You will see that the OHPs refer to Tort. Don't fret. Tort is not on your syllabus, you only get the notes as they are part of the file and may be of interest to some of you.

The notes are intended to be an essential summary of the course. You may then want to refer to the BPP textbook or any other appropriate texts for amplification, reinforcement etc.

Understanding of these notes, the practice questions on Contract, Agency and Sale of Goods, and the notes that take you through intellectual property and competition law will provide a positive conclusion to your course of study.

I want you, the student, to enjoy and to understand the law. My function is to ensure that you have the best opportunity to develop your learning and understanding of law. During our first session I will show you one or two tricks that will help you learn cases and appreciate the overview of the law, so necessary in dealing with problems.

My law notes are posted to the Internet at www.bigwig,net/sljohn

If you have any queries or want to submit work you can e mail me at sljohn@bigwig.net

Finally, please tell me if you have any problems or queries.

First we want to develop a deep understanding of contract law.

Law of Contract..

What is a legal agreement

Contract is an agreement which the law will enforce. It is an extension of an agreement (offer and acceptance) by the addition of intent to create legal relations and consideration.

Use the OHPs as outline notes, with these notes acting as developers of understanding.

Contract needs offer, acceptance, intent to create legal relations and consideration

Note the characteristics of an offer that are in the OHPs. These are basic to your understanding. Differentiating an offer from an intent to trade is particularly important as is the fact that an offer has to be certain.

During the build up to an agreement there is often a period of negotiation which differentiates an offer from negotiations. e.g. Harvey v Facey and must be distinguished from an intent to trade : Fisher v Bell 1961 and Pharmaceutical Society of Great Britain v Boots Cash Chemists 1953. This is due to the "limited stock argument" put by Lord Herschel in Grainger and Son v Gough 1896 re : wine list sent out by wine merchant.

The concept of intent to trade is one of the most important and must be thoroughly understood.

Offer may be express or implied. Court of Appeal in Thornton v Shoe Lane Parking Ltd 1971 held that an automatic ticket machine in a car park was an offer. An offer must be communicated before it can be accepted and an offer may be to a particular person or to the world at large.

Consider : Why is the term 'offer for sale' not really an offer in law whilst taking a ticket from an automatic ticketing machine is an offer?

Not usually an offer. See : Partridge v Crittenden 1968; re advertisement in "Cage and Aviary Review".

In an auction the bid is the offer and acceptance is when the auctioneer's hammer falls. See Payne v Cave 1789. An advertisement of an auction will as a result of Harris v Nickerson 1873 be regarded as an intent to trade, but if the advertisement of the auction states that the goods will be sold without a reserve price, then it appears from Warlow v Harrison 1859 to be an offer.

An offer lasts until it is :

1 accepted

2 rejected, rejection terminates offer as does a counter offer. See Hyde v Wrench 1840. Also Jones v Daniel 1893 where the acceptance contained new terms it was held to be a rejection

3 revoked. Offer can be withdrawn (revoked) even if the offeror has promised to keep the offer open for a specified time. Routledge v Grant 1828. Revocation is only effective when it has been communicated to a third party and may be communicated by a third party as in Dickinson v Dodds 1876 where sale of house offered to Dickinson was told to him by a third party

4 lapse of time as in Ramsgate Victoria Hotel v Montefiore 1866. See also Manchester Diocesan Council for Education v Commercial and General Investments Ltd 1970 where it was held that because of application for consent etc. the council had not rejected the offer due to lapse of time.

5 death of offeror or offeree. Usually leads to termination especially when contract is for personal services.

Acceptance must take place before the offer has ended. The place of acceptance is where the contract is made. Acceptance must be absolute and unconditional acceptance of the terms offered. However in Branco v Cobarro 1947 "provisional agreement until a fully legalised agreement is signed" was held to be binding.

Like an offer, the acceptance must be certain. Felthouse v Bindley 1862

1 by word written or spoken

2 by conduct Brogden v Metropolitan Railway 1877; where coal was supplied without formal agreement. Formal contract sent, returned with amendment. Coal still supplied even though supplier tried to claim amendment a counter offer. Held acceptance by conduct

If tender is for a specified amount then there is a contract. However where the tender calls for the supply of goods as and when required - it is regarded as a standing offer and may be revoked at any time up to legal acceptance. This applies to future supplies. as in Great Northern Railway v Witham 1873

Basic rule is that there is no contract until acceptance is communicated as Felthouse v Bindley 1862. Note exceptions where offeror can waive need for communication of acceptance as in Carlill v Carbolic Smokeball Co. 1893

Rule of postal acceptance is that acceptance takes place when posted. See Adams v Lindsell 1818, and Household Fire and Carriage Insurance v Grant 1879; and Byrne v Van Tienhoven 1880 which was a battle as to when revocation and postal acceptance took place. Acceptance must be properly posted as in Re London and Northern Bank 1900 ;and usually must be the stipulated form of acceptance, but note Tinn v Hoffman and Co. 1873; where it was held that "reply by return of post" included an equally speedy method. Also in Yates v Pulleyn 1975; where the requirement that a reply be sent by registered post was not enforced.

See Hughes v Holwell Securities 1973 It is important that you understand the reasoning in this case.

See Entores v Miles Far East Corporation 1955 confirmed in Brinkibon v Stahg Stahl 1983.

Court of Appeal held in Butler Machine Tool Co. v Ex-Cell-O Corporation 1979 that seller had consented to buyer's terms because :

- seller's document was an offer

- buyer's reply was a counter offer

- return of acknowledgement slip was an acceptance of the counter offer

This is a topic that students sometimes have difficulty in handling. I suggest you start with the general rules. A business agreement is legally binding unless it says that it is not. You can then state the law and refer to the Kleinwort Benson v Malaysian Mining Corporation case 1989. This case is important to an international business community as Guernsey. You can then state the general rule that social / domestic agreements are not legally binding.

Simple isn't it? Not quite. The rules relating to law are easy, it is the exceptions that make for a fascinating subject.

Here the law presumes that there is an intent for the agreement to be legally binding. However this presumption can and has been rebutted as in Jones v Vernon's Pools 1938 and Ford v AUEW 1969. It is important to look at Kleinwort Benson v Malaysian Mining Corporation 1989 at both High Court and Appeal Courts for differing views on ‘comfort letters" and intent.

No intent presumed. See Balfour v Balfour 1919 and Jones v Padavatton 1969 where a mother agreed to finance and house her daughter during studies. Later, after a quarrel the mother went back on her agreement. Held that it was not legally binding as it was a social or domestic arrangement. This last case can be contrasted with that of Merritt v Merritt 1970 where the family circumstances were different, and with Simpkins v Pays 1955.

This is the last part of the constituents of the legal agreement.

English law of contract is concerned with the presence of and not the fairness of a bargain. The law requires that in all contracts other than those by deed, both parties bring something -to the agreement i.e. provide consideration to the bargain.

Note distinction between Executed and Executory Consideration

Tweddle v Atkinson 1861; " No stranger to the consideration can take advantage of a contract , although made for his benefit. This rule is related to the concept of privity of contract.

In Thomas v Thomas 1842 it was held that payment of £1 for a house which was obviously much less than its value was held to be of some value to the contract and was adequate consideration. What the law requires is that something is given in return for the promise. What the law requires is that the bargain does not have to fair. This means that a Rolls Royce could be sold for a consideration of £5.

This appears to be a contradiction to the rule that consideration must be adequate. What we need to remember is that something has to be given (sufficiency) for the promise. This topic is best approached through the cases of Stilk v Myrick 1809 and Hartley v Ponsonby 1857. After looking at these cases we will be in a position to understand the distinction between adequacy and sufficiency of consideration. However, note how Stilk may be altered by Williams v Roffey Bros & Nicholls 1989.

White v Bluett 1853; contained a vague promise and was not consideration. In the same manner uncertainty as in Gunthing v Lynn 1831 is also no adequate consideration

See Re McCardle 1951. Note however that where a promise is made for services after the service has been performed then such a promise in enforceable if the services were carried out at the request of the promisor and the parties understood that there was an implied promise of payment when the service was first asked for. Cases such as Lampleigh v Braithwait 1615 and Re Casey's Patents 1892 apply.

