Monday, 3 August 2015
Induced Mistake- Denny v Hancock
Often sellers can induce mistake on the part of buyers, this is precisely what happened in the case of Denny v Hancock (1870). The buyer had assumed that three trees were part of the property when in fact there was an iron fence which separated them- but this was concealed by shrubbery. The plans provided by the vendor were unclear as to whether the trees were part of the property, but any reasonable person would have assumed that they were part of the land. The buyer, who had a particular interest in the trees, went on to bid on the property at auction and was successful. He then discovered that the trees were not part of the land he had purchased and refused to continue with the transaction. The plaintiffs sued for breach of contract, and were issued with a specific order of performance. The buyer appealed, stating that his decision to purchase the property was based upon being misled by the plans provided by the seller. It was held that a specific performance order could not be issued on the grounds that the mistake made by the buyer had been undoubtedly induced by the seller, therefore they were not entitled to it as a remedy as it was their own fault that the buyer had made the assumption regarding the trees. This is an instance of crassa negligentia on the part of a vendor.
Smith v Hughes- The Standard Example of Objectivity
Smith v Hughes (1871) is frequently alluded to as the best exemplar of the objective test in practice. In a dispute over the sale of oats, it was decided that the defendant's state of mind (ie. thinking that he was purchasing old oats) was irrelevant to the case. An objective approach was applied where the fact that the parties were 'ad idem' and at cross purposes to the terms of the case were considered to be of the most importance, regardless of subjective considerations.
This case also illustrated the fact that silence cannot be considered to be a misrepresentation, which the claimant also attempted to bring an action forth for.
This case also illustrated the fact that silence cannot be considered to be a misrepresentation, which the claimant also attempted to bring an action forth for.
Snapping Up- The Case of Hartog's Hare Skins and Subjectivity
The case of Hartog v Colin & Shields focuses on the problems arising when a unilateral mistake is made. When it is clear that someone has made a mistake in the terms of a contract, as a general rule, the other party cannot 'snap up' the offer and be able to enforce the contract. In this case, it was decided that the offeree had indeed recognised the mistake made by the plaintiff, Colin & Shields and had deliberately accepted the offer quickly and attempted to enforce it whilst being fully aware that the terms were based in a mistake. This case is similar to that of Centrovincial (1983), however, as in that instance it was unlikely that the plaintiffs could have reasonably been aware of the mistake it was ruled in the favour of the promisee.
In this case, the plaintiff has mistakenly written a price on an offer which was a third of the intended price for the product. The defendant recognised this yet still went on to accept the offer. The price which had been communicated orally prior to this was a better representation of the intended offer, so it was clear that the promisee was aware of the price which the offeror initially intended to offer, which was significantly higher than the price communicated in written form. It was held that the plaintiffs had made a mistake and that on the grounds that the defendant, Mr Hartog, could have been reasonably expected to recognise this should not be allowed to enforce the contract.
This case is demonstrative of the manner in which the courts can apply a subjective approach in certain instances. These considerations can be noted in the fact that the parties were not agreed in a subjective sense, their states of mind as to what the contract was communicating clearly did not coincide in any way. However, an objective interpretation might have taken the route that the agreement had been reached- thus should be enforced, as was done in Centrovincial. This illustrates that the courts are willing to extend beyond the scope of the objective approach in the interest of fairness to parties within a contract.
In this case, the plaintiff has mistakenly written a price on an offer which was a third of the intended price for the product. The defendant recognised this yet still went on to accept the offer. The price which had been communicated orally prior to this was a better representation of the intended offer, so it was clear that the promisee was aware of the price which the offeror initially intended to offer, which was significantly higher than the price communicated in written form. It was held that the plaintiffs had made a mistake and that on the grounds that the defendant, Mr Hartog, could have been reasonably expected to recognise this should not be allowed to enforce the contract.
This case is demonstrative of the manner in which the courts can apply a subjective approach in certain instances. These considerations can be noted in the fact that the parties were not agreed in a subjective sense, their states of mind as to what the contract was communicating clearly did not coincide in any way. However, an objective interpretation might have taken the route that the agreement had been reached- thus should be enforced, as was done in Centrovincial. This illustrates that the courts are willing to extend beyond the scope of the objective approach in the interest of fairness to parties within a contract.
Mistakes in Contract Law- The Case of Centrovincial Estates Plc v Merchant Investors Assurance Ltd
This case is significant in demonstrating that the subjective state of mind of the promisee can be considered to be of importance when the promisee is aware of the mistake and attempts to 'snap it up'.
