case study contract law sample

• --> Login or Sign Up

Shop by Author

• Sabrineh Ardalan
• Robert Bordone
• Robert Clark

John Coates

• Susan Crawford
• Alonzo Emery
• Heidi Gardner
• Philip B. Heymann
• Howell E. Jackson
• Wendy Jacobs
• Adriaan Lanni
• Jeremy McClane
• Naz Modirzadeh
• Catherine Mondell
• Ashish Nanda
• Charles R. Nesson
• John Palfrey
• Bruce Patton

Todd D. Rakoff

• Lisa Rohrer
• Jeswald W. Salacuse
• James Sebenius

Joseph William Singer

• Holger Spamann
• Carol Steiker
• Guhan Subramanian
• Lawrence Susskind
• David B. Wilkins
• Jonathan Zittrain

Shop by Brand

• Howell Jackson
• Ashish Nanda and Nicholas Semi Haas

Chad M. Carr

• John Coates, Clayton Rose, and David Lane
• Ashish Nanda and Lauren Prusiner
• Ashish Nanda and Lisa Rohrer
• Ashish Nanda and Monet Brewerton
• View all Brands
• $0.00 - $2.00
• $2.00 - $4.00
• $4.00 - $6.00
• $6.00 - $8.00
• $8.00 - $10.00

Contracts & Transactions

• Published Old-New
• Published New-Old

Project Merchandise: An Introduction to Private Equity

Holger Spamann and Johnathan Robertson

Teaching Guide for Project Merchandise: An Introduction to Private Equity

Digital Currencies

Margaret E. Tahyar, Trevor I. Kiviat, Madison J. Roberts, and Suiwen Liang of Davis, Polk and Wardwell with assistance by Howell Jackson

The Case of the Smoking Tenant

Joseph William Singer and Esme Caramello

After the Sale (B)

After the Sale (A)

AmesCard Role Play Package

John Coates and Karina Shaw

The Case of Cross-Deputization

Joseph William Singer, Jeremy McClane, and Nicholas Price

Diego Primadonna Spanish Language Version

Robert Ricigliano

Sheila Heen

The Case of the Anti-Bacterial Toys

Wendy Jacobs and David Abrams

Zen & Kerry's

Robert C. Bordone

The Vineyard

Pandora's Box

Mark Freeman

Iqbal's Big Venture

Robert C. Bordone and Tobias C. Berkman

Scott R. Peppet and Melissa Bast

Diego Primadonna

Amity Island Focus Group

The Case of the Encumbered Employee

The Case of the Medical Stent

The Case of the Rent-Paying Tenant

David Grossman, Todd Rakoff, Joseph William Singer, with Chris Bates

The Case of the Lead Toys

Todd Rakoff and Joseph William Singer

• Find a Lawyer
• Ask a Lawyer
• Research the Law
• Law Schools
• Laws & Regs
• Newsletters
• Justia Connect
• Pro Membership
• Basic Membership
• Justia Lawyer Directory
• Platinum Placements
• Gold Placements
• Justia Elevate
• Justia Amplify
• PPC Management
• Google Business Profile
• Social Media
• Justia Onward Blog

Contracts Cases Outline

Contract law concerns the creation and enforcement of binding agreements between parties. Generally, the elements of a legally enforceable contract are assent, a valid offer, acceptance, and consideration. Most contract law concepts stem from common law, but some come from other sources, such as the universally adopted Uniform Commercial Code (UCC). Below is an outline of key cases in contract law with links to the full text of virtually every case, provided free by Justia.

• 2 Mutual Misunderstanding
• 4 Destroying an Offer
• 5 Option Contracts
• 6 Acceptance
• 7 Imperfect Acceptances
• 8 Consideration
• 9 Reliance and Promissory Estoppel
• 10 Contract Terms
• 11 Integrated Agreements
• 12 Conditions Precedent
• 13 Definiteness
• 14 Unconscionability
• 16 The Statute of Frauds
• 17 Breach of Contract
• 18 Anticipatory Repudiation
• 19 Excusing Conditions
• 20 Remedies

Assent binds parties in a contract. Assent is measured by the outward manifestations of the parties, rather than the inner, private, or secret intentions of the parties. Assent may be found when a reasonable person in the situation would have believed that there was assent, even if one party lacked subjective intent to be bound.

Lucy v. Zehmer 一 A contract is enforceable if one party reasonably believes that the other party has sufficient intent to enter into the agreement, even if the other party actually does not.

Leonard v. Pepsico, Inc. 一 Generally, an advertisement is not an offer. In evaluating whether an advertisement was an offer, a court will not consider the subjective intents or views of the parties, but what an objective, reasonable person would have understood.

Gleason v. Freeman 一 Whether a binding contract exists depends on the objective expressions of intent to be bound and the definitiveness of the terms of the agreement. When a party’s words create doubt as to their intent to be bound, a court will consider the situation and conduct of the parties under the circumstances. Continuing to negotiate an agreement’s terms may be evidence that the parties did not intend to be bound.

Mutual Misunderstanding

There is no mutual assent if the parties attach materially different meanings to their manifestations. However, the meaning attached by one party may control if that party does not know or have reason to know of a different meaning attached by the other and the other knows or has reason to know of the meaning attached by the first.

Raffles v. Wichelhaus 一 A contract is invalid if there is no meeting of the minds, as is the case when there is a mutual mistake.

An offer is a manifestation of assent by an offeror to an offeree that the offeror commits to a deal on specific terms and gives the offeree the power to assent to the terms and make a contract. If the so-called offeree knows that the so-called offeror does not intend to give the offeree the power to make a contract by simply accepting, there is no offer.

Lonergan v. Scolnick 一 An invitation for offers is not by itself an offer to form an enforceable contract.

Maryland Supreme Corp. v. Blake Co. 一 A mere price quotation and an invitation to enter into negotiations is not an offer, but whether an offer was made depends on the intention of the parties and the facts and circumstances of the case.

