CONTRACT LAW

Trinidad & Tobago Hospitality & Tourism Institute

Hospitality Law & Insurance: BC 229
Lecturer: Ms. V. Maharaj
 Learning Objectives
 Nature of Contract
 Offer & Acceptance
 Consideration
 Intention To Create Legal Relations
 Contract Terms & Exclusion Clauses
 Nature of Contract
A Contract is an agreement either written or oral
by which two or more parties having legal
capacity agree with sufficient certainty in
accordance with terms and conditions that are
express or implied to perform certain
obligations (either for benefit or a detriment)
that are not contrary to law or public policy.
 Offer
An offer is an expression of willingness to contract on
specified terms, made with the intention that it shall
become as binding as soon as it is accepted by the
person to whom it is addressed.

There is generally no requirement that the offer be made

in any particular form; it may be made orally, in
writing or by conduct.
 Offer
An offer must be distinguished from:-
 The mere supply of information;
 An invitation to the other party to enter into
negotiations;
 An invitation to make an offer or invitations to
treat.
McGowan & Co. v Gomes [1891-93] L.R.B.G. 171

Facts
A merchant’s stock was offered for sale in an
advertisement headed “highest offer gets it” and in
which tenders were invited. The Plaintiff made a
tender; the defendants refused to sell at the price
tendered, there being only one tender.

Held
The advertisement constituted an offer to sell, and there
being no condition in the advertisement that there
should be more than one offer, the plaintiff’s tender
was an acceptance which bound the defendant.
 Carlill v C. Smokeball Co. (1893)
In this case the manufacturer’s advertisement
was construed as an offer, which was accepted
when the plaintiff bought the product. It was
an offer to the whole world which the P
accepted, resulting in a unilateral contract.
 Unilateral Contract
A contract based on an offer which was not
made to one particular person but to the world
at large.

 If I offer $500.00 to the person who finds my

lost dog, such offer is a unilateral offer. Offer
is accepted as soon as person finds the dog.
 Invitation to Treat
An invitation to treat is simply a willingness to enter
into negotiations which, it is hoped, will lead to the
conclusion of a contract at a later date.

The distinction between the two is said to be one of

intention: that is, did the maker of the statement
intend to be bound by acceptance of his terms without
further negotiation or did he only intend his statement
to be part of the continuing negotiation process.
Counter Offer
 Counter-Offers
When a person makes an offer and the person to
whom the offer is made responds by proposing
changes to the terms of the offer, the law
considers the response of that party not as an
acceptance but rather a counter-offer.

The effect of a counter offer is to ‘kill off’ the

original offer so that it cannot subsequently be
accepted by the offeree.
Hyde v Wrench [1840] 3 Beav. 334
Facts
The Defendant offered to sell some land to the Plaintiff for ₤1000
and the Plaintiff replied by offering to purchase the land for
₤950. The Defendant refused to sell for ₤950. So the Plaintiff
then wrote to the Defendant agreeing to pay the ₤1000 but the
Defendant still refused to sell.

Held
There was no contract between the Parties. The Plaintiff’s offer
was a counter-offer which killed off the Defendant’s original
offer so as to render it incapable of subsequent acceptance.
 Termination of Offer
 Lapse of Time - where offer is expressed to last for a
specified time.

 Revocation- offeror may revoke his offer at any time

before acceptance.
 Rejection- offer can be rejected outright or by a
counter-offer.

 Death- death of both the offeree and the offeror

terminates the offer, especially if offer involves a
personal service such as teaching.
 Acceptance
Acceptance may be by express words or by action (and may
even be implied from conduct) but it must be quite
clear, the language used must be such as would
convey to a reasonable person in the position of the
offeror a clear and definite decision by the offeree to
be bound by the terms of the offer leaving nothing
further to be negotiated.

An acceptance must be communicated to the offeror.

The acceptance is generally only validly
communicated when is actually brought to the
attention of the offeror.
 Acceptance
THE POSTAL RULE

 Acceptance is from the date of letter not when offeror opens. Thus,
when a contract is made by post, it is clear law that the acceptance is
complete as soon as the letter is put into the box and that is the place
where the contract is made.

 So if it reasonable to reply to an offer by post, there will be a

binding contract as soon as the letter is properly stamped, addressed
and posted. Even if it never arrives.

