Professional Documents
Culture Documents
INTRODUCTION TO LAW
GENERAL CONCEPTS
Definition Of Law:
However, this definition does not cover that part of law which is
unwritten and customary. It is said that no nation can survive only
without other rules of social conduct which hold its members together
and become binding on them by habitual practice. There are also rules
of Morality , Ethics, Customs and Religion.
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the external power of the courts, whereas rules of morality, religion or
ethics are not.
There are other rules of social conduct which are called customs.
There may be recognised by the courts if they are referred to by any
statute or law. For example , in Cyprus, the Sale of Good's Law allows
the Courts in deciding the "merchantable quality" of goods sold, to take
into account existing customs among merchants dealing in goods of the
same kind.
Many times rules of Law and morality may be the same but not
always. For example in many countries in Europe now, homosexual
behaviour in private between consenting adults is not illegal although
many people would regard it against religion or moral rules.
The essential elements required for the existence of Law are the
following:
a-There must be a community,
b- There must be a body of rules for human conduct or behaviour within
that community
c- There must be common consent of the community that these rules
shall be enforced by external force.
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The express consent of an overwhelming majority of its members
that those who dissent are of no importance as compared with the
community viewed as an entity in contrast to the will of its single
members.
This means the law restricts the will of individual as well as the
society. Because it is impossible to talk about freedom and liberty of
individual in a society where there is no respect for law. By doing this,
the law protects both individual as well as the society or state.
As neither the individual, nor the /state can exist or survive without
each other, the role of the law is to act as moderator of the age old
conflict between the liberty of individual and the authority of State.
From cradle to grave every person inevitably come into contact with
law and is affected by it almost constantly. When a baby is born he or
she has to be registered in the Registries of Birth, Death and Marriage
(in Turkey), when a person dies a death certificate has to be obtained
before his or her burial because these formalities are required by law.
On the other hand a legal system may not or can not be fully
enforced there may be arbitrariness in its applications . Some people
may find ways to avoid it or it may be demonstrated that it is a reflection
of the socio-economic infrastructure yet it does make itself felt one way
or another. Some may wish or hope or predict that legal order at least as
a means of coercion should or will disintegrate . It seems, nevertheless,
that it will be here to stay for generations to come.
Headlines such as these are commonplace and their like can be seen
in newspapers most days of the week. If there was no system of law the
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persons responsible for the above events would be under no fear of
punishment or sanction by the State or community in general. Murder is
considered by modern society to be a terrible offence. therefore. it is
essential that there is an established procedure for providing that murder
is a crime and that murderers will be punished. It is essential in a
civilised community that there is a clearly defined criminal law which
may be enforced and a system of law for determining commercial and
Private disputes and providing a means of compensation for injured
parties.
A community has its own values and its law should reflect these
values. Laws are not made to be broken but to be followed.
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All breaches of civil or criminal law are not necessarily deliberate.
The examples mentioned above could result in a breach of law which
was not intentional; an employer may have created a dangerous place of
work by accident a motor car accident could have been caused by the
negligence of the driver, and a shopkeeper may not have known that the
goods were unsatisfactory. Yet all there may have committed an offence
or a breach of law. There have been breaches of law because the
community created the laws and requires individuals to behave or
conduct themselves accordingly for the benefit of the community as a
whole.
If we leave aside the great systems of Hindu and Islamic law, the
modern world may be divided into two main both groups of legal
systems, the common law countries which comprise the English-
speaking world and territories which have formed part of the British
Empire and Commonwealth and the civilian countries which include
continental Europe and many other even Oriental-states which have,
with westernization, adopted accidental codes of law, like Japan and
Turkey. To a greater or lesser degree, civilian systems stem from Roman
Law, or rather revived Roman Law. Some jurists add to legal systems
mentioned above the one of the socialist countries which greatly
affected the former Eastern European countries. The socialist law also
accelerated the development of International Law in many aspects. The
main characteristics of some of these legal systems are briefly explained
below.
I- Roman Law
Roman Law was the legal system developed and applied in the
ancient Rome and the Roman Empire. As we noted above it is called
civil law. One reason for this is the fact that the main tenets of the
Roman Civil law are complied by Emperor Justinian and his successors
in a series of treaties collectively called the Corpus Juris Civilis. i.e. the
basic principles and rules of the Roman civil law. Off course Roman
law did not consist only of civil or private law i.e. the legal rules
regulating rights, obligations and relations of private persons and
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procedures of litigation concerning civil law cases. Along the civil law
there also was a public law pertaining the organisation and functions of
the Roman State. Thus, one of the basic characteristics of the Roman
law is the division between ius privatum (private law) and ius publicum
(public law) . But the part of the Roman law later affected the legal
systems of many countries has mainly been its private or civil section.
Corpus Juris Civilis was coplied in the Sixth Century AD During the
next five centuries the Roman law had been neglected and had no
impact outside of Byzantium “its second life began with the use and
study of Justinian’s work in the Italian Universities of the eleventh
century AD which spread thereafter throughout Europe influencing the
development of judicial terminology and though and of the municipal
(national) legal systems of Europe down to the period of codification,
with the French Code Napoleon ( The French Civil Code prepared
with the directive of the Emperor Napoleon Bonapart) of AD 1804.”
Today, the legal systems of many countries are based on the Roman
law tradition. All Europe with the exception of England, all of central
and South America, Philippines, Japan and Turkey may cited here.
The basic characteristics of the Roman law system may be
summarised as follows:
• As we mentioned above in this system the law is divided as public
and private law.
• The legal rules are essentially in the form of written laws, codes and
regulations. This means customs and the court decisions play a
limited role as parts or sources of law.
• Many of the basic legal principles, institutions and concepts have
their origin in the Roman law and frequently expressed in Latin. Here
are some examples:
• Pater is est quem nuptiae demondstrandt (the father of a child is the
husband)
• Pacta sunt serverda ( Parties to an agreement must observe its
clauses)
2-Common Law
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As Roman law developed originally in the ancient Rome, the
common law came into being in the medieval England. It is the product
of the actions of courts. This means that in the case of common law the
main source of the legal rules in force had been the decisions of the
courts and not the written laws. To explain its nature we may give the
following account for common law.
3-Islamic Law
The main characteristics of the Islamic law is, of course its religious
nature, Islam is a comprehensive or totalitarian doctrine. It therefore
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aims at regulating all aspects of personal and social life on the basis of
its religious precepts. These rules are strictly legal i.e. must be obeyed in
the Moslem communities or in countries where Islam is the official
order of the state, and called "sharia", the Islamic law.
SOURCES OF LAW
A. Legislation
This conventional view has been challenged more recently, but only
to a limited and uncertain extent as yet.
The process by which an Act is passed is a long one. The first and most
important step in most cases is for the Government to decide that it
wishes the legislation to be passed. Once this decision has been taken,
and so long as public opinion does not cause the Government to change
its mind, the legislation will pass through Parliament and become law,
because of the Government's effective command of a majority in the
House of Commons. On some issues the Government will first seek the
response of interested parties to its legislative proposals by the
publication of a consultative Green Paper. After considering the
response, advance notice of the more definite proposals upon which the
legislation will be based is given in a White Paper.
