Past Year Questions

1. Consideration need not be adequate, but it must be sufficient.

Discuss.

) It is said that consideration is not getting benefit in return of

some product but it is also known as mutuality and agreement.
Consideration is a way by which it seems whether there was a
valid exchange between the parties to legally enforce the contract.
The definition of consideration can be taken from the case of
‘Currie v Misa’, which states that there should be a benefit to the
person making the promise or a detriment made to the person to
whom the promise is made.

The concept of consideration needs to be adequate but it must be

sufficient is the requirement that if something is being put
forward must have some economic value if not same as product
so that the courts will recognize it as a legally binding contract
constituting of valid consideration. For example I get a car from
my father and in return I pay nothing then the car will be
considered of my father’s. But if I pay even $10 for that car I will
be considered as the owner legally. This can be backed with the
case of ‘Thomas v Thomas’, in which $1 was considered as a good
consideration.

The contract maker is known to be the boss of his/her and has full
authority to put terms in the contract of his/her choice. There is a
freedom of contract in civil matters, and so the courts necessarily
don’t intervene in every matter. But there are some contracts in
which the value of a product is not adequate. This can be followed
in the case of Edmonds V Lawson in which there was no contract
between pupil and pupil master as relationship was not
 considered as a consideration. This means that there needs to be
some value which is not adequate but sufficient, that value will be
considered by the courts as a legally binding consideration.
Another case that can be referred is the case of ‘Chappell v
Nestle’, in this case the chocolate wrappers were considered to
have some economical value if not much.

There are some existing duties under the law which are not said
to be as good considerations. For example the police has an
existing duty of protecting people generally and try finding stolen
items but if there is a unilateral contract of finding something that
has been stolen in return of a reward, a police officer cannot claim
that reward as police has an existing duty to find and return
stolen things and to keep crime rate low in an area. But as in the
case of ‘Glassbrooke V GCC.’ where police performed extra for the
mine owner qualified for the payment he offered for extra
security. It is also a pre-existing duty under the law on parents in
which they have to raise child but there was an exception in the
case of ‘Ward v Byham.’ Where raising child HAPPILY was
considered something extra.

The discussion above backed with the case laws clearly highlights
what the term ‘consideration need not be adequate but it must be
sufficient’ means. But consideration would not be sufficient in any
case if it has no economic value at all.

2. The distinction between an invitation to treat and a contractual

offer is difficult to draw.

The difference between offer and an invitation to treat is often

questioned. There are long debates available in this regard. In
past distinction among them was unclear but slowly it became
vivid as case laws in their regard developed. The law has clearly
defined the characteristics that distinguish offer from an invitation
to treat.

For something to amount to an offer, the offeror must make a

crystal-clear statement that he will be legally bound to perform
his promise if the other party accepts his offer. Treitel defined an
offer as “an expression of willingness to contract on certain terms
made with the intention that it shall become binding as soon as it
is accepted by the person to whom it is addressed.” The
difference between offer and IIT and communication and
intention. If the communication is specific in terms of obligations
and is made with clear intention to be bound legally by the mere
fact of acceptance and there is no further room for negotiation
then it constitutes an offer. We get this rule from the case of
Storer v Manchester CC where the court held that there was,
indeed, a binding contract because there was intention to be
bound.

Lord Denning stated “In contracts you do not look into the actual
intent in a man’s mind. You look at what he said and did”. In the
case of Gibson v Manchester CC, it was held that there was no
contract because the Council had not made an offer capable of
acceptance as the offer was not clear on the terms as it was
stated that the council may be prepared to sell the house to
Gibson, which shows clearly a statement of intention but not a
complete and clear offer. Although it was an invitation to treat.

The clarity that displays of goods was an ITT was brought in the
case of Boots v pharmaceutical society where by placing the
goods into the basket, it was the customer that made the offer to
buy the goods and the pharmacist who had to accept the offer.

Similar in the case of Fisher v Bell where defendant had a flick

knife displayed in his shop window with a price tag on it. Statute
made it a criminal offence to 'offer' such flick knives for sale. His
conviction was quashed as goods on display in shops are not
'offers' in the technical sense but an invitation to treat.

It is held that the advertisements are also construed to be

Invitation to Treat the courts sough this rule from an old case of
Partridge V Crittenden, wherein the defendant placed an advert in
a classified section of a magazine offering some bramble finches
for sale.

The Protection of Birds Act 1954 made it an offence to offer such

birds for sale. He was charged and convicted of the offence and
appealed against his conviction. The defendant's conviction was
quashed. The advert was an invitation to treat not an offer. The
literal rule of statutory interpretation was applied. Having given
clear and classic elements that distinguish offer from and
invitation to treat it can be deduced that an offer by its very words
is clear and definite for the offeree to comprehend and an
invitation to treat is now how the modern world operates in big
super markets and stop and buys, so, it may have been an elusive
task to differentiate between an offer and acceptance but in this
day and age it is clearly not.

As discussion above backed with case laws differentiates between

offers from invitation to treat and vice versa.
3. Past consideration is never a good consideration. Discuss.

Regarding this question, the general rule is that past

consideration is never a good consideration. The issue then arises
as to whether this statement is accurate or not. Firstly,
consideration forms part of a valid contract. It is actually known as
the batch of enforceability. In other words, it is what makes a
promise enforceable in the court of law. The definition is found in
the case of Currie v Misa which states the benefit-detriment
principle. One party is getting some profit/benefit/interest or the
other party suffer some kind of detriment/loss/forbearance. In
the UK, there are certain principles governing consideration. One
of those principle says that past consideration is not a good
consideration.

