RatioDecidendi

Case Facts Held

A nadvertisementwith element ofreward is apublic offer.

Carlill vCarbolicSmokeBall Co[1893]

An advert placed for 'smokeballs' to prevent influenza.offered to pay £100 if anyonecontracted influenza afterusing the ball. Deposited£1,000 with the AllianceBank to show their sincerityin the matter. The plaintiffbought one of the balls butcontracted influenza

she was entitled to recover as(a) The deposit of money showed anintention to be bound, therefore theadvert was an offer;(b) It was possible to make an offerto the world at large, which isaccepted by anyone who buys asmoke-ball;(c) The offer of protection wouldcover the period of use; and (d) The buying and using of thesmoke-ball amounted to acceptance.

Acceptance ofoffer has to becommunicated.

R v Clarke[1927]

The Government offered areward for informationleading to the arrest of certainmurderers and a pardon to anaccomplice who gave the

The court dismissed the case. Therecannot be assent without knowledgeof the offer; and ignorance of theoffer is the same thing whether it isdue to never hearing of it or

information. Clarke saw theproclamation. He gaveinformation which led to theconviction of the murderers.He admitted that his onlyobject in doing so was to clearhimself of a charge of murderand that he had no intentionof claiming the reward at thattime. He sued the Crown forthe reward

forgetting it after hearing."

Revocation hasto becommunicated.

Byrne VLeon Van

[1880]

An offer made on 1st October(In Cardiff). Claimant (inNew York) received it on11th & send acceptance atonce. In the main time thedefendant change his mindand sent a letter of revocationon 8th Oct. Revocation letter

The revocation was not completeuntil it had been communicated tothe offeree. This was on 15thOctober. In the main time, howeverthe offer had been accepted. As aresult the revocation was ineffective& the contract did exist. Thedefendant was therefore liable underthe contract.

reached on 15th Oct.

Revocation canbecommunicatedby a reliablesource.

Dickinsonv Dodds[1876]

Dodds offered to sell hishouse to Dickinson, the offerbeing open until 9am Friday.On Thursday, Dodds sold thehouse to Allan. Dickinsonwas told of the sale by Berry,the estate agent, and hedelivered an acceptancebefore 9am Friday.

As the Claimant knew that thedefendant was no longer in a positionto sell the property to him thedefendant had drawn his offervalidly. It was impossible, therefore,to say there was ever that existenceof the same mind between the twoparties which is essential in point oflaw to the making of an agreement.

Offer does notlaps with deathof offeree andremains valid ifconsideration isbeing made.

Erringtonv

Errington[1952]

A father bought a house onmortgage for his son anddaughter-in-law and promisedthem that if they paid off themortgage, they could have thehouse. They began to do thisbut before they had finishedpaying, the father died. His

The father's promise was a unilateralcontract - a promise of the house inreturn for their act of paying theinstallments. It could not be revokedby him once the couple entered onperformance of the act. The couplewas entitled to continue paying theinstallments and claim the house

widow claimed the house. when the mortgage has been fullypaid off.

A counterofferrevokes theoriginaloffer.

Hyde vWrench

[1840]

.6 June W offered to sell hisestate to H for £1000; Hoffered £950 27 June Wrejected H's offer 29 June Hoffered £1000. W refused tosell and H sued for breachof contract

Held that if the defendant's offerto sell for £1,000 had beenunconditionally accepted, therewould have been a bindingcontract; instead the plaintiffmade an offer of his own of £950,and thereby rejected the offerpreviously made by the defendant.It was not afterwards competentfor the plaintiff to revive theproposal of the defendant, bytendering an acceptance of it; andthat, therefore, there existed noobligation of any sort between theparties.

Products ondisplay areonly an

Fisher vBell [1960]

A shopkeeper displayed aflick knife with a price tagin the window. The

The knife had not, in law, been'offered for sale. According to thelaw of contract the display of an

invitation totreat and notan offer.

Restriction of OffensiveWeapons Act 1959 made itan offence to 'offer for sale'a 'flick knife'. Theshopkeeper was prosecutedin the magistrates' court

article with a price on it in a shopwindow is merely an invitation totreat. It is in no sense an offer forsale the acceptance of whichconstitutes a contract.