Conversely, Parliament can never take away its own power to amend
or repeal earlier legislation. Nor can it abandon its own freedom to
legislate in future as it thinks fit. The European Communities Act 1972
does at present limit the power of Parliament to legislate in a manner
inconsistent with the European Treaties. As we have seen, this was
confirmed (in effect) in the Factortame case recently. Nevertheless, the
European Communities Act could always be repealed by a future
Parliament, although this would mean withdrawal of the United
Kingdom from the European Communities.
B-Delegated legislation
The task of making the detailed rules needed to translate this new
development into practice was beyond the capacity of any one
legislative body. What the Government has often done, therefore, is to
pass an `enabling' Act setting up the main framework of the reform on
which it has decided, and then empowering some subordinate body--
often a Minister-to enact the detailed rules necessary to complete the
scheme. Thus the Factories Act 1961 provides for sufficient and suitable
lighting in factories but leaves to the Minister responsible the work of
laying down specific standards of lighting that shall be deemed
sufficient and suitable for different types of work. Rules enacted under
such powers are called `delegated legislation'. The following are the
principal forms that this may take:
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It is generally felt today that these criticisms were exaggerated, and
to some extent simply an expression of resentment at the sheer volume
of legislation needed in a modern industrialised country. Certainly some
safeguards do exist against abuse of delegated powers; how adequate
these safeguards are is a matter which is still sometimes discussed.
1-Parliamentary control
2- Judicial control
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(b) Unreasonableness. The courts will sometimes take the
view that Parliament has given the power only on the
understanding that it be exercised reasonably. Some local
authority by-laws have been held void, because the court
felt that they were unreasonable.
(c) European Community law. As we have seen, it has been
held in the Factortame case that the courts can and must
hold UK legislation invalid in so far as it contravenes
European Community law. This can apply to Acts of
Parliament as well as to delegated legislation.
B- Judicial precedent
1. Decisions of the House of Lords bind all other courts for the
future, and until 1966 were even binding on the House of Lords
itself in subsequent cases. In that year, however, the Lord
Chancellor issued a statement on behalf of the House that it
would no longer regard itself as rigidly bound if this would
cause injustice by reason of changing social circumstances.
2. The Court of Appeal is bound by previous decisions of the
Lords and, in most circumstances, by its own previous
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decisions. Its decisions are binding on all lower courts but not
upon the House of Lords.
3. A High Court judge is bound by decisions of the House of
Lords and the Court of Appeal but not by other High Court
decisions.
4. A County Court judge is bound by decisions of all higher
courts. The decisions of the County Courts themselves are not
binding in any future case, and they are not normally reported
at all.
This does not mean that decisions of lower courts will be disregarded
by higher courts. These decisions may not be binding precedents, but
they will have persuasive value. They may be long standing, recognised
by people as the law, and acted upon accordingly. Similarly, decisions
of the House of Lords in appeals from Scotland or Northern Ireland, and
decisions of the Judicial Committee of the Privy Council in appeals
from some Commonwealth countries, while not binding in English
courts, have strong persuasive influence. Note, for instance, the Wagnn
Mound case in 1961. An English court may even turn for guidance the
decision in the United States or the Commonwealth, where the legal
systems have the same basis as our own.
1. He gives his actual decision between the parties: `I find for the
plaintiff', or `the appeal must fail'. This is obviously the part
which is of most interest to the parties themselves.
2.He will also give his reasons for reaching that decision: what
facts he regards as `material', the legal principles which he is
applying to those facts and why. This is called the ratio
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decidendi (the reasoning vital to the decision), and it is this part
of the judgement which may bind future courts.
3.He may also, at the same time, discuss the law relating to this
type of case generally, or perhaps discuss one or two
hypothetical situations. These will be obiter dicta (other
comments) and while they may have persuasive force in future
cases, they are not binding.
Precedent or code?
3. Finally, although case law provides us with many detailed rules, this
can itself be a drawback. In English law there are at least 1000
volumes of law reports in which precedents are to be found. The ease
with which cases may now be discovered by computerised retrieval
methods has already led to the courts expressing concern at the
number of precedents being cited.
Law reporting
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Law reporting in England began in the thirteenth century with the
Year Books, which were very brief notes written by anonymous
lawyers, often in a curious mixture of English and Norman French.
From about 1530 the Year Books were replaced by private reports
published under the names of those compiling them. These continued
until the nineteenth century, but they vary considerably in value
according to the accuracy of the reporter. In 1865, the Council of Law
Reporting was established by the legal profession to provide for
systematic publication of professionally prepared and officially revised
volumes of reports.
Today, the main reports are still produced by what is now the
Incorporated Council of Law Reporting. It now publishes only one
volume each year of reports of decisions in the Queen's Bench Division
of the High Court, one of Chancery Division cases, and one of Family
Division decisions. Court of Appeal cases are included in the volumes
for the High Court Division from which the appeal came, but House of
Lords decisions are found in a separate volume of Appeal Cases. Since
1953 the Council has also issued the Weekly Law Reports, to enable
reports of certain cases to be available more quickly.
Some private reports did survive after the nineteenth century; the
main general ones now issued are the All England Law Reports,
published now in four volumes each year, and also periodically, about
weekly. An increasing number of more specialised private reports also
continues in fields such as commercial law, taxation and industrial law.
Subject to this, it is for the judges to say what the words of an Act
mean should any doubt arise. Words will be given their literal or
everyday meaning unless this would lead to absurdity. If particular
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words are followed by general words, the general words are restricted to
things similar to those specified particularly. Thus wheat, barley and
other crops' would include oats but not potatoes. On the other hand, if
there is particular mention only, nothing else is included. Thus `wheat
and barley would not include oats.
Finally, there are certain presumptions which a court will make. Thus
it is presumed that a statute is not intended to bind the Crown unless the
statute expressly so provides. Since `the Crown' includes all crown
servants (e.g., civil service departments) this presumption can be very
important. Similarly, it is presumed that an Act is not intended to create
a strict criminal offence; the courts will assume that the defendant is
guilty only if he intended to commit the offence, or acted carelessly.
This presumption will, of course, be rebutted if the words of the Act
make it plain that the legislature wishes to impose strict liability.
Codes of practice
Section 45 of the Road Traffic Act 1930 provided that `The Minister
shall prepare a code (in this section referred to as the "Highway Code")
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comprising such directions as appear to him to be proper for the
guidance of persons using roads...'. This code is not a piece of
legislation; it does not have binding force, it is not a criminal offence to
break it, nor will breach of it give rise to civil liability. It can always,
however, be cited in evidence, and a person who breaks it is much more
likely to be held negligent, or guilty of careless driving, than a person
who observes the provisions. The code must be treated as a source of
law to the extent that a court must accept its provisions in evidence.
The use of this type of code seems likely to increase in future. Under
the Industrial Relations Act 1971, a Code of Industrial Relations
practice was produced, having the same practical effect as the Highway
Code. Subsequent legislation preserved this code of practice, which is
still governed by the Employment Protection Act 1975, and further
codes have since been added. Codes with similar effect have been
produced under the Health and Safety at Work, etc., Act 1974, the
Control of Pollution Act 1974, and the Race Relations Act 1976.