See Collins v Godfrey 1831 and Ward v Byham 1956 where the court said that the mother had done more that her duty to look after the child by stating the child would be well looked after , happy and could choose with which parent to live. In Ward the mother was giving consideration for the promise. Also in Shadwell v Shadwell 1860 where an uncle promised Shadwell to pay him money if he married Ellen Nicoll to whom he was engaged. There was no consideration for the new promise as Shadwell was already engaged and the fact that an engagement was legally binding. Refer also to Stilk v Myrick above.

This important case stated that payment of a smaller sum was not consideration for the discharge of the debt. Pinnel's Case stated the there will be consideration for the discharge of the contract if the payment is in a form different from the original debt, or at a different time or in a different place. Pinnel's Case was confirmed in Foakes v Beer 1884 and in D and C Builders Ltd v Rees 1966 it was held that a cheque was the same as money (cash) and of itself was not consideration to discharge the debt.

This is a relatively new equitable doctrine in English law, being brought to notice in Central London Property Trust v High Trees House 1947. One aspect of the still evolving doctrine of promissory estoppel is the rule that it is to used as "a shield and not as a sword". This means that you can bring forward a promise unsupported by consideration as a defence if you are sued. In Combe v Combe 1951 where the husband who had volunteered to pay his wife £100 a year could not be sued. The doctrine did not permit the wife to use it as a sword. It appears that an action for promissory estoppel requires three conditions :

1) there must be a promise not to enforce rights under a contract

2) the promise must have been acted upon by the other party

3) it must have been inequitable to allow the promisor to go back on his promise.

We have learnt about the constituents of a contract. A legal agreement requires an offer, an acceptance, an intent to create legal relations and the presence of consideration. We have also seen that the law can sometimes be seen as a series of rules, complicated by exceptions. We are now in a position to examine further aspects of the law of contract.

It is important for us to consider some basic information on the terms of a contract. Terms can be divided into :

These are of two types conditions and warranties. Two cases, Poussard and Spiers 1876 and Bettini v Gye 1876 both about singers illustrate the legal distinction between condition and warranty.

Terms may be implied into a contract by custom, courts or statute. Hutton v Warren 1836 is an example of custom. Also consider Liverpool Corporation v Irwin 1976 which stated that the legal relationship between banker and customer is governed by implied terms. In a similar manner it was held to be an implied term that ground along a wharf was safe at low tide i.e. The Moorcock 1889. Statute law has also implied terms into contract law. An important example is the Sale of Goods Act 1979 (1994)

Innominate Terms

In Cehave v Bremer, The Hansa Nord 1975 the House of Lords introduced a form of intermediate clause called an innominate clause. In such cases the court could delay deciding whether an event is a breach of condition or warranty until the extent of the damage is known.

Such clauses have the objective of :

a) Limits compensation for breach of contract

b) Limits remedies available

c) specifically excludes liability for breach of an express or an implied term

d) Attempt to restrict the scope of a contractual obligation.

Graucob v L'Estrange 1934 re cigarette vending machine, Chapleton v Barry UDC 1940 re collapsing deck chair, Olley v Marlborough Court Hotel 1949, Curtis v Chemical Cleaning Company 1951 where it was held the exclusion clause could be varied by the oral representation of a shop assistant.

This rule that the courts will in cases of ambiguity interpret the clause against the person making it.

This doctrine is well set out in Suisse Atlantique 1967 and affirmed in Photo Production v Securicor Transport Ltd 1980. In these cases an exemption clause could still be applied even though there had been a fundamental breach of the contract containing the exemption clause. This is an important issue and one which must be given adequate study time.

The Unfair Contract Terms Act 1977 is a landmark in the development of exclusion, exemption clauses and its main provisions must be appreciated.

The common law states that we must live with our mistakes. However, over the years there have been exceptions :

Where both sides make the same mistake as to the subject matter. See Galloway v Galloway 1914

Where both parties are mistaken, but about different things . The best case is Raffles v Wichelhaus 1864 the so called "Ex Peerless Case"

Cundy v Lindsay 1878 and Phillips v Brookes 1919 are important to read and understand. Remember that cases concerning unilateral mistake frequently involve mistaken identity.

If we are mistaken at all times about the identity of the person we are contracting with, then the contract is void. See Cundy v Lindsay.

If the identity is not important or becomes of importance after our initial dealings the law in Phillips v Brookes and Lewis v Avery suggests that the contract is not void by mistake, but is voidable by reason of deceit.

Whether the contract is void or voidable determines whether the supplier can recover goods from an innocent third party.

Equity provides remedies for mistake. These include

1) recission see Leaf v International Galleries 1950

2) rectification see Weeds v Blaney 1976 and

3) Webster v Cecil 1861

An actionable misrepresentation is an untrue statement of past or existing fact made by one party to another party of the contract which induces the representee to enter the contract. Misrepresentation is best learnt by referring to the following statements and explanations.

Two good cases are Smith v Land and House Property Corporation 1884 and Bisset v Wilkinson 1927. Where statements of law are made then it is not a misrepresentation as everyone is deemed to know the law. See Solle v Butcher 1950

No general duty to disclose facts that are not known to the other contracting party. Rule confirmed in Keates v Lord Cadogan 1851.

With v O'Flanagan 1936

Re Kyslant 1931

Insurance contracts of the utmost good faith

Representation must induce the representee to enter the contract and it is usual for the representee to prove that he was induced by the representation

Misrepresentation Act 1967

Derry v Peak 1889

The main remedies are damages and or recission. Recission is an equitable remedy and it must be understood when recission will fail i.e. if we fail to act in time, and when a third party has develops rights are the most important. cases such as Leaf v International Galleries 1950 and Phillips v Brookes 1919 and Lewis v Avery 1972

General rule is that the contract must be performed in the exact and precise manner in which was agreed. See Cutter v Powell 1795 and Moore v Landauer 1921. We now need to examine some of the exceptions.

Severable contracts

Prevention of performance i.e. Planche v Colburn 1831

Acceptance of partial performance - where one party has performed part of the contract and the other derives benefits, the party gaining must pay a reasonable sum.

Substantial performance - problem here is what is a minor difference?

Agreement

accord and satisfaction - purchase of relief from obligation by consideration

recission - totally new contract

variation - alter or modify existing contract

novation - applies in debtor creditor situation A B then A C

waiver - voluntarily waiver rights in contract

Frustration

In Paradine v Jayne 1647 the severity of the common law was shown to parties who failed to perform their part of the contract even though it had become impossible for that to happen. Frustration is another example of equitable remedies and is best approached through case law.

Cases :

Taylor v Caldwell 1863 which set out the doctrine of subsequent impossibility (frustration) stated that the parties to a contract are excused further performance of their obligations if some event occur, without fault of either party, which makes further performance impossible or radically different from the original intention.

Krell v Henry 1903

Herne Bay Steamboat Company v Hutton 1903

Davis Contractors v Fareham UDC 1956

If the frustrating event was self induced then there is no frustration of contract. See Maritime National Fish Ltd v Ocean Trawlers Ltd 1935.

If the event was foreseeable by both parties then the law is unclear whether there is frustration or not. See Ocean Tramp Tankers Corporation v Sovfracht : The Eugenia 1964

Finally note the importance of the Law Reform (Frustrated Contracts) Act 1943

Damages is the standard common law remedy. If the plaintiff proves the case then the plaintiff is entitled to damages for his loss. Other remedies are mainly equitable and as such are discretionary.

The purpose of damages is to put the plaintiff back in the position he would have been in if the contract was carried out as agreed. See Lazenby Garages Ltd v Wright 1976 but note the case of Jarvis v Swan Tours 1973 and the consequence of that case on the travel tour industry and photographic development industry.

The plaintiff has an express duty to mitigate losses.

Hadley v Baxendale 1854 and Victoria Laundry (Windsor) Ltd V Newman Industries Ltd 1949 are the important cases. Students frequently need to read and think both cases through before seeing the logic behind the theory of remoteness of damage. The lasting importance of Hadley v Baxendale is that it states damages should be awarded when :

"arising naturally or as may reasonably been supposed to have been in the contemplation of both the parties at the time they made the contract."