An Offermust bedistinguishedfrom a meresupply ofinformation

Harvey vFacey[1893]

The plaintiff sent a telegramto the defendant to sellproperty. Telegraph lowestcash price. The defendantreply was “lowest cash priceis £900”. The plaintifftelegraphed “we agree tobuy ….. for £900 asked byyou”.

It was held that the defendant’stelegram was not an offer butsimply an indication of minimumprice the defendant would want.

Anadvertisement is only aninvitation to

Harris vNickerson

[1873]

Auction of sale of furniturewas advertised in anewspaper London brokersaw the advertisement and

It was not an offer as it was notclear definite or unequivocal fromthe advertisement that theauctioneer wanted to sell the items

treat and notan offer.

travel to London to attendthe sale the items had beenwithdrawn from the salebefore he arrived he claimedthat his action of attendingthe auction amounted to anacceptance of an offer asresult he claimed thatcontract has been breechedand sued for damages.

of furniture to the broker theauctioneer had no intention to bebound to this broker it was a merestatement of intention.

Acceptanceis valid ifsent in timeby any moreunlessexclusivelyspecified.

Yatesbuildings vR J Pulleyn

& Sons[1975]

Offeror asked for the offerto be accepted by registeredpost the offeree accepted theby an ordinary letter whicharrived promptly

The offeror had suffered nodisadvantage in a way that theoffer had been accepted as theofferor did not put a conditionspecifying that the acceptancecould only be made by registeredpost the acceptance was valid.

Silence doesnot amount

Felthouse vBindley

F wrote to his nephewoffering to buy the nephews

It was held that there was nocontract the uncle had no right to

toacceptance.

[1863] horse for £30.15 and adding“if I hear no more abouthim, I will consider thehorse mine. The nephewnever replied.

impose upon the nephew to sellhis horse. The nephew had notgiven any written proof.

Acceptancemust becommunicated throughauthorizedperson.

Powell vLee [1908]

The plaintiff applied for ajob as headmaster & theschool managers decidedto appoint him. One ofthem, acting withoutauthority, told the plaintiffhe had been accepted.Later the managersappointed someone else.The plaintiff sued allegingthat by breach of acontract to employ him

There was no contract as therehad been no authorisedcommunication of intention tocontract on the part of thebody, that is, the managers,alleged to be a party to thecontract.

Postal Rule: Adams vLindsell

2 Sept. The defendantwrote to the plaintiff

A binding contract was madewhen the plaintiff posted the letter

A letter ofacceptanceonce postedis deemedaccepted.

(1818) offering to sell goodsasking for a reply "in thecourse of post"

5 Sept. The plaintiffreceivedthe letter and sent a letterof acceptance.

9 Sept. The defendantreceived the plaintiff'sacceptance but on 8Sept

had sold the goods to athird party.

of acceptance on 5 Sept, so thedefendant was in breach ofcontract.

The Postal Rule – Ifacceptance by post has beenrequested or where it is anappropriate and reasonablemeans of communicationbetween parties, acceptance iscomplete as soon as theacceptance is posted,

even if the letter is delayed,destroyed or lost in the post sothat it never reaches theofferor.

Consideration:Price paid by Currie v

each party tothe contractfor the otherparty’spromise.

Misa [1875]

Consideration need notbe adequate(satisfactory)but must bevaluable(beneficial).

Thomas vThomas[1842]

A promise to convey a house to awidow on her promise to pay£1.00 rent p.a. and keep the housein repair was binding

Performanceof existinglegalobligationdoes notamount to

Collins vGodefory

[1831]

A witness legally requiredto attend the court waspromised payment if hewould attend the court andgive evidence. He attendedcourt and sued for the

He had not provided considerationas he was legally obliged to attendunder the summon (Writtencommand to a person to appear incourt.)

consideration.

promise

Performanceof existingduty doestnot amounttoconsideration.

Stilk vMyrick[1809]

Two out of eleven sailorsdeserted a ship. Thecaptain promised to paythe remaining crew extramoney if they sailed theship back, but laterrefused to pay

As the sailors were alreadybound by their contract to sailback and to meet suchemergencies of the voyage,promising to sail back was notvalid consideration. Thus thecaptain did not have to pay theextra money.