3. Decisions of the Court of Justice. The Court has (in theory) no law-
making powers and there is no doctrine of binding precedent.
Nevertheless (in practice), through interpretation of `statutory'
provisions, a body of rules is emerging in the Court's judgements which
have a strongly persuasive influence and are published here in the
Common Market Law Reports (CMLR).
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commercial and business practice, in cases where they have to decide
how existing legal rules should be applied in business situations.
These are not cited very frequently in the English courts, contrary to the
practice in many continental countries. At one time this practice was
seldom allowed here, and was restricted to a few notable authorities.
More recently the rule has been relaxed and the number of acceptable
authors increased.
Legal personality
Capacity
The main limits on the capacity of corporate bodies arise from their
very nature. First, there are things which they cannot physically do, such
as marry. Secondly, these are the creation of law and, therefore, only
have such powers as the law attaches them; anything outside those
powers (ultra vires) is void, although there is a special provision for
companies (see below).
B. Corporations
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Bay Company. This type of a charter today is confined to non-
commercial undertakings, for example universities.
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In Salomon v. Salomon & Co. Ltd. (1897), Salomon, who
manufactured boots, formed his business into a company. Six members
of his family held one share each, and he held the remaining 20 000. He
lent money to the company on the security of its assets and, when the
company ran into financial difficulties, it was held that he took
preference over the ordinary creditors. Although he was, in effect, the
company, he was treated in law as an entirely separate person.
The Companies Act 1989 has now largely abolished the ultra vires
rule as between companies and outsiders. The validity of something
done by a company cannot be questioned for lack of capacity by reason
of anything in the company's memorandum, and for someone dealing
with the company in good faith the power of the directors is deemed free
of any limits under its constitution. (Ashbury would probably be liable
today.) The ultra vires rule does still operate internally, and a
shareholder can restrain a proposed act by the directors . The 1989 Act
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only applies to companies and does not affect ultra vires for other types
of corporation.
C. Unincorporated associations
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Most unincorporated associations for business purposes are
governed by the Partnership Act 1890 .
D. Partnerships
Formation
The partners are known collectively as a `firm', and the name under
which they carry on business is the `firm name'. They can, within limits,
choose whatever name they think fit, subject only to the Business
Names Act 1985. This Act, like the Companies Act, consolidates earlier
legislation, and provides that whorever a firm carries on business in a
name which does not consist of the surnames of all partners, with or
without `permitted additions' such as first names, initials, phrases such
as `and Sons' or, where two or more partners have the same surname, the
addition of an `s' at the end of that surname (`Smiths'), then it is subject
to limits. It must not, for example, use a firm name which suggests
Government or local authority connections, is offensive, or falsely
suggests connection with another business. Other important checks are
that a partnership must not use `limited' or `public limited company' as
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the last words of its name, although it can use `company' or an
abbreviation thereof. In any event, the true surnames of all partners must
appear on letter headings (although there are exceptions for firms with
more than 20 partners), and must be displayed in a prominent place to
which customers have access at the firm's business premises. Non-
compliance with any of the above provisions is a criminal offence.
When can the acts of one partner render the whole firm liable?
By the Partnership Act, section 5, the rules are those of agency. The
firm is hound by anything which an individual partner was expressly
authorised to do. The firm may also be bound if the partner does
something for `carrying on in the usual way business of the kind
carried on by the firm', so that there is nothing to make the outsider
suspicious. The partner has implied authority, and the firm is bound
even if he has exceeded his actual authority. It follows, however, that
the firm will not be bound if the outsider either knows that a partner has
no authority, or does not know or believe him to be a partner .
When is the firm liable for wrongs, such as torts, committed by one
partner?
(a) the act was done with the actual authority of his fellow partners; or
(b) the act was within his `usual' authority, in the ordinary course of the
firm business.
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When is an individual partner personally liable for the firm's debts
and liabilities?
Partners do not have limited liability. By section 9, they are jointly liable
on the firm's contracts. Each partner is liable for the full amount due, but
can apply to the court to have the others joined as co-defendants. In
practice, plaintiffs usually sue the firm in the firm's name, but can then
enforce the full judgement against any partner. By section 12, partners
are liable jointly and severally for torts committed by or on behalf of the
firm. Again, each can be made liable for the full amount.
New partners are not liable for things done or debts incurred before
they became partners. A retiring partner remains liable for debts
incurred before his retirement, but can be discharged if a contract of
`novation' is made between himself, the other partners, and the creditor.
He may also be liable for debts incurred after he leaves. Someone
dealing with a firm after a change in its constitution is entitled to treat all
apparent members of the old firm as still being members until he has
notice of the change. The retiring partner should, therefore, protect
himself by notifying all existing customers and suppliers of his
retirement, so that he no longer appears to them to be a partner. He
should also advertise his retirement in the London Gazette, which serves
as notice to those who have not previously dealt with the firm. In any
event, he is not liable to those who have not previously dealt with the
firm, and who did not even know that he had been a partner.
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The estate of a partner who dies or becomes bankrupt is not liable for
partnership debts incurred after the death or bankruptcy.
When is a person who is not a partner liable for the debts of the
firm?
We have seen that a retiring partner can sometimes be liable for debts
incurred after he left. By section 14, others may also be liable. A non-
partner can be liable for the debt if he has by his words, spoken or
written, or by his conduct represented himself to be a partner and, as a
result, an outsider has given credit 1 the firm. Similarly, a non-partner
can be liable if he has allowed himself to be `held out' as being a
partner, and the creditor has relied on this misapprehension. The
`apparent' partner can be liable whether or not he knows that the
representation which he has made or allowed have been used to
persuade a potential creditor this way.
Any partner may apply for a court order to dissolve the partnership if
any of the following conditions apply.
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If a partnership is dissolved for any of the above reasons, the
authority, rights and duties of the partners continue, but only for the
purpose of winding up. Any partner may publicise the dissolution, and
the others must concur.
When there ought to be a final settlement and it does not take place,
for example if a partner dies or retires and the remaining partners carry
on without settling with him or his estate, then the outgoing partner may
claim either such share of the profits after he left as are attributable to
use of his share of the assets, or interest on the amount of his share;
Limited partnerships
E. The Crown
At common law, the Crown was above the law, and no action could
be brought against the King in the King's courts. This was summarised
in the maxim, `The King (or Queen) can do no wrong'. This legal
immunity applied also to public acts carried out in the King's name by
Ministers and Government departments.