 The postal rule does not apply in respect of ‘instantaneous’

communications such as telephone or telex. Actual communication
of an acceptance must be made.
 Acceptance
Telex, Facsimile & Email

Telex, Telegram, facsimile and email are considered

as forms of instantaneous communications and
they are treated in accordance with the general rule
of acceptance which is that a contract is formed at
the place where acceptance is communicated to the
offeror.
 Certainty
In order to create a binding contract , the parties must express their agreement
in a form which is sufficiently certain for the courts to enforce.

May and Butcher v R [1934] 2 KB 17

The Parties entered into a written agreement under which the British Gov’t
was to sell tentage to the Plaintiff and the agreement provided that “the
price shall be agreed upon from time to time”

It was held that the Parties not having reached an agreement on these matters ,
no contract had been concluded. The reasoning behind this judgment was
that an agreement between two Parties to enter into an agreement in which
some critical part of the contract matter is left undetermined is no contract
at all.

To be a good contract there must be a concluded bargain, and a concluded

bargain is one which settles everything that is necessary to be settled and
leaves nothing to be settled by agreement between the Parties.
Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)

Facts

The Appellant agreed that the Respondent would have the right
to live in her house ad occupy the garage free of cost “so long
as he and his wife live together in peace”. The question was
whether this stipulation rendered the agreement void for
uncertainty.
Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)
Held

In order to constitute a valid contract the parties must so

express themselves that their meaning can be determined
with a reasonable degree of certainty. The words “so long
as he and his wife live together in peace” are uncertain
and the proviso is void.

There are two grounds on which a court ought to hold that

there was never a contract. The first is that the language
used was so obscure and so incapable of any definite or
precise meaning that the court is unable to attribute to the
Parties any particular contractual intention.
 Consideration
There are three fundamental aspects of consideration:-

iii. Consideration must be sufficient but it need not be

adequate;
iv. Past consideration is not good consideration; and
v. Consideration must move from the promisee.
 Consideration
Sufficiency of consideration

If the promisor gets what he asks for in return for his promise, he has
received sufficient consideration and is bound. It is immaterial that
his promise if far more valuable than the price he asked for it. The
courts are generally concerned only with the question whether the
promisor made a bargain, not whether he has made a good bargain.

Mountford v Scott [1975] 1 All E.R. 198 (C.A.)

In consideration for the payment of £1, granted in writing an option to
O to purchase V’s house for £10,000, exercisable within six months.
Before the option was exercised, V purported to withdraw his offer.
P exercised the option and it was held that he was entitled to specific
performance of the contract to sell the house. The offer was
irrevocable even though the consideration for it might be described
as token payment; and it as the contract for sale which was
specifically enforced
 Consideration
Intangible Returns

Natural affection of itself is not sufficient consideration.

White v Bluett [1983] 23 LJ Ex. 36

A son’s promise not to bore his father with complaints about the
father’s distribution of his property among his children was held not
to be good consideration for the father’s promise not to sue his son
on a debt owed by the son to the father.

Held
The son had no right to complain to his father, because it was for the
father to decide how he wanted to distribute his property, and so in
giving up his habit of complaining, he had not provided any
consideration.
 Consideration
Duty Under Law

If a party is under an agreement to perform a duty by virtue of a legal

obligation then the performance of such a duty is not good
consideration to create an enforceable legal obligation.

Collins v Godefroy [1831] K.B.

Godefroy brought an action against one Dalton, and caused Collins to
be subpoenaed to attend. Collins who attended for six days, but was
no called, demanded for Godefroy six guineas as his fee for
attendance.

Held
If it be a duty imposed by law upon a Party regularly subpoenaed to
attend from time to time to give his evidence then a promise to give
him remuneration for loss of time incurred in such attendance is a
promise without consideration.
 Consideration
Glasbrook v Glamorgan County Council [1925] A.C. 270

The appellants were the owners of a valuable group of mines about two
miles from Swansea that was the subject of industrial action.
Picketing which was not of a peaceful nature took place and as a
result the safety men said that they would no longer work because of
insufficient police protection. The appellants requested that a police
garrison be established at the mines but this request was refused.
The police indicated that they already has a small presence at the
colliery and was prepared to rapidly dispatch a large force at the
sight of trouble but the Appellants insisted on a garrison.