Contractholds if workis done intime andboth partiestake practicalbenefit fromit.

Williams vRoffey(1990)

Roffey had a contract torefurbish a block of flats - sub-contracted the workto Williams - work begun- Williams realized thefact that heunderestimated the costof the work and was infinancial difficulties.

Held that where a party to anexisting contract later agreesto pay an extra "bonus" inorder to ensure that the otherparty performs his obligationsunder the contract, then thatagreement is binding if theparty agreeing to pay thebonus has thereby obtained

Roffey (to avoid foul of apenalty clause in his maincontract with the owner),agreed to pay Williamsan extra payment per flat.William did not receivefull payment – Workstopped Roffey arguedthat Williams was onlydoing what he wascontractually bound to doand so had not providedconsideration.

some new practical advantageor avoided a disadvantage.

Performancebeyondexisting dutyamounts toconsideration.

Hartley vPonsonby

[1857]

A high number of desertionsfrom a merchant shiprendered the vesselunseeworthy, undermannedsince extra pay was offer tothe crew if they remainloyal

The promise of extra money wasrecoverable by seaman whoremained loyal since they werenow working in a dangeroussituation (they were doing morethan required in there originalcontract)

Pastconsideration is noconsideration.

Re McArdle[1951]

A wife and her threegrown-up children livedtogether in a house. Thewife of one of the childrendid some decorating andlater the childrenpromised to pay her £488and they signed adocument to this effect.

It was held that the promisewas unenforceable as all thework had been done beforethe promise was made andwas therefore pastconsideration

Privity ofcontract:Only partiesto thecontract cansue eachother.

Tweddle vAtkinson

[1861]

The claimant’s father andfather-in-law agreed witheach other to pay theclaimant £100 and £200 inconsideration of his thenintended marriage and afterthe marriage had takenplace they confirm theiragreement in writing. £200was not paid and the

Son-in-law could not sue becausehe had not providedconsideration.

claimant sued hisfather-in-law

Performanceof anexistingcontractualobligation issufficientconsideration to supporta promisefrom a thirdparty.

Shadwell vShadwell

[1860]

C promised his nephew, A,an allowance if he wouldmarry his fiancée, B (Inthose days an agreement tomarry was legally binding).

The promise was binding, eventhough A was already obliged tomarry B. A had providedconsideration for the uncle’spromise as he was initially undera duty to fiancée not to uncle, butby entering into the agreementwith the uncle he had put himselfunder an obligation to him too.

Pinnel’scase:A lesser sumis not a goodconsideration for a

Foakes vBeer [1884]

Mrs Beer had obtainedjudgment for a debt of £2090/- against Dr Foakeswith interest, whosubsequently asked for timeto pay. She agreed that she

The interest was recoverable.Payment & satisfaction of asmaller sum was not considerationfor the promise to accept thisamount in satisfaction of a debt,interest and cost a greater sum.

higher sum. would take no further actionin the matter provided thatFoakes paid £500immediately and the rest byhalf-yearly installments of£150. After receiving £2090/- she sued for £ 360/-interest on the judgmentdebt which the defendantrefused to pay.

Dr., Foakes had not provided anyconsideration.

Payment bycheque givesno benefitover andabovepayment incash ( alesser sum isnot a goodconsideratio

D & CBuildings v

Rees[1965]

The Ps, a small buildingcompany, had completedsome work for Mr. Rees forwhich he owed the company£482. For months thecompany, which was insevere financial difficulties,pressed for payment.Eventually, Mrs. Rees, whohad become aware of the

It was held that the company wasentitled to succeed. The judge wasof the view that it was not unfairfor the creditors to go back ontheir word and claim the balanceas the debtor had acted unjustlyby exerting improper pressure.

n for ahigher sum).

company's problems,contacted the company andoffered £300 in fullsettlement. She added that ifthe company refused thisoffer they would getnothing. The companyreluctantly accepted acheque for £300 "incompletion of the account"and later sued for thebalance.

