18. Privity and third parties

This chapter examines how English law, through a doctrine known as privity of contract, deals with the problem posed by contracts whose performance involves third parties. According to the doctrine of privity, a contract ordinarily only affects persons who are party to it. Third parties are neither bound by the contract nor entitled to claim rights under the contract. However, the courts and Parliament developed a number of exceptions to the strict rule of privity, each of which gives third parties a right to sue under the contract in a certain type of situation. For example, the Contracts (Rights of Third Parties) Act 1999 gives third party beneficiaries a right to enforce contract terms. This chapter first considers the problem of third party rights in contracting before discussing the effects of privity and the provisions of the Contracts (Rights of Third Parties) Act 1999 in more detail.

17. Non-compensatory remedies

This chapter considers a range of non-compensatory remedies that are available at English law in cases of breach. Non-compensatory remedies seek to respond to breach of contract in ways other than compensation. The starting point for non-monetary obligations is that breach is best remedied through the award of damages. Literal enforcement of such an obligation, through an order for specific performance or an injunction, is only awarded in exceptional circumstances. In contrast, obligations involving the payment of a definite sum of money are frequently literal enforced through the remedy of debt. This chapter first examines literal performance as a non-compensatory remedy before discussing debt, gain-based remedies, and restitution interest.

14. Protecting the public interest

This chapter examines how English law deals with contracts against the public interest under the doctrine of illegality. The doctrine of illegality reflects a broader principle that applies across private law, that legal actions cannot be founded on illegal acts. In contract law, its implication is that contracts contrary to law or public policy are void. The chapter first considers the problem of illegal behaviour in contracting before discussing the rule-based approach to illegality and its limits. It then reviews the Supreme Court decision in Patel v Mirza and how it gave rise to the ‘range of factors’ approach to illegality. It also looks at criteria that make a contract illegal, including cases where the illegality consisted of criminal and civil wrongs. The chapter concludes with an overview of other types of illegality, such as the ‘injurious to good government’ ground and restraint of trade.

5. Non-contractual promises

This chapter considers how promissory and proprietary estoppel intersects with the law of contract. Where an agreement is unenforceable at contract law because some legal prerequisite or formality has not been met, that role is played by the law of estoppel. The law of estoppel works by deeming a party to be legally prevented (‘estopped’) from going back on something she has in the past asserted, promised, or accepted. The effect of estoppel is to hold the person to that past assertion or promise, by preventing her from resiling from it. This chapter first examines the context of promissory estoppel before discussing its requirements and its effect, such as suspending rights and extinguishing debts. It then explains the requirements of proprietary estoppel, namely: there must be a promise or encouragement; the promise or encouragement must induce reasonable reliance; reliance must be detrimental; and unconscionability.

12. The limits of hard bargaining

This chapter examines how English law sets limits to hard bargaining through the application of the doctrines of duress and undue influence. It first considers the problem of coercion in contractual transactions and how the doctrine of duress deals with coercion through the use of threats. It then discusses three key elements of duress: the impact of the pressure on the person who was subject to it, the need to prove illegitimacy, and the pressure must induce the decision to contract. It also describes remedies for duress and proceeds with an analysis of the scope and nature of undue influence, the elements of actual undue influence, presumed undue influence, remedies for undue influence, and specific issues that arise in relation to undue influence where third parties are involved. The chapter concludes with an overview of the regulation of aggressive practices.

10. Fundamental changes

This chapter examines the doctrines of frustration and common mistake that deal with situations where fundamental changes have occurred. Frustration and common mistake apply to situations where the parties find themselves in uncharted territory. The doctrines ask courts to determine the limits of a contract, the point where the contractual framework runs out and the contract no longer holds. This chapter first considers the impact of ‘unknown unknowns’ on the contract and the distinction between frustration and common mistake before discussing frustrating events and the consequences of frustration. It also describes three types of common mistake that render the contract void: mistakes as to the existence of the subject matter, mistakes as to the possibility of performance, and certain types of mistakes as to the quality of the subject matter. Finally, it looks at the legal consequences of common mistake and remedies for common mistake.

7. Interpreting the terms

This chapter considers how the courts make sense of contracts whose terms are capable of more than one interpretation. It begins by discussing two broad approaches to construing contracts, both of which have influenced English law and both of which continue to form part of the law: literalism and contextualism. It then examines the role English law currently assigns to literalism and contextualism and how the courts decide which to apply, with particular emphasis on the Investors rule and contextual readings. It also evaluates an alternate remedy known as rectification and concludes with an analysis of the limits of construction and the law of mutual mistake.

3. Consideration

This chapter discusses consideration as a requirement for an agreement to be treated as a legally binding contract. Consideration is the price one party pays for the other party's promise or performance. The doctrine of consideration provides, in essence, that a price of some sort must be paid if an agreement is to be enforceable as a contract. This chapter begins with an analysis of the first requirement imposed by the doctrine of consideration: that the act, forbearance, promise, or commodity given in exchange for the promise should be something of value. It then examines the three different conceptual approaches used in the legal understanding of value based on the idea of economic value, benefit and detriment, and practical benefit. It also describes the ingredients of exchange and includes case in depth boxes that cover the most influential and important cases pertaining to consideration.

13. Controlling contract terms

This chapter examines how the law regulates contract terms, with particular emphasis on rules that are intended to protect weaker parties. It begins with a discussion of the limits of freedom of contract and proceeds by assessing the role played by formal requirements, such as the requirement that contracts be in writing. It then considers how the law regulates contract terms which seek to alter the liability that one party will have in the event of breach. More specifically, it looks at exclusion clauses in the common law and the statutory regulation of such clauses, along with liquidated damages, contractual remedies, and the rule against penalties. It also explores the extent to which consumer protection law restricts the terms that can be included in consumer contracts, especially when dealing with the problem of unfair terms.

11. Untrue statements

This chapter examines how English law deals with the problem of untrue statements through the doctrines of misrepresentation and unilateral mistake. It begins with an overview of contractual transactions involving at least some measure of information asymmetry and proceeds by considering the basic principles of the law of misrepresentation. It then considers the three elements of false statements: the absence of general duties to disclose relevant facts, an objective approach to construing ambiguous statements, and a distinction between statements of fact and statements of opinion. It also discusses the remedies available to the representee in the case of misrepresentation, along with two types of unilateral mistakes recognized in law: unilateral mistakes as to identity and unilateral mistakes as to terms. The chapter concludes with an analysis of misleading selling practices and statutory remedies which are available to victims of misleading selling practices under the law of unfair commercial practices.