Sateriale v. R.J. Reynolds Tobacco Co. 一 An offer to enter into a unilateral contract may exist when an advertiser, in clear and positive terms, promises performance in exchange for something requested by the advertiser, and the recipient of the advertisement reasonably may conclude that acting in accordance with the request would form a contract. Advertisements may be offers when they invite the performance of a specific act without further communication and leave nothing for negotiation. If the offeror retains some discretion in performance, this does not preclude the existence of an offer.

Destroying an Offer

There are four general ways to destroy an offer: rejection or counteroffer, revocation, lapse, or death or incapacity. An offer may be effectively revoked if the offeree learns that the offeror no longer intends to keep the offer open, even if the offer is not expressly revoked. An offer may lapse after a reasonable period of time, depending on the circumstances surrounding the offer.

Dickinson v. Dodds 一 A promise to keep an offer open for a certain period of time is not binding without the consideration and acceptance necessary to form a binding agreement. One cannot accept an offer when they have knowledge that the offeror’s mind is no longer in agreement, even if the offeror did not expressly retract the offer.

Minnesota Linseed Oil Co. v. Collier White Lead Co. 一 An acceptance must be made within a reasonable time after an offer is received, as defined by the circumstances of the case.

Option Contracts

An option contract is a promise that the offeror’s right to revoke their offer will be limited, usually by a period of time. An offer is generally binding as an option contract if it is in writing and signed by the offeror, includes purported consideration, and proposes an exchange on fair terms within a reasonable time. (An offer may also be binding as an option contract if it is made irrevocable by statute.)

Beall v. Beall 一 An option agreement must be supported by consideration to be binding. Otherwise, it is a mere offer to sell, which may be revoked at any time before acceptance. However, an option may be binding if it is accepted within the time limit and before the offer is withdrawn.

Board of Control of Eastern Michigan University v. Burgess 一 One dollar may be valid consideration for an option to purchase land, so long as the dollar is paid or tendered. Written acknowledgment of receipt of consideration merely creates a rebuttable presumption of consideration. If an option contract fails for lack of consideration, the underlying offer will not be affected. However, the underlying offer may then be revoked at any time.

An offeree exercises their power to create a contract by accepting an offer. An offeree usually has a reasonable period of time to accept an offer, unless the offer specifies a time limit. Conduct by both parties recognizing the existence of a contract may be sufficient to show an agreement, even if the moment when a sufficient agreement was formed cannot be determined.

La Salle National Bank v. Vega 一 There is no offer when the so-called offer is not intended to give the so-called offeree the power to make a contract. A contract may dictate certain requirements for acceptance and may specify the mode of acceptance required.

Ever-Tite Roofing Corp. v. Green 一 If the time limit to accept is not specified in the offer, it is within a reasonable period of time. What constitutes a reasonable period of time is determined by the nature of the proposed contract, usages of business, and other relevant circumstances that the offeree knows or has reason to know at the time of acceptance.

Maryland Supreme Corp. v. Blake Co. 一 Conduct by both parties recognizing the existence of a contract may be sufficient to show an agreement, even if the moment when a sufficient agreement was formed cannot be determined. In addition to any contractual language, usage of trade, course of dealing and performance, and general circumstances may be used to determine the terms of the parties’ agreement.

Hendricks v. Behee 一 A valid contract is only formed when acceptance of the offer is communicated to the offeror. Similarly, a revocation is only effective when it is communicated to the offeree before acceptance. Communication of acceptance of a contract to an agent of the offeree does not bind the offeror. However, when an agent of the offeree obtains notice that the offer was withdrawn, that notice is binding upon the offeree.

Adams v. Lindsell 一 Under the mailbox rule, an offer is accepted when the acceptance is put into the mail by the offeree.

Carlill v. Carbolic Smoke Ball Co. 一 An advertisement may be an express contractual promise to pay when evidence of the advertiser’s sincerity, such as a deposit of the reward in a bank, would lead a reasonable person to think that they had the power of acceptance. Acceptance of such an offer may be made by performance, and no prior notice of the acceptance is required.

Marchiondo v. Scheck 一 An offer that invites acceptance by performance, which does not also invite acceptance by promissory acceptance, may not be revoked after performance has begun. Beginning performance effectively creates an option contract conditional on completed performance in accordance with the offer’s terms.

Imperfect Acceptances

Imperfect acceptances (or implied rejections) may take the form of counteroffers, acceptances with conditions, or responses containing new terms. Under the mirror image rule, acceptance generally must be coextensive with the offer and may not include additional terms or conditions. The mirror image rule is different for transactions falling under Section 2-207 of the UCC.

Gresser v. Hotzler 一 Under the mirror image rule, acceptance must be coextensive with the offer and may not introduce additional terms or conditions. Immaterial variations included in an acceptance will not hinder contract formation. However, a material term or condition introduced in the acceptance may preclude contract formation.

Diamond Fruit Growers, Inc. v. Krack Corp. v. Metal-matic, Inc. 一 Under UCC Section 2-207, a common-law counteroffer containing different or additional terms operates as an acceptance if the responding form includes a definite and seasonable expression of acceptance. Between merchants, such terms become part of the contract unless the offer expressly limits acceptance to its terms, the terms materially alter the contract, or a party objects to the terms. If the definite and seasonable expression of acceptance is expressly conditioned on assent to the different or additional terms, a contract is not created unless the offeror assents to the new terms. If the conduct of the parties recognizes the existence of a contract, but the offeror does not assent to the new terms, only the terms on which the parties’ forms agree will remain, and any other terms may be replaced with UCC terms.

Klocek v. Gateway, Inc. 一 Additional terms included with a product do not become part of a contract if the purchaser is not a merchant, unless the purchaser expressly agrees to them.

Hancock v. American Telephone & Telegraph Co., Inc. 一 Clickwrap agreements, which require a computer user to consent to terms and conditions by clicking on a dialog box, are typically upheld when they were clearly presented to the consumer, and the consumer had an opportunity to read the agreement and unambiguously accepted the terms.