Doctrine ofpromissoryis estoppel:You cannotexploit thesituation bygoing backagainst your

CentralLondonProperty

Trust Ltd. vHigh TreesHouse Ltd

[1947]

In 1937 the Ps granted a 99year lease on a block of flatsin London to the Ds at anannual rent of £2500.Because of the outbreak ofwar in 1939, the Ds couldnot get enough tenants andin 1940 the Ps agreed in

It was held that they were entitledto recover this money as theirpromise to accept only half wasintended to apply during warconditions. Ps were estoppedfrom going back on their promiseand could not claim the full rentfor 1940-45.

own words writing to reduce the rent to£1250. After the war in1945 all the flats wereoccupied and the Ps sued torecover the arrears of rent asfixed by the 1937 agreementfor the last two quarters of1945.

* Ps – Plaintiff , Ds – Defendant

The doctriceofpromissoryestoppeldoes notcreate a newcause ofaction wherenon existedbefore.

Combe vCombe [

1951]

A husband entered into acontract promising his wifeto pay £ 100.00, free ofincome tax, after theirdivorce. The wife did notapply to the court for amaintenance order, butwhen the husband failed toimplement his promise shesued to enforce theagreement relying on hispromise and the doctrine of

The wife was not a in appositionto enforce the agreement as shelacked consideration on her part.The equitable doctrine did notcreate a new cause of actionwhere none existed before.

promissory estoppel.

Agreementsbetweenspousesabout to oralreadyseparated arelegallybinding.

Merritt vMerritt[1970]

A husband separated fromhis wife wrote and signed adocument stating that inconsideration of the wifepaying off the outstandingmortgage debt of £180 ontheir matrimonial homehe would transfer thehouse into her soleownership. The wifeimplemented her promisebut husband did not. Healleged that his promisewas a domestic relationnot giving rise to a legalrelation.

Husband promise was enforceablethe agreement having been madewhen the parties were not livingtogether courteously. A legalrelation is assumed where ahusband deserts his wife and anagreement is concluded of theownership of the matrimonialhome occupied by the wife andchildren.

A statementof quality

Bannermanv white

A buyer of hops asked bythe seller whether sulphur

The court decided that the sulphurwas a vital part of the contract.

based uponwhich acontract ismade as faras buyer isconcerned,considered aterm.

[1977] had been used in thetreatment and added that ifit had he will not buy. Theseller assured him thatsulphur had not been used.Sulphur had been used.

Around which the whole dealrevolved it was a term.

An assertionmade byperson whois a laymanfor thosegoods beingsold is notconsidered aterm.

OscarChess Ltd.v Williams

[1957]

William on selling a car tothe claimant company of cardealers asserted that it was a1948 model. Theregistration book appearedto confirm this statementbut it had been altered bysome previous owner andthe car was infect a 1939model

The statement was in innocentmisrepresentation but not a termof the contract. The seller whowas not a car dealer withexperience knowledge did notintend to be bound contractuallyby his statement concerning theage of the vehicle.

The A wharf (dock) owner made The court implied a term into the

Moorcockcase [1889]

an agreement to permit aship owner to unload hisship at the dock the shipwas damaged when at lowtied it was grounded at thebottom of the river on ahard ridge.

agreement that the river bottomwould be reasonably safe. Suchimplied terms are based on thepresumed but unexpressedintention of the parties.

Contract istermed voidon breach ofa condition.

Poussard vSpiers[1876]

A soprano, MadamePoussard agreed to sign aseries of opera for Spiers,she failed to appear on theopening night and wasrefused for her services forher subsequent nights shesued for the breach ofcontract.

The obligation to appear on theopening night was a condition andsince madame Poussard was inbreach of this condition Spierswas entitled to treat the contracthas at an end.

Breach of awarrantydoes not

Bitteni vGye [1876]

A tanner Bitteni who addedto sign in a series ofconcerts and to attend 6

The obligation to appear in therehearsal was a mere warranty andBitteni breach could not be treated

make thecontractvoid.

days of rehearsalsbeforehand failed to appearfor the first 4 days ofrehearsal Gye inconsequence refused Bitteniservices for the balance ofthe rehearsal andperformances Bitteni suedfor the breach of contract.

as an end of the contract. Gye wasaccordingly in the breach ofcontract when he refused Betteniservices for the remainder of thecontract.