In tort, the Crown can now be liable for the wrongful acts of its
servants, for injuries arising out of the ownership and control of
premises and, where the statute expressly states that the Crown is to be
bound, for breach of statutory duty. An immunity preserved by the 1947
Act that no action would lie for death or personal injury suffered during
service in the armed forces if the Minister responsible certified that this
injury ranked for entitlement to pension was removed by the Crown
Proceedings (Armed Forces) Act 1987,
COMPANY LAW
There are other classifications for special purposes which have little
to do with the Companies Acts. For example, if a public company
wishes its shares (or debentures, to be dealt with on a stock exchange, it
must apply to the exchange, which will only grant permission if the
requirements of the exchange (as to total value of the shares, and as to
disclosure, etc.) are met. A stock exchange `quotation' or `listing' is
often desirable in order to increase the saleability and value of a
company's shares. By no means are all public companies `listed'. For tax
purposes, it can be an advantage for a company to remain a `close'
company, that is, one `controlled' by directors who are also shareholders
or creditors, or `controlled' by five or fewer shareholders or creditors.
Accounting exemptions by which only modified accounts need to be
filed with the Registrar may be secured if the company is classed as a
medium or small company: this depends upon balance sheet total,
turnover and number of employees.
One company can hold shares in another, and most large companies
do control many subsidiary companies, for instance by holding most of
the shares in the subsidiary. Although in law each of these companies is
a separate person, in reality they are controlled by the `parent' company.
Often the arrangements are much more complex, and may involve
companies or their equivalents in many different countries. Some such
`multinational' enterprises include hundreds of companies throughout
the world.
A. Formation of companies
The articles of association may later be altered under the 1985 Act,
section 9, but the alteration must not (a) clash with the memorandum; or
(b) discriminate between members, or take away the rights of any class
of shareholders; and (c) the alteration must be for the benefit of all
shareholders. 3. There must be a separate statement of the nominal
capital.
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requirements of the Act have been complied with, and may be
accepted by the Registrar as evidence of this.
B. Capital
The real value of shares may be more than the nominal value. Thus if
a company's assets are worth much more than its nominal capital, its
shares may ': reflect this. If would-be shareholders pay £5 for each of
the £1 shares issued, the shares are said to be issued at a premium of £4.
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In theory, an amount equal to the money actually paid to a company
in return for its shares has to be kept available in order, in the last resort,
to pay off ' creditors and repay the shareholders if the company is wound
up. The Companies .: Act, therefore, still contains detailed rules to
prevent or control reduction of this capital, although the rules have been
relaxed slightly since 1981.
When a company invites the public to buy its shares, it must issue a
prospectus, which must contain detailed information about the company
so that investors can make an informed choice. False statements in
prospectuses can be a criminal offence, and can also render the share
issue voidable.
Shareholders
We have seen that there are three ways in which someone can become a
shareholder: the subscribers of the memorandum must each take at least
one share new shares may later be issued by the company: or the
shareholder may have acquired existing shares from another holder.
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Different varieties of preference share exist. For example, preference
shares are “participating” if , in addition to the preferential dividend, the
holders are also entitled to participate in the ordinary dividend, if one is
declared. Unless otherwise provided, preference shares are presumed to
be `non-participating'. Preference shares are `cumulative' if, should the
preference dividend not be paid in one year, it is carried forward, so that
in the next year all arrears of preference dividend must be paid before
anyone else gets anything. Unless otherwise provided, preference shares
are presumed cumulative.
Company meetings
These rules regarding meetings are relaxed for private companies if all
the members consent in writing, except where the resolution concerns
the removal of a director or of an auditor.
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Every company must have directors, who are the persons responsible for
managing the company. The actual numbers depend upon the articles,
but a public company must have at least two, and a private company at
least one. No qualifications are needed, except that a director of a public
company must retire at 70 unless either the articles, or a resolution of
which special notice has been given specifying his age, provide
otherwise, The court can disqualify a person from being or acting as a
director for up to five years if he has been convicted of an offence under
the Act, and an undischarged bankrupt may not act as a director.
In Bushell v. Faith (1970), a director's shares validly gave him two votes
per share on such a resolution, and this was enough to defeat the attempt
to sack him.
Directors are not as such employees of the company, and they are not
automatically entitled to payment. In practice, the articles often provide
for directors to receive fees and expenses, and executive directors such
as a `managing director' often, in addition to being directors, have
employment contracts under which they receive a salary.
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A company must keep a register of directors and secretaries at its
registered office, and notify the Companies' Registrar of its contents.
The register is open to public inspection. Detailed statutory provisions
also require directors to disclose to the company and members matters
such as their financial interest in this and connected companies.
Duties of directors
In Boston Deep Sea Fishing and Ice Co. v. Ansell (1888), a director
received an undisclosed commission from the builders of a new boat for
his company, and undisclosed bonuses from a company supplying ice.
After he had been dismissed as director, and his employment contract
ended, he had to account to the company for the money.
3. Directors must exercise their powers for the company's benefit, not
for their own or for any other ulterior motive. This has often arisen
when shares are issued.
In Piercy v. Mills Ltd (1920), the directors issued extra voting shares to
themselves and their supporters, not because the company needed the
extra capital, but solely to prevent the election of rival directors. The
share issue was held void.
In Foss v. Harbottle (1843), two directors sold their own land to the
company, allegedly for much more that its true value. Some
shareholders tried to sue the directors, but the court would not hear the
action. It was up to the company to decide whether or not to sue.
The rule in Foss v. Harbottle does not, however, allow the majority
to get away with everything. In some situations, the court will hear an
action by a minority.
1.Under the Companies Act 1989, even one shareholder can still
restrain a future ultra vires act by the directors, unless the
proposed act is ratified by a threequarters majority.
2.If the directors try to do something which requires a special or
extraordinary resolution (with a three-quarters majority and
appropriate notice) without first obtaining such a resolution, a
simple majority cannot ratify it. To allow this would be to
destroy the whole protection given to minorities by special or
extraordinary resolutions, namely that a 26 per cent minority
can defeat the resolutions.
3.Sometimes the directors may commit a wrong to the member
personally, not to the company. If this occurs, the individual
member can sue to protect his own rights.
55
In Pender v. Lushington (1877), the chairman wrongfully
refused to accept the votes of certain shareholders and, as a
result, a resolution which they wished to oppose was passed.
It was held that the chairman had infringed the shareholders’
personal rights to vote, and the court granted them an
injunction restraining the company from acting on the
resolution.
56
wishes) at a fair price. It can also allow a minority holder to sue in the
name and on behalf of the company.
59
2. Under the Insolvency Act 1986, section 213, if in the course of
winding up a company it appears that any business has been carried
on with intent to defraud creditors, or for any fraudulent purpose, the
liquidator may ask the court to declare that persons knowingly party
to such fraudulent trading are liable to make such contribution to the
company's assets as the court thinks proper. 'I his can apply even if the
company was solvent when wound up.
3. If the company was insolvent when wound up, the Insolvency Act,
section 214 introduces the further concept of wrongful trading under
which directors can he held liable even if there was no fraud. When a
company has financial difficulties, and a director knows or ought to
conclude that it has no reasonable prospect of recovery, then he
should immediately take steps to minimise the loss to its creditors, for
example by applying immediately for a winding up order. A director
who fails to do so, and wrongfully carries on trading, may be ordered
to contribute personally to the company's assets on an eventual
insolvent liquidation. `Shadow directors' (e.g., dominant managers)
can also he liable.
4. Under the Disqualification of Directors Act 1986, if a
person who has been disqualified by the court from acting as a
director disobeys the court order. he can be personally liable for debts
which the company incurs while he is wrongfully involved in its
management.
