he
told the plaintiff purchaser that it did 11 miles to the gallon and, after a trial run, all that was wrong
with the vehicle. The plaintiff purchase the lorry and, two days later, on a short run, further faults
developed and the plaintiff noticed that it did only about 5 miles to the gallon. That evening he
reported these things to the defendant and the plaintiff accepted the defendant's offer to pay for
some of the repairs. The next day the lorry set out on a longer journey and broke down. The plaintiff
wrote to the defendant asking for the return of his money. The lorry had not been in a roadworthy
condition, but the defendant's representations concerning it had been honestly made. The Court of
Appeal held that the plaintiff was not entitled to rescission of the contract as he had finally accepted
the lorry before he had purported to rescind. The second journey amounted to affirmation of the
contract.

(2) Lapse of Time

Leaf v International Galleries – The plaintiff bought a painting after an innocent misrepresentation
was made to him that it was by 'J. Constable'. He did not discover this until five years later and
claimed rescission immediately. The Court of Appeal held that the plaintiff had lost his right to rescind
after such a period of time. His only remedy after that length of time was for damages only, a claim
which he had not brought before the court.

(3) Restitution in Integrum Impossible

Vigers v Pike – A lease of a mine which had been entered into as a result of a misrepresentation
could not be rescinded as there had been considerable extraction of minerals since the date of the
contract.

Armstrong v Jackson – A broker purported to buy shares for a client, but in fact sold his own shares
to the client. Five years later, when the shares had fallen in value from nearly £3 to 5s, it was held
that the client could rescind on account of the broker's breach of duty. He still had the identical shares
and was able to return them, together with the dividends he had received. McCardie J. said: "It is
only... where the plaintiff has sustained loss by the inferiority of the subject-matter or a substantial
fall in its value that he will desire to exert his power of rescission... If mere deterioration of the subject-
matter negatived the right to rescind, the doctrine of rescission would become a vain thing."

(4) Third party acquires rights

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Philips v Brooks – if a third party acquires rights in property, in good faith and value, the
misrepresentee will lose their right to rescind

(B) Indemnity

An order of rescission may be accompanies by the court ordering an indemnity. This is a money payment
by the misrepresentor in respect of expenses necessarily created in complying with the terms of the
contract and is different from damages.

Whittington v Seale-Hayne – The plaintiffs bred poultry and were induced to enter into a lease of
property belonging to the defendants by an oral representation that the premises were in a sanitary
condition. In fact the water supply was poisoned and the manager fell ill and the stock died. The terms
of the lease required the plaintiffs to pay rent to the defendants and rates to the local authority and they
were also obliged to make certain repairs ordered by the local council. Farwell J rescinded the lease,
and, following the judgment of Bowen LJ in Newbigging v Adam (1886) 34 Ch D 582, held that the
plaintiffs could recover the rents, rates and repairs under the covenants in the lease but nothing more.
They could not recover removal expenses and consequential loss (ie, loss of profits, value of lost stock
and medical expenses) as these did not arise from obligations imposed by the lease (the contract did
not require the farm to be used as a poultry farm). Had they been awarded, they would have amounted
to an award of damages (ie, expenses resulting from the running of the poultry farm).

(C) Damages

(i) Fraudulent Misrepresentation

The injured party may claim damages for fraudulent misrepresentation in the tort of deceit. The purpose
of damages is to restore the victim to the position he occupied before the representation had been made.

Doyle v Olby (Ironmongers) Ltd – After buying an ironmonger's business, things turned out to be very
different from what the vendors had led the plaintiff to believe. He was awarded damages for fraudulent
misrepresentations and the appeal concerned, among other things, the measure of damages. Lord
Denning MR said that: "The defendant is bound to make reparation for all the actual damage directly
flowing from the fraudulent inducement... It does not lie in the mouth of the fraudulent person to say that
they could not have been reasonably foreseen."

Damages may include lost opportunity costs e.g. loss of profits

East v Maurer – The plaintiff could recover damages in respect of another such business in which he
would have invested his money if the representation had been made, but not the profits which he would
have made out of the defendant's business, if the representation relating to it had been true. (Note: the
damages were reduced by one-third, from £15,000 to £10,000).