Consideration

Consideration may be virtually anything for which one would bargain in exchange for a promise. Consideration may be a return promise, some kind of property, an affirmative action, or the forbearance of a legal right. Usually, consideration is a return promise. A contract will be unenforceable if it lacks consideration or an adequate substitute.

Reed v. University of North Dakota 一 Surrender of a legal right by signing a release form in exchange for participation may constitute consideration.

McCormick v. Dresdale 一 The forbearance of a legal right may qualify as valid consideration for a settlement agreement, but claims forgone that were false and made in bad faith may not constitute valid consideration.

Kirksey v. Kirkse y 一 A mere gratuitous promise without consideration is not enforceable, even if the promisee reasonably relied upon the promise and incurred a detriment.

Hamer v. Sidway 一 The forbearance of a legal right may still be valid consideration even if such forbearance benefited the promisee and did not benefit the promisor.

Schnell v. Nell 一 Consideration of one cent, which is clearly nominal, cannot support an exchange of $600. Furthermore, a moral consideration cannot support a promise, nor will a compromise of a legally groundless claim. Past services, love, and affection cannot be legal consideration for the promise to pay money to a third person.

Hooters of America, Inc. v. Phillips 一 There is no consideration if a return promise is in fact illusory. An illusory promise is one that makes performance optional and is, therefore, no promise at all. A promise to arbitrate when one party retains the right to modify or terminate the agreement, thereby creating an imbalance of obligation, is an illusory and unenforceable promise.

Alaska Packers’ Ass’n v. Domenico 一 There is no consideration when a party refuses to perform that which they are already bound to perform until the other party agrees to increased compensation for that same performance.

Angel v. Murray 一 A contract modification is generally unenforceable without additional consideration, and a promise to perform a pre-existing duty is not valid consideration. However, if the parties voluntarily and in good faith agree to a modification, it may be enforced without additional consideration if it is made to fairly and equitably address unexpected or unanticipated circumstances that arise during performance.

Reliance and Promissory Estoppel

When a promisee reasonably and foreseeably relies on a promise to their detriment, the promise is enforced to avoid injustice. Similarly, when an offeror should reasonably expect to and does in fact induce the offeree’s substantial action or forbearance before acceptance, a binding option contract may be enforced to the extent necessary to avoid injustice.

Ricketts v. Scothorn 一 When a promisee alters their position for the worse in reliance on a promisor’s promise, and the promisor should have expected that alteration as a reasonable and probable consequence of their promise, the promise may be enforced under the doctrine of equitable estoppel.

Dixon v. Wells Fargo Bank, N.A. 一 It is not necessary that there be an intent to mislead or deceive for an otherwise unenforceable contract to be enforced under the doctrine of promissory estoppel. Instead, under the circumstances, it must be unjust to allow one party to walk away from the natural or reasonably anticipated detrimental consequences of their representations or conduct when they take advantage of or string along another party. In such cases, pre-contractual liability should be limited to reliance expenditures.

Salsbury v. Northwestern Bell Telephone Co. 一 For reasons of public policy, charitable subscriptions should be binding even if there is no consideration or detrimental reliance.

Contract Terms

Contracts may contain both express and implied terms. If a dispute arises because contract language is ambiguous, a court may consider evidence other than the language contained therein, such as the circumstances surrounding the contract. Courts sometimes infer contract terms by examining circumstances such as course of performance, course of dealing, and usage of trade.

Threadgill v. Peabody Coal Co. 一 A party may be bound by trade usage if they had actual knowledge of the trade usage, or if the trade usage was so well established as to suggest constructive knowledge. When a party has not expressly agreed to be bound by trade usage, it may only be binding if it is reasonable, generally meaning that the usage must not be illegal or violative of public policy.

Wood v. Lucy, Lady of Duff-Gordon 一 An implied promise may exist when a contract’s express terms lack mutuality of obligation.

Billman v. Hensel 一 Financing clauses impose an implied obligation to make a reasonable and good-faith effort to satisfy the condition. A promisor cannot be excused from performance because of a condition precedent when they prevented the performance of the condition themselves.

Locke v. Warner Bros., Inc. 一 A contract that gives one party discretion affecting the rights of the other party imposes a duty to exercise that discretion in good faith and in accordance with fair dealing. In cases of subjective satisfaction, so long as dissatisfaction is asserted in good faith, it does not matter whether such dissatisfaction is reasonable.

Traders Bank v. Dils 一 Generally, there is no fraud when a promise is not performed, but an exception exists when the device used to accomplish the fraud is the promise itself. Fraudulent inducement is based on a party’s fraudulent representation of their intention to perform, rather than a breach of the agreement to perform.

Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp. 一 When a contract term is in dispute, a court will consider the language of the contract; definitions of the term from other sources, such as dictionaries and regulations; the circumstances surrounding the agreement, including preliminary negotiations; trade usage; and course of performance. A court will also consider whether one party knew or should have known how the other party interpreted the contract.

Random House, Inc. v. Rosetta Books LLC 一 Contract language is ambiguous if a reasonably intelligent person who has considered the context of the agreement and applicable customs, practices, usages, and terminology could objectively interpret the language in more than one way. If contract language is ambiguous, a court will consider extrinsic evidence to interpret it. If contract language can most reasonably be read to convey one certain meaning, the party wishing to deviate from that interpretation bears the burden of negotiating for language expressing that deviation.

Integrated Agreements

Only a binding, completely integrated agreement discharges prior agreements to the extent that they are within its scope. An agreement is not completely integrated if it omits a consistent, additional agreed term either agreed to for separate consideration or naturally omitted under the circumstances.

Trident Center v. Connecticut General Life Ins. Co. 一 There is no prohibition against the use of parol evidence in interpreting contracts under California state law, no matter how thoroughly they appear to be integrated.

Mitchill v. Lath 一 An oral agreement may alter a written contract if it is a collateral agreement, it does not contradict express or implied provisions of the written contract, and it is one that parties would not ordinarily include in the written contract. An oral agreement may not alter a written contract if it is closely related to the subject of the written agreement.