A nonseriousbreach of aninnominateterm canonly result inclaim fordamages.

Hansa Nord[1976]

An exclusionclausecannot be

Olley vMarlboroug

A notice in a hotel roomexcluded liability for loss or

This was ineffective because thecontract for accommodation had

introducedinto contractafter it hasbeen made.

h court[1949]

damage to guest property. been made at the reception desk.

Only naturallossesreasonablyforeseeableby abystandercan beclaimed for.

Hadley vBaxendale

[1854]

A carrier was given amill-shaft to deliver to aplant manufacturer as amodel for making a newshaft the carrier delayed indelivery and unknown tohim the mill stood idleduring the period of delay.

He was not liable for the loss ofprofit and the rule was formulatedas follows:

The loss should be such asmay fairly and reasonably beconsidered either arisingnaturally, from the breach ofcontract, or as may reasonablybe supposed to have been incontemplation of both partiesat the time they made thecontract.

There are two types of loss forwhich damages may berecovered:General damage - normal loss.

Special damages - abnormalloss.

A companyis a separatelegal entityhaving itsown assetsandliabilities.

Salmon vSalmon &company

Ltd. [1897]

Salmon had been in the bootand leather business forsome time together withother family members hesold the old business to hisnewly formed Ltd.company. Payment was inform of cash shares anddebentures when thecompany was eventuallywinded up it was agreedthat Salmon and thecompany was the same andhe could not be the creditorof his own so his debentureswould not have any effect.

House of lord held that since therewas no fraud involved hisdebentures were valid thecompany was properly constitutedand therefore it was a separatelegal personality from Salmon.

A company Lee v Lee’s An aerial crops spraying Although he was majority share

is a separatelegal entity.

Air farmingLtd. [1960]

business in which Mr. Leewas a majority shareholderand was the sole workingdirector was killed whilepiloting the air craft.

holder and the sole workingdirector of the company he andthe company separate legalpersons and therefore he couldalso be and employee of it for thepurpose of relevant statute withrights against it when killed in anaccident in the course of hisemployment.

A shamcompany isalso liablealong withthe relatedviolator.

Jones vLipman[1962]

L agreed to sell some landto J, L than changed hismind and in order to evadespecific performance soldthe land to a company ofwhich he was a controllingmember.

The company was sham andspecific performance extended notonly to L but also to the company.

Court is notfree to thisregard theprinciple of

Adams vCape

industries

Cape, an English registeredcompany was involved inmining asbestos(a form of

It was unsuccessfully argued thatthe veil should be lifted betweenthe companies so as to enabled the

Salomon vSalomonunlesscarefullywatched.

[1990] mineral) in south Africa andmarketing it world wide tovarious subsidiaries one ofits marketing subsidiaries,CPC, a companyincorporated and carryingon business in the U.S had acourt judgment against it.

judgement to be enforced againstcape.

Fortnum &Mason Ltd.v FortnumLtd. [1995]

The claimant, a well knownstore in Piccadilly, Londonbought an action in the tortof passing off, against thedefendant. The defendantcarried on business as animporter of low price togoods from Hong Kong andChina and then exported toEurope. The defendant didnot apply its name to thegoods themselves

There was no evidence that anycostumer of the claimant storewould buy the defendants goodthinking they were the claimantstherefore the action failed.

Any contractnotauthorizedby theobjectsclause of acompany istermed ultravirus.

AshburyRailways

Carriage vRiche[1875]

The objects clause of thecompany set out purpose ofthe company as the makingand selling of railwaycarriages. The companyentered into a contract topurchase a concession forconstructing a railway.

The contract was ultra virus andbeyond the capacity of thecompany.

Failure ofsubstratummay result inwinding upof company.

Germandate coffeeCo. [1882]

There was a failure to carryout the object of makingcoffee from dates by meansof a German patent(although the company didmanufacture it with aSwedish patent).

The company would be woundup.

The articlesin all

Hickman vKent [1920]

The Co.’s articles includeda clause to the effect that all

The proceedings were stayed. TheCompany could enforce the

respects areenforceableby companyagainst itsmembers.

disputes between thecompany & its memberswere to be referred toarbitration. A memberbrought court proceedingsagainst the Co.

arbitration clause against amember.