Whenever there is a promise made, the consideration provided

must be given after the promise is made. This simple means
something must be given in return for the promise and that is
why the promise becomes enforceable. Past consideration is
where the consideration or the work is done before the promise
is made. According to Roscorla v Thomas, it is suggested that past
consideration is not a good consideration. This case involves the
issue of consideration and whether or not a promise that a horse
was sound was enforceable when it occurred after the sale of the
horse was executed. The promise was unable to enforce the
second promise because the consideration provided was for the
original contract that had already passed.

In the light of Re McArdle, McArdle carried out certain

improvements and repairs on a bungalow. After the work had
been carried out the brothers and sisters signed a document
stating ‘in consideration of you carrying out the repairs we agree
that the executors pay you £480 from the proceeds of sale’.
However, the payment was never made. It was held that Lady
McArdle will not be able to claim on the grounds that the work
had already done before the consideration is made. Promise of
payment is not enforceable after work was done. The courts
would look at the actual sequence of events/chronology in order
to determine to see whether the promise is enforceable.

In conclusion, past consideration will not be enforceable in the

court of law. This particular general rule can seem quite harsh and
this can be seen in the case of Eastwood v Kenyon where the
guardian could not enforce the promise because he did not
provide fresh consideration for the promise. All those thing that
the guardian did was before the promise. However, because of
the harshness of this particular rule, there are some exceptions to
this general principle where the courts may not strictly apply the
strict chronology of events. This means that the statement above
is not fully accurate. The courts might say that past consideration
is a good consideration. However, it is important to note that all
the exceptions must be satisfied as per the case of Pao On v Lau
Yiu Long.

The first exception is that the act must be at the request of the
promisor. This can be seen in the case of Lampleigh v Braithwaite
where the defendant had killed a man and wanted the plaintiff to
beg a pardon from the king. After the plaintiff had successfully
secure a pardon from the King, the defendant had promised to
pay him in gratitude. He later did not pay him the money. The
court found in favor of the plaintiff because the act was done at
 the request of the promisor. Therefore, he was entitled to the
money.

Another exception is that the act must be reasonable

contemplated by both parties that payment ought to be made. In
Re Casey’s Patents, The Court of Appeal held that the plaintiff’s
services were clearly always meant to be paid for, and the
promise was merely putting the expectation into the form of a
specified amount. It also must be a legally enforceable
agreement. If these three exceptions are satisfied then the courts
would recognize past consideration as good consideration.

As far as the courts are concerned, it is therefore not an absolute

rule that past consideration cannot be applied. If the courts find
that the consideration and the promise was all part of the same
transaction, the exact order of events will not be decisive as per
the case of Classic Maritime Inc. v Lion Diversified Holdings.

4. The roof of Amelia’s house was damaged in a winter storm. She

contracted with Bertie who told her it was about a week’s work
and would cost £10,000. Amelia accepted Bertie’s price and they
further agreed that the work would be completed before 1 May so
that Amelia could host a 21st birthday party at her house on 3
May for her daughter Camilla. Bertie began the work on 1 April
but bad weather caused many delays. As a result Bertie said he
would only be able to complete the job by 1 May if he employed
extra workmen and this would increase his costs. Amelia offered
to pay him £12,000 if he completed the job on time. Bertie went
on to complete the repairs before 1 May and Amelia paid him
£10,000 but refuses to pay any more. Advise Bertie
In advising Bertie, the issue would be whether she could claim the
money from Amelia which she promised to pay. On the facts, it
appears that Amelia contracted Bertie to work on her damaged
roof and Amelia promised to pay Bertie £10,000. However, there
are some modifications on the contract after work has started on
1st April. Amelia offered an extra £2,000 for Bertie to employ
extra workmen to complete it on time. It is a positive modification.
However, she refuses to pay the extra £2,000 after Bertie
completed the repairs before the due date. The question then
arises as to whether Bertie will be able to enforce the new
promise made by Amelia for the additional £2,000.

In order to enforce this promise, Bertie needs to provide

consideration. When the second promise was made, he actually
completed the work of the roof on time before the due date. He
actually finishes the repairments and this is the exact same work
that he contracted to under an existing contract. Therefore, the
next issue is whether the performance of an existing contractual
duty amounts to a good consideration.

Traditionally, the performance of an existing contractual

obligation has been held not to be good consideration. In the light
of Stilk v Myrick where a promise by the captain to pay extra
wages to the remaining crew members was held not enforceable.
The crew was simply doing what they were contracted to do so.
The claimant was under an existing duty to work the ship back to
London. Therefore, he had not provided any consideration for the
promise of the extra money.
However, moving from the traditional position, the case of
Williams v Roffey Bros will become relevant on the facts of our
question. In this case, Roffey were builders who were contracted
to refurbish some flats. The contract contains a penalty clause for
late completion. The Roffey Bros subcontracted some work to
Williams. Roffey offered him bonus payment when Williams fell
behind his work. They stopped paying him after some time. It was
held that the promise to pay extra was enforceable as Stilk v
Myrick has since been refined.

