Tuesday 13 October 2009
Friday 24 July 2009
Statutory change in contract law
The requirement for consideration and the principle of privity of contract are of course fundamental to English contract law. Derived from these rules is the principle with which these cases are concerned - that a contracting party can only claims the losses that he has suffered as a result of a breach of contract, not anyone else’s.
These rules make English law somewhat different from other legal systems. They have led to considerable criticism over the years. If a contract between two parties says expressly that it is for the benefit of another named person, why should that person not be able to sue under the contract if obligations are not performed?
The Law Commission suggested new legislation, a central element of which would be that a third party would have a right to enforce a contract where the contract expressly states that the third party is to be able to do so. The recommendations of the Law Commission were incorporated into English law by way of the Contracts (Rights of Third Parties) Act 1999. It applies to all contracts entered into after 11May 2000.
It is interesting to consider how St Martins Investment, Darlington and Unex would have fared if they had brought their claims under this law if enacted - they would have LOST. This is because the proposed new law requires that the contract expressly mentions the third party. In none of the building contracts was the subsequent owner or occupier expressly identified.
These rules make English law somewhat different from other legal systems. They have led to considerable criticism over the years. If a contract between two parties says expressly that it is for the benefit of another named person, why should that person not be able to sue under the contract if obligations are not performed?
The Law Commission suggested new legislation, a central element of which would be that a third party would have a right to enforce a contract where the contract expressly states that the third party is to be able to do so. The recommendations of the Law Commission were incorporated into English law by way of the Contracts (Rights of Third Parties) Act 1999. It applies to all contracts entered into after 11May 2000.
It is interesting to consider how St Martins Investment, Darlington and Unex would have fared if they had brought their claims under this law if enacted - they would have LOST. This is because the proposed new law requires that the contract expressly mentions the third party. In none of the building contracts was the subsequent owner or occupier expressly identified.
The effect of the clause prohibiting assignment without consent
In all the cases except Darlington, the building contract contained a clause prohibiting assignment without consent. One party to a contract can never transfer his obligations to a third party without the consent of the other party. But, providing he gives notice, he is able to assign his rights under a contract unless the contract prohibits it. The logic behind prohibiting transfer of the employer’s obligations under a building contract without the contractor’s consent is that the contractor wants to know whom he is dealing with.
Despite the prohibition on assignment, the court in St Martins and Darlington found the contractor liable for substantial damages suffered by a third party. In the St Martins case, Lord Browne-Wilkinson decided it was proper "to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach."
It is difficult to understand this, as the prohibition on assignment would seem to lead to completely the opposite conclusion – namely that McAlpine showed an express intention of wanting to avoid responsibilities to third parties, directly or indirectly.
Despite the prohibition on assignment, the court in St Martins and Darlington found the contractor liable for substantial damages suffered by a third party. In the St Martins case, Lord Browne-Wilkinson decided it was proper "to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach."
It is difficult to understand this, as the prohibition on assignment would seem to lead to completely the opposite conclusion – namely that McAlpine showed an express intention of wanting to avoid responsibilities to third parties, directly or indirectly.
Third Party Rights to Damages
As a result of recent developments in the law of contract, contractors can now find themselves directly or indirectly liable to third parties with whom they have no contract.
The common feature of all these cases (and which led to the litigation) was that the original employer transferred his interest in the property to a subsequent owner or occupier for full value.
Defects were alleged to have appeared in the building, and the cost of repairing the defects fell on the subsequent owner or occupier. The original owner suffered no loss.
In each case, the contractor was sued under its building contract by or on behalf of a subsequent owner or occupier. Each contractor argued that he could not be liable to the subsequent owner/occupier because he had not contracted with him and the party he had contracted with had suffered no loss.
In the St Martins Property and Darlington cases the contractor lost.
In the Linden Gardens and Alfred McAlpine cases he won.
In the St Martins case, the House of Lords held that this principle could be adapted to construction cases.
In Darlington, the court followed the decision in St Martins, as did the Court of Appeal when it heard the Panatown case.
This dramatically changed English contract law - a party to a contract who has suffered no loss can now sue and recover substantial damages on behalf of a third party.
The decision was based on presumed intentions of the parties to the original building contract. This was despite contrary indications as to their intentions contained in non-assignment clauses and collateral warranty/duty of care deeds, which are analysed below.
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In the Panatown case, the House of Lords came close to developing English law still further. The court picked up a theory that had been advanced by Lord Griffiths (but not adopted by the rest of the court) in the St Martins case.