An alterationof articles ofassociationcan be madein the bestinterest ofthecompany.

Greenhalghv AlderneCinemas

[1950]

The issue was the removalfrom the articles of themembers’ right of firstrefusal of any shares whicha member might wish totransfer; the majority wishto make the change in orderto admit an outsider tomembership in the interestof the company.

The benefit to the company aswhole held to be a benefit whichany individual hypotheticalmember of the company couldenjoy directly or through thecompany & not merely a benefitto the majority of the membersonly.

An alterationof articles ofassociation

Sidebottomb Kershawleese & Co.

The alteration was to expela member who carried on abusiness completely with

The alteration was held valid.

to expel amember inthe bestinterest ofthe companycan be madewithcompensation.

[1920] the company.

Companyhas thepower toalter itsAOA with aretrospectiveeffect.

Aleen vGold Reefs

[1900]

Z held fully paid & partlypaid-up capital in thecompany. The Co.’s articlesprovided for a lien (a rightover another’s property toprotect a debt charged onthat property.) for all debts& liabilities of any memberupon all partly paid sharesheld by the member. The

It was held that the Co. had thepower to alter its articles byextending the lien to fully paidshares. Alteration to the articles isonly subject to the alteration byS9 CA 1985. Rights in the articlesare limited as to their duration bythe articles which confer them.

Co. by special resolutionaltered its articles so that thelien was available on fullypaid-up shares as well.

Claim can bemade onbreach of aserviceagreementdue toalteration ofthe articles.

SouthFoundries

ltd. vShirlaw[1940]

A managing director wasappointed under contractwith a company for tenyears but, after the articleshad been changedempowering his removal asdirector, he was dismissed.

The court awarded them damagesfor wrongful dismissal since thealteration of the articles, althougheffective, constituted a breach oftheir contract of service; it wascontrary to the agreement that heshould serve for ten years, whichbecame impossible when he losttheir directorship.

RaisingShareCapital todilute ashareholder’s voting right

Clemens vClemensBros. ltd[1976]

P held 45% of the shares, dheld 55%. D along withother directors decided toincrease the nominal sharecapital. A general meetingwas held for the issue. D

The fact revealed that the directorwith majority shareholders wereraising share capital not with theintension to favour all but, thereason was to dilute the minorityvoting control. The directors were

is animproperpurpose &shall not bevalidated.

favoured, P showeddeterrence 7 alleged that thepurpose of this was to diluteher voting control below to25% & therefore deprive ofher power to vote specialresolution.

miss using their power.

The directorsowe nogeneral dutyto individualmembers.

Percival vWright[1902]

Some Shareholders askedCo.’s secretary for any partyinterested to buy theirshares – Shareholders thensold shares to Chairman.Later it was revealed that atthe time of negotiation,directors were engaged witha party for sale of shares ata price which wasconsidered to be high of thecurrent deal. Theshareholders wished to

The director owe a fiduciary dutyto company but not to individualshareholders, so under no dutydoes the director is liable to actfor the best interest of anindividual. Co. could have suedthe director if any would havedone.

return back.

Directorscannot attainany benefitfrom thereoffice bybreachingtheirfiduciaryduties.

Cook vDeeks [1916]

Shares of the railway Co.(T) were equally divided onits directors. The companygot a contract. Threedirectors of (T) were notwilling the Co. to have thecontract. They formedanother company (D) justbecause of getting a newcontract. These directorslater sold a plant bymajority voting to D. Othersdirectors sued.

It was held that Directors couldnot retain benefits of the Co. (T)to themselves. The director couldnot use their voting control tobring a loss to the minority.

Directorcannot makeprofit fromthereposition as

Regal(hasting)

ltd. vGulliver[1942]

Regal (hasting) ltd. owed acinema & wished to buytwo more cinemas & latersell them all as goingconcern. But regal was not

It was held that Directors usedtheir special knowledge to gainhidden profits. It was a breach ofduty. They were accountable forthe profit made.

directorsregardless oftheir motivesorconsequences to thecompany.

in financial position to buythe two cinemas. Somedirectors were not were notagree. Regal with somedirectors formed anothercompany, real applied formajority shares, managedamount, sold cinemas asgoing concerns, regal gotmore profit portion where asco. got less.