Masterson v. Sine 一 Parol evidence may not be used to add to or alter the terms of an integrated agreement. To determine whether a written contract was an integration, meaning a complete and final embodiment of the terms, a court will consider whether the parties intended their writing to serve as the exclusive embodiment of the agreement. If an agreement is only partially integrated, parol evidence can be used to prove elements of the agreement that are not reduced to writing.

Luther Williams, Jr., Inc. v. Johnson 一 The parol evidence rule does not prevent a court from admitting testimony concerning an oral condition precedent. Parol testimony concerning an oral condition precedent is admissible when the contract is silent on the matter, the testimony does not contradict the writing, and it may be inferred under the circumstances that the parties did not intend the writing to encompass their entire agreement.

In re Soper’s Estate 一 When contract language is ambiguous not on its face, but when practically applied, parol evidence is admissible to determine the parties’ intent.

Conditions Precedent

If parties include a condition precedent in their agreement, the performance obligations to which the condition precedent applies will not become due until the condition precedent is satisfied.

Luttinger v. Rosen 一 A contract is not binding if a condition precedent, meaning a fact or event that the parties intend must exist or take place before performance, is not met.

Dove v. Rose Acre Farms, Inc. 一 An employer may not be obligated to perform under a bonus contract until the employee has satisfied all required conditions, even if those conditions seem especially strict.

Evans, Mechwart, Hambleton & Tilton, Inc. v. Triad Architects, Ltd. 一 A pay-when-paid provision operates only as a timing mechanism, while a pay-if-paid provision operates as a condition precedent that may discharge the duty to pay if the parties clearly intended to create such a condition precedent.

Definiteness

A contract may be unenforceable if a material term of the agreement is too indefinite. A contract will not fail for indefiniteness if the parties intended to make a contract, and there is a reasonably certain basis for giving an appropriate remedy.

Varney v. Ditmars 一 The words “fair” and “reasonable” may be definite enough to be enforceable, depending on the circumstances of the case, especially when they are used synonymously with “market value.” However, such words may be too indefinite to be enforceable when their meaning cannot be determined with a reasonable degree of certainty under the circumstances.

Community Design Corp. v. Antonell 一 An uncertain contract may nevertheless be enforceable when one party benefits from another party’s performance. A jury may properly determine the exact terms of such a contract.

Walker v. Keith 一 An agreement to agree, even in a renewal option, is not enforceable. Only option contracts that specify all the material terms with substantial certainty and leave nothing to be agreed upon in the future are enforceable.

Moonlenaar v. Co-Build Companies, Inc. 一 If a renewal clause leaves rent to be determined by a subsequent agreement, it is implied that the new rent will be “reasonable” or the “fair market” value, and is thus specific enough to be enforceable. Parol evidence may be used to explain the implicit term and show what the parties intended. There may be additional reason to enforce a renewal option when a party has already paid valuable consideration, such as higher rent.

Unconscionability

A contract may be unenforceable for unconscionability in certain circumstances. A court may consider such factors as the relevant bargaining power between the parties, their relationship, the ability of the accepting party to review and understand the contract before signing, and whether the terms unreasonably favored one party.

Williams v. Walker-Thomas Furniture Co. 一 Unconscionability, including an absence of meaningful choice on the part of one of the parties together with contract terms unreasonably favorable to the other party, may be a valid defense to the enforcement of a contract.

Vernon v. Qwest Communications Int’l, Inc. 一 In Colorado, a contract is unconscionable if it is both substantively and procedurally unconscionable. Relevant factors include unequal bargaining power, lack of opportunity to read the document before signing it, use of fine print, an absence of evidence that the provision was commercially reasonable, the terms of the contract, the relationship of the parties, and the circumstances surrounding the formation of the contract.

A contract may be rescinded when a mistaken belief related to a basic assumption of both parties materially affects the agreed performance. However, rescission may not be appropriate when the party challenging the contract has assumed the risk of loss related to a mistake.

Estate of Nelson v. Rice 一 A party bears the risk of mistake when they are aware at the time of contracting that they have only limited knowledge of the facts to which the mistake relates but treat such knowledge as sufficient. One who is consciously ignorant may be said to have assumed the risks associated with that ignorance.

Grenall v. United of Omaha Life Ins. Co. 一 A decedent’s unilateral mistaken belief that they were in good health when purchasing an annuity is not a valid basis to rescind the contract. The burden of such a risk is reasonable because it is an inherent part of a life annuity contract.

The Statute of Frauds

The statute of frauds provides that certain agreements are not enforceable without a written document signed by the party against whom enforcement is sought. Agreements that fall under the statute of frauds include contracts not performed within one year of the making of the contract, contracts for the sale of goods worth $500 or more, and contracts involving an interest in land.

Radke v. Brenon 一 A letter written to offer land for sale is sufficient to satisfy the Minnesota statute of frauds. Under the statute, a note or memorandum may be sufficient evidence to enforce an oral contract so long as the writing expresses consideration, is signed by the selling party or their lawful agent authorized in writing, and states expressly or by necessary implication the parties to the contract, the land involved, and the general terms and conditions of the sale. When all the evidence clearly indicates that an oral contract was made, a court may overlook technical requirements that would otherwise lead to an outcome contrary to the statute's purpose.

DF Activities Corp. v. Brown 一 There is an exception to the UCC's statute of frauds when the party against whom enforcement is sought admits in court that an oral contract for sale was made. However, once one party has submitted a sworn statement denying the existence of a contract, the other party cannot continue a lawsuit under the exception, hoping that the first party will perjure themselves.

McIntosh v. Murphy 一 A court has discretion to ignore the statute of frauds to avoid injustice, especially considering the doctrines of part performance and equitable estoppel.

Breach of Contract

Once a party breaches a contract, the other party has the right to sue for damages. If the breach is material, the party may have the right to suspend their own performance while pursuing damages. A breach is not material if there was substantial performance of the contract.