5. Under the Insolvency Act, section 216, a person who was a
director in the last 12 months' life of an insolvent company must not
trade for the next five years in a name too similar to that of the
insolvent company. If he does so, he can be personally liable for the
new company's debts.
6. Exceptionally, a director may be vicariously liable for torts
committed by the company, particularly if he had extensive control
over the company's conduct at the time in connection with the
tortious activity.
In Evans & Sons Ltd v. Spritebrand Ltd (1985), it was held that a
director personally, as well as the company, could be liable for the
company's breach of copyright. Many of these exceptions only affect
those shareholders who are either directors or persons involved in
management. Directors who, as occasionally happens, are not
shareholders can also be affected.
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E. Public controls over companies
F. Winding up
Voluntary winding up
The shareholders can resolve at any time to end (`wind up') the
company, and this is now governed by the Insolvency Act 1986, even if
the company is solvent. The resolution must usually be a special one,
needing a three-quarters majority.
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Alternatively, an extraordinary resolution may be passed that the
company is insolvent and should be wound up.
Compulsory winding up
If there is not enough to pay off any category, each gets a dividend of
so much in the pound. If anything remains after ordinary creditors are
fully paid, it goes in repayment of capital, and then division among
shareholders.
Malice
STRICT LIABILITY
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however, a person may be liable when he acts neither intentionally nor
negligently. In these instances the law ha: imposed a strict limit on a
person's activities, and if this limit is exceeded the defendant is strictly
or absolutely liable. The most common example of such liability is
known as the Rule in Rylands v. Fletcher (1868). The rule applies when:
(i) a person brings on to his land for his own purpose some dangerous
thing, which is not naturally there (water, wild animals, gas, fire),
(ü) the dangerous thing escapes from the land, (strict liability does not
apply if the injury occurs on your own land), and
(iii) causes damage.
If these three events occur the occupier of land is liable for the damage
caused, but the following defences may be used (i) The untoward event
was caused by the act of a stranger (ü) It was the plaintiff s own fault.
(iii) It was an act of God. (iv) There was statutory authority.
NEGLIGENCE
65
omissions which you can reasonably foresee would be likely to injure
your neighbour." My neighbours are " . . . persons who are so directly
affected by my act that I ought reasonably to have them in
contemplation . . . "
The neighbour principle has been used in many different situations, for
example to show that a duty of care was owed to (i) a lady locked in a
public lavatory, (ü) wearers of underpants who caught dermatitis from a
chemical in the material, (iii) persons living in the neighbourhood of an
open borstal, (iv) the users of a defective hair-dye.
A breach of duty
It is a general rule of law that a plaintiff must prove that the defendant
has been negligent. In cases, however, where the ac' or omission
obviously indicates negligence, the burden o: proof moves to the
defendant who must shown that, in fact, he was not negligent. This rule
has been applied where:
(i) Bags of sugar fell on the plaintiff from an upper floor of a
warehouse. Scott v. London & St. Katherine's Dock Co. (l 865).
(ii Swabs were left in a patient after an operation. Mahon v. Osborne
( 1939).
(iii A customer slipped on yoghurt which had spilled on to the floor of a
supermarket. Ward v. Tesco Stores Ltd. ( 1976).
The application of the rule does not automatically mean that the
defendant was negligent, but it is presumed that the act or omission was
negligent, unless it can be shown otherwise. In Pearson v. N.W. Gas
Board ( 1968), a gas explosion killed the plaintiff's husband and
destroyed her home. The court applied the rule, but the defendants were
able to show that severe frost caused the gas leak and, as there was no
reasonable way in which the explosion could have been prevented, they
were not negligent.
Contributory Negligence
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It is generally considered that a young child is never guilty of
contributory negligence.
TRESPASS
Trespass is probably the oldest tort, and many other torts owe their
origin to the writ of trespass, which has been described as the "mother
of actions." There are three forms of trespass:
l. trespass to the person ,
2. trespass to chattels (goods), and
3. trespass to land.
All trespasses are actionable per se (by itself); that is the plaintiff does
not have to prove that the defendant caused any damage.
3. Trespass to land
An invasion of air space may be a trespass of land, even though the land
is not touched. The courts have held in Kelson v. Imperial Tobacco Co.
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(1957) that a sign erected on a building, but which protruded over
another person's land was trespass, as it was in Woolerton and Wrlson v.
Costain (1969), there a crane swung over another person's land. In Lord
Bernstern of Leigh v. Skyvrews and General Ltd. (1978) it was held that
an aircraft which took an aerial photograph would not be trespassing if it
was at a height which did not affect the use of land.
Trespass is a civil wrong and a mere trespasser, as a general rule, is not
liable for criminal prosecution, and therefore the familiar sign,
"Trespassers Will Be Prosecuted," has no legal effect, except in relation
to certain government undertakings where an Act of Parliament has
provided a fine for tresspassing.
(i) Damages. If no real injury has been incurred the damages awarded
may be nominal (i.e. 1 p).
(ii) ) Injunction. This may be used to stop the defendant from
repeating the trespass.
(iii) Forcible ejection. The occupier may only use reasonable force to
move the trespasser after first requesting him to leave and giving him
reasonable time to do so.
NUISANCE
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There are two forms of nuisance which have quite different meanings
and little in common. They are public nuisance and private nuisance.
Public Nuisance
Private Nuisance
This tort covers the interference with the plaintiff's enjoyment or use of
his land or the disturbance of some legal interest over the land. An
example of interference with the enjoyment of land would be playing
music very loudly in the middle of the night so that your neighbour's
sleep is disturbed. To block your Nuisance 193 neighbour’s access from
the road to his house would be to disturb his legal right of way.
a) Reasonableness
It is a good defence to claim the act was a reasonable use of one's own
property. The courts take an attitude of "live and let live." What is
reasonable is based on the conduct of the ordinary man.
b) Sensitiveness
An act which would not disturb a normal person will not be a nuisance
just because the plaintiff, or his property, is unduly sensitive. In
Robinson v. Kilvert (1889) the plaintiff stored brown paper in the
defendant’s premises. The heat from the defendant's boiler damaged the
paper, which was extremely sensitive to heat. The court held the
defendant was not liable in nuisance.
(c) Loca1ity
"What would be a nuisance in Belgrave Square would not necessarily be
so in Bermondsey" said a judge in 1879. He was pointing out that
different standards are necessary for different areas, so it is possible that
noise from a club in the city center may be reasonable, but would be
unreasonable in ~ residential area and would be a nuisance.
(d) Continuity
The general rule is that a single event is not a nuisance and the plaintiff
must show that there was some degree of repetition of the offending act.
In Stone v. Bolton(1950), a ball was hit out of a cricket ground and
injured a lady. It was shown that a ball had been hit out of the ground
only six times in 35 years. The court held that this was not often enough
to be a nuisance.