The parties to a contract may anticipate the possibility of a breach and include in the contract a term that a certain sum shall be paid to the injured party by the party in default if a specified breach occurs. If this sum is a genuine pre-estimate of the damage the term is known as Liquidated Damages. If the estimated sum is much less it is frequently termed a limitation clause. If it is much more it is termed a Penalty Clause. See Dunlop Pneumatic Tyre Co. Ltd v New Garage and Motor Co. Ltd 1915 which lays down the test for distinguishing between liquidated damages and penalty clauses.

We should now have a sound knowledge of the basics of contract law. Before we finish we need to consider some factors that might affect the existence of a contract. These are restraint of trade, duress, undue influence and capacity to contract.

A restraint of trade occurs when one party to a contract seeks to limit the future liberty of the other party to carry out his business. In reality the restraint clause is usually seen as part of a contract such as a contract of employment or a contract to purchase a business. The law states that a restraint clause is prima facie void unless it is held to be reasonable from the point of view of the parties and of the community. It is all a question of reasonableness in all the circumstances.

Must protect some form of proprietary interest of the person receiving the promise. Usually to do with either trade secrets or business connections. In Forster v Suggett 1918 it was held that an employer cannot prevent an employee from using his own skill after he has left even if that skill was learnt from the employer. In regard to business connections Lord Parker in Herbert Morris v Saxelby 1916 said the before any restraint is justifiable the employee must be one who will acquire not merely the knowledge of customers but influence over them.

In considering whether a restraint is reasonable depends on :

1 Area See Fitch v Dewes 1921

2 Time See Fitch v Dewes 1921

3 Activities. A restraint will not extend to an activity which is irrelevant to the activity being protected. See Home Counties Dairies Ltd v Skilton 1970 where the contract of employment contained a clause "the employee expressly agrees not at any time during one year after the determination of his employment...either on his own account or as representative or agent of any person or company to serve or sell milk or dairy produce to, or solicit orders for milk or dairy produce from any person or company who at any time during the last six months of his employment shall have been a customer of the employer and served by the employee in the course of his employment"

Should only be applied to agreements whereby garages agree with oil companies to only stock petrol and lubricating oils from the company and in return have a rebate and often loans from the company. See Esso v Harper's Garage (Southport) Ltd 1968

Duress original concerned itself with physical duress i.e. Barton v Armstrong 1976 where there was a threat to kill unless a substantial sum of money was paid. In Maskell v Horner 1915 there appeared to be an attempt to widen the scope of duress to economic duress but this was an exception to the rule and it was not until Northern Ocean Shipping Co Ltd v Hyundai Construction Co. Ltd (The Atlantic Baron) 1979 that Maskel was recognised and the right to sue in economic duress established. A case that deeply analyses duress in business is Universe Tankships of Monrovia v International Transport Workers Federation 1983.

A contract or gift may be set aside under the equitable doctrine of undue influence. There are two distinct situations where the doctrine is applied :

1) where a special relationship of confidence exists and one party has abused his position of trust and confidence acting for his own interests.

2) where one exerts unfair mental pressure over another.

Cases : Alcard v Skinner 1887, Williams v Bayley 1866, Lloyds Bank v Bundy 1975, National Westminster Bank plc v Morgan 1985 and George Michael case 1994

Minors

The Minor's Contract Act 1987 sets out the rules relating to the contractual capacity of minors. Basically two kinds of contract negotiated by a minor are valid

1) contracts for the supply of goods and services which are necessaries i.e. Nash v Inman 1908 and

2) a service or educational contract which is for the benefit of the minor.

Companies

Capacity of a company can be seen by examining its articles and memorandum of association. From these document s we can determine if an action is ultra vires or not. The Companies Act 1989 has made many previously ultra vires actions now intra vires.

We now have a sound appreciation of the basics of contract law. We can see how case law has played an important part in the development of contract law. It is important to use your list of key words in order to learn and importantly, understand the case and where its story fits in relation to any question you may have to answer.

The cases of Kleinwort Benson Ltd v Malaysian Mining Corporation (1989) and Williams and Roffey Bros. v Nicholls (Contractors) Ltd (1989) are important cases for students studying the "A" level law course.

This case is one on intent to create legal relations and questions to assumption that all business agreements are legally binding unless there is a clause to the contrary in the agreement.

Students have copies of the transcripts of the QBD and Court of Appeal hearings. Some of the main points about the comfort letter and its intent or otherwise are seen in the transcripts.

"It is our policy to ensure that the business of MMC Metals Ltd is at all times in a position to meet its liabilities to you under the arrangement. (NLJ 29 January 1988 p 21)

Hirst J said "I have to carry out precisely the same task...of ascertaining what common intentions should be ascribed to the parties from the terms of the documents in question and the surrounding circumstances" (NLJ 29th January 1988 p 21)

For Hirst, the presumption that there was an intent to create legal relations was reinforced by "(a) KB clearly acted in reliance...on this paragraph in agreeing to advance £10 million. (b) It was of paramount importance to KB that MMC should ensure that Metals were at all times in a position to meet the liabilities made under the facility arrangements" (NLJ 29th January 1988 p 22)

Now we can look at the ratio of the Court of Appeal hearing in NLJ February 17th 1989 p 221) "A letter of comfort stating that it is the policy of the defendants to ensure that its subsidiary ‘is at all times in a position to meet its liabilities’ in respect of a loan made by the plaintiffs to a subsidiary will not have contractual effect if it is shown to be merely a statement of present fact regarding the defendant’s intentions and is not a contractual promise as to the defendants future conduct" (NLJ February 17th 1989 p 221)

Ralph Gibson LJ said " In my judgment the defendants made a statement as to their policy and did not...expressly pronounce that such policy would be continued in future" (NLJ February 17th 1989 p 221)

Ralph Gibson ended his speech with "The consequences of the decision of the defendants to repudiate their moral responsibility are not matter for the court". (NLJ February 17th 1989 p 222)

1 What are the essentials of a legally binding contract?

2 "What appears to be a contract is often an intention to trade" Explain

3 How can you use the case of Byrne v Van Tienhoven to illustrate the concepts of revocation and postal acceptance?

4 What are the exceptions to the law of postal acceptance?

5) Explain the importance of the following cases

a) Bettini v Gye 1876 and b) Poussard v Spiers 1876

6) Using examples, what is meant by the term counter offer?

7) What cases would you use to illustrate the following :

exclusion clauses

postal acceptance

certainty of contract

Intent to create legal relations

consideration

8) Explain why the Unfair Contract Terms Act 1977 was introduced.

9) Payment of a lessor sum does not discharge a debt. Discuss

10) "Minors can only contract for necessities" Discuss

11) In what aspect of misrepresentation would you use the case of Smith v Land and General Insurance?

12) What are the importance of Bisset v Wilkinson and With v O'Flanagan in misrepresentation ?

13) What is the difference between common and unilateral mistake ?

14) When can goods passed to a third party be recovered in cases of unilateral mistake?

15) "Consideration need not be adequate but must be sufficient". Explain

14) "The law relating to duress has changed over the years." In what ways has the law relating to duress changed ?

15) Explain the rule of strict performance in contract.

16) What are the exceptions to the rules of strict performance?

17) What rule does Hadley v Baxendale attempt to explain?

18) What cases would you use to illustrate :

recission

unilateral mistake

fact and opinion in misrepresentation

equitable remedies

frustration

injunction

19) A's car broke down on the way to work and his garage informed him that he would be able to have a lift with a worker who is a neighbour for the two weeks it took to repair the car. At the end of the two weeks the neighbour gave A bill for £100. Advise A

20) Explain whether Paul is under an obligation to fulfil his promise in each of these instances :

a) he promises to sell his very expensive car for £10

c) he returns home and discovers that Bernard has cleaned his windows and is now asking for £1

21) On Monday Smith offers to sell Jones a bicycle for £60 stating the offer was open for seven days. On Thursday Jones writes stating he would buy the bicycle for £50. Smith refuses , and Jones then tells Smith he will pay £60

Smith sells the cycle to M on the Friday and the next day Jones delivers his formal acceptance. Explain the legal background to this case?

22) "By virtue of recent developments in the law relating to exclusion clauses , it has become increasingly difficult for a person to exclude or limit his liability in the event of a breach of contract"

Discuss in relation to the statute and case law on exclusion clauses.

23) Give three examples of each of the following:

contracts that must be in writing

contracts that must be evidenced in writing

contracts that must be under seal

24) Explain, with examples the distinction between void, voidable and unenforceable contracts.