Kingston v. Preston 一 If a condition precedent is not met by one party, the other has no duty to perform, since their obligation to perform does not arise until the condition is satisfied.

Jacob & Youngs, Inc. v. Kent 一 Parties are obligated to fully perform under their contracts, but a trivial and innocent omission may sometimes be excused to the extent that damages may be limited to the difference in value between the performance bargained for and the actual performance, rather than the cost of replacement.

Anticipatory Repudiation

Anticipatory repudiation occurs when one party unequivocally manifests their intention not to perform their contractual obligations before they become due. Generally, an aggrieved party may await performance for a reasonable period of time or pursue a remedy for the breach.

Hochster v. De La Tour 一 Once a party repudiates their contractual obligations, the other party has the right to sue under the contract, even if performance has not yet become due.

Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp. 一 If one party reasonably believes that the other will commit a breach by non-performance, they have the right to demand adequate assurance of future performance. This UCC principle is equally applicable under New York common law.

Excusing Conditions

Certain conditions may excuse a party from performing their contractual obligations. Under the doctrine of impossibility, a party may generally be excused from performance if performance becomes impossible or impracticable due to no fault of their own. Under the doctrine of frustration of purpose, a party may be excused from performance if their principal purpose for contracting is substantially frustrated by no fault of their own.

Acme Markets, Inc. v. Federal Armored Express, Inc. 一 If the non-occurrence of a condition would cause a disproportionate forfeiture, a court may excuse the non-occurrence so long as the condition was an immaterial part of the agreement. To determine whether a forfeiture is disproportionate, a court must weigh the extent of the obligee’s forfeiture against the importance of the risk against which the obligor sought to protect and the degree to which that protection would be lost if the non-occurrence was excused.

Alderman v. Davidson 一 A party’s waiver of their right to enforce one provision of a contract may waive their right to enforce another provision if their waiver intended such a consequence as indicated by their conduct. Even if the party did not intend to waive their right, they may be estopped if their conduct induced the other party into reasonably believing that strict compliance was not necessary.

Zwick v. Lodewijk Corp. 一 A clause in a lease providing that a lessor’s failure to act on any default does not waive the right to declare a default is not effective. A non-waiver provision may be considered evidence of non-waiver, but it itself can be waived. Additionally, the statute of frauds does not bar an oral modification to extend the time for performance, including payment.

Taylor v. Caldwell 一 Impossibility may excuse a borrower or bailee from returning a bailed item if performance becomes impossible because the item has perished, so long as the impossibility is not due to the fault of the borrower or bailee.

Hewitt v. Biscaro 一 Only a governmental order or promulgation of a governmental regulation rises to the level of an event that may excuse performance based on impracticability. A verbal instruction is insufficient. A party may not assert that a condition excuses them from performance if the attempt to avoid performance is not made in good faith and in accordance with fair dealing.

Route 6 Outparcels, LLC v. Ruby Tuesday, Inc. 一 When parties define the contours of a force majeure provision, such contours dictate its application, effect, and scope. A party may not use a force majeure clause to excuse their non-performance when they expressly limited the clause to events beyond the control of the non-performing party. While a global economic downturn is not within a party’s control, their decisions regarding how to cope with the downturn are.

Krell v. Henry 一 When a party’s purpose for contracting is frustrated by the non-occurrence of a condition, the occurrence of which was a basic assumption of the contract, the party’s duties may be discharged so long as the non-occurrence was not their fault.

Remedies for breach of contract protect each party’s expectation interests, reliance interests, and restitution interests. Parties often include liquidated damages provisions in their contracts, under which they agree on damages in event of a breach ahead of time. Parties are also entitled to limit available remedies by including provisions such as damages caps.

Carr-Gottstein Properties v. Benedict 一 A liquidated damages provision is valid when actual damages would be difficult to calculate, so long as the agreed amount is a reasonable forecast of likely damages and not so disproportionate an amount as to be punitive in nature.

O’Brian v. Langley School 一 A party opposing a liquidated damages provision may be entitled to conduct discovery to prove that the provision is an unenforceable penalty.

Nohe v. Roblyn Development Corp. 一 A court has discretion to compare the damages fixed in a liquidated damages provision to actual damages and choose not to enforce the liquidated damages provision if the difference between the provision and actual damages is unreasonable.

Ash Park, LLC v. Alexander & Bishop, Ltd. 一 When a contract for the sale of land is breached, a court has discretion to order specific performance, regardless of whether it is demonstrated that a legal remedy would be inadequate.

Reed Foundation, Inc. v. Franklin D. Roosevelt Four Freedoms Park, LLC 一 A court may order specific performance even if this would offend aesthetic considerations.

i.Lan Systems, Inc. v. Netscout Service Level Corp. 一 Specific performance may be appropriate when goods are unique or irreplaceable as a practical matter, but specific performance may not be appropriate when it is the contract itself that is unique, rather than the goods.

Grossinger Motorcorp, Inc. v. American National Bank and Trust Co. 一 A liquidated damages provision is only enforceable if the parties intended to agree to settle monetary damages in advance. Therefore, an optional liquidated damages clause is unenforceable because it shows that the parties did not have the necessary intent.

Groves v. John Wunder Co. 一 When a construction contract is breached, the correct measure of damages is the cost of remedying the defect, rather than the difference in value between the land as it was before the contract was made and the land as it would have been had the contract been performed.

Peevyhouse v. Garland Coal & Mining Co. 一 A breach of contract claim cannot give rise to a damages award so substantial that it results in economic waste. If a breach is merely incidental to the main purpose of the contract, and the economic benefit that would result from full performance would be grossly disproportionate to the cost of performance, damages may be limited to the diminution in value to the premises due to the non-performance.

Parker v. Twentieth Century-Fox Film Corp. 一 The measure of damages for wrongful discharge is the salary that the employee would have earned, minus the amount that the employer affirmatively proves that the employee has earned or with reasonable effort might have earned from other employment. However, the employer must show that the other employment was comparable or substantially similar to the job from which the employee was discharged.

R.R. Donnelley & Sons Co. v. Vanguard Transp. Systems, Inc. 一 A non-breaching party’s duty to mitigate damages is suspended when they reasonably rely upon the breaching party’s assurances that they would correct the issue. When reliance is not reasonable, a non-breaching party retains their duty to mitigate, even though the breaching party could conceivably cure the breach.

Hadley v. Baxendale 一 Damages for breach of contract may be any damages naturally arising from the breach or any damages that the parties could have reasonably contemplated at the time when the contract was made.

Manouchehri v. Heim 一 The measure of direct damages for breach of warranty is the difference between the value of the goods as warranted and the value of the goods actually delivered. This value may reasonably be approximated by the cost to repair the goods. In instances in which goods are irreparable or non-replaceable, a court may use other proper grounds to approximate the value.

This outline has been compiled by the Justia team for solely educational purposes and should not be treated as an independent source of legal authority or a summary of the current state of the law. Students should use this outline as a supplement rather than a substitute for course-specific outlines.

Last reviewed August 2023

US Law Schools Contents   

• US Law Schools
• Administrative Law
• Advanced Torts
• Antitrust Law
• Arbitration Law
• Business Organizations
• Civil Procedure
• Constitutional Law
• Criminal Law
• Criminal Procedure
• Employment Law
• Entertainment Law
• Environmental Law
• Federal Courts
• First Amendment
• Immigration Law
• Intellectual Property
• International Law
• Local Government Law
• Professional Responsibility
• Real Estate Transactions
• Securities Law
• Trusts and Estates
• Connecticut
• Massachusetts
• Mississippi
• New Hampshire
• North Carolina
• North Dakota
• Pennsylvania
• Puerto Rico
• Rhode Island
• South Carolina
• South Dakota
• Washington, D.C.
• West Virginia
• Law Professors Blogs
• Writing a Law School Outline
• Studying for a Law School Exam
• Paying for Law School
• US Law Schools FAQ
• Bankruptcy Lawyers
• Business Lawyers
• Criminal Lawyers
• Employment Lawyers
• Estate Planning Lawyers
• Family Lawyers
• Personal Injury Lawyers
• Estate Planning
• Personal Injury
• Business Formation
• Business Operations
• International Trade
• Real Estate
• Financial Aid
• Course Outlines
• Law Journals
• US Constitution
• Regulations
• Supreme Court
• Circuit Courts
• District Courts
• Dockets & Filings
• State Constitutions
• State Codes
• State Case Law
• Legal Blogs
• Business Forms
• Product Recalls
• Justia Connect Membership
• Justia Premium Placements
• Justia Elevate (SEO, Websites)
• Justia Amplify (PPC, GBP)
• Testimonials

Contract Law Cases: 21 Leading Case on the Law of Contract

In today’s post, I will be sharing a list of some of the leading cases on contract law. This is basically to help scholars, lawyers and law students all of the world, find contract law cases so as to enable them consolidate their legal arguments, articles and points in law examinations. If you have been searching for cases to fortify your points in any matter that concerns contract, then search no further. Trust me; this article contains almost all the leading cases on the law of contract.

Nonetheless, before I move to the crux of this article, I would like to share some of basic information about the law of contract with you. This is also very pertinent because it will help you to understand the cases that will be mentioned here wholesomely. So what is a contract?

MUST READ: 10 Differences between military and democratic government

Table of Contents

What is a contract?

Contract has been given different definitions by different people. According to Sir Fredrick Pollock , A contract is a promise or set of promises which the law will efforce. More so, the American Law Institute gave an elaborate definition in their paper titled “ Restatement of American Law: Contracts ” when they defined contract as “ a promise or set of promises, the breach of which the law gives a remedy, or performance of which the law in some way recognizes as a duty.” 

In my view, “a contact is an agreement giving rise to obligations which are enforced or recognized by law”. Conversely, it should be noted that while every contract is ultimately an agreement, it is not every agreement that is a contract.

Characteristics of a contract

Below are some of the characteristics of a binding contract:

• There must be an offer and acceptance (the agreement)
• There must be an intention to create legal relations
• There is a requirement of written formalities in some cases
• There must be consideration (Except if the agreement is under seal)
• The parties must also have the capacity to contact
• There must be genuineness of consent by the parties to the terms of the contract
• The contract must not be contrary to public policy

Also read : Fundamental human rights in Nigerian Constitution and cases

Classification of Contract

Basically, contract is classified into Simple contract or Formal contract. The two classifications of contract will be explained explicitly below:

Simple contract:

A simple contract is also called an informal contract. It is a contract, whether writen or oral, which is not under seal. It can also be implied from the conduct of parties. Simple contract are not binding except there is consideration. In a simple or informal contract, only a party who has furnished consideration can bring an action to enforce the contract.

Formal contract:

On the other hand, a formal contract is a contract which is reduced to writing, singed by parties contracting and impressed with a seal. It is also called a specialty contact or a deed. The basic features of a formal contract is to that it must be signed, sealed and delivered. These actions constitute the execution of a deed.

Now that you known what a contract is, the various types of contract and the characteristics of a contract, we will now see some of the leading cases in contract law.

Contact law cases

Below are some of the cases in the law of contract:

Carlill v Carbolic Smoke Ball Co

Andrews v hopkinson, fisher v bell, spencer v harding, central london property trust ltd v high trees house ltd, brodgen v metropolitan railway co., lampleigh v braithwaite, roscolar v thomas, stevenson v mclean, eastwood v kenyon, white v bluet, combe v combe, dela bere v pearson, read v dean, bournemouth athletic football club ltd v manchester united football club, tinn v hoffman & co, couturier v hastie.

• Dunlop Pneumatic Tyre Co Ltd v Selfridge

Griffith v Brymer

Darkin v lee, startup v macdonald.