The police agreed provided that a requisition be signed with a promise

to pay as such garrison would be a special duty. An agreement was
signed and then the appellants refused to pay claiming that the
contract lacked consideration. It was agued that, when a subject has
need of police protection and has done nothing to increase the risk,
he is entitled to protection without payment and an agreement to
pay is without consideration and contrary to public policy.
 Consideration
Held

It does not appear to follow that it was the duty of the police authority
to provide the garrison. They were no doubt bound to protect the
safety man from violence, but it was not for the safety men to decide
the form in which that protection should be given.

The appellants who deliberately entered into an agreement to pay for

the services and maintenance of the police garrison and did not
dispute their liability until they had had the benefit of those services
for a period of nearly two months, cannot now repudiate their
agreement.
 Intention to Create Legal Relations

An agreement is not binding as a contract if it was made without any intention

to create legal relations.

Balfour v Balfour [1919] 2 K.B. 571

Facts

The Defendant, who was a civil servant stationed in Ceylon came to England
with the Plaintiff, his wife. They remained in England until the husband's
leave was up and he had to return. The Plaintiff, on the doctor’s advice,
remained in England, and the husband before sailing, promised to give her
£30 a month until she returned,

Later the husband wrote saying that it would be better is they remained apart
and the wife obtained a divorce. The Plaintiff sued on the promise to pay
her £30 a month.
 Intention To Create Legal Relations
Held

It is necessary to remember that the are agreements between

Parties which do not result in contracts and one of the most
usual forms of agreement which do not constitute a contract
appears to me to be the arrangements which are made between
husband and wife.

Although such arrangements made between husband and wife are

arrangements in which there are mutual promises, or in which
there is consideration in form, they are not contracts because
the parties did not intend that they should be attended by legal
consequences.

The consideration that really obtains for them is natural love and
affection, which counts for so little in these cold courts.
 Intention To Create Legal Relations

The rule laid down in Balfour has been interpreted as a

presumption that Parties into a domestic and/or social
agreement do not intend to create legal relations. The opposite
presumption lies for commercial agreements where the
presumption is that parties did intend to create legal relations.

The policy which underpins these presumptions is one of keeping

contract in its place; to keep it in the commercial sphere and
out of domestic cases, except where the judges think it has a
useful role to play.
 Intention to Create Legal Relations
Westmoorings Ltd v National Insurance Property Dev. Ltd. [1993]
Facts
The applicant had an agreement with the owner of Edingborough Estate
to purchase 420 acres of the said estate. The applicant has
discussions with the respondent to convert the 420 acres to a
housing estate. Following discussion, the applicant by letter made
certain proposals to the respondent. The said letter referred to the
number of housing units to be constructed over a five year period.
The respondent after further discussions issued a letter of intent to
the applicant. This was issued pending te execution of a formal
agreement.

Immediately upon receipt of the letter of intent, the applicant embarked

on the construction of the housing estate. No formal agreement was
executed although the drafts were produced and commented upon.
An issue arose with respect to some outstanding terms that emerged
from the construction of the housing estate.
 Intention to Create Legal Relations
Held

On a careful perusal of those documents that the Parties had arrived at a

consensus on the essential aspects of the bargain. The Parties had
not however fixed a date for the completion of the contract but a
court in such circumstances will always read into an agreement and
imply a term that the completion will take place within a reasonable
time.

There was a binding agreement between Westmoorings and NIPDEC

and the formal contract contemplated by the Parties was one which
was intended to put into more correct form a completed agreement.
 Contract Terms
A contract consists of a number of terms. However not everything that
is said or written during the course of negotiations constitutes a term of
the contract. Whether or not a statement becomes a term of the contract
depends substantially on the intention of the Parties.

EXPRESS TERMS

These are terms that are contained in a contract and are openly
articulated by the Parties to the Contract.
 Contract Terms
Incorporation by Express Reference

Terms may be incorporated into an agreement by express reference to a

third party document. Three hurdles must be overcome before such
terms can be incorporated:-

vii. Notice of the terms must be given at or before the time of

concluding the contract;

ix. The terms must be contained or referred to in a document which

was intended to have contractual effect; and

xi. Reasonable steps must be taken to bring the terms t the attention
of the other Party.
 Contract Terms
Implied Terms

Terms may be implied in a contract:-

iv. Based on custom or usage;
v. As the legal incidents of a particular class of kind on contract;
vi. Based on the presumed intentions of the parties where the implied
term must be necessary to give “business efficacy” to a contract;
vii. As meeting the “officious bystander” test as a term which the
Parties would say, if questioned, that they had obviously
assumed.
 Contract Terms
Terms Implied by Law

Terms can be implied by law on the basis of Statute.