(e) Malice
The occupier of property has the right to bring an action bu1 any other
person injured on the property has no claim in nuisance. The person
liable in an action for nuisance is likewise the occupier of the property
from which the nuisance emanated.
generator which vibrated and caused the bracket to fall. The plaintiff
sued in nuisance but the court held that, as she was only the wife of the
tenant and not the tenant, she had no interest in the land.
Remedies
The usual remedies are damages and an injunction, which are obtained
from the courts. In Kennaway v. Thompson (1981) the plaintiff lived
near a lake used for motor boat racing. She was awarded damages by the
High Court for nuisance already suffered and damages for future
nuisance. The Court of Appeal varied the award and in the place of
damages for future suffering, substituted an injunction which restricted
the number of races that the defendants could hold.
Defences
l. Statutory authority
It is a complete defence that a nuisance was expressly authorised by an
Act of Parliament.
2. Prescription
When a nuisance has been in continuous existence for not less than 20
years, the right to carry on the act may be acquired.
It is a general rule that parents are not liable for the torts of their
children. A parent will be liable, however, if he is negligent in allowing
his child to be in a position to commit a tort.
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In Bebee v. Sales (1916), a father gave his 15-year-old son a shotgun,
and the father was held to be liable when the son injured another boy.
However, the parent is not negligent if he has taken steps to lessen the
risk of injury, as was the case in Dofzaldson v. McNiven (1952). A
father showed his son how to use an airrifle, warned him of the dangers
and told him not to use it outside the house. The father was held not to
be liable when his son injured another child.
It should be noted that, under the Firearms Act 1958, it is an offence for
any person to make a gift of an air weapon o~ ammunition to a person
under 14 years of age.
DEFAMATION
(ii) The statement must lower the plaintiff's reputation in the minds of
right-thinking members of society. A bank robber would not be liable
for defamation if he informed other thieves that one of the gang had
served a prison sentence for theft. This is because the gang would not
disapprove, and they are not held to be right-thinking members of
society.
In Byrne v. Dean (1937) a golf club had some illegal gaming machines
which the police removed. A verse was placed on the notice board,
which inferred that Byrne had informed the police. ("May he Byrne in
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hell and rue the day.") Byrne sued, but it was held that he had not been
defamed, because right-thinking members of society would have
approved of a person informing the police of an illegal practice.
In addition to showing that the statement was defamatory and published
to a third party, a plaintiff must prove that the third party understood that
the statement referred to the plaintiff. It is for the judge to decide if the
statement is likely to be understood as referring to the plaintiff and for
the jury (if here is one) to decide if the third party actually did so.
Not all defamatory statements are actionable. Consider the following
statements and decide whether or not they are defamatory.
"All students in class 1 A cheated in their examination." (There were six
students in the class.) "Half of the Maths `A' level class (four students)
cheated in examination."
The first statement would be defamatory because the class is small
enough for all students to consider that they have been individually
defamed.
The second statement would also be defamatory because, although it
referred to only half of the class, it is small enough 'or any of the class to
bring an action.
The last statement would not give a 1aw student a right to sue because
the class is too large for any one person to claim that it referred to him.
Innuendo
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have not been defamed, Their parents would be able to sue, because the
statement implies and infers that they are not married.
Defamation is either:
l. Libel
This is defamation in a permanent form, such as writing, or broadcasting
on radio or television. It could be in a painting or cartoon, or on record,
cassette or tape recorder. Libel is actionable per se, that is, the plaintiff
does not have to show special damage. Libel may also be a crime.
2. Slander
This is defamation in a non-permanent form, such as by words and
gestures. Slander is not actionable per se, and a plaintiff must prove
special damage, except with regard to statements which:
(i) Impute that a person has committed a crime punishable by
imprisonment.
(ii) Impute that a person has an existing infectious disease (for
example, leprosy or venereal disease).
(iii) Impute unchastely of a woman.
(iv) Impute against the plaintiff in respect of his office, profession,
calling, trade or business.
Defences
l. Justification
It is a defence to show that the statement was completely or substantially
true. Defamation must be a false statement, and a true statement which
damaged a person's reputation would not be actionable.
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3. Absolute privilege
The following carry complete protection from actions for defamation,
regardless of the truth or motive behind the statement.
a) Parliamentary proceedings
This means any statement made by a Member of Parliament n either
House, and officially authorised reports on parliamentary proceedings.
b) Judicial proceedings
This includes all statements made in court by judge, jury, :counsel,
witnesses, etc.
4. Qualified privilege
The following carry similar protection to absolute privilege, unless it
can be shown that the maker of the statement acted from malice, such as
an improper motive or out of spite.
5. Apology
A newspaper or periodical may offer this defence if it can show that the
libel was published without malice or gross negligence. In addition to
publishing an apology, a payment o money must be paid into court
before the commencement o~ the case. The Defamation Act 1952
provides that, as regard; unintentional defamation, apology and amends
will be a good defence.
While apology and amends is only a defence for defamatory statements
in newspapers, it may serve to reduce damages if offered by a private
person.
VICARIOUS LIABILITY
This expression is used when a person is liable for the torts of another,
and mainly arises in employer/employee relationships.
The reasoning behind such liability is:
(i) To stop an employer hiring an employee to commit a tort.
(ii) To encourage the employer to install and maintain a safe
system of operation.
(iii) That, as a general rule, the employer is in a better financial position
to compensate the injured. The employer is only liable for torts
committed by employees during the course of their employment.
In Lloyd v. Grace, Smith & Co. (1912), L asked the defendants, a firm
of solicitors, for advice. All the negotiation were with a managing clerk
and he persuaded L to sign documents which conveyed property to him.
The property was sold by the clerk and he kept the money. It was held
that the firm was liable because the clerk was employed to give advice
and convey property although in this case he did it for his own benefit.
An employer is liable if the employee commits a tort in the course of his
employment even though the latter performs his, duty in a manner
expressly forbidden by the employer.
In Limpus v. London General Omnibus Co. (1862) the defendants had
expressly warned their drivers not to race against buses of another
company. One of their drivers injured a third party while racing his bus
and the court held that he was acting within the course of his
84
employment. An employer is not liable, however, if the employee goes
on a "frolic of his own," and leaves his duties to follow a personal
pursuit. For example, a driver who decides to watch a football match
while on his delivery round, and damages another vehicle when parking.
If an employee performs a function for which he has no authority, the
employer will not be liable. In Beard v. London General Omnibus
( 1900) the conductor drove a bus and injured the plaintiff. The court
held that the employer was not liable because the conductor was not
acting within the scope of his employment.
An employer will be liable, however, when the employee carries out an
authorised task in an incorrect way. A porter thought a passenger was on
the wrong train and pulled the person off the train, causing him injuries.
The company was liable because the porter acted within the scope of his
employment.
In Harrison v. Michelin Tyre Co. Ltd. (1985)S, an employee, whose
duties included pushing a truck within a passage marked by chalk lines,
deliberately moved the truck outside the lines as a practical joke and the
plaintiff was injured. The plaintiff sued the company, arguing that S's
negligence was within the course of his employment. The company
contended that S was "on a frolic of his own." The court held that S's act
could reasonably be regarded as incidental to the performance of his
employment, regardless that the company had not authorised or
condoned it. The company, therefore, was vicariously liable.