As per GIldwell LJ, a promise to make bonus payments to

complete work on time was enforceable if the promisor obtained
a practical benefit and the promise was not given under duress or
by fraud. On the facts, it can be seen that Amelia did receive some
kind of benefit as the roof repairs were complete before the
promised due date. Amelia is able to celebrate her daughter’s
birthday as well. Moreover, by hiring a new contractor would
probably cost more. If Amelia received all these ‘practical benefit’,
it would be enough for Bertie to enforce the promise.

However, it is important to take note that there must not have any
economic duress from the promise to the promisor. If there is any
form of duress, the promisor can automatically not pay the extra
amount even though he or she has received some kind of
practical benefit. This can be seen in the case of Universe
Tankships Inc of Monrovia v International Transport Workers
Federation and also The Sibeon and Sibotre. MWB Business
Exchange Centres Ltd v Rock Advertising Ltd suggests that a
‘practical benefit’ can actually amount to a fresh consideration.

On the facts, Bertie told Amelia that he could not finish it on time
unless Amelia pays for the extra workmen. The question then
arises as to whether this amounts to economic duress. This is a
 form of negotiation rather than an economic duress. Therefore,
Bertie will be entitled to the extra amount of money.

Bertie may also raise the argument of frustration. It would not be

able to apply on our facts according to Davies Contractors v
Fareham UDC which is similar to our case. The event makes the
contract difficult to perform but it is not impossible to perform.
Even if he pleads frustration, there are limitations. It is a self-
induced frustration as the bad weather is a foreseeable event as a
roof repair person.

In conclusion, Bertie by raising the argument of practical benefit

will be a successful plead whereas frustration will not be able to
apply here on our facts. Amelia is liable to pay the extra £2,000 to
Bertie.

5. Arnold, an electrician, develops novel lampshades. Earlier this

year, he developed a new lampshade suitable for use with
compact fluorescent lights. On 1st May, he emailed Bob and
Charlie, both wholesalers to whom he had previously sold
lampshades. In his email, he asked each of them whether they
would be interested in becoming the sole distributor of his new
lampshade. On 5th May, Bob and Charlie both emailed Arnold
independently, each stating that they were interested in becoming
sole distributor for the lampshade and requested further
information. On 7th May Arnold emailed Bob: “I offer you the post
of sole distributor of the lampshade at a basic 10% commission. If
I hear nothing from you by 14th May, I will assume that this is
acceptable to you”. Bob immediately posted a first-class letter to
Arnold in which he accepted Arnold’s offer. The letter did not
arrive until 16th May. In the meantime, Charlie, having heard
nothing further from Arnold, posted a letter to Arnold in which he
offered to become Arnold’s sole distributor for a 20% commission.
Arnold received Charlie’s letter on 15th May. Arnold immediately
telephoned Bob and told him that the post of sole distributor was
no longer available. Bob insists that there is a binding contract to
appoint him as sole distributor. Advise Arnold.

Introduction
 In this case, the problem seems to be one related to the
formation of a contract. According to Lord Wilberforce in The
Eurymedon: In order to form a valid contract, there must be a
clear and unequivocal offer, mirrored by acceptance,
consideration must be provided and a rebuttable presumption
that there is an intention to create legal relations must also exist.
 The question seems to focus on the issue of whether there is a
valid offer and acceptance. On the fact of the question…
 Arnold would like to know whether there was a binding contract
between him and Bob and Charlie.
 Bob and Charlie would like to know whether Arnold has
breached the contract [if any] between them and whether they
are entitled to any form of remedies.

Relevant principles and case laws will be discussed below.

Offer and invitation to treat [ITT]

Offer: An expression of willingness to be bound on certain and

specified terms with the intention that it would be binding upon
acceptance.
ITT: Preliminary stage of negotiations, in which one party invites
another to make an offer. It is also known as form of sales
gimmick.

Cite an authority (a key case) to justify your answer: Gibson v

Manchester CC : A statement in a letter stating that “the
corporation may be prepared to sell” constituted an ITT as it is still
uncertain and not specified, and indicated that the parties are still
in the process of negotiation. Lord Denning’s approach of looking
at the correspondence and conduct of the parties as a whole to
see if they have come to an agreement was rejected by the other
law lords.

Cite a contrasting case to justify your answer: Storer v Manchester

CC: A statement in a letter stating that “we are willing to sell”
constituted an offer as the terms are certain and specified

Analyse further on other types of transactions that applies the

same legal principle. Cite other authorities /recent developments -
optional

Partridge v Crittenden: C’s conviction was quashed as it was held

that an advertisement offering to sell Bramble finch hens and
cocks [a protected species] was merely an ITT.

Lord Parker: it would make much “business sense” to be an ITT

due to limited stock available, and the seller would owe an
obligation to everyone who had accepted if it is construed as an
offer, manifesting in business inconvenience.
Carlill v Carbolic Smoke Ball Co: an advertisement stating that 100
pounds would be given to those who used the smoke balls in the
prescribed method and still caught influenza was construed as an
offer, as the terms are certain and specified and it is made to the
world at large. The conduct of the Ds in placing 1000 pounds in a
bank account as deposit demonstrated their sincerity to be bound
by the contract.

Identify the relevance of the cases and legal principles that is

available and relate it to the facts of the question/case study.

On the facts of the question…

Arnold sent an email on 1 st May to both Bob and Charlie

independently, asking each of them whether they would be
interested to be the sole distributor of his novel lampshades.