Fiduciarydutiessurvive evenafter thedirectorsleave thecompany.

IDC vCooley[1972]

Colle was a director of IDC.A company wanted to givea contract to Colle not toIDC. Colle because ofhaving interest in thecontract, resigned &accepted the contract in hisown capacity.

He was in a breach of fiduciaryduty as he preferred to earn profitfor his own sake and acted againstthe best interest of the company.Fiduciary duty exited even afterhis resign from the company.

A directorshould notbe allowedto contractwith his owncompany.

AberdeenRailway v

Blaikie[1854]

Co. Contracted for chairfrom a claimant partnership.(of which the director was amember). The director wasinterested at both sides butcouldn’t bargain for thecompany.

Company was entitled foravoiding the contract. No questionshould be raised for fairness /unfairness of the contract.

A director ismadepersonallyliable fordebts &liabilities ifhe hascommittedwrongfultrading.

ProduceMarketing

ConsortiumLtd. [ 1989]

Company tradedsuccessfully for 9 years,built up an overdraft, had acontinuing loss – Liabilitiesexceeded assets (between1980 – 87). In Feb. 87,directors recognizingexpected liquidation carriedon trading. Suffered loss,directors were sued.

The court required the directors tocontribute for £ 75000/- in Co.’sassets, because being aware of thegoing concern problem, tradingwas carried on. Wrongful attitudeobserved.

A Company Panorama Co.’s secretary of the The contract was binding, since

secretarywithin hisauthority canmakecontractswith thirdparties onbehalf of hiscompany.

Development v FidelisFurnishing

[1971]

defendant ordered aLimousine & stated that itwas to be used in business,but used personally.Secretary usually hired carsin the past.

hiring of cars was usual to theoffice of company’s secretary.

End of Cases

Glossary of Legal terms:

Estoppel: Rule of evidence which prevents a person from relying on facts when, by deed, wordor action, he has led another person to act to his detriment on those facts. Estoppel is a defense,not a cause of action. Anyone who wishes to rely on the defense of estoppel to defend an actionmust request it.

Mens rea: (Latin: guilty mind) Most crimes require proof of guilty intention before a person canbe convicted. The prosecution must prove either that the accused knew his action was illegal orthat he was reckless or grossly negligent. Some offences (such as drunken driving) are matters ofstrict liability, which means that the intention or state of mind of the person committing theoffence is irrelevant.

Obiter dicta: (Latin: sayings by the way) Observations by a judge on law or facts not specificallybefore the court or not necessary to decide an issue.Pari passu: (Latin: with equal step) Often used in bankruptcy proceedings where creditors are saidto rank pari passu, which means the assets are distributed without preference between them.

Plaintiff: Person who brings a case to court. (Also called the petitioner or applicant.) The personbeing sued is generally called the defendant or respondent.

Quantum meruit: (Latin: as much as he has deserved) Principle stating that a person should notbe obliged to pay (nor another allowed to receive) more than the value of the goods or servicesprovided.

Quorum: (Latin: of whom) Minimum number of people necessarily present at a meeting forbusiness to be validly conducted. Without a quorum, decisions are invalid.

Rescission: Abrogation or cancellation of a contract, putting the parties in the same position theywould have been in, had there been no contract. Rescission can occur because of some defect inthe formation of the contract (such as misrepresentation, duress or undue influence) or byagreement of the parties - for example where they reach a new agreement.

Sanction: To ratify, to approve or to punish.

Stare decisis: (Latin: to stand by decisions) Policy whereby, once a court has made a decision ona certain set of facts, lower courts must apply that precedent in subsequent cases which embodythe same facts.

Subpoena: (Latin: under penalty) Court order requiring a witness to attend at a certain time andplace or suffer a penalty.

Ultra vires: (Latin: beyond the powers) an action which is invalid because it exceeds theauthority of the person or organisation which performs it. A company cannot normally be boundby an act which it is not empowered to do by its memorandum of association.

Sham: A person or thing pretending or pretended to be what he or she or it is not.

Fur more stuff join: