English Contract Law

One of the prominent parts of the Common law legal system is the Contract Law. Generally speaking, the Contract law rules are similar in almost all legal system around the world, however, in the English system, the Contract law has some unique characteristics not in others jurisdictions as we will spot later.
The Contract Law has a variety of principles and rules so much as one article or even a booklet could not cover, however, and despite of the wider of this topic, the following lines shall try to simplify the major headlines in the following few papers.
We could summarize the Contract Law under main categories,
such as :

Contract Formation, and how lawfully being able to form a valid contract
The Contract Terms, and how to classify them and subsequent of those classifications
Elements that vitiating a Contract, and what lead to consider the contract valid, void, voidable
Contract termination, and the subsequent of every termination type
Lastly, the Remedies resulting from breaching the contract.

1. Contract Formation

To form a contract under the English legal system, some elements must be present, those elements summarized as follows,

a. Offer and Acceptance
b. Consideration, and
c. Intention to create legal relationship.

a. Offer and acceptance,

Means one party has to offer something, while the other party mandate to accept as it without pinny modification. Once this operation done, then the first element of the contract has been accomplished.

b. Consideration,

Means, what is paid for that contract, or what both parties shall gain from this relationship. The famous shape of consideration is the “Price” while one part offer to sale a “thing” then the other part accepts in return of “price”. But the price is not the only consider in the English contracts, so you can find a “service”, “promise” etc. which all be accepted as a consideration under the English law.

c. Intention to create legal relationship,

Definitely, not all “promises” or “money paid” or even any act done between two parts shall be considered as an official contract, the “Intention” is the milestone, once the Intention found then the contract born.

In majority of contract, the apparent intention usually addressed and mentioned in the contract preamble, however, not all contract at that level of officiality, so what is the situation when the ambiguity arise when facing a “dealing” that can’t be classified as a legal relationship or not. this point will lead us to distinguish between two context that almost all people dealt with on daily basis, both contexts are, a Business dealing context, and a Social dealing context.

Define the correct dealing and classify it correctly will result to determine the “act” is a contract or not.

The law considers all social actions as NOT a contract, so when one part offers to invite another part to a concert, then this “act” basically will not consider as a contract as it done within the Social context circle. While on the other hand when same part offers another part to attend the same concert BUT the first part is a salesman “his capacity is a commercial now” then the total dealing will be considered as a contract as the context of dealing was a commercial not a social.

2. The Contract Terms

All the contract terms as so important, as it bind every part with particular obligations, so, the contract terms are classified in two categories, “Conditions” and “Warranties”, differentiating between both will reflect on the contract subsequence, as the result from breaching a “Condition” completely differ from breaching a “Warranty”, the first one will lead to voidness of a contract, while the other will lead to remedy.

a. Conditions

It is the most important obligations in the contract, beaching which, will lead to completely demolish the entire contract.

How to recognize the contract article is a “Condition” or a “Warranty”?
To answer this query, we can rely on two tests, the first one is the Contract Construction itself, means, both parties have agreed to consider such obligation as a Condition so they list it under a “Condition” part in the contract, while the less important obligations shifted to the “Warranty” part in the contract.

Second test, is the objective test, and to weight the obligation and check the result to see has breaching the obligation may lead to collapse the contract or just inflect some detriments to the other part of the contract that may be remedy by a proper compensation.

b. Warranties

The less important obligations to the contract parties, and same above-mentioned tests shall be applied to consider whether the “Warranty” is actually mere “warranty” or “condition” or in-between.

Distinguished between the contract terms and classify them precisely will lead to correctly adjudge wither the assumed breach actually robust hitting the contract and convert it to useless or just a one-way burden obligation or not.

Lastly, there is the “ambiguous” obligations, which can’t be easy to be classified as a “Condition” or a “Warranty”. Fate of those ambiguous obligations will be left to a third party which usually the Court to decide the nature of which.

3. Vitiating the Contract

The contract may be affected by elements, nature of this elements may reach to corrupt the entire contract and convey it to be vitiated.

We could collect the vitiating element under five as follows,

a. Misrepresentation
b. Mistake
c. Duress
d. Illegality
e. Undue influence

a. Misrepresentation

Misrepresentation in the contract language means “false information” or “mislead one” which surely will induce one party to enter in a legal relationship.
The law distinguish between three types of Misrepresentations as follows,

First, Fraudulent Misrepresentation, which mean one part “deliberately” mislead another to induce him to enter into a contract.

Second, Negligent Misrepresentation, which mean one part “carelessly” inform another part with some information and resulted to influence that second part to conclude a contract.

Third, Innocent Misrepresentation, which mean the first part “innocently belief” in one information and convey this information to the second part and both parties conclude a contract.