Clearly, this is an ITT, in which Arnold invited both Bob and Charlie
to make an offer. The terms of the contract are also not certain
and specified as the parties are still in the preliminary stage of
negotiations as per Gibson v MCC. Besides, it would make much
more business sense to construe this as an ITT, due to the
principle of limited stock, as Arnold only needed a sole distributor
for his products as per Partridge v Crittenden.

Relevant principles and case laws

Cite an authority (a key case) to justify your answer:

Counter offer and mere request for information

 Hyde v Wrench: D offered to sell his farm for 1000 pounds, C
responded by offering to buy it at 950 pounds. This constitutes a
counter offer, which terminates the original offer, as a new term is
introduced into the contract. C cannot try to accept the original
offer later.

Stevenson v McLean: D made an offer to sell iron to C. C enquired

whether the goods can be bought at credit instead of COD. This
was a mere request of information and did not constitute a
counter offer, so the original offer still stood and there was a
binding contract.

Identify the relevance of the cases and legal principles that is

available and relate it to the facts of the question/case study.

On the facts of the question… Bob and Charlie both emailed

Arnold independently on 5 th May, stating that they are interested
in being the sole distributor of Arnold’s products and requested
for more information.

At this stage, there was still no conclusive agreement of any kind

between the parties. There are still in the midst of negotiations.
Therefore, this is only a mere request of information and not a
counter offer as per Stevenson v McLean.

Conduct of the respective parties:

On the facts of the question… On 7 th May, Arnold sent an email

to Bob, offering him the post with a basic of 10% commission.
Clearly, this is a bilateral offer, where each party owes an
obligation to one another. This can be justified as the terms are
certain and specified as per Storer v MCC and

Carlill v Carbolic Smoke Ball Co. Hence based on the above

analysis, we may suggest that, Arnold would be the offeror
whereas Bob would be the offeree.

Having heard nothing further from Arnold, Charlie posted a letter

to Arnold, in which he offered to become Arnold’s sole distributor
for a 20% commission. This can be construed as an offer, as the
terms are certain and specified as per Storer v MCC and Carlill v
Carbolic Smoke Ball Co]. Similarly, this is a bilateral offer. Charlie
would be the offeror, whereas Arnold would be the offeree.
Now we have two issues to deal with:
1. We have Arnold who has made an offer to Bob and;
2. We have Charlie who has made an offer to Arnold
Q: Which of these transactions would be deemed as effective and
binding? Who does Arnold owe an obligation to?

Move on to the next element…. Relevant principles and case laws.

Cite an authority (a key case) to justify your answer Acceptance
Acceptance: an unqualified, unconditional assent to all the terms
of the offer.

Tinn v Hoffman: As the offer was to sell 1200 tons of iron and the
order was for 800 tons, there was no acceptance as an acceptance
must be unconditional.

Acceptance must be communicated. It can be made orally, by

conduct or in writing. In Brogden v Metropolitan Railway, there
was acceptance by conduct.
Felthouse v Bindley: An uncle and nephew had negotiated over
the sale of the nephew’s horse. The uncle had said “If I hear no
more from you, I shall consider the horse mine...” Through the
negligence of the auctioneer, the horse was sold off during an
auction. It was held that there was no acceptance, as silence
generally does not amount to acceptance unless it was the
offeree who suggested that silence on his part would constitute
acceptance as per Re Selectmove Ltd.

On the facts, Arnold has stated in his email to Bob in which he

made the offer that he would assume that there was acceptance
on Bob’s part if he heard nothing from Bob by 14th May. There
was no acceptance at this point as silence does not amount to
acceptance as per Felthouse v Bindley, unless stipulated by the
offeree as per Re Selectmove Ltd.

Acceptance must be communicated. Entores v Miles Far East

Corporation, per Lord Denning: “suppose, for instance, that I
shout an offer to a man across a river or a courtyard but I do not
hear his reply because it is drowned by an aircraft flying
overhead. There is no contract at that moment. If he wishes to
make a contract, he must wait till the aircraft is gone and then
shout back his acceptance so that I can hear what he says. Not
until I have his answer am I bound.” Here, the offer was accepted
by telephone and the offeror fails to catch the words of the
acceptance and fails to ask them to be repeated.

Rules of communication: depends on whether it is instantaneous

or non-instantaneous mode of communication.
 Instantaneous communication: via telephone, fax, email, etc.
 Non-instantaneous communication: via letters, mail order, etc

On the facts this question…. The rules governing non-

instantaneous communication would be discussed.

Non-instantaneous communication [ The Postal Rule ]

Adams v Lindsell: wool was offered for sale, an acceptance by

post was requested and sent, but not received until long after the
wool was sold. It was held that acceptance takes place when it is
posted. Household Fire Insurance v Grant: a written offer was
made to purchase shares. Notification of acceptance was posted
but never received. There is valid acceptance if the letter is
correctly addressed; stamped and there is proof of posting.
Holwell Securities v Hughes: an attempt to use this rule failed
where the acceptance is required to be “by notice in writing”.
Henthorn v Fraser: it must be reasonable, convenient and not
absurd to use this rule. Mason v Benhar Coal [Scotland authority]
per Lord Shand: no contract came into existence when
acceptance was posted but never reached the offeror.