25) "In English law, the parties to a contract are, as a general rule, free to make whatever bargain they can, and such bargain is enforceable notwithstanding that it is a bad bargain for them. However, there are limits and the law will act to relieve a party from a contract arising from certain pressures put upon them"

What sort of pressures does the law regard as illegitimate?

26) How are damages assessed in contract law?

27) Roger is the manager of a cafe used by Supercooking Ltd. There have been complaints about the quality of service and cleanliness of the cafe. The Managing Director of Supercooking has decided to make an inspection and Roger has offered staff £15 per head if they will turn up on time and clean the cafe properly before the Managing Director turns up.

Is Roger bound by this promise?

28) The Vicar of Much Happiness arranged a day trip for his 15 choirboys. He hired a coach from Magical Mystery Travel Tours. Unfortunately the bus driver was new to the area and lost his way several times. The consequence was the party failed to reach its destination.

At a garage where the bus driver was asking for directions, the Vicar saw a notice

Much Binding Chip Shop. Grand Opening Offer. Special Offer

Fish and Chips at 1970 prices. Tonite Only.

The Vicar decides to treat the boys to the fish and chips. When they get to Much Binding they found the fish and chip shop with the sign:

Sorry folks about the fish and chips. Gone to the disco instead.

Discuss the contractual obligations of Magical Mystery Travels, and the Much Binding Chip Shop.

29) George owns a house overlooking the Epsom racecourse. He agrees to hire out the house to Richard on Derby day for £2500. Richard pays a deposit of £500. George has windows enlarged and refurbishes several rooms. The Derby is cancelled and Richard no longer wants to hire the house. George refuses to return the deposit.

Advise both George and Richard.

30) Alpine Excursions Ltd is a holiday company which runs chalet and touring holidays in Switzerland and Austria. Hansel and Gretel recently booked holidays with the company.

Hansel booked a two week chalet holiday in Switzerland, The brochure described the chalet's in question as 'nestling in remote Alpine splendour high in the Swiss mountains'. Two days before he was due to leave England, Hansel was informed that due to an "unfortunate booking" he would be staying at a chalet just on the outskirts of Zurich.

Gretel obtained a late booking from the company. Unlike Hansel who had signed a formal Alpine Excursions contract, Gretel merely signed a small form which the company booking clerk described as a "receipt". The form however stated that it was an agreement to be bound by the standard terms of Alpine Excursions.

During the holiday some of Gretel's belongings were stolen due to the negligence of employee's of Alpine Excursions. One of the terms of the standard contract states :

Advise Hansel and Gretel.

31) The Lushus Bakery in Keswick contracted to deliver to the Grand Hotel (situated 10 miles from Keswick) 2,000 fresh strawberry flans on 29th January at an all in price of £1,000. On 28th January the flans were made but during the night the area experienced the worst blizzard in living memory. All roads were blocked to and from the hotel. On the 29th January although the weather improves the bakery does not deliver the flans. Discuss

32) a) Explain, using illustrations, the doctrine of privity of contract whereby the rights and obligations arising under a contract benefit and directly affect only the parties to the contract themselves

b) Arthur promises Bert that he (Arthur) will pay £1,000 to a third party, Charles, if Bert cleans his (Arthur's) factory windows until the end of the year. Bert cleans the windows until the end of the year whereupon Arthur refuses to pay Charles the promised sum.

Advise Bert and Charles

33) Explain, briefly, the legal position where a person claims that an apparent contract which he is said to have entered into arose as a result of a mistake as to the identity of the other party.

Now that we have an appreciation of contract law we can move on to look at the Sale of Goods Act.

The Sale of Goods Act applies to all contracts where the seller transfers or agrees to transfer property in goods to the buyer for a money consideration called price.

Definitions

It is important to understand the meaning of some of the words we will come across in studying sale of goods. :

Property means the ownership of goods

Goods include anything that can be touched, or moved, is visible and of which physical possession can be taken

Specific goods are those identified and agreed upon at the time of a contract for sale

Unascertained goods are those which are not specific. It is only when goods are identified in accordance with the contract that the property can pass from one to another.

It must be appreciated that goods cannot be transferred until they are ascertained (specific)

Implied Conditions and Warranties

Implied terms are of two kinds :

1) condition

2) warranty

see : Bettini v Gye 1876, Poussard v Spiers 1876 and Bernstein v Pamson Motors (Golders Green) Ltd 1986

Seller to have title [S12] Rowland v Divall where plaintiff bought a car from the defendant who was not the owner. Held Rightful owner could recover car

Goods to correspond to contract description [S13] Moore v Landaeur 1921, Beale v Taylor 1967

Goods to be of merchantable quality [S14(2)] Note the term in the 1994 legislation is satisfactory quality. Grant v Australian Knitting Mills 1936, Wilson v Rickett Cockerall & Co. 1954

Goods to be suitable for the purpose disclosed [S14(3)] Grant v Australian Knitting Mills 1936, Wilson v Rickett Cockerall & Co. 1954, Priest v Last 1903

In a sale by sample the bulk to correspond with the sample [S15}.

This area of law is rich in cases of the type the student can remember due to the circumstances (story) of the particular cases. Students need to develop their own bank of cases and stories with which to illustrate this popular examination subject area.

Note that the Unfair Contract Terms Act 1977 states that sections 13-15 of the Sale of Goods Act 1979 cannot be excluded in a consumer sale.

The more alert will wonder how Parliament could legislate in 1997 for an Act that came into force in 1979. How did this happen?

Note that whilst the Sale of Goods Act 1979 does not apply directly to Guernsey it has been used in the island as a persuasive precedent.

Transfer of Property and Possession

This section will demonstrate the value of understanding the definitions at the beginning of these notes. Property and possession must be distinguished since the property in the goods (ownership) may be passed to the buyer, even though the possession is still with the seller. The sorting of such problems is a frequent examination topic.

Why timing of passing of property is so important

1) Unless otherwise stated risk passes with property

2) If property has passed the seller can sue the buyer for the price

3) If the seller resells the goods after the property has passed, the second buyer usually acquires no title, unless there is some exception under the Nemo Dat rule.

Rules concerning passing of property

These are important and need to be learnt and understood.

Rule 1 Applies to specific goods that can be taken away. In this case ownership transfers immediately e.g. we see a new car that has had a pre delivery check.

Rule 2 Applies where specific goods need something doing to them before they can be taken away e.g. our new car needs a pre delivery check. In this case property passes when the pre delivery check has been completed.

Rule 3 This states that where goods have to be measured and weighed, property passes only when the weighing or measuring has been completed.

Rule 4 Applies to goods delivered on approval or by sale or return. In this instance property does not pass until the buyer has indicated to the seller acceptance.

Rule 5 applied to Unascertained goods (non specific goods) and states that property will only pass when goods have been ascertained.

Exceptions to Nemo Dat Rule

Another very popular examination topic. The basic rule is that a person cannot pass to another property he does not own. The essence of the Nemo Dat rule for examination students lies in the ability to identify exceptions to that rule.

The main exceptions are :

* sale in market overt

* sale by mercantile agent

(see Cundy v Lindsay, Phillips v Brookes, and Lewis v Avery)

* resale by buyer or seller in possession

* sale of a vehicle acquired under hire purchase

* estoppel

* sale by bailees and by order of the court

* sale under voidable title (see Cundy v Lindsay Phillips v Brookes, and Lewis v Avery)

It is the duty of the seller to deliver the goods and the duty of the buyer to accept and to pay for the goods. Unless otherwise agreed the place of delivery is the sellers place of business.

Note the Sale of Goods Act 1979 allows the buyer a reasonable period after delivery, in order to inspect the goods.

a) reject the goods or

b) accept the short delivery and pay a proportion of the price

a) reject the whole assignment

b) accept and pay for the whole assignment

c) accept and pay for the contracted amount and reject the rest.

Buyer Accepts Goods When :

he informs the seller of his acceptance,

if he resells the goods to a third party,

if, after the lapse of a reasonable time he retains the goods without informing the seller he is rejecting them.

The unpaid seller has rights against the goods and the seller. This is another favourite examination topic.

1 Lien : that is the right to retain possession of the goods until the contract price has been paid

2 Stoppage in Transit : when the goods are in the hands of an independent carrier. Transit means the time from which the goods are handed to the carrier to the time when the buyer takes delivery.