In this case, the plaintiff had agreed to let the premises in question to the defendants. A letter was written to the defendants stating that the 'current market rental value' of the property was £65,000 and this was agreed to constitute an offer which the defendants then went on to accept. This offer was made by the plaintiff's solicitors and was based upon a mistake, the actual price that they had meant to feature in the offer was actually £126,000. The plaintiffs then telephoned the defendants and pointed out their mistake, this was followed by a letter from the plaintiff's solicitors who pointed out that the price they had provided was an accident. The defendants, however, asserted that the contract had already been made and that they were not to know that the price offered had been a mistake. In this instance it was held that the contract was not rendered void by the mistake, as an objective approach was taken. Aatiyah challenged the fairness of this decision, stating 'why should an offeree be entitled to create legal rights for himself by the bare act of acceptance when he has in no way relied upon the offer before being informed that it was a mistake and in reality did not reflect the intention of the offerror?'.
The reasoning behind this is simple, if the law were to take into consideration whether promises were relied upon, then this would serve to deprive contractual agreements of stability until they are relied upon. This would subvert the elements of predictability, contractual stability and certainty which are developed by the objective approach in its current format. Despite Aatiyah's criticisms being valid in terms of fairness they are ultimately devoid of pragmatism.
In this case, the plaintiff had agreed to let the premises in question to the defendants. A letter was written to the defendants stating that the 'current market rental value' of the property was £65,000 and this was agreed to constitute an offer which the defendants then went on to accept. This offer was made by the plaintiff's solicitors and was based upon a mistake, the actual price that they had meant to feature in the offer was actually £126,000. The plaintiffs then telephoned the defendants and pointed out their mistake, this was followed by a letter from the plaintiff's solicitors who pointed out that the price they had provided was an accident. The defendants, however, asserted that the contract had already been made and that they were not to know that the price offered had been a mistake. In this instance it was held that the contract was not rendered void by the mistake, as an objective approach was taken. Aatiyah challenged the fairness of this decision, stating 'why should an offeree be entitled to create legal rights for himself by the bare act of acceptance when he has in no way relied upon the offer before being informed that it was a mistake and in reality did not reflect the intention of the offerror?'.
The reasoning behind this is simple, if the law were to take into consideration whether promises were relied upon, then this would serve to deprive contractual agreements of stability until they are relied upon. This would subvert the elements of predictability, contractual stability and certainty which are developed by the objective approach in its current format. Despite Aatiyah's criticisms being valid in terms of fairness they are ultimately devoid of pragmatism.
Contract: Acceptance
In determining whether a contract exists, courts typically seek to establish whether there has been an agreement. In deciding this, the courts may look to see whether an offer has been made and acceptance has taken place. This is the typical make-up of a simplistic contract, however, this rule cannot be applied in all instances.
The 5 components of a contract
1. Agreement must be demonstrated, typically via offer and acceptance.
2. The agreement must be expressed in a format which is sufficiently clear, ie. it must not be vague, uncertain or incomplete.
3. There must be consideration. Consideration alludes to the fact that both the promisor and promisee must benefit and detriment within a contract. It is this detriment or benefit which is considered to constitute good consideration. However, consideration may not be a necessary component of a contract if an estoppel can be identified. Yet it is key to remember that the doctrine of promissory estoppel in the English legal system is not yet fully developed and can only be utilised as a 'shield and not a sword' as was demonstrated in Combe v Combe (1951).
4. The contract must exist in an accepted form, such as writing. The need for contracts to exist in particular formats has been diminished in modern times yet has not been wiped out altogether.
5. There must be an intent to create legal relations. This means that there must not be duress or other factors which could impinge upon a clear desire to establish a legal relationship. The law does not typically bestow social or domestic agreements with the intent to create legal relations, as typically it does not exist in such instances, yet in commercial contracts it is presumed to be present.
Why does our legal system adopt an objective approach as opposed to being subjective?
'Lord Clarke -> RTS Flexible Systems Ltd (2010)
It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct.
The English legal system adopts an objective outlook when deciding whether a legally binding contract exists. This means that subjective considerations, such as the state of mind of the parties are not typically taken into account. There are many reasons for this. Firstly, in transactions of a commercial nature there is the need for certainty when resolving contractual disputes. Although applying a subjective standard in such instances would lead to an individualised sense of justice, it would drag out cases significantly which would constitute an unprecedented drain on resources, not only temporally but in monetary terms.
