Contract Law

Part C
(AC 5.1)
Distinguish between liquidated and unliquidated damages:

● Damages that may be specified in a contract as the amount to be paid to the
nonbreaching party in the event the contract is later breached.
● Clauses providing for liquidated damages are unforced if the damages were
difficult to the estimate at the time the contract was formed and if the amount
stipulated is reasonable.
● If construed to be a penalty, the clause will not be enforced.
● The amount of damages should place the innocent party in the same position
that he would have been in had the contract been property performed
● Damages can include.
● Expectation loses.
● Personal injuries.
● Disappointment, distress and discomfort.
Because the claimant has the burden of proving the amount of his loss, it is a great
convenience to him if the contract can simply state a sum which will be payable by the
defendant in the event of breach and the claimant can then sue for the state sum. On
the other hand, any such system is open to abuse if the sums might be set at a level far
higher than the loss actually suffered. The House of Lords attempted to reconcile these
arguments.
Dunlop Pneumatic Tyre v New Garage and Motor (1915):

● Where a fair sum is agreed for the payment for liquidated damages after several
different breaches of a contract, that sum will not be classed as penal.
● In deciding whether a clause is penal, ask if a clause:
● Requires an extravagant unconscionable payment in comparison with the
maximum loss which could conceivably be proved.
● Requires a greater sum of money to be paid as a secondary obligation over the
primary obligation which is replaced.
● Clauses may or may not be classed as penal depending on how the contract was
breached and if the parties relied upon the clause for certainty.
● The test for a penalty is now:
“Whether the impugned provision is a secondary obligation which imposes a determent
on the contract -breaker out of all proportion to any legitimate interest of the innocent
party in the enforcement of the primary obligation.”
Part D
(AC 3.1)
Identify the elements of actionable representation:

In order to be actionable, the representational must be material so that it would
positively influence a reasonable person to enter the contract.
● The representation made must be material.

● The representation must be known to the representation.
● The representation must be acted upon.
A deceit occurs when a misrepresentation is made with the expressed indentation of

defrauding a party, subsequently causing loss to that party.
● A clear false representation of fact or law.

● Fraud by the maker,in the sense that they knew that the representation was
false, or had no belief in its truth, or was reckless whether it was true or false.
● Action by the claimant in reliance on the representation.
● Damage suffered by the claimant in reliance on the representation.
In Connolly v Bellway Homes, the seller of development land was able to obtain
damages from the buyer on the basis that it relied upon a statement by the buyer about
the value per square foot of development land. The figure suggested by the buyer was
used as the base figure in a formula designed to provide the seller with a share of
increase in value of the side. The buyer’s representative adopted a figure of $210 per
square foot in the negotiations, giving the impression that this was comparable to other
developments.Negotiations continued in reliance on this representation and a base
figure of $212 was agreed.
(AC 3.2)
Differentiate between fraudulent,Negligent and innocent

misrepresentation:
When a false statement is made:
● Knowingly, or
● Without belief in its truth, or
● Recklessly, careless as to whether it to be true or false.
For the purpose of making a reckless statement, there is no need to prove dishonesty or
fraud: only that the statement was made without caring whether the statement was true
or not.
The difference between fraudulent misrepresentation and negligent misrepresentation is

the existence of a fraudulent intention.
There’s no reason in principle why a fraudulent misrepresentation can’t also be a

negligent misrepresentation, provided the facts of the case satisfy the test for each
cause of action.
Traditionally, damages could only be claimed for fraudulent misrepresentation. Not

negligent misrepresentation. Only the remedy of rescission was avaliable.
Section 2(1) of the Misrepresentation Act 1967 changed that. It introduced the
availability of damages as a remedy for negligent misrepresentation. Also, a court has a
discretion to refuse the remedy of rescission and award damages instead.
The pre-contractual statement was false, but the maker of the statement wasn’t
negligent in making the statement.
● The statement has become a term of the contract.

● The contract has been performed,according to s1 of the Misrepresentation Act
1967, and.
● Common law tests are satisfied.
(AC 4.3)
Examine the doctrine of frustration:

The doctrine of frustration basically talks about the impossibility of performance of the
contract.It means a contract cannot be executed because of an incident beyond the
control of parties. The performance of such a contract becomes frustrated i.e. It
becomes complicated,impossible or even illegal.
The principle of freedom to contract is a founding principle upon which the world of
commercial contracts operates. This strictly means that the parties to a contract are free
to agree on their own rights and obligations to be included in their agreement.
The doctrine of frustration in contract law was initially defined by two points, namely: (1)
the doctrine was to be only permitted where it was raised as a defence to a primary
assumption on which the agreement was reached; and (2) the parties were entitled to
insert provisions as a contingency measure to provide for the occurrence of the same.
“From the nature of the contract it is apparent that the parties contracted on the basis of
the continued existence of the particular person or chattel”.
The application of the doctrine of frustration can arise in a variety of situations. The
body of case law on the subject, however, illustrates that there are typically situations in
which the doctrine arises. Most commonly, the doctrine arises in situations in which
there is an inability to perform the contract due to the subject-matters destruction or
unavailability:
Taylor v Caldwell [1863]:

The claimant hired out a music hall in Surrey for the purpose of holding four grand
concerts. The claimant went to great expense and effort in organising the concerts.
However, a week before the first concert was due to take place the music hall was
destroyed by an accidental fire. The claimant sought to bring an action for breach of
contract for failing to provide the hall and claiming damages for the expenses incurred.
The claimant’s action for breach of contract failed. The contract had been frustrated as
the fire meant the contract was impossible to perform.
There are a variety of issues which can prevent the doctrine of frustration from
occurring. Firstly, where one party is found to have been negligent, the doctrine shall not
apply. However, negligence per se does not strictly prevent frustration from occurring,
as it is for the person claiming frustration to provide proof of the same.
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935]:

The respondents owned a strem trawler, which was fitted with another traw. The vessel
could only operate as a trawler. The respondents chartered the vessel to the appellants.
According to the charterparty, the vessel could only be used in the fishing industry. The
charterparty was renewed for the year in October 1932. In March 1933, the applicants
applied to Minster to grant them licenses for five trawlers that they were operating. The
appellants named the three trawlers and the vessel in question was not among them.
Subsequently, they claimed that they were no longer bound by the charterparty as it
was frustrated by the refusal of the Minster to grant licence in respect of the steam
trawler in question.
The decision was in favour of the respondents.
(1) There was no frustration of the charterparty as the absence of a licence was due to
the fact that the appellants' choice of vessels, which were to be granted licences.
(2) Therefore, the appellants remained liable for the hire of the vessel.

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Part C

Distinguish between liquidated and unliquidated damages:

Dunlop Pneumatic Tyre v New Garage and Motor (1915):

Identify the elements of actionable representation:

● The representation made must be material.

A deceit occurs when a misrepresentation is made with the expressed indentation of

● A clear false representation of fact or law.

Differentiate between fraudulent,Negligent and innocent

The difference between fraudulent misrepresentation and negligent misrepresentation is

There’s no reason in principle why a fraudulent misrepresentation can’t also be a

Traditionally, damages could only be claimed for fraudulent misrepresentation. Not

● The statement has become a term of the contract.

Examine the doctrine of frustration:

Taylor v Caldwell [1863]:

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935]:

The decision was in favour of the respondents.

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