Yeah! Those are some of the leading cases in contract law. Nevertheless, as we continue, will be sharing with you the case summary of each of the cases mentioned in the list above with their citations. I enjoin you to read painstakingly so that you will achieve your purpose for reading this work. Now, below is the case summary of the leading cases in the law of contract.

MUST READ: Problems facing the legal profession in Nigeria: 5 cogent solutions

Citation : [1893] 1 QB 256

The case of Carlill v Carbolic Smoke Ball Co is a good illustration of a unilateral contract. In this case, the defendant were proprietors of a medical preparation called “ The Carbolic Smoke Ball” . They advertised in various newspapers and magazines offering to pay €100 to any person who contracted influenza after using the ball three times a day for two weeks.

They added that they had deposited €1,000 at the Alliance Bank, Regent Street, to show their sincerity in the matter. The plaintiff, a lady, used the ball as was advertised and was attacked by influenza. She sued for €100 and the company agured that there was no intention to create legal relations.

The court held in favor of the plaintiff and said that the fact that €1,000 was deposited at the Alliance Bank, shows that there was an intention to create legal relations.

Citation: [1956] 3 All ER 422

The case of Andrews v Hopkinson is one of the contract cases that explains where a collateral contract will fail with the main contract. Apparently, a collateral contract is a preliminary contract which is usually oral and forms the reason or the inducement for the making of another related contract.

In the case of Andrews v Hopkinson, the collateral contract failed with the main contract. Here, a dealer said to the plaintiff, “ It is a nice little bus, I would stake my life on it. You will have no trouble with it. ” The plaintiff entered into a written hire-purchase contract with a finance company. The car was not roadworthy. The court held that the dealer was liable.

Also read : Richest lawyers in Ghana: Top 5

Citation: [1960] 3 All ER 731

The case of Fisher v Bell is a contract case that is usually used to explain the difference between an invitation to treat and an offer. In this case, the respondent, shopkeeper, displayed a knife with a price tag. He was charged for offering to sale a knife contrary to section 1(1) of the Restriction of Offensive Weapons Act 1959 .

The question that arose for determination in court was whether the display of this knife constituted an offer for sale within the meaning in the Restriction of Offensive Weapons Act 1959. It was held by the Court of Appeal that the display was an invitation to offer and so the shopkeeper was not liable.

Citation: [1870] LR 5 CP 561

In Spencer v Harding, the defendant sent out circulars inviting tenders to buy stock. The Plaintiff claimed that the circular was an offer to sell the stock to the highest bidder and that they had sent the highest bid which the plaintiff had refused to accept.

The court held that the circular was an invitation to treat and not an offer. Wiles J said thus: “ It is a mere attempt to ascertain whether an offer can be obtained within such a margin as the seller are willing to accept.”

Citation : [1947] KB 130

The case of Central London Property Trust Ltd v High Trees House Ltd is also one of the leading cases in the law of contract. This case changed the former rule of law in pinnel’s case. The case is usually referred to as the High Trees case or principle of Equitable Estoppel.

In Central London Property Trust Ltd v High Trees House Ltd, the plaintiff least a block of flat to the defendant at a rent of €2,500 per annum in September 1939. In January 1940 the plaintiff agreed in writing to reduce the rent by half because of war condition which had caused many vacancies in the flats. No express limit was set for the operation of this reduction.

From 1940 to 1945 the defendant paid the reduced rent. In 1945, the flats became fully occupied again. The plaintiff’s company then claimed the full rent, suing for rent at the ordinary rate for the last two quarters of 1945.

It was held by Lord Denning that, as agreement for the reduction of rent had been acted upon by the defendants, the plaintiff were estopped in equity from claiming the full rent from 1941 until early 1945 when the flats were fully let.

Also read: Defences to strict liability in tort: 5 Defences A Defendant Can claim

Citation: [1877] 2 AC 666

This is one of the contract cases that is offen cited to backup the rule that a contract can be made by conduct. In this case, Brodgen had for many year supplied the defendant company with coal without a formal contract. Brodgen then suggested that the relationship be regularised through a formal contract. Metropolitan’s agent sent a draft agreement to Brodgen who inserted an Arbitrator’s name in the space provided for it, signed it and wrote it away in his drawer and nothing further was done to complete its execution.

Both parties acted on the strength of the terms contained in the draft, supplying and paying for the coal in accordance with its clauses until a dispute arose and Brodgen denied that any binding contract existed between them. The house of Lord’s held that a contract arisen by conduct.

Citation : [1615] Hob 105

In this case, the defendant, Braithwaite, had killed Patrick Mahume. He then requested the plaintiff to do all he could to obtain a royal pardon for him from the king. To this end, the plaintiff exerted himself and undertook a lot of journeys to and from London, incurring certain expenses.

He succeeded in obtaining the pardon and the defendant promised to pay him the sume of €100 for his trouble and expenses. It was held that the plaintiff was entitled to the sum as his services were procured at the defendant’s previous request an in circumstances in which it was responsible to expect that payment would be made for the services. Accordingly, there was consideration for the defendant’s promise.

Also read : Nigerian leading cases on frustration of contract

Citation: [1842] 2QB 234

To wholesomely discuss past consideration as a topic in the law of contract, the case of Roscolar v Thomas must be mentioned. In this case, the plaintiff bought a horse from the defendant. After sometime, the defendant promised the plaintiff that it was a sound horse, free from vice. The horse was in fact a vicious horse. The plaintiff sued the defendant for breach of promise.

It was held that the action will fail. If the promise had been given at the time of the sale, it would have been supported by consideration, but since it was given after the sales had taken place, the consideration which the plaintiff furnished was past and he had furnished no new consideration for the defendant’s promise.

Citation: [1880] 5 QBD 346

In Stevenson v McLean, the defendant offered on a Sunday to sell the plaintiff some quantity of iron. The offer was left open till close of business on Monday. On Monday, the plaintiff telegraphed ro ask for information. On that same Monday, at 10:00am, the defendant received a telegram but didn’t reply it. On that same day, the plaintiff accepted the original offer at 1.34pm. At 1.25pm the defendant revoked the offer by telegram. At 1.46pm the plaintiff received telegram of revocation.