 Sale of Goods Act, Chap. 82:30, Laws of Trinidad and Tobago

 Unfair Contract Terms Act No. 28 of 1995, Laws of Trinidad and

Tobago
 Exemption Clauses
An Exemption Clause is a clause in a contact or a term in a notice
which appears to exclude or restrict liability or a legal duty which
would otherwise arise.

A Party relying on a Exemption Clause that limits or excludes liability

must from the start demonstrate that the clause is incorporated into
the contract (by signature, notice or course of dealing) governing his
performance of the contract and that it provides protection against
the consequences of breach if contract for which he is accused.

The law of exemption clauses has been revolutionized by the Unfair

Contract Terms Act, which precludes exemption clauses which
purport to exempt liability for personal injuries caused by someone
acting negligently.
 Exemption Clauses
Unfair Contract Terms Act: Chapter 82:37

4. (1) For the purposes of this Part, “negligence” means the breach—

(a)   of any obligation, arising from the express or implied terms

of a contract, to take reasonable care or exercise reasonable
skill in the performance of the contract;
(b) of any common law duty to take reasonable care or exercise
reasonable skill, but not any stricter duty.

(3) In the case of both contract and tort, … liability for breach of
obligations or duties arising—
         (a)   from things done or to be done by a person in the course of
a business (whether his own business or another’s); or
         (b) from the occupation of premises used for business purposes

(4) In relation to any breach of duty or obligation, it is immaterial …

whether the breach was inadvertent or intentional, or whether liability
for it arises directly or vicariously.
 Exemption Clauses
5. (1) A person cannot by reference to any contract term or to a
notice given to persons generally or to particular persons
exclude or restrict his liability for death or personal injury
resulting from negligence.

(2) In the case of other loss or damage, a person cannot so

exclude or restrict his liability for negligence except in so far
as the term or notice satisfies the requirement of
reasonableness.

(3) Where a contract term or notice purports to exclude or

restrict liability for negligence a person’s agreement to or
awareness of it is not of itself to be taken as indicating his
voluntary acceptance of any risk.
 Exemption Clauses
Roger Rahamut & National Ins. Property Dev. Co v Airport
Authority
of Trinidad and Tobago [1995]

Facts
The Plaintiff parked his car in Car park B. He asked the attendant whether
it could be left there for three days and the cost of doing so. He was
then given a car park ticket which sets out certain “conditions of
parking’ on the reverse side. The Plaintiff returned to the car park three
days later where he discovered his car was missing. He reported the
matter and sought to negotiate a settlement for damages to his vehicle,
without avail.

The Plaintiff claimed damages for negligence, claiming that he was not
aware of a sign/notice on the eastern wall of the car park showing rates.
There was no warning sign on the guard booth or a disclaimer sign. He
did not see a disclaimer in block letters. He got the ticket after he
parked the car. He did not look at the words on the ticket “PTO for
conditions of parking”.
 Exemption Clauses
HELD

The first question is whether the disclaimer has been incorporated into
the contract. The second is how must the disclaimer be construed.
The third is whether the customer was notified or his attention
drawn to the disclaimer or exempting condition.

The general rule is that if a person pays for a service and receives a
ticket which contains a disclaimer on the reverse he is not bound by
the conditions therein, because the ticket is a receipt for the money
paid. The notice was not put in a prominent place, neither was it
drawn to his attention in any explicit way.

The general rule regarding disclaimer notices (exemption clauses), is

that they are to be construed strictly against the Party who
introduced them and seeks to rely on them- the contra preferentum 
rule. Therefore an ambiguous disclaimer should be construed so that
the meaning is not extended in favour of the Party seeking to rely on
it.
 Exemption Clauses
Section 4 (2) of the Unfair Contracts Act (28/1985) sets out
the ‘reasonableness test’ which applied to this case
evidences that the bargaining position of the Parties was
unequal.

The Plaintiff has to park his car in one of the car parks: the
card/ticket is ambiguous (a representation and an
disclaimer), the Plaintiff was not informed nor was the
disclaimer or notice drawn to his attention. The contract
was unfair to the Plaintiff. He could not bargain and for
these reasons the case is decided in favour of the Plaintiff.
End of Lecture