(ii) Negligent Misrepresentation

The injured party may elect to claim damages for negligent misrepresentation at common law. The test
of remoteness in the tort of negligence is that the injured party may recover for only reasonably
foreseeable loss (Esso v Mardon)

Royscott Trust Ltd v Rogerson – A car dealer induced a finance company to enter into a hire-purchase
agreement by mistakenly misrepresenting the amount of the deposit paid by the customer, who later
defaulted and sold the car to a third party. The finance company sued the car dealer for innocent
misrepresentation and claimed damages under s2(1). The Court of Appeal held that the dealer was
liable to the finance company under s2(1) for the balance due under the agreement plus interest on the
ground that the plain words of the subsection required the court to apply the deceit rule. Under this rule
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the dealer was liable for all the losses suffered by the finance company even if those losses were
unforeseeable, provided that they were not otherwise too remote. It was in any event a foreseeable
event that a customer buying a car on HP might dishonestly sell the car.

(iii) Innocent Misrepresentation

In cases of innocent misrepresentation s. 2(2) of the Misrepresentation Act 1967 gives the court a
discretion, where the injured party would be entitled to rescind, to award damages in lieu of rescission.
Damages under s.2(2) cannot be claim as such; they can only be awarded by the court.

5. CONDITIONS AND WARRANTIES

In order to resolve the difficulty of determining the relative importance of contractual terms, judges use the
words “conditions” and “warranties”. These two terms have different meanings in English law and Roman
Dutch law.

English law Roman Dutch law

Condition A condition is a major term which is The word ‘condition’ is not used as a
vital to the main purpose of a promissory condition but as a suspensive
contract. A breach of condition will or contingent condition on which means
entitle the injured party to repudiate a condition which affects the very
the contract and claim damages. The existence of the contract. If the condition
injured party may also choose to go fails there is no contract at all. It is clear
on with the contract, despite the therefore, that while English law uses the
breach and recover damages word in a sense of a term of a contract,
instead. the Roman Dutch law uses it in the sense
of a suspensive condition distinct from a
term.

A condition in the Roman Dutch law

sense affects the existence of an
obligation. A condition is an external fact
but a term is a very part of the contract
itself. An example of a condition in this
sense is a condition that if the article
taken at a given price corresponds with
another article in my possession, I will
keep it. It is always a condition precedent
in the Roman Dutch law that goods sold
are free from serious latent defects.
Warranty A warranty is a less important term: it The word ‘warranty’ is used in Roman
does not go to the root of the contract. Dutch law to have the same meaning as
A breach of warranty will only give the the word ‘condition’ in English law.
injured party the right to claim However, the English law meaning of
damages; he cannot repudiate the warranty has, to some extent, been
contract. adopted by the modern Roman Dutch
law

Poussard v Spiers – an actress who was hired to act in a leading role in a play could not take up her role
for a week due to illness. Her services were refused by the producers who had already engaged a substitute.

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It was held that performance from the first night was a condition precedent and that failure of the condition
precedent entitled the producers to treat the contract as discharged.

Beetini v Gye – a singer who undertook to perform for the entire season in theatres and at concerts and
appear for rehearsals six days in advance arrived only three days in advance. It was held that the rehearsal
clause was not a condition and a breach of this clause therefore, was not sufficient to terminate the contract.

Jamis v Suppa Umma – In Sri Lanka the terms ‘warranty’ and ‘condition’ in so far as they are used in
contracts governed by English law must be given meaning s they bear in English law and in so far as they
are used in reference to contracts governed by the Roman Dutch law must be given the meanings they bear
in Roman Dutch law.

In English law, judges do not have a positive criterion for determining whether a term in a contract is a
condition or a warranty. The guidelines are:-

(i) Considering the effects of the breach rather than the quality of the terms broken:-

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd – ship was unseaworthy (contrary
to a term of the contract) but only delays occurred as a result – defendants could not repudiate
contract and were entitled to only damages.

(ii) Examine the contract at the time of making it and infer the intention of the parties:-

The Mihalis Angelos – ship was delayed, found at the time of the contract that owners had no
reasonable grounds for believing that the ship would be ready by the set date therefore charterers
were entitled to repudiate the contract.