3 Resale of Goods : The seller may only resell goods if :

they are of a perishable nature, and

he gives notice to the buyer of his intention to resell, and

the buyer does not, within a reasonable time, pay or offer to pay the price

he has reserved a right of resale under the contract

4 Repossession of Goods e.g., Romalpa Clause Note that a Romalpa clause is only effective against specific goods.

1 Action for contract price

2 Action for non acceptance e.g. damages

Remedies of the buyer

The buyer may :

1 Sue for non delivery e.g. damages

2 Sue to recover any money paid to the seller

3 Repudiate the contract for breach of condition by the seller

4 Take action for breach of warranty

The definition of an agent is a person used to make a contract between his principal and a third party.

The agent has the power to make a binding contract between the principal and the third party without incurring any personal liability.

Special

General

Universal

1) Express agreement oral or in writing

2) Implication (Implied) where a contract of agency can be implied from the conduct of the parties. See : Spiro v Lintern 1973

3) Estoppel See Spiro v Lintern 1973

4) Necessity This type of agency arises where :

a) emergency requires the agent to act as he did

b) it was impossible for the agent to obtain instructions from the principal and

c) the agent acted in good faith and in the interest of all parties. See Great

Northern Railway v Swaffield 1874

5) Ratification. This arises when the agent exceeds his authority as an agent, and the principal adopts (ratifies), at a later date the contract made by the agent.

Duties of Agent to Principal

performance

skill and care

personal performance

accountability

no conflict of interest

all benefits to be handed to principal

Agent Personally Liable if :

he executes a deed in his own name

he signs a negotiable instrument without indicating he is an agent

agents are personally liable, by custom

when the principal is fictitious or non existent

completion of task

notice

death of agent or principal

insanity of either party

bankruptcy of either party

frustration

1) The seller is asked to deliver goods to the premises of the buyer. The carrier employed by the seller obtains at the premises a receipt from the person who appears to have authority to accept goods. That person is in fact a thief. Neither he nor the goods have been seen since.

What is the legal position of the seller and the buyer

2) The owner of a car delivered it to a mercantile agent who agreed not to sell the car for less than the price stipulated by the owner. The agent sold the car for less than the stipulated price.

Advise the seller of the car of his rights especially any rights of recovery of the vehicle he might have.

3) The managing director of a trawler company was a shareholder of the company that supplied ice for the ship's hold. As a result of placing continuing orders the managing director received a bonus from the ice company. When the trawler company discovered this they dismissed the managing director.

Discuss the various aspects of law in this case.

4) An estate agent was employed to sell a block of flats and received an agreement to buy "subject to contract". Later another person made a better offer to the agent who refused to pass the offer to the principal on the grounds that the house had been sold.

Comment on the liability of an agent in such a case.

5) K a wine merchant agreed to sell wine to B who was acting for a hotel that was in the process of being set up. When the company was formed the hotel refused to honour the agreement made by B with the wine merchant.

Discuss

6) Peter engages Robert as his agent to sell 2,000 boxes of apples. Robert entrusts the fruit to John for storage in his warehouse until he can find a buyer for the fruit. Several days later John notices that the apples are beginning to go rotten. John then takes immediate action to sell what he can of the remaining fruit.

Discuss in relation to the various legal relations

7) L a printer asks M a paper merchant to supply him with paper. M agrees and selects a quantity of paper. L asks M to select and put aside for him a similar quantity of paper. M telephones L to say the second order of paper had been sorted and put aside and was ready to be collected. Before either order of paper was delivered fire totally destroyed the warehouse.

Advise L

8) A went into B's shop to buy a second hand typewriter. He explained to B that he wanted a machine suitable for beginners. B recommended a machine and told A that it required some minor adjustment. A purchased the machine for £35. Later A discovered that the machine was too complex and that the cost of properly repairing the adjustment fault was £50. In addition certain of the letters did not print properly.

Advise A on his rights in relation to the Sale of Goods Act 1979

9) Brown inspects a load of 3 tons of potatoes at Allen's warehouse and agrees to buy them for £100. Allen is to wash and pack the potatoes into 1 cwt. bags for collection. Allen's workmen complete the washing and bagging on the same day. During the night the warehouse and its contents are destroyed by fire.

Can Allen make Brown pay for the potatoes.

10) Brown agrees in writing to supply White with 100 tons of rag flock. Deliveries were to be made in weekly loads of 2 tons, each load to be separately paid for. White is happy until the 16th. load which is not up to standard. White sees this as an opportunity to regard the contract as being broken. As a result White refuses to accept any further deliveries.

Advise both White and Brown

11) A was authorised to charter P's ship. A contracted to charter the vessel to T without disclosing that he was chartering as an agent. In the agreement with T, a described himself as the "owner of the Good Ship Ann". The owner of the vessel refused to allow the charter to go ahead. The charterer sued the owner for breach of contract.

Advise P

12) Jim is the manager of a small company. Whilst he is away on business his secretary and personal assistant, Olga is left in charge with the instruction to "keep things ticking over" One day a salesman persuades Olga to purchase an expensive photocopying machine.

When Jim returns he is horrified and cancels the order. However the photocopying firm has now issued a writ against Jim's company.

Advise Jim

13) Palmer, a wine merchant , contracts to sell to Romano, a restaurant owner five dozen bottles of Chateau Cissac 1970 from a stock of twelve dozen bottles held by Palmer. Romano pays cash and arranges for Palmer to deliver the wine at the end of the week. Later that day Palmer instructs Talbot, his cellar man to put sufficient bottles aside for Romano.

Talbot packs two dozen bottles in cases and decides to finish the job the next day as the wine is not being delivered until the week end. Next morning Later that night Palmer declares himself bankrupt.

Advise Romano of his rights against the liquidator .

14) G goes to see a delivery van which has been advertised by H as a "1988 model in good condition. Suitable for large loads" G specifically asks about the carrying capacity of the van as he has heavy equipment to deliver. H assures G that the van is suitable.

G inspects the van but fails to appreciate that it is a 1987 model. G buys the van and is surprised when some weeks later F turns up claiming the van is his and that H had no right to sell the van.

Some weeks later whilst still contesting ownership, G is delivering some heavy equipment when the van breaks down and G is told that it requires a new suspension and gearbox.

What advice would you give G

15) Brian obtains a second-hand car after the salesman had described it as being in perfect condition. The car is obtained under a hire purchase agreement.

Brian soon discovers that the car has a number of serious defects and asks the supplier to rectify them. The supplier refuses. Brian then refuses to pay any further hire purchase instalments . The finance company then claims possession of the car. Exasperated, Brian sells the car to Tom, his best friend who is a scrap merchant.

Advise Brian of his legal situation

16) Robert is restoring his house and he orders a number of items from Home Renovation Ltd which the company is to fit and supply. These items include a chimney cowl, which Home Renovations Ltd would have to make at their factory and a set of antique irons chosen by Robert from Home Renovations Ltd existing stock.

The day before the items are due to be delivered and fitted at Robert's home, Home Renovations LTD's shop was damaged by a gas explosion and all the above items were destroyed. At the time of the explosion the making of the chimney cowl had not been completed.

Advise Robert of his position under the Sale of Goods Act 1979

17) D wishes to purchase a new computing system for the office. D wants to run a particular spreadsheet and E, the computer salesman, assures him that the proposed system is capable of running the spreadsheet, believing this to be the case. Ten days later D signs a contract for the purchase of the system which makes no mention of the spreadsheet. During this that period E had discovered that the system was not capable of running the spreadsheet, but he had forgotten that he had discussed it with D and he did not mention it further.

D paid £500 for the system. When he tried to operate the spreadsheet software all his data held on disk was corrupted. Over £3,000 worth of information was lost.

Advise D of his common and statute law position.

18) In addition to the personal remedies open to him (damages) the unpaid seller has important "real" remedies whereby he may assert a proprietary or possessory right over the goods themselves.

Discuss the nature and extent of these remedies.