An employer is not generally liable for the torts of independent
contractors, unless:
(i) They were expressly hired to commit a tort.
(ii) The work must create a dangerous situation.
(iii) The work obstructs the highway, thereby creating a public
nuisance.
(iv) The employer delegates a duty imposed by statute or common law.
Independent contractors are employed to do specific tasks but can
choose the method of carrying out the work. An employee, on the
other hand, is under the control of hi: employer as to what to do, and
how to do it.
85
There are specific defences to specific torts. Absolute privilege applies
to defamation only. Often the defence may be a straight denial of the
alleged facts. There are, however, the following defences which may be
raised in most actions for tort.
l. Statutory authority
If a statute grants indemnity for a particular act, damages cannot be
claimed unless the statute provides for compensation to be paid.
3. Inevitable accident
It is a good defence to show that the injury was caused by an accident
which could not have been prevented through forethought or by taking
ordinary precautions. In Stanley v. Powell ( 1891 ) the plaintiff was
injured during a shooting party when a pellet glanced off a tree. It was
held that the defendant was not liable as his act was neither intentional
nor negligent
4. Necessity
It may be a defence to show that the damage was caused in trying to
prevent a greater evil.
In Cope v. Sharpe (1912), fire broke out on the plaintiff land and the
defendant, who was a gamekeeper, set fire to
4. Necessity
It may be a defence to show that the damage was caused in trying to
prevent a greater evil.
In Cope v. Sharpe (1912), fire broke out on the plaintiff's land and the
defendant, who was a gamekeeper, set fire to other parts of the plaintiff's
land with the intention of preventing the fire from spreading to his
employer's land , where there were pheasants. The fire was extinguished
by other means and the plaintiff sued for damages. The court held that
the defendant had carried out a reasonably necessary act and was not
liable.
5. Act of God
87
This is an act of nature which could not have reasonably foreseen.
In Nichols v. Marsland (1876) the defendant owned an artificial lake
which overflowed as a result of a thunderstorm and caused damage to
the plaintiff’s land. The court held the defendant was not liable as the
damage was caused by an act of God.
CONTRACT LAW
For example, buying a newspaper taking the bus of train into work or
college, getting a cup of coffee at break-time, arranging to meet a friend
for lunch are all contracts that we are not at the time of making them
aware of them.
During our lecture we will deal with the questions such as what is a
contract, when is a contract formed, what happens if either party breaks
the agreement, so on.
TYPES OF CONTRACTS
88
Contracts may be divided into two broad classes:
89
breach of contract. The absence of an essential element will render the
contract either void, voidable or unenforceable.
AGREEMENT
Offer:
An offer is a proposal made on certain terms by the offeror together
with a promise to be bound by that proposal if the offeree accepts the
stated terms. An offer may be made expressly -for example, when an
employer writes to a prospective employee to offer him a job- or
impliedly, by conduct- for example, bidding at an auction.
90
The offer may be made to a specific person, in which case it can only
be accepted by that person. If an offer is made to a group people, it may
be accepted by any member of the group. An offer can even be made to
the whole world, such as where someone offers a reward for the return
of a lost dog. The offer can be accepted by anyone who knows about it
and finds the dog.
The court concluded that Mrs. Carill was entitled to recover the 100
pounds. It is important to identify when a true offer has been made
because once it is accepted the parties are bound. If the words and
actions of one party do not amount to an offer, however, the other
person cannot by saying 'I accept' ,create a contract. A genuine offer
must ,therefore, be distinguished from what is known as 'invitation to
treat'.
An Invitation To Treat;
91
This is where a person holds himself out as ready to receive offers,
which he may then either accept or reject.
Examples:
3- Company prospectus
4-Auctions
93
At an auction sale the call for bids by an auctioneer is an invitation to
treat. The bids are offers . The auctioneer selects the highest bid and
acceptance is completed by the fall of the hammer
The defendant made the highest bid for the plaintiff's goods at an
auction sale, but he withdrew his bid before the fall of the auctioneer's
hammer. It was held that the defendant was not bound to purchase the
goods. His bid amounted to an offer which he was entitled to withdraw
at any time before the auctioneer signified acceptance by knocking
down the hammer.
5- Tenders.
Where the subject matter of a proposed sale is land, the courts are
reluctant to find a definite offer to sell unless very clearly stated.
a) The offeree notifies the offeror that he does not wish to accepts the
offer.
b) The offeree attempts to accept the offer but subject to certain
conditions.
c)The offerree makes a counter-offer.
Wrench offered to sell his farm to Hyde for 1000 pounds. Hyde replied
with a 'counter offer' of 950 pounds, which was refused. Hyde then said
that he was prepared to meet the original offer of 1000 pounds. It was
held that no contract had been formed. The counter-offer of 950 pounds
had the effect o rejecting Wrench's original offer.
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The defendants posted a letter in Cardiff on 1 October to the
plaintiffs in New York offering to sell them 1000 boxes of tinplates. On
8 October, the defendants posted a letter withdrawing the offer, which
was received by the plaintiffs on 20 October. However, on 11 October
the plaintiffs telegraphed their acceptance, which they confirmed by
letter posted on 15 October. It was held that a revocation takes effect
only when communicated to the offeree. The contract in this case came
into existence when the defendants' offer was accepted by the plaintiffs
on 11October. The letter of revocation was ineffective as it was received
after the acceptance was complete.
It is not necessary that the offeror himself should tell the offeree that
the offer has been revoked. The information may be conveyed by a
reliable third party.
If someone has started to perform the act requested in the offer, the
offer cannot be revoked.
A father bought a house for his son and daughter-in-law to live in.
The father paid a deposit of one-third of the purchase price and
97
borrowed the balance from a building society . He told his son and
daughter-in-law that if they paid the mortgage he would convey the
house to them when all the installments had been paid. The Court of
Appeal held that the father's offer could not be revoked provided the son
and daughter-in-law continued to make the mortgage payments.
4-If the offer is lapses. The offeror may stipulate that the offer is only
open for a limited period of time. Once the time limit has passed. Any
acceptance will be invalid. Even if no time limit is mentioned, the offer
will not remain open indefinitely. I must be accepted within a reasonable
time.
5- Death. If the offeror dies after having made an offer and the offeree
is notified of the death, any acceptance will be invalid. However, where
the accepts in ignorance of what has happened, the fate of the offer
seems to depend on the nature of the contract . An offer which involves
the personal service of the offeror clearly cannot be enforced, but other
offers may survive, be accepted and carried out by the deceased's
personal representatives. If the offeree dies, there can be no acceptance.
The offer was made to that person and no one else can accept.
Acceptance:
Once the presence of a valid offer has been established, the next
stage in the formation of an agreement is to find an acceptance of that
offer. The acceptance must be made while the offer is still open. It must
be absolute and unqualified.
Unconditional acceptance
If the offeree attempts to vary the terms offered, this will be treated
as a counter-offer. As we have already seen in Hyde v. Wrench this has
the effect of rejecting the original offer. A similar problem exists in '
battle of forms ' cases . This is where the offeror makes an offer on his
own pre-printed standard forms which contains certain terms, and the
offeree accepts on his own standard form which contains conflicting
terms.