In contracts for sale the second guideline is usually followed whereas in other contracts such as building
contracts the first guideline has been adopted.

Unfair Contract Terms Act No. 26 of 1997

The basic purpose of the Unfair Contract Terms Act No. 26 of 1997 (“UCTA”) is to restrict the extent to
which liability in a contract can be excluded for breach of contract and negligence, largely by reference to a
reasonableness requirement, but in some cases by a specific prohibition.

Scope: UCTA does not apply to insurance contracts, sale of land, contracts relating to intellectual property,
companies and partnerships and the sale of shares (First Schedule).

Most of UCTA applies only to “business liability” which is defined in Section 13 as liability arising from things
done by a person in the course of business or from the occupation of business premises. An exception is
Section 7 where UCTA also applies to private contracts.

UCTA gives greatest protection to consumers. Under Section 13(2) a person “deals as a consumer” if he
does not contract in the course of a business while other party does contract in the course of a business;
and if it is a contract for the supply of goods, they are of a type ordinarily supplied for private use or
consumption.

Peter Symmons & Co v Cook – The plaintiff firm of surveyors bought a second-hand Rolls Royce
from the defendants which developed serious defects. It was held that the firm was acting as a
consumer and that to buy in the course of a business 'the buying of cars must form at the very least
an integral part of the buyer's business or a necessary incidental thereto'. It was emphasised that
only in those circumstances could the buyer be said to be on equal footing with his seller in terms of
bargaining strength.

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Main Provisions

 Section 3 Exemption of liability for negligence

o Under Section 3(1) no one can exclude liability or restrict his liability in negligence for death
or personal injury by means of a term in a contract or by way of notice
o Under Section 3(2) liability for negligence for any other kind of loss or damage can be
excluded provided the term or notice satisfies the requirement of reasonableness

 Section 4 Exemption of liability of breach of contract

o Where one party deals as a consumer or on the other party’s written standard terms of
business, then the other party cannot exclude or restrict his liability for breach of contract,
non-performance of the contract or different performance of the contract unless the
exemption clause satisfies the requirement of reasonableness

 Section 5 Unreasonable Indemnity Clauses

o Indemnity clauses in contracts where one of the parties deals as a consumer are
unenforceable unless they are reasonable

 Section 6 Guarantees of Consumer Goods

o A manufacturer or distributor cannot exclude or restrict his liability in negligence for loss
arising from defects in goods ordinarily supplied for private use or consumption by means of
a term or notice contained in a guarantee

 Section 7 Exemption of Implied Terms in Contracts of Sale and Hire-Purchase

o Section 7(1) in contracts for the sale of goods and hire purchase, the implied terms as to title
cannot be excluded or restricted by a contract term
o Section 7(2) the implied terms as to the correspondence with description or sample, fitness
for purpose and satisfactory quality cannot be excluded or restricted by any contract term
against a person dealing as a consumer
o Section 7(3) where the person is not dealing as a consumer, such liability can only be
excluded or restricted in so far as the term is reasonable

 Section 9 Exclusion Clauses in Secondary Contracts

o Anti-avoidance provision which prevents the rights preserved under one contract being
removed by a secondary contract

 Section 10 Requirement of Reasonableness

o Section 10(1) the requirement of reasonableness is that term shall have been a fair and
reasonable one to be included having regard to the circumstances which were, or ought
reasonably to have been known to or in the contemplation of the parties when the contract
was made.
o Section 10(4) where the exclusion clause seeks to limit liability rather than exclude it
completely the court must have regard to two factors: the resources available to meet the
liability and the extent to which insurance cover was available to the party aiming to limit
liability.

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 Section11 Clauses

To the extent that UCTA prohibits the exclusion or restriction of any liability, it also prohibits:
 the making of the liability or its enforcement subject to restrictive or onerous conditions
 the exclusion or restriction, of any rights or remedy in respect of the liability or the subjection
of any person to any prejudice in consequence of his pursuing any such right or remedy ;
and
 the exclusion or restriction of rules of evidence or procedure.

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