19) In what circumstances can a principal ratify and adopt a contract which an agent has entered into on his behalf but without his authority

20) "In general the rule nemo dat quod non habet (no one can give a better title than he himself possesses) However, this is subject to many exceptions"

Explain and discuss

21) Section 14 of the Sale of Goods Act 1979 / 1994 provides that where goods are sold in the course of a business there is an implied condition that they shall be of 'merchantable quality" and reasonably fit for their purpose.

a) Explain with illustrations, the meaning of the expression merchantable quality;

b) What is the significance of the fact that the implied stipulation as to merchantable quality is designated a condition?

c) Where goods are unmerchantable / unreasonable because they contain a defect which has caused damage and which was undiscoverable by the seller in the current state of scientific and technical knowledge will this prevent liability from arising under section 14?

In its simplest form consumer credit is a loan to a customer with which the customer can purchase whatever goods he requires.

In practice, creditors prefer to supply the goods themselves, on terms commonly known as hire purchase.

Consumer credit agreement -

this is a credit agreement by which the creditor provides the debtor with credit not exceeding £15,000. The debtor must be an individual.

Consumer hire agreement -

this is where the goods are bailed to the a person for a period of more than three months, for not more than £15,000 and which is not a hire purchase agreement

Hire purchase agreement -

this is where goods, under the sum of £15,000 are bailed to an individual, and the individual has the option to purchase the goods when the full payment has been made.

Conditional sale -

an agreement for the sale of goods, where the price is payable by installments and ownership remains with the seller until all the installments have been made.

Credit sale -

an agreement for the sale of goods, the purchase price being payable by 5 or more instalments, not being a conditional sale agreement. In this type of sale the buyer becomes the owner on taking possession.

Bailment

Where goods belonging to someone else are put into the possession of another. The person who is in effect looking after the goods has a duty of bailment e.g. to look after the goods when in his possession.

To bring under one statute all the previous law relating to consumer credit transactions.

1 regulates the making of consumer agreements

2 gives the consumer the right to cancel certain credit arrangements

3 gives the courts considerable control over consumer credit agreements

4 requires that agreements must be in writing, and in a manner that ensures that the debtor is made aware of his rights and obligations

5 the debtor must be given a copy of the agreement

where there has been oral representation made in the presence of the debtor, for or on behalf of the person with whom the debtor negotiates

when the agreement is signed by the debtor

at any place other than the business of the creditor

To cancel the debtor must give notice, in writing of exercising his right to cancel a cancellable agreement.

The debtor has 5 days, after receiving notice of the right to cancel, to exercise that option.

Notice of cancellation is effective on posting.

When a debtor exercises the right to cancel an agreement, he is no longer liable to make any payment, and may recover any payments made.

At the same time, the debtor who has exercised the right to cancel has to take reasonable care of the goods in his possession, and must allow the creditor to collect the goods from his, the debtors home.

Note that the debtor has a lien over the goods for any money to be returned to him.

Finally, the debtor must return any money lent to him.

Default and termination

If a consumer defaults the creditor must serve a default notice specifying :

* the alleged breach

* the action required to remedy the breach

* what sum, if any, is required to as compensation

* the date by which the action must be taken

The default notice must give the debtor 7 days notice of its requirements.

Where a debtor has paid one third of the total price of goods, plus any installation charge, the goods are known as protective goods and cannot be recovered other than by order of the court.

A debtor has the statutory right to terminate a hire purchase agreement at any time on paying such amount that would raise his aggregate payments to the creditor to one half of the total price plus the whole of the installation charge.

The main players in competition law are :

The Director General of Fair Trading (DGFT)

Monopolies and Mergers Commission (MMC)

Secretary of State for Trade and Industry

Competition law is mainly based on statue law. Some of the Statutes we need to have a knowledge of are :

Fair Trading Act 1973

Competition Law 1980

Monopolies and Mergers

Much of the law relating to the control of monopolies and mergers is to be found in the Fair Trading Act 1973

A monopoly situation is said to exist when either :

1 25% or more of goods and services in the UK are supplied by or to a single business or person.

(Subsidiaries of holding companies are regarded as one)

or

You must be aware of the three elements that need to be defined when a monopoly reference is made to the MMC.

The market

Geographical area

Forms of supply.

The purpose of the MMC is to consider if a merger is against the public interest. Note the range of possible outcomes from a reference to the MMC on proposed mergers.

A qualifying merger - one to examine if it leads to or strengthens a monopoly situation, or if it leads to the takeover of assets exceeding a certain amount (£5 million)

All references are to the Monopolies Commission. Reference is normally when a matter of important public interest is involved.

Note : The Secretary of State refers mergers to the Monopolies Commission whilst the Director General of Fair Trading refers monopolies to the Monopolies Commission

Note the ways in which the Monopolies Commission reports on its investigations.

Note the role of the DGFT in investigations into anti competitive practices (ACPs) and the purpose of competition law – to protect the public interest by encouraging competition.

You should understand the definition of an ACP (CA 1980 S.2) being a course of conduct which restricts, distorts prevents competition.

Some typical ACPs should be known. These include

Discriminatory and predatory pricing

Tie in sales

Refusal to supply or discriminatory supplying

Unreasonable terms.

What you need to be able to do in an examination is to give two or three examples of ACPs.

Finally, note the EC influence on anti competitive practices where such practices may affect trade between member countries. (i.e. car prices)

The Consumer Safety Act 1978 dealt with the issue of defective products.

The Secretary of State has the power under the Act to make regulations forbidding the sale of certain products that have been judged to be dangerous.

Dangerous items have included inflammable clothes for children, harmful toys etc. It is a criminal offence to breach these rules.

The provisions of the Consumer Safety Act 1978 were aimed at the manufacturer and not the supplier. The Consumer Protection Act 1987 was intended to supplement and to extend the 1987 law.

The general requirement of the law is largely unchanged, but liability for a failure to meet the required safety standard may lie with the producer, or the person whose trademark is on the product, or the importer - where the goods come from outside of the EEC, or the supplier.

The supplying of defective goods is a criminal offence. In actions in the civil courts there is strict liability, but note the working of the state of the art defence introduced at the request of the pharmaceutical lobby.

One new aspect of the Consumer Protection Act 1987 is that third parties have the right to claim against if the goods do not meet the requirements of the legislation.

The Trades Description Act applies to services as well as goods. The Act applies to goods and services offered in the course of business. The Act does not apply to a private individual unless the goods or service are offered as part of a commercial business.

A trade description is only false if it is false to a material degree. An example is the case of Wickens Motors (Gloucester) Ltd v Hall 1952, where the winding back of a motor car clock (odometer) by 50,000 miles was held to be material.

In Norman v Bennett 1974 it was held that the presence of a disclaimer (exclusion clause) was a means of avoiding the consequence of the Act as the disclaimer was notification that no statement was being made rather than a defence to a breach of Trades Description Act prosecution. The disclaimer must be prominent and brought to the attention of the purchaser before the sale of goods or service.

The disclaimer will have to be fair and reasonable in accordance to the terms laid down in the Unfair Contract Terms Act 1977

It is now obvious that for an offence to have taken place under the Trades Description Act 1968 there has to be a statement which the defendant knows to be false or was made recklessly. (In this area there are a number of travel cases) such as Wings Ltd v Ellis 1985

Recklessness need not be dishonesty (MFI Warehouses v Natress 1973) and if a statement was true when it was made subsequent events do not render it false.

A trade description offence occurs if a statement is made "in the course of ... services, accommodation or facilities"

Statements made before work is carried out are statements of intention or promise and must be distinguished from those made in relation to work that has been completed. The later come under the Trade Description Act

1 There must be a trade description

2 The offender must be acting in the course of trade or

business

3 Was statement made before work or service was carried out

4 Statement must be knowingly false or reckless

5 Is there a valid disclaimer (See Norman v Hutton 1974)

6 Check the disclaimer (Unfair Contract Terms Act 1977)

The law of intellectual property is especially important to students of ICSA. The subject appears in most examinations. It is important to be able to provide an overview of copyright, and patents and trade marks.

Typical questions include :

Q(a) Explain the general nature of the protection provided by the law of copyright.

(b) What are the main ways in which copyright may be infringed and what remedies are available to copyright owners in cases of infringement?

Q. Throughout the 1990's your company, Naturaljuice plc, has been manufacturing and marketing pure fruit juice in distinctively shaped containers which closely resemble the relevant fruits, for example oranges and grapefruit. At a recent meeting the advertising director has expressed concern that rival companies may start to package and market their drinks in a similar way. He fears that this may confuse the public and affect sales. He wishes to know whether the law provides the means of protection against his potential threat to company sales.