The 5 components of a contract
1. Agreement must be demonstrated, typically via offer and acceptance.
2. The agreement must be expressed in a format which is sufficiently clear, ie. it must not be vague, uncertain or incomplete.
3. There must be consideration. Consideration alludes to the fact that both the promisor and promisee must benefit and detriment within a contract. It is this detriment or benefit which is considered to constitute good consideration. However, consideration may not be a necessary component of a contract if an estoppel can be identified. Yet it is key to remember that the doctrine of promissory estoppel in the English legal system is not yet fully developed and can only be utilised as a 'shield and not a sword' as was demonstrated in Combe v Combe (1951).
4. The contract must exist in an accepted form, such as writing. The need for contracts to exist in particular formats has been diminished in modern times yet has not been wiped out altogether.
5. There must be an intent to create legal relations. This means that there must not be duress or other factors which could impinge upon a clear desire to establish a legal relationship. The law does not typically bestow social or domestic agreements with the intent to create legal relations, as typically it does not exist in such instances, yet in commercial contracts it is presumed to be present.
Why does our legal system adopt an objective approach as opposed to being subjective?
'Lord Clarke -> RTS Flexible Systems Ltd (2010)
It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct.
The English legal system adopts an objective outlook when deciding whether a legally binding contract exists. This means that subjective considerations, such as the state of mind of the parties are not typically taken into account. There are many reasons for this. Firstly, in transactions of a commercial nature there is the need for certainty when resolving contractual disputes. Although applying a subjective standard in such instances would lead to an individualised sense of justice, it would drag out cases significantly which would constitute an unprecedented drain on resources, not only temporally but in monetary terms.
Objectivity in Contract Law
In English law, an objective approach is used as a 'general rule', which takes into consideration the 'words and conduct' of the parties involved as opposed to their 'subjective state of mind', as is outlined by Lord Clarke. The benefits of this are the 'certainty and predictability in commercial disputes' which is pointed out by Steyn in 'The Reasonable Expectations of Honest Men' (1997). If the law were to bestow a subjective approach with legal force, the outcome would most likely be a catastrophic one- cases would be substantially longer, the outcomes of them would be increasingly unpredictable as the individual mindsets of promisees/promisors would have to be taken into account each time, this could also be considered to constitute an additional financial burden on the part of those who do have to pursue legal proceedings. The objective test, noted by Steyn as 'the English way' is excellent at providing stability and predictability in the outcome of cases, which is of particular importance in the commercial realm.
Howarth has attempted to distinguish between the different types of objective approach which can be applied. He states that the term 'promisor' is to be used in relation to those who wish to prevent a promise from being executed, where as the term 'promisee' is to be considered to relate to those who wish to have a promise enforced. Howarth, in his text 'The Meaning of Objectivity in Contract' has distinguished between three distinct approaches.
1) Promisee objectivity -> This alludes to the way in which the reasonable promisee would interpret the terms of the promise.
2) Promisor objectivity -> The manner in which the reasonable promisor would interpret the terms.
3) Detached objectivity -> How an independent and neutral by-stander would interpret the terms of the promise.
In English law, it has been suggested that the promisee objectivity component is the most utilised component, however, this is not to state that promisor objectivity is not of importance. It is often the case that courts will consider both perspectives.
Despite the 'general rule' being in place that the subjective approach will not be considered, in instances where it has been determined that parties have attempted to 'snap up' promises which were not intended by the promisor the courts have resorted to the subjective interpretation. This is also true in instances where mistakes have been made.
Howarth has attempted to distinguish between the different types of objective approach which can be applied. He states that the term 'promisor' is to be used in relation to those who wish to prevent a promise from being executed, where as the term 'promisee' is to be considered to relate to those who wish to have a promise enforced. Howarth, in his text 'The Meaning of Objectivity in Contract' has distinguished between three distinct approaches.
1) Promisee objectivity -> This alludes to the way in which the reasonable promisee would interpret the terms of the promise.
2) Promisor objectivity -> The manner in which the reasonable promisor would interpret the terms.
3) Detached objectivity -> How an independent and neutral by-stander would interpret the terms of the promise.
In English law, it has been suggested that the promisee objectivity component is the most utilised component, however, this is not to state that promisor objectivity is not of importance. It is often the case that courts will consider both perspectives.
Despite the 'general rule' being in place that the subjective approach will not be considered, in instances where it has been determined that parties have attempted to 'snap up' promises which were not intended by the promisor the courts have resorted to the subjective interpretation. This is also true in instances where mistakes have been made.
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