Correct differentiate between the mentioned three categories, strongly affect the contract fate, while the burden of proof is rested on the innocent party to provide, the subsequent of the contract fate in the range of voidable the contract and may reach to voidness, noting the decision is for the innocent to accept complete the voidable contract whither to terminate it and receive the proper compensation.

b. Mistake

Mistake may be formed in one of three shapes,

First, Common Mistake, means both parties fall in the “same” mistake and conclude the contract rely on that mistake.

Second, Mutual Mistake, means, both parties are mistaken but every one has his own mistake.

Third, unilateral Mistake, means, only one part fall in a mistake in touch with a major element to the contract.

Again, the subsequent of the Mistake is decided by the innocent party, who can accept continue in the contractual relationship and granting it the validity, and also who can request to terminate the relationship and seek a proper compensation in return of any detriment occurred.

c. Duress

Duress means influence the willing of the contract party and practice an illegal pressure over the party himself safety, his property, or even over his economic needs which lead at end to force a party to burden an obligation without free will.

d. Undue influence

Like a Duress, the Undue influence is practicing an illegitimate pressure by guilty party over the innocent party.

Undue influence may take one of three forms,
First, direct and actual undue influence,

Second, presumed undue influence in private relationship,

Third, presumed undue influence in private relationship that governed by trust or confidence.

e. Illegality

As determined from the name, the illegality is concluding a contract while its subject matter is illegal, like impede the justice, conducting a crime like fraud or tax evasion

4. Contract termination

Contract could be ended by one of four methods,

a. Performance
b. Mutual agreement
c. Breaching
d. Frustration

a. Performance

By doing each party obligations toward to the other contract party, the contract reaches its end, so no more actions are required. However, the contract in real world best practice is not one-shot contract, that is means the contract may be divided to milestones like a construction contracts, or divided to batches like a supplying a goods, then the contract shall be considered as fully performed once reached to its target.

This methodology will lead to raise some questions based on the situations that many contracts counter, like what about performing major works in a construction contract, or what about the supplying contract which consider a “serial” of contracts each of which is fulfilled when every batch delivered.

To answer like those questions, we shall introduce some terminologies which well-know in the contract filed like,

“Substantial performance” under this concept we could consider the contract “fully” performed based on accomplish its major parts, the famous example is a construction contract, when the contractor been finished all construction demanded “except” the finished accessories to the building. In this case the contract will consider fully performed with a consideration to the proper deduction against the contractor from one side, and compensation to the building owner from the other side against the un-finished works.

Another terminology is “Divided performance” and its obvious example is the supplying contract of goods, when every batch supplied is considered as a separate contract.

b. Mutual agreement

Is the second type of terminating a contract. As driven from the name both parties are entering into a second agreement aimed to reach an amicable agreement to terminate already living contract.

c. Breaching

Breach means one contract party didn’t fulfill (not completely discharge) his obligations toward the other party.

Breaching has two forms, complete breach, this one happens when main pillar to the contract collapse, usually one main condition to the obligations, then the innocent party has initially the right to cease his counterpart of the contract obligation, then secondly has the right to sue the breacher to recover the damage occurred.

Second form of breach is the “Anticipatory breach” this form of breach happens when one part excuse the other part to execute the contract after concluding. In this situation the innocent party has the option to i) request enforcing the guilty part to execute his obligation, or ii) to opt to agree to discharge the guilty party.

d. Frustration

Apart from the literal meaning of Frustration, the legal meaning of this term means “the contract became impossible due to no fault by either contract party” and has several forms which will be list as follows,

“Destruction of the subject matter” for instance the building subject matter of the lease contract collapsed, in this case the lease contract will terminate automatically due to absence of a subject matter of the contract.

“Impossibility” and its example in the employment contract, when the employee die or infected with uncured illness, in this situation the employment contract yield to termination via frustration. “illegality” when the subject matter of the contract converted from being legitimate to be illegitimate, like a contract for supplying medicine which “the medicine” became banned through new published statute banned this type of medicine.

5. Remedies

Remedies to the contract law has many forms, the famous remedy that all almost circulating is the Damages, while there is another type of remedies such as “Specific performance”, “Injunction”, “Liquidated damages” and so on.

a. Damages

It is the most common type of remedies, but the law demand specific measures and applied principles to be satisfied to award a damage to the innocent party such as “Remoteness” principle, which means how both contract parties were expecting the breach event, so the court could adjudge the case based on what both parties’ expectation at the time of contract concluding which absolutely a fair treatment.

b. Specific performance

This type of remedy occurs when the subject matter of the contract is “unique” or “valuable” and the innocent party can’t recover same subject matter elsewhere, in this situation the innocent party will request the court to enforce the guilty party to fulfill his obligation to avoid the potential high loss.

c. Injunction

This type of remedy demands the innocent party to seek the court to compel the guilty party to i) do something or to ii) refrain from doing something.

d. Liquidated damages

This type of remedy usually included in the contract as a contract clause, and aim to reach an amicable remedy between both parties without recourse to the judicial path, mainly based on balanced evaluation to the expected damage and its fair restitution.