Advise the advertising director.

Lets look at patents in more detail. The statute law is contained in the Patents Act 1977. Inventors can register discoveries and in return are given monopoly rights over their invention. Whist the Patents Act 1977 is still law it was substantially amended by the Copyrights, Designs and Patents Acts 1988.

A past examination question was :

In J. Miller and N. E. Palmer. Business Law (Prentice Hall 1992) it is said that: "The protection of industrial designs is a matter of great significance to industry : the subject matter ranges from the shape of hidden and tiny functional parts of a machine to the pattern engraved on or affixed to expensive jewelry or tableware"

Explain how such industrial designs are protected in English law.

This is a typical question from past papers. Do not be put off by quotes such as the one above. The question is simply "Explain how such industrial designs are protected in English law". In order to answer this question we need to know the criteria for patentability. Key words are new, inventive and capable.

You need to be aware of how and where we register patents. What steps would we have to take in order to register a patent in respect of a new type of screen filter to protect computer users from danger?

What is the definition of new as stated by S2 (1) of the Patent Act?

What is the definition of inventive as stated by S3 of the Patent Act?

Note that an invention is capable of industrial application if it can be made or used in any form of industry. (Section 4 Patent Act)

What rights does the owner of a patent obtain and for how many years?

Patent registrations continues automatically. True or false?

What does section 60 of the Patent Act say about infringement of

a) a product, and

b) a process?

It is also of importance to know the distinction between licenses of right and compulsory licenses. The words in the ICSA manual that introduce the subject matter patent exploitation are of interest "The Act encourages exploitation of the patent by..."

One frequent problem is that of whether an employees invention belongs to the employee or employer. The words normal duties are important.

Finally on the matter of patents note the special status granted to pharmaceutical patents.

The law relating to trade marks is to be found in the Trade Marks Act 1938 and the Trade Marks (Amendments) Act 1988.

"It would be unfair if a newly formed business attempted to capitalise...by making out that its own products or services were those of an established business". Note also the reference to goodwill.

At this stage we can benefit from a consideration of the Sainsbury / Coca Cola conflict in 1994 over the marks on a coca cola bottle. (An examination of some old financial papers either in the library or on CD disc would help your understanding)

There are two registers of trade marks - Part A and Part B. Remember that registration under Part B is relatively easy. "It is only necessary to show that the mark is capable of distinguishing one trader's goods from another".

To register a trade mark under Part A a mark must contain one of five essential particulars. A look at this list suggests that even registration under Part A is not particularly difficult.

Note especially the requirement of S9 that a mark will only be regarded as distinctive if it is adapted to distinguish one traders goods from another"

Can you understand why Harris Tweed and International Wool Secretariat are certification trade marks and not defensive trade marks??

The Trade Mark (Amendments) Act 1988 permits the registration of service marks. These as the text states distinguish services rather than goods. You need to understand the reasoning behind Re Dee Corporation plc and others 1989. Can you see why the text states that service marks are likely to be associated with computer maintenance firms??

In both Parts A and B the owner of the trade mark has exclusive right of use of the mark.

"If the owner of a trade mark succeeds in his action against an infringement, he is entitled to an injunction and to damages or an account of profits for infringement and to an order for the destruction or modification of the offending material". This is quite a menu of remedies and needs to be learnt and understood.

A person alleged to have breached the rights of a trade mark owner can attempt to put up a defence. Read with care the five defences. I suggest you attempt to reduce each defence to one or two words for easy recall.

Note the introduction in the 1988 Act of anti-counterfeiting measures.

One final technical detail on trade marks is the fact that trade marks have become an indicator of the quality rather than the origin of goods.

A typical examination question would be :

Discuss the protection accorded to manufacturers of registered trade ` marks.

Another frequent examination topic is that of passing off. This is where the court attempts to "protect traders from unscrupulous competitors who seek to market their own products as being those of a different, and better known, business".

The analysis of the case of Ervin Warnick BV v J Townend & Sons (Hull) Ltd 1979 is educational. It states that a valid cause of action for passing off will arise if there is :

a) a misrepresentation

b) made by a trader in the course of a trade

c) to prospective customers of his or the ultimate consumers of goods and services supplied by him

d) which it is reasonably foreseeable will injure the goodwill and business of another trader

e) which causes actual damage to that goodwill and business.

Therefore the person bringing the action, the plaintiff, must show that there is goodwill attached to names or mark, that the defendant is misrepresenting the goods as being those of the plaintiff and damage has resulted. Lets look at these in more detail - Chelsea Man Menwear Ltd v Chelsea Girl Ltd 1987 is a good illustrator of an instance when goodwill was vested in a distinctive trading style. The plaintiff was granted an injunction. The case of Nationwide Building Society v Nationwide Estate Agents Ltd 1987 laid down the requirement that the goodwill in the name must have continued for some time. The last requirement concerning goodwill is that it must not claim too wide a territory - see Anheuser-Buse Inc v Budejovicky Budvar NP 1984.

When it comes to misrepresentation there is a legal requirement that :

a) the impression given was false and that

b) consumers generally would be confused by the defendant's trading style.

Case law shows that a similar name is not always certain to lead to an injunction. In Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd 1946 it was stated that where a trader adopts words in common use, some risk of confusion is inevitable. It would be wrong to allow someone to monopolise words such as 'office cleaners'. As the text states a similar confusion will occur when many people have a similar name. In Wright Layman & Umney Ltd v Wright 1949 the rule was stated as "If a man uses his own name, and uses it honestly and fairly, and is doing nothing more, he cannot be restrained, even if confusion results". However as in Wright Layman "once he oversteps the line and confusion results or is calculated to result, the fact that he is using something approaching his own name is no justification".

Final cases to consider are Wombles Ltd v Wombles Skips Ltd 1975 which failed because there was no common field of activity and Mirage Studios v Counter-Feat Clothing Co Ltd 1991 which suggests that the doctrine of 'common field activity' is no longer important.

Note that in any passing off cases the plaintiff must show that he has suffered damage or that he will probably do so.

In the section entitled the scope of passing off note carefully the words "although a container shape cannot be registered as a trade mark, a container may be so distinctive that anyone who uses the same shape can be sued for damages. The classic case to study is Reckitt and Colman Products Ltd v Borden 1990.

"The notion of copyright is the exclusive right to use one's own work, the corollary of which is the right to stop others from exploiting it" This right includes the copyright, not only of books, but also of musical works, broadcast and cable transmissions of literary and dramatic works where copying plays no significant part.

One of the important requirements of the definition of copyright is that there must be some form of work or product. In Green v Broadcasting Corporation of New Zealand 1989 it was held that an idea is not protected by the law of copyright.

Copyright law is found in the Copyright, Designs and Patents Act 1988. Note the meanings assigned to the words original, literary, dramatic, musical and artistic by the act.

Case law is important in the understanding of copyright. The case of Hensher (G) Ltd v Restawhile Upholstery (Lancs) Ltd 1976 shows that protection will apply to something as simple as the design of a chair.

The concept of author is relatively simple. It is however worth thinking about the section authorship and ownership of copyright. Copyright may be passed to another. The technical term is assigning the copyright. A valid assignment must be in writing and signed by or on behalf of the copyright owner.

Examination questions sometimes centre around the duration of copyright. Note that the initial protection lasts for 50 years, except for typographical arrangement of a published edition that is protected for 25 years. Remember literary, dramatic types of copyright last for 50 years after the death of the author (or last surviving author) Films etc are copyright for 50 years after they were made.

The remedies available for breach of copyright may include

Damages

Account of profit

Injunction

Anton Pillar order

Delivery up order

The topic is best approached from the historical angle.

The bill of exchange has its origins in the law merchant and was devised as an easy way for merchants to settle their debts. This meant that the merchants did not have to transfer large amounts of bullion or other precious metals for the value of every transaction in which they were involved.

To best understand the concept of bill of exchange we need to consider the elements of the law of property, and in particular the means by which choses in action are transferred.

When we transfer a chose in action the person receiving the property will want any rights the seller had transferred to him. The problem with assigning a chose in action is that if there was a defect with this form of transfer then the person who received the chose in action did not acquire a good title to the property.

The law of property relating to a chose in action was too restrictive for the merchants who set about devising their own system of transferring obligations. In this way the law relating to bills of exchange and negotiable instruments was developed.

Under a negotiable instrument the holder of the bill or note is not encumbered by any rights that might be owing to a third party. If a person takes a bill in good faith then he acquires a better title than the transferor had.

Bill of Exchange

It is strongly recommended that the student pay attention to the definition of the bill of exchange and practices writing them in outline. remember, a cheque is a form of bill of exchange.

Bills of Exchange : Characteristics

1 The holder of a negotiable instrument, for the time being can sue in his own name.

2 The transferee takes any negotiable instrument free from equities and rights of third parties, provided he had no notice of the defects or rights, at the time of transfer.

3 If a transferee takes a bill in good faith and for value, he can acquire a better title than the transferor had.

4 It is not necessary for the new holder to give notice to the previous holders in order to establish a good title.

5 Title to a negotiable instrument is transferable by delivery (if a bearer ) or by endorsement and delivery ( if Order ).

Examples of negotiable instruments:

1 Bills of exchange

2 Cheques

3 Promissory notes

4 Treasury notes

5 Bearer bonds

Instruments that are not negotiable.:

1 Insurance policies

2 Deeds of a house

3 Share certificates

4 Money orders

If a negotiable instrument such as a bill of exchange is transferred and the new owner takes it in good faith and for value, the bill of exchange cannot be recovered by the true owner, if it is later discovered that the bill was stolen. If however the instrument had not been negotiable, such as a share certificate then the true owner can recover it if the shares were wrongly transferred.Definition of a Bill of Exchange

A Bill of Exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay, on demand, or at a fixed, or determinable future time, a sum certain in money to or to the order of a specified person or to the bearer.

Meaning of definition of Bill of Exchange :

1 An unconditional order : Must have no conditions attached.

2 In Writing : pen, pencil, typed etc. and can be on anything even on an animal.

3 Addressed by one person to another : to the drawee, from the drawer .

4 Signed by the person giving it : this is because a person will not be liable until he has signed the bill. This responsibility is on the drawer.

5 Requiring the person to whom it is addressed to pay:

6 To pay on demand: The payee (or holder if it has been endorsed )

7 or to pay at affixed or determinable future time:

8 A sum certain in money:

9 To or to the order of a specified person or bearer:

The majority of bills of exchange will be drawn on and payable to real people .It may sometimes happen that the drawee or payee may be non existent i.e. unknown when the drawer writes the bill. Where the drawer is aware of the existence of someone but that person was not intended to receive payment then the person is known as a fictitious payee.

See : Clutton v Attenborough 1897 and Bank of England v Vagliano Brothers 1881 for case law and a clear understanding of the distinction between non existent and fictitious payees. Such bills are payable to the bearer

1 Sight

2 future time, sometimes called a tenor or usance bill.

3 At a fixed future time.

4 At a determinable future time i.e. 3 months after sight. Bills falling due on a Saturday, Sunday or a bank holiday are payable on the next working day. Month means calendar month. Date of the drawing of a bill, and of its acceptance are excluded in the calculating of the due date of payment.

Endorsement (Indorsement)

Indorsement or Endorsement (either term is correct), must be of the entire bill, and be signed by the endorser on the bill itself.

Types of endorsement are:

1 Blank : Here no endorsee is specified and the bill becomes payable to the bearer after endorsement.

2 Special : In this instance the payee (endorser) specifies the person or to whose order the bill is payable.

3 Restrictive : In this case the endorsement will indicate that the bill is to be transferred to one party only and this in consequence prohibits any further transfer of the bill.

4 Conditional : effectively is of no consequence.

In Blank : "S John"

Special : "Pay D Rees or order, S John"

Restrictive : Pay "D Rees only. S John"

San Recours : "San recours, S John" No comeback on me!

Negotiation of a bill of exchange involves the transferring of the bill from one person to another, with or without indorsement.

draws Payable

Drawer -------- Drawee ------- Payee

Bill on to

A bill of exchange can be either on demand or at a fixed or determinable date.

Gift of cheque for £20

1 David ----------------------- Wife

Cheque for £40

2 Jacob ------------------------- Thief

Cheque payable to bearer

In both of these examples the wife and the thief are holders, but the thief is a holder with no rights i.e. he cannot sue on the cheque.

Before considering examples what is the definition of a holder for value?

Section 27 of the Bills of Exchange Act 1882 defines the holder for value as:

Cheque for £20

1 Customer --------------- Tradesman

for goods

£30 cheque Endorses

2 Husband --------- Wife -------- Housekeeper

As a gift for services

Cheque for £55 Indorsed

3 George --------------- Mike -------- Isaac

for goods Gift

It is worth considering the examples

In example 1 the tradesman is a holder for value. Can you explain why?

In example 2 the wife is a holder, but not for value. However, the housekeeper is a holder for value.

In example 3 Mike is the holder for value as he receives it in return for goods. The interesting question concerns Isaac's status. Is he a holder for value? Look again at the definition.

Isaac is a holder for value because value has at some time been given on the bill i.e. by George's transaction with Mike.

Let's look at the definition in section 29 of the Bills of Exchange Act 1882

and where value has previously been given.

The holder in due course is the holder who obtains the best title to a bill of exchange. The next best claim lies with the holder for value.

A draws a bearer cheque on B bank and gives it to c as part of a transaction. It is stolen by D. These and other subsequent events can be described as follows:

A Value Gift Value Gift

---- ----- C ** D ------ E ----- F ------ G

B Bank

Points arising:

1 When D stole cheque he became the holder

2 As E received the cheque as a gift, he is not the holder in due course as he has not given value. E is however a holder for value as value was given before the cheque was stolen.

3 As E is not a holder in due course, C at this stage has rights of restoration

4 Because F gave value he can become the holder in due course. he is at this stage the owner of the cheque.

5 G is not a holder in due course because he has not given value

No person is liable as a drawer, indorser or acceptor of a bill unless they signed the bill as such. It follows from this that if the signature on the bill is forged, then the bill becomes inoperative.

If the indorser's signature is forged then good title cannot consequently pass on the bill. This means that there can be no future holders in due course on the bill. This means that a person who takes a bill after a forged indorsement does not have the right of action against any party prior to the forged indorsement. However, the holder of a bill that has a forged indorsement does have rights against all parties after the forged indorsement.

Note that in the example above, concerning the holder in due course, if the document had been a conventional bill of exchange requiring indorsement, then the thief would have had to forge the indorsement thereby bringing into play the provisions in the paragraph above.

In our example the cheque was to bearer, whilst if it had been to a named person requiring specific indorsement then the story would have been very different as the rules relating to forgery would apply.

Acceptance of Bills of Exchange.

The drawee (payer) is asked to accept a bill of exchange. Sight bills are only presented for payment and bills drawn payable at fixed future times are not legally required to be sent for acceptance. In practice the majority of bills are sent for acceptance, in order to obtain the drawee to accept liability on the bill. The point to remember is that the drawee is not liable until he has accepted the bill.

Types of Acceptance.

Acceptance of a bill of exchange may be qualified or general.

General acceptance : The drawee makes no attempt to alter the terms of the bill. General acceptance is by the signature of the drawee, or by the signature plus the word accepted.

Qualified acceptance: May be conditional , or partial, local i.e. payable at A Bank branch only. Acceptance may also be qualified as to time i.e. at an earlier or later date than that for which the bill was drawn. Where a bill is drawn on more than one party, then the acceptance of some but not all will also be qualified acceptance.

The objective is obviously to look for an unqualified acceptance. If this is not given then the bill should be regarded as dishonoured for non acceptance.

The Bill of Exchange Act lays out three instances when presentation for acceptance must take place.

1 If it is drawn payable after sight. Presentation then fixes the date for payment

2 If it payable elsewhere than the drawee's place of residence or business

3 If it expressly stipulates that presentment for acceptance be made

There are two types of acceptance. One, and the most usual is where the bill is accepted without qualification. The second is if payment is made conditional.

Where there is a qualified acceptance the holder can treat the bill as being dishonoured.

A bill may be dishonoured for non acceptance where the drawee refuses to accept the bill, or for non payment.

The holder of any dishonoured bill has an immediate right of recourse against the drawer and any previous indorser provided he has given them notice of the dishonour.

Notes prepared by : Stephen John BSc(Econ); MSc; MEd; MBA; MPhil

Revised June 24 1999