Exceptions to the general rule where the postal rule would not
apply:

I. Where an instantaneous mode of communication is used:

Brinkibon v Stahag Stahl.
II. The offeror makes it a term of the contract that acceptance
only takes place when communicated: Holwell Securities v
Hughes.
III. The acceptance is lost or delayed through the offeree’s
carelessness: Korbetis v Transgrain Shipping BV
On the facts this question…. Bob posted a first-class letter to
Arnold, accepting the offer after reading Arnold’s email. The
letter did not arrive until 16th May.

Here, the postal rule applied i.e., acceptance takes place the
moment it is posted as per Adams v Lindsell. There is a valid
acceptance even if it does not reach the offeror, as long as
the letter is correctly addressed, stamped and all the
formalities of the postal system were complied with when
posting the letter of acceptance as per Household Fire
Insurance v Grant, Holwell Securities v Hughes. The
exceptions to this rule did not apply on the facts.

On the facts this question…. Although Bob’s letter did not

arrive until 16th May, he may argue that there was valid
acceptance here, as the postal rule applied. There would be
a valid agreement between Bob and Arnold. If the element
of consideration and the presumption of intention to create
legal relations were satisfied, there would be a binding
contract between the parties.

On the other hand, Arnold may try to argue that the postal
rule could not be applied here, as it is absurd, unreasonable
and inconvenient to use this rule as per Henthorn v Fraser.

Arnold may argue that it would be more reasonable and

convenient for Bob to accept the offer via email, as the
earlier mode of communication used by the parties was
instantaneous communication.
Using the postal service would be absurd, inconvenient and
unreasonable as it is slow and take up a lot of time. Besides,
the letter of acceptance may be lost, and this would be
inconvenient for both parties. If this argument is favored by
the courts, then the postal rule would not apply here. Thus,
there would be no acceptance on Bob’s part. There would
only be acceptance when Bob’s letter reached Arnold on
16th May.

Moving on to Charlie…..

Arnold received Charlie’s letter on 15th May. The facts were

silent as to whether Arnold accepted the offer or not, as
there was no indication that Arnold had communicated his
acceptance to Charlie.

Revocation [withdrawal] The rules governing revocation of a

bilateral offer would apply on the facts. Payne v Cave: an
offer may be withdrawn any time before it is accepted.

Routledge v Grant: D offered his house for sale with the

understanding that the offer would remain open for 6
weeks. When he took it off the market within 6 weeks, it was
legitimate because there was no acceptance. A bilateral offer
can be revoked any time before acceptance.

Byrne v Leon Van Tienhoven: D wrote to C offering to sell

certain goods. D changed his mind and withdrew the offer
before the offer reached C. C accepted the offer later and
confirmed it in writing. Revocation received after
acceptance. It was inevitable because it had not been
 received before acceptance. Revocation must be
communicated.

Arnold telephoned Bob on 15th May to revoke the offer. If

the postal rule applied, then revocation is not valid, as
acceptance has already taken place the moment the letter
was posted by Bob as per Payne v Cave, Routledge v Grant,
Byrne v Leon Van Tienhoven; There would be a valid
contract between Arnold and Bob. [Based on Bob’s
argument above].

On the contrary, if the postal rule did not apply, then

revocation is valid as it takes place before acceptance on 16
th May and it has been communicated by the offeror to the
offeree as per Payne v Cave, Routledge v Grant, Byrne v
Leon Van Tien hoven]. [Based on Arnold’s argument above]

Conclusion
 Bob may sue Arnold for breach of contract if there was a
valid and enforceable contract between them.
 If Arnold has accepted Charlie’s offer, then there would be
a binding contract between them.
 Charlie may sue Arnold for breach of contract if Arnold
failed to fulfil his obligations – this is where there was a
binding contract between Arnold and Bob.

6. Dr Anson decides to sell his private medical practice. In May, Dr

Chitty expresses an interest in purchasing the business and
negotiations begin. Dr Anson, in the course of the negotiations,
tells Dr Chitty that ‘everything is splendid at the moment. I have
more work than I could possibly want’ and that the practice would
be ‘an excellent opportunity for a young doctor such as yourself’.
Dr Anson offers to show Dr Chitty the accounts, which show a
profit of £80,000 per annum, but Dr Chitty is so impressed that he
decides not to bother. He is relieved to hear that Dr Anson is
planning to retire, as he knows him to be popular with his
patients. He asks, however, for more time to consider his position.
Dr Anson (falsely) tells him that he has two more doctors coming
to visit the practice the next day and he fully expects one of them
to make him an offer. This prompts Dr Chitty to offer the full
asking price immediately, which Dr Anson accepts. Having
operated the practice for six months, it becomes clear to Dr Chitty
that there is no way the practice could possibly have shown a
profit of £80,000 per annum. His own accountant examines the
accounts and informs him that the sum was greatly exaggerated.
He has also found out that, having taken a round-the– world
cruise, Dr Anson plans to set up a private medical practice nearby
and has already been contacting his former patients to inform
them of this fact. Dr Chitty fully expects many of his patients to
move to Dr Anson’s practice and, if this occurs, his accountant
informs him that the practice will no longer be financially viable.
Advise Dr Chitty.

INTRODUCTION – Identify the crux of the issue.

The question requires us to advise Dr Chitty on his potential

claims against Dr Anson with regards to his statement and the
validity of the sale of the medical practice. A contract is enforced
by law because it is an expression of parties’ free will as parties
consented to their contractual obligation. Vitiating factors are
undermining a contract by rendering invalid the parties’ consent
to their agreement in some way. Vitiating factors recognized by
the law include misrepresentation and mistake. On the facts of
this case, the issue appears to concern misrepresentation. Dr
Anson seems to have potentially misrepresented to Dr Chitty. If
the misrepresentation is actionable, it renders the contract
voidable. The contract still comes into existence but the
misrepresentee has the freedom to choose whether or not to
terminate it. As per Dyson LJ in Islington London Borough Council
v UCKAC, the decision to rescind lies with party not court, but
court’s function is to determine whether the party entitled to do
so.

According to Ewan McKendrick, for a misrepresentation to be

actionable, it must be an unambiguous, false statement of fact or
law. Moreover, it must have addressed to the party misled and
materially induced the contract.

First and foremost, Dr Anson stated that the practice was in

splendid situation, there were many businesses to do and was a
good opportunity for young doctors. Generally, a statement of
opinion does not amount to a misrepresentation. As per Bisset v
Wilkinson [1927], it was held that there was no representation by
stating an opinion as to the capacity of a land based on one’s
personal knowledge. The exceptions occur when the representor
has greater knowledge than the representee, where the court will
imply that the representation must be made with reasonable care
and the representor knows facts that justify his opinions. As per
Bowen LJ in Smith v Land & House Properties Corp. [1994], in the
above situation, the statement of opinion is often a statement of
material fact, and the opinion is justified. Similar decision was
made in Esso Petroleum v Mardon. On the facts, the practice was
owned by Dr Anson, he had greater knowledge of the practice’s
assets, liabilities, income and expenses than Dr Chitty. Thus, his
opinion is justified. The exception rule is applicable and thus his
statement can be treated as a representation.

Secondly, Dr Anson stated that the profit of the practice was

£80,000 per annum and offered to show him the account. This is
not a false statement because Dr Anson has readied to show his
accounts as to the practice’s profit. The third potential
misrepresentation is that Dr Anson told Dr Chitty that he was
planning to retire. This situation considers the scenario of
statement of future intention. By general rule, statement
expressing future intention amounts to speculation rather than
fact therefore is not a misrepresentation. This can be seen in
Wales v Wadham [1977], where the intention to remarry of the
wife did not render the settlement voidable. On the facts, if Dr
Anson’s intention to retire was true at the time when the intention
was made, there would be no misrepresentation. However, if his
intention was false at the time, it will fall within the exception of
the principle. A person who misrepresents his present intention
does make a false statement. The defendants in Edgington v
Fitzmaurice [1885] were guilty since they had misrepresented
their actual intention at the time the intention was made. On the
facts, if Dr Anson was planning to set up a new medical practice
when stating his intention to retire, there will be an actionable
misrepresentation. Mr Anson also mentioned that two doctors
were coming to visit the practice the next day. In facts, this was a
false statement. However, this is nothing more than a mere puff
to have the practice sold. A mere puff is not actionable.

Furthermore, the statement must be addressed to the party

misled by the representation. As per Peek v Gurney [1973], the
action was failed because the false statement was not addressed
to the person misled. On the facts, the statements were directly
delivered from Dr Anson to Dr Chitty, in the course of the
negotiation. Thus, this requirement is met.

The third requirement is that the statement must have materially

induced the contract. Following JEB Fasteners v Marks, Bloom &
Co [1983], a contract could not be rescinded if the
misrepresentation had not played a ‘real and substantial’ part in
inducing the claimants into entering the contract. Note, according
to Edington v Fitzmaurice, it need not be the only inducement. On
the facts, Mr Chitty may argue that he relied on Dr Anson’s
statements, the statements had materially induced him to enter
the contract

However, in several circumstances, there will be no reliance on

the part of the representee. It is not an inducement if the
representee unaware of the representation at time of entry into
contract. This was shown in Horsfall v Thomas [1862], the claim of
fraudulent misrepresentation was failed, the misrepresentation
did not induce him to enter the contract as he was unaware of it.
The situation in question does not fall within this circumstance as
the representation was delivered to Dr Chitty before the time of
entry into contract, Dr Chitty was aware of the representation.
Moreover, the representation is not an inducement if the claimant
does not allow the representation to affect his judgement. As per
Attwood v Small [1838], the claimant was not induced by the
representation as he relied on a third party to check out the
representor’s reports. On the facts, Dr Chitty relied on Dr Anson’s
representation without referring to third parties’ advice. Last but
not least, it is not an inducement if the representor corrected the
misrepresentation and informed the representee of correction
prior to entry into contract, which is the scenario in Peekay
Intermark Ltd v Australia and New Zealand Banking Group Ltd
[2006]. However, according to the question, Dr Anson has made
no correction as to his false representation. Thus, the situation
does not fall within any of the above circumstances, Dr Chitty was
materially induced by Dr Anson’s representation to enter the
contract.

If the misrepresentation is actionable, we should move on to

identify the type of misrepresentation. First and foremost, is the
fraudulent misrepresentation. The term was defined by Lord
Herschell in Derry v Peek [1889], as a statement made knowingly,
without believing in its truth, or recklessly as to whether it is true
or false. On the facts of this situation, there are evidence of
making false statement as to the state of operation of the medical
clinic. The claim of fraudulent misrepresentation arises in tort of
deceit, the misrepresentee can claim for losses directly flowing
from the deceit. For example, expenses incurred, loss of profits,
non-financial losses etcetera. These claims can be observed in
judgement of Doyle v Olby, and East v Maurer. Notably, the
burden of proof is on the representee, the representee is
required to prove that the statement was made fraudulently.
However, it is extremely difficult to prove and should not be
pleaded unless there is substantial basis for the allegation.

Moving on to consider negligent misrepresentation, which is the

careless making of false statement to the representee. According
to House of Lords decision in Nocton v Lord Ashburton [1914], it
arises when the defendant was ‘negligent and rash and regardless
of the obligation of his position.’ It is governed by the tort of
negligence. The requirements of negligent misrepresentation
were set down in Hedley Byrne v Heller [1964], which required the
existence of a fiduciary relationship between the parties,
assumption of responsibility, and reasonable reliance on the
advice on the part of the representee. On the facts, special
relationship arises as Dr Anson was in charging of the practice
and thus had greater knowledge of its operation than Dr Chitty,
there was an assumption of responsibility on Dr Anson. Dr Chitty
had also showed his reasonable reliance by entering into contract.
However, there was no sufficient evidence to prove that the
representation was made by Dr Anson ‘carelessly’. Thus, this
approach is not suggested.

The last common law misrepresentation is innocent

misrepresentation. This happens when the representor believes
that the statement made by him was true and was not negligent
when making statement. On the facts, Mr Anson may claim that
he truly believed that the operation of the medical practice was
splendid and was had earned 80,000 per annum. According to
section 2(2) of the Misrepresentation Act 1967, the remedies
available are rescission, or damages in lieu of rescission, if it is
equitable to do so. The damage under this subsection is awarded
William Sindall v Cambridgeshire County Council [1993].

Dr Chitty can also claim under statue, according to section 2(1) of

the MA 1967, if the misrepresentee enters into a contract due to
misrepresentation, he can claim damages, unless the
misrepresentor can prove that at the time the contract was made,
they reasonably believe that the statement was true. Notably, the
burden of proof lies on the misrepresentor to prove that the
statement made was true. Following Howard Marine v Ogden
 [1978], the defendant’s counterclaim was successful because the
claimant failed to establish the reasonable grounds for the belief
as to the statement made by him was true. Dr Chitty is suggested
to claim under this subsection, for the reason that he need to
prove neither fraud nor negligence on the part of the representor.
The burden of proof is shifted to Dr Anson, the misrepresentor. It
is an easier approach for Dr Chitty to take.
In conclusion, it can be submitted that Dr Chitty is able to take one
of the two approaches. If Dr Chitty claim under section 2(1) MA
1967, he would be able to rescind the contract and claim
damages. The number of damages would be the same as those
claimed under fraudulent misrepresentation after Royscott Trust
Ltd v Rogerson [1991]. The quantum of damages is based in
reliance measure, Dr Chitty would be paid for the loss suffered to
put him back into the position as though the misrepresentation
never occurred. Alternatively, if the claim for innocent
misrepresentation succeed, Dr Chitty would be able to rescind the
contract or claim damages in lieu of rescission if rescission was
not possible.

7. Suggs visits Marlow in response to an advertisement placed by

Marlow about the sale of his grand piano for £15,000. Suggs is
posing as Felix, a well-known YouTube star; the resemblance is
remarkable. Suggs offers Marlow £10,000 for the piano. Despite
the reduced price, Marlow wishes to accept the offer because he
thinks that it would be exciting to sell to such a star. Suggs
presents a cheque for £10,000. He has stolen this from Felix and
fraudulently signed it in Felix’s name. In an attempt to falsely
prove his identity to Marlow, Suggs shows him a short YouTube
video on his smartphone featuring Felix. Marlow accepts Suggs’
offer and allows Suggs to take the piano away in his van. Suggs
immediately takes the piano to Arias, a dealer, and sells it to
them. A few days later, Marlow is contacted by his bank and
informed that the cheque is worthless. Depressed by this news,
Marlow goes out to cheer himself up. He sees a sign in the
window of his favourite music shop offering for sale a guitar that
was owned by Brian Carferry, a famous singer and songwriter.
The price is advertised at £30. Marlow rushes in and buys the
guitar, arranging for it to be delivered to him the next day.
However, the shop later refuses to deliver the guitar, telling
Marlow that their new sales assistant mistakenly put the wrong
price tag on the guitar. Advise Marlow.

Introduction:-

- Advising Marlow (M). - The doctrine of mistake, a vitiating factor

in contract formation, operates to render a contract void subject
to the condition that the mistake is sufficiently fundamental. Thus,
the presence of mistake nullifies any contractual agreement
between the parties. Mistake is categorised to be either a bilateral
mistake or a unilateral mistake.

- Issue 1 – M v Arias (A): whether M’s mistake as to the identity of S

is sufficiently fundamental to render their contract, for the sale of
M’s grand piano, void. If so, rights of ownership of the piano
cannot be passed on from Suggs (S) to A since S hasn’t validly and
legally acquired the title of ownership over the grand piano.
Thereby, M can legally acquire the piano back or its value from A.

- Issue 2 – M v Music Shop (MS): whether M’s unilateral mistake as

to the true price of the guitar is sufficiently fundamental to render
the contract, for the sale of the guitar, void. The snapping up
doctrine shall be considered in the sense of whether M can validly
accept, and so take advantage, of MS’s mistaken offer.

Issue 1 (M v A)
- General rule in English law – nemo dat quod non habet (you
cannot give what you do not have).
1. Has S lawfully and validly acquired the title of ownership over
the piano to pass on the rights of ownership to A?
2. If the contract between M and S was void, S hasn’t acquired
legal ownership of the piano, S cannot pass on rights of
ownership to A (mistake operates). M can obtain piano or its
financial value back from A.
- Bringing a contractual claim of fraudulent misrepresentation as
to identity against S is not beneficial since the doctrine of
misrepresentation renders a contract voidable whereby the
contract between M and S remains in force until M has elected his
right to terminate the contract. M has not done so in this case,
should not bring a claim for misrepresentation, would not be able
to acquire the piano back from A since A has lawfully acquired the
rights of ownership by purchasing the piano from S.
- Purported contract between M and S has been concluded orally.

- Shogun Finance Ltd v Hudson – In contracts formed orally, there

is a prima facie presumption of the law that M intends to deal
with the person in front of him. This presumption is difficult to
rebut by merely claiming to be mistaken as to the true identity of
S, who was purporting to be someone else. Lord Phillips
expressed that where a contract has been concluded orally with
the person in front of him, “the innocent party will have in mind …
both the person with whom he is in contact and the third party
whom he imagines that person to be”.
  Evinced by the facts, M and S have been involved in a face-
to-face transaction since S has visited M in person and made
an offer of £10000 for the piano. M mistakes S’s identity for
Felix (F), a well-known Youtuber, since S looks exactly like F.

- Cundy v Lindsay – accordingly, S has stolen the cheque from F

and signed it in his name to strongly assure M that he, S, is
truly F. On this basis, M’s mistake as to the identity of S is
sufficiently fundamental to render their contractual agreement
void. However, Cundy involved a written contract which
strengthened the case for the operation of mistake as to
identity to render the contract void.

- Phillips v Brooks Ltd – the rogue posed to be someone else while

writing out the cheque and gave that person’s address. The plaintiffs
purportedly confirmed the rogue’s dishonest identity by checking the
address in the directory and then allowed the rogue to take the goods
with him, having accepted the cheque. Cheque was dishonored but the
rogue had already sold the goods to a third party. Plaintiffs failed to
recover the goods or their financial value from the third party as per
the court’s decision that there was no identity mistake, rather the
plaintiff’s dealt with the rogue in person and made a mistake by
allowing him to take away the goods on credit.

 However, S has actually presented a cheque stolen from F

and signed in F’s name and further attempted to prove his
identity by showing him a YouTube video featuring F, who
looks remarkably resembles S. Only then has M allowed S to
take away the goods on credit. It may be possible that
identity mistake operates to render the contract void. On
this basis, A has not acquired legal rights of ownership over
 the piano and M can successfully claim to recover the piano
or its financial value from A.

- Ingram v Little – distinguishing this case from the present case, M has
not refused payment by cheque prior to S proving his false identity
whereby the contract may not be void. However, identity is vital to the
contract’s conclusion since the facts evince that M only accepts S’s offer
since S proves to be F. Close resemblance of S and F.

- Lewis v Averay – the prima facie presumption could not be rebutted

regardless of the extensive measures taken by the rogue to prove his
false identity after the claimant had disallowed the car to be taken away
until the cheque’s clearance. After the extensive measures, the claimant
allowed the car to be taken away but the cheque was not cleared later.
Identity mistake not found. C could not acquire car back from third
party. Ingram v Little was distinguished on its “special facts”.

 This case may be distinguished on its unique facts due to

the extraordinary resemblance of S with F, the cheque,
belonging to F, presented to M by S having signed it in F’s
name.
- On the balance of probabilities, an exception to the nemo dat rule
may be made whereby M is advised to bring a contractual claim
against A to recover the piano or its financial value from her.

Issue 2 (M v MS)
- Does M know that MS has made a mistake as to the terms of the
offer, i.e. the price of the guitar?
- Centrovincial Estates plc v Merchant Investors Assurance Co Ltd
– it is highly likely that M “could reasonably have known” that MS
had mistakenly advertised the price of the guitar, on the ground
that the guitar had belonged to a famous celebrity and could not
reasonably have been offered for sale at such a low price.
- Hartog v Colin and Shields – M is highly unlikely to have
concluded that advertisement reflected the MS’s actual intention
as to the price of the guitar and so M cannot snap up the MS’s
offer by taking advantage of the mistake through purported
acceptance of the offer. MS has not breached any contract by
refusing delivery subject to operation of M’s unilateral mistake
which is sufficiently fundamental to render the contract void.
- Longley v PPB Entertainments – persuasive authority wherein it
was stated that a mistaken offer cannot be accepted and snapped
up by the offeree where he knows that a mistaken offer has been
made.
- However, M could argue that the advertisement was an
invitation to treat (Fisher v Bell) whereby he made an offer to
purchase the guitar for £30 which was accepted unequivocally
accepted by the MS (Hyde v Wrench).

Conclusion
M is advised to bring a contractual claim against A to recover the
piano or its financial value. This contractual claim is based on the
fact that M’s mistake as to the identity of S was sufficiently
fundamental, in light of the discussion above, to render the
contract void between M and S. Therefore, S did not acquire title
of legal ownership over the piano and so could not pass on the
rights to A. In relation to MS, M is advised not to take advantage of
MS’s advertisement by purporting to accept it. M may resort to
the technique of alternative dispute resolution, mediation or
negotiation to settle his dispute with MS. Finally, M must prove his
contractual claims against both parties on the balance of
probabilities.