This theory suggests that a party to a contract where the other party had not performed does not have to show a financial loss. Rather, he could recover substantial damages (as opposed to nominal damages) for loss of bargain - because he did not receive what he had contracted for.
Two of their Lordships (Goff and Millett) found in favour of Panatown on this ground, and two against (Clyde and Browne-Wilkinson). Lord Jauncey agreed in principle with the loss of bargain theory, but thought that it was not appropriate to apply it in this case. This provides an important indicator to those who want to rely on it in the future to argue that the loss of bargain theory is now part of English law
The common feature of all these cases (and which led to the litigation) was that the original employer transferred his interest in the property to a subsequent owner or occupier for full value.
Defects were alleged to have appeared in the building, and the cost of repairing the defects fell on the subsequent owner or occupier. The original owner suffered no loss.
In each case, the contractor was sued under its building contract by or on behalf of a subsequent owner or occupier. Each contractor argued that he could not be liable to the subsequent owner/occupier because he had not contracted with him and the party he had contracted with had suffered no loss.
In the St Martins Property and Darlington cases the contractor lost.
In the Linden Gardens and Alfred McAlpine cases he won.
In the St Martins case, the House of Lords held that this principle could be adapted to construction cases.
In Darlington, the court followed the decision in St Martins, as did the Court of Appeal when it heard the Panatown case.
This dramatically changed English contract law - a party to a contract who has suffered no loss can now sue and recover substantial damages on behalf of a third party.
The decision was based on presumed intentions of the parties to the original building contract. This was despite contrary indications as to their intentions contained in non-assignment clauses and collateral warranty/duty of care deeds, which are analysed below.
-------------
In the Panatown case, the House of Lords came close to developing English law still further. The court picked up a theory that had been advanced by Lord Griffiths (but not adopted by the rest of the court) in the St Martins case.
This theory suggests that a party to a contract where the other party had not performed does not have to show a financial loss. Rather, he could recover substantial damages (as opposed to nominal damages) for loss of bargain - because he did not receive what he had contracted for.
Two of their Lordships (Goff and Millett) found in favour of Panatown on this ground, and two against (Clyde and Browne-Wilkinson). Lord Jauncey agreed in principle with the loss of bargain theory, but thought that it was not appropriate to apply it in this case. This provides an important indicator to those who want to rely on it in the future to argue that the loss of bargain theory is now part of English law
Friday 17 July 2009
Abraham Lincoln FAvourite Poem
Oh, why should the spirit of mortal be proud?
Like a swift-fleeting meteor, a fast-flying cloud,
A flash of the lightning, a break of the wave,
He passes from life to his rest in the grave.
The leaves of the oak and the willow shall fade,
Be scattered around, and together be laid;
And the young and the old, the low and the high,
Shall molder to dust, and together shall lie.
The infant a mother attended and loved;
The mother that infant's affection who proved;
The husband, that mother and infant who blessed;
Each, all, are away to their dwelling of rest.
The maid on whose cheek, on whose brow, in whose eye,
Shone beauty and pleasure - her triumphs are by;
And the memory of those who loved her and praised,
Are alike from the minds of the living erased.
The hand of the king that the sceptre hath borne,
The brow of the priest that the mitre hath worn,
The eye of the sage, and the heart of the brave,
Are hidden and lost in the depths of the grave.
The peasant, whose lot was to sow and to reap,
The herdsman, who climbed with his goats up the steep,
The beggar, who wandered in search of his bread,
Have faded away like the grass that we tread.
The saint, who enjoyed the communion of Heaven,
The sinner, who dared to remain unforgiven,
The wise and the foolish, the guilty and just,
Have quietly mingled their bones in the dust.
So the multitude goes - like the flower or the weed
That withers away to let others succeed;
So the multitude comes - even those we behold,
To repeat every tale that has often been told.
For we are the same that our fathers have been;
We see the same sights that our fathers have seen;
We drink the same stream, we feel the same sun,
And run the same course that our fathers have run.
The thoughts we are thinking, our fathers would think;
From the death we are shrinking, our fathers would shrink;
To the life we are clinging, they also would cling -
But it speeds from us all like a bird on the wing.
They loved - but the story we cannot unfold;
They scorned - but the heart of the haughty is cold;
They grieved - but no wail from their slumber will come;
They joyed - but the tongue of their gladness is dumb.
They died - aye, they died - we things that are now,
That walk on the turf that lies over their brow,
And make in their dwellings a transient abode,
Meet the things that they met on their pilgrimage road.
Yea, hope and despondency, pleasure and pain,
Are mingled together in sunshine and rain;
And the smile and the tear, the song and the dirge,
Still follow each other, like surge upon surge.
'Tis the wink of an eye - 'tis the draught of a breath -
From the blossom of health to the paleness of death,
From the gilded saloon to the bier and the shroud
Oh, why should the spirit of mortal be proud?
Like a swift-fleeting meteor, a fast-flying cloud,
A flash of the lightning, a break of the wave,
He passes from life to his rest in the grave.
The leaves of the oak and the willow shall fade,
Be scattered around, and together be laid;
And the young and the old, the low and the high,
Shall molder to dust, and together shall lie.
The infant a mother attended and loved;
The mother that infant's affection who proved;
The husband, that mother and infant who blessed;
Each, all, are away to their dwelling of rest.
The maid on whose cheek, on whose brow, in whose eye,
Shone beauty and pleasure - her triumphs are by;
And the memory of those who loved her and praised,
Are alike from the minds of the living erased.
The hand of the king that the sceptre hath borne,
The brow of the priest that the mitre hath worn,
The eye of the sage, and the heart of the brave,
Are hidden and lost in the depths of the grave.
The peasant, whose lot was to sow and to reap,
The herdsman, who climbed with his goats up the steep,
The beggar, who wandered in search of his bread,
Have faded away like the grass that we tread.
The saint, who enjoyed the communion of Heaven,
The sinner, who dared to remain unforgiven,
The wise and the foolish, the guilty and just,
Have quietly mingled their bones in the dust.
So the multitude goes - like the flower or the weed
That withers away to let others succeed;
So the multitude comes - even those we behold,
To repeat every tale that has often been told.
For we are the same that our fathers have been;
We see the same sights that our fathers have seen;
We drink the same stream, we feel the same sun,
And run the same course that our fathers have run.
The thoughts we are thinking, our fathers would think;
From the death we are shrinking, our fathers would shrink;
To the life we are clinging, they also would cling -
But it speeds from us all like a bird on the wing.
They loved - but the story we cannot unfold;
They scorned - but the heart of the haughty is cold;
They grieved - but no wail from their slumber will come;
They joyed - but the tongue of their gladness is dumb.
They died - aye, they died - we things that are now,
That walk on the turf that lies over their brow,
And make in their dwellings a transient abode,
Meet the things that they met on their pilgrimage road.
Yea, hope and despondency, pleasure and pain,
Are mingled together in sunshine and rain;
And the smile and the tear, the song and the dirge,
Still follow each other, like surge upon surge.
'Tis the wink of an eye - 'tis the draught of a breath -
From the blossom of health to the paleness of death,
From the gilded saloon to the bier and the shroud
Oh, why should the spirit of mortal be proud?
Tuesday 14 July 2009
Contractual Cartography Guidelines
Whatis Contractual Cartography Guidelines?
Is to help the court to distinguish which express statement amount to a representation or a terms of a contract. The distinction is important so that proper remedies can be granted to the claimant accordingly and to avoid too rigid adherance towards parties freedom of anatomy.
Thus, a few guidelines has been put down to help the court to do so by Lord Moulton in Heilbut Symons v Buckleton.
1. The time the statement was made and the importance of the statement and undertakings by the promisor
Cases that illustrates thispoint are:
Bannermanv White[5] •
This is where a prospective buyer, in the course of negotiating for the purchase of hops, asked the seller if any sulphur had been used in their treatment, adding that, if it had, he would not even trouble to ask the price.
• The seller answered that no sulphur had been used.
Held: It is anundertaking and therefore is a term of a contract. A reasonable man would notbuy if he had known that the hops had sulphur.
Couchman v Hill[6](Court of Appeal)
• There was a statement that a heifer is “unserved” by a seller is a term and may override any written terms to negate liability.
Birchv Paramount Estates[7]
Whena seller makes a promise about something that which is or should be within hiscontrol intending that the buyer would act on it, it was easy to infer that thestatement was a term of the contract.
2. Did the person who made the statement have special knowledge or skill as compared to the other party?
Inorder to understand to different, the cases such as Oscar Chess v Williams and Dick Bentley v Harold Smith Motor should be considered.