Method of acceptance:
Felthouse v. Bindley
100
This case established the principle that the offeree's silence of failure
to act cannot constitute a valid acceptance. The rule has a particularly
useful application to the problem of 'inertia selling'. This is where a
trader sends unsolicited goods to a person's home, stipulating that if he
does not receive a reply within a specified time, he will assume that his
offer to sell the goods has been accepted and the indicated price is
payable. The Felthouse rules makes it clear that a recipient of goods in
these circumstances is not obliged to pay because his silence or inaction
cannot amount to an acceptance. Many people however, have paid up in
ignorance of the law.
Brogden had supplied the railway company with coal for many years
without benefit of a formal agreement. Eventually the parties decided to
put their relationship on a firmer footing. A draft agreement was drawn
up by the company's agent and sent to Brogden. Brogden filled in some
blanks, including the name of an arbitrator, marked it as 'approved, and
returned it to the company's agent who put it in his drawer. Coal was
ordered and supplied in accordance with the terms of the 'agreement'.
However, a dispute arise between the parties and Brogden refused to
supply coal to the company, denying the existence of a binding contract
between them. The court held that a contract had been concluded.
Brogden's amendments to the draft agreement amounted to an offer
which was accepted by the company either when the first order was
placed under the terms of the agreement or at the latest when the coal
was supplied. By their conduct the parties had indicated their approval
of the agreement.
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The offeror may state that the acceptance must be in a particular
form. It follows that the offeror' wishes should be respected. So if he
asks for an acceptance in writing, a verbal acceptance by telephone will
not be valid. Sometimes the offeror may say 'reply by return post', when
he really means 'reply quickly' and a telephone call would be acceptable.
Provided the chosen method of acceptance fulfils the intentions of the
offeror it will be binding.
Communication of acceptance
102
shareholder of the company. The contract to buy shares was formed
when the letter of allotment (acceptance) was posted.
The offeree must accept the offer as made, and not add any
conditions or terms. If a counter-offer is made the offer is terminated
and the offeror is under no obligation to honor the offer, even if at a later
date the acceptor wishes to accept the original terms. In effect, when a
counter-offer is made the acceptor is saying "I do not accept your offer,
will you accept my offer?" (see above mentioned Hyde v. Wrench case).
b) Acceptance
104
The general rules of acceptance apply when using the post, that is,
the acceptance must actually be received by the offeror. Howell
Securities v. Hughes (1974). However, if it can be clearly or reasonably
shown that the offer intended that it be sufficient for acceptance to be
posted, acceptance is effective as soon as it is placed in the post-box,
provided the letter is correctly addressed and properly stamped. It would
be considered a good acceptance if the letter was lost in the post and not
delivered to the offeror.( Household Fire Insurance Co. v. Grant.).
c) Revocation
CONSIDERATION
105
If a person promised to give you a 100 pounds as a gift at the end of
the month, the promise would not be enforceable, because it is a
gratuitous gift. It has not been supported by a promise from you.
c-) The promise must be more than a duty: It would not be good
consideration for a school teacher to promise a class that in return for
extra money would teach the best of his ability, because it is his duty to
teach in such a manner. IT may be , however, good consideration if the
teacher promised extra lessons after school hours, because this would be
outside his duty. In Stilk v. Myrick (1809) two seamen deserted their
ship, and the captain offered to share their wages between the rest of the
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crew if they brought the ship back to London. Stilk sued for his share
but the court held that he had not provided consideration as it was his
duty to work the ship back to London.
INTENTION
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As was shown when dealing with offer and acceptance, it is essential to
a contract that the parties intend to create legal relationships. The courts
presume that with business contracts the parties intend legal relations,
and if the parties intend otherwise it must be clearly expressed.
FORM
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While the majority of contracts may be made informally by word of
mouth or by implication the following contracts need to be made
formally to be effective.
Certain Acts of Parliament have laid down that the following contracts
must be in writing:
1-Contracts of guarantee
This Act covers any contract for the sale or other disposition of land
or any interest in land. The note or memorandum must contain the
following information:
CAPACITY
Generally, any person may make a contract, but the law sometimes
protects certain classes. In the main, where a person is denied full
contractual capacity, the aim is to protect and not to prohibit, and
difficulty in enforcing the contract is usually experienced by the party
with full contractual capacity.
This section deals with persons, both natural ( minors, drunks, mental
patients) and legal ( corporations) who have slightly less than full
capacity.
Minors
1- Binding contracts
The minor has full contractual capacity and may be enforced against,
as well as by, the minor for these contracts.
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A-contracts for necessaries, and
B- beneficial contracts of service.
A-Necessaries
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Included under this heading are contracts for training, education,
apprenticeship, and other similar contracts They are binding if , taken as
a whole, they are for the minor’s benefit.
2-Void contracts
The Infants Relief Act 1874 provided that the following contracts made
by a minor shall be void.
The effect of the Act is that is that a minor cannot be sued on the
contract, and goods or money which have been transferred to a minor
cannot be recovered by the other party. Iff, however, a minor obtained a
load or goods by fraud. E.g. claiming to be over 18, the courts may order
the property to be returned, or if sold to a thrd party, order the proceeds
of the sale to be returned. (Stocks v. Wilson)
3- Voidable contracts:
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All other contracts which are not binding or void on a minor are
voidable at the minor’s option. This means that the minor may force an
adult to perform the contract but it cannot be enforced against the minor.
If, however, a minor repudiates a contract which has been partly
performed by the other party, the minor will have to pay for the benefit
received. For example, if a minor contracted to rent a flat for six months
at 100 pounds per month, and after three months wished to end the
contract, he would be able to do so, but would have to pay 300 pounds
for the three month in which he lived in the flat. A minor who pays a
deposit on goods may not, after returning the goods, claim back the
deposit unless there has been a total failure of consideration. (Steinberg
v. Scala Ltd. )
1- they were so drunk or ill that they did not know what they were doing
and
2- the other party knew of their condition.
Corporations
GENUINENESS OF CONSENT
Mistake
Where one party sells goods, but the other party thinks he is buying
something different (Raffles v. Wichelhaus)
Courtier v. Hastie . A contract was made for the sale of corn which
was being shipped by sea. Unknown to the parties, the corn had begun
to perish and had been sold at a port en route. The court held that at the
time of making the contract the corn was not really in existence , having
already been sold.
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not be used because the lady had signed the kind of document she
intended to sign, it was the contents which were different.
There is a rule of law that no court action will arise from an illegal act.
If the contract requires either party to act against the law, the courts will
not help the guilty party. A contract may be illegal because it is :
a- forbidden by statute
b- against public policy.
The second type is more difficult, because in this instance the courts
consider that in the public interest the contracts should bot be enforced.
Examples of contracts considered to be against public policy are as
follows:
3- Immoral contracts
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b-Contracts for the sale of a business
A business may be sold on condition that the seller will not carry on
a similar business within a fixed time and/or distance. The courts are
more likely to uphold such agreements if they are considered reasonable
between the parties.
c- Solus agreements
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