Oscar Chess v Williams[8] (Court of Appeal) • A statement by a seller to car dealers of the model of a car is was not a term of the contract It was the plaintiffs as car dealers, who possessed special skill and knowledge, and who if anyone could have discovered in time the true age of the car.
Contrast this with:
Dick Bentley v Harold Smith Motors Ltd. [9] • The defendants were motor dealers made a statement in relation to the mileage of the car to the plaintiffs who were private purchasers.
• The statement turned out to be wrong, as the actual mileage was more.
Held: The defendant’s statement in relation to the mileage of the car was aterm of the contract. The defendants were as motor dealers involved in therunning of a car business whereas the plaintiffs were not. Therefore it wasreasonable for the plaintiffs to rely on the statement made by the defendants.
3. Accepting responsibility or advising on verification?
This guide concerns as to whether the maker of the statement takes responsibility over the statement.
Consider the case of Schawel v Reade[10]
Here, there is a declaration of a seller, “ You need not look foranything; the horse is perfectly sound. If there was anything the matter withthe horse I would tell you.” Would render a statement a term
Compared this case to:
Ecay v Godfrey[11] - Here, there would not be a term inferred if there is no undertaking by sellers – such undertaking could be negated by suggesting for a survey to be conducted.
4.Was the statement reduced to writing?
This is where you would have to understand the impact and status of statements that were reduced into writing and those which are not.
Routledge v McKay[12]
If the parties intended the statement to be a term where there is a written agreement, the statement would have incorporated into the written agreement. Failing to incorporate such a term would indicate that it may not be important enough to be a term
Is to help the court to distinguish which express statement amount to a representation or a terms of a contract. The distinction is important so that proper remedies can be granted to the claimant accordingly and to avoid too rigid adherance towards parties freedom of anatomy.
Thus, a few guidelines has been put down to help the court to do so by Lord Moulton in Heilbut Symons v Buckleton.
1. The time the statement was made and the importance of the statement and undertakings by the promisor
Cases that illustrates thispoint are:
Bannermanv White[5] •
This is where a prospective buyer, in the course of negotiating for the purchase of hops, asked the seller if any sulphur had been used in their treatment, adding that, if it had, he would not even trouble to ask the price.
• The seller answered that no sulphur had been used.
Held: It is anundertaking and therefore is a term of a contract. A reasonable man would notbuy if he had known that the hops had sulphur.
Couchman v Hill[6](Court of Appeal)
• There was a statement that a heifer is “unserved” by a seller is a term and may override any written terms to negate liability.
Birchv Paramount Estates[7]
Whena seller makes a promise about something that which is or should be within hiscontrol intending that the buyer would act on it, it was easy to infer that thestatement was a term of the contract.
2. Did the person who made the statement have special knowledge or skill as compared to the other party?
Inorder to understand to different, the cases such as Oscar Chess v Williams and Dick Bentley v Harold Smith Motor should be considered.
Oscar Chess v Williams[8] (Court of Appeal) • A statement by a seller to car dealers of the model of a car is was not a term of the contract It was the plaintiffs as car dealers, who possessed special skill and knowledge, and who if anyone could have discovered in time the true age of the car.
Contrast this with:
Dick Bentley v Harold Smith Motors Ltd. [9] • The defendants were motor dealers made a statement in relation to the mileage of the car to the plaintiffs who were private purchasers.
• The statement turned out to be wrong, as the actual mileage was more.
Held: The defendant’s statement in relation to the mileage of the car was aterm of the contract. The defendants were as motor dealers involved in therunning of a car business whereas the plaintiffs were not. Therefore it wasreasonable for the plaintiffs to rely on the statement made by the defendants.
3. Accepting responsibility or advising on verification?
This guide concerns as to whether the maker of the statement takes responsibility over the statement.
Consider the case of Schawel v Reade[10]
Here, there is a declaration of a seller, “ You need not look foranything; the horse is perfectly sound. If there was anything the matter withthe horse I would tell you.” Would render a statement a term
Compared this case to:
Ecay v Godfrey[11] - Here, there would not be a term inferred if there is no undertaking by sellers – such undertaking could be negated by suggesting for a survey to be conducted.
4.Was the statement reduced to writing?
This is where you would have to understand the impact and status of statements that were reduced into writing and those which are not.
Routledge v McKay[12]
If the parties intended the statement to be a term where there is a written agreement, the statement would have incorporated into the written agreement. Failing to incorporate such a term would indicate that it may not be important enough to be a term
Friday 19 June 2009
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