On hearing the matter, the court held that the plaintiff first telegram was not a counter offer but a mere inquiry, so that the offer was still open when the plaintiff accepted it. The plaintiff had accepted the offer before the defendant’s revocation was communicated to him.

Citation: [1840] 11 Ad & El 438

Eastwood v Kenyon is the case in contract that is used to explain that moral obligation does not amount to consideration. In this case, the death of John Sutcliff left his infant daughter as his sole heiress. The plaintiff, as the girl’s guardian, spent money on her education and for the benefit of the estate, and the girl, when she came of age, promised ro reimburse him.

She then married the defendant, who also promised to pay. The plaintiff sued the plaintiff on this promise and the court dismissed the action, reiterating the rule that moral obligation does not amount to consideration. The court noted that if the notion is accepted it would destroy the requirement of consideration as the law requires an additional element to the defendant’s promise. That element is consideration and it cannot be a mere moral obligation.

Citation: [1853] 23 LJ Ex 36

The case of White v Bluet explains the position that consideration in contract need not to be adequate by sufficient. In this case, a sun owned his father a sum of money. Subsequently, the sun harassed his father with frequent complaints about the way his father distributed his wealth among his children which was unfavorable to him.

The son then alleged that his father promised him that if he would stop complaining, he (the father) would discharge him from the debt and he stopped. The question before the court was whether this action of the son constituted consideration for the father’s promise. The court held that it did not because:

The father had a right to distribute his property in any manner he liked and so the son had no right to complain in the first place.

The son had no right to complain; thus is abstaining from doing what he had no right to do constituted no consideration for the father’s promise.

Citation : [1951] 2 KB 213

This is a contract case where the court held that consideration is an essential element of a binding contract. Here, a wife started proceedings against the husband for divorce and she obtained a decree nisi against the husband. The husband then promised to pay her an annual allowance of €100 free of tax as a permanent maintenance for her.

After the decree nisi was made absolute, the husband never kept his promise. Thereupon the wife brought an action against him to make him pay the money. The court held that she didn’t offer consideration for the husband’s promise.

Citation : [1908] 1 KB 280

In this case, the defendant placed an advertisement in the newspaper to give financial advice to readers. The plaintiff wrote, asking for the name of a good stockbroker. The editor negligently recommended someone who was an undischarged bankrupt.

On the strength of the editor’s advice, the plaintiff sent some money to the broker, who misappropriated it. The plaintiff brought an action in court seeking to recover his money from the the newspaper. The issue in court was whether the plaintiff furnished any consideration.

The court considered that many people bought newspaper because of that publication. It further held that the plaintiff had furnished consideration for the contract. The defendant could and did benefit from the plaintiff buying the newspaper and the plaintiff had also consented to the publication of his question in the defendant’s newspaper if the defendants wished to do so.

Citation: [1949] 1 KB 188

In the case of Read v Dean, the plaintiff hired the defendant’s moto launch for a holiday with his family on the river Thames. Two hours after he had set sail, the launch caught fire.

The firefighting equipment provided in the launch was out of order and the plaintiff suffered serious injuries and lost all his belongings on board. It was held that there must be implied into the contract of hire an undertaking by the defendant to make the launch as fit for the purpose of the hiring as reasonable care could make it, and that the defendant was therefore liable.

Citation: Vol Xi (2) Student Law Report 22

The case of Bournemouth Athletic Football Club Ltd v Manchester United Football Club is another popular case in the law of contract. In this case, a transfer agreement was made between the two football clubs. Under it, a footballer was to be transferred from Bournemouth to Manchester united for €194,445 in addition, a further sum of €27,777 was to be paid to Bournmouth if the footballer scored 20 goals in the first-team competitive matches. From October to December 1972, the football scored 4 goals in 11 matches. In December, Manchester United appointed a new manager who re-organised the team.

As a result, the footballer was transferred in early 1973 to Westham United Football club for €170,000. The plaintiff argued that the contract of the defendant in transferring the footballer was in Breach of the contract because there was an implied term in the contract that the footballer was entitled to a reasonable opportunity to score the goals. The court of appeal held that such term must be implied in order to give business efficacy to a contract.

MUST READ : Ukeje v Ukeje | Inheritance Right of Women

Citation: [1873] 29 LT 271

The court in Tinn v Hoffman & Co held that a cross-offer does not constitute a contract.

The facts of the case are as follows: the defendant wrote to the plaintiff offering to sell him 800 tons of iron at 69s per ton. The plaintiff wrote to the defendant, on the same day offering to buy 800 tons of iron at 69s per ton. The letters crossed in the post and the court held that there was no contract.

Citation: [1856] 5 HLC 673

This is the leading contract law case that stipulates the position of the law where there is a mistake as to the existence of the subject matter of the contract. In Couturier v Hastie, a man bought a cargo of corn which he and the seller thought at the time of the contract, to be in transit from Salonica to England, but which, unknown to them had become fermented and had already been sold by the master of the ship to a Tunis. It was held that the contract was void and the buyer not liable for the price of the cargo.

In the words of Lord Cranworth , “ The contract plainly imports that there was something which was to be sold at the time of the contract and something to be purchased. No such thing existing; I think the Court of Exchequer Chamber has come to the only reasonable conclusion upon it . ..”

Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd

Citation: [1915] AC 847

This is one of the leading contract cases that is associated with the principle of privity of contract. The principle states that only a party to a contract can enjoy right or suffer burdens partaining to the contract.

In Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd, the plaintiff sold tyres to a certain dealer on the understanding that he would not re-sell below a certain price and that in the event of a sale to customers the dealer would extract the same promise from them.

The dealer sole the tyres to Selfridge who agreed to observe the restrictions and to pay Dunlop €5 for each Tyre they sold below the restricted price. Selfridge in fact sold the tyres below the restricted price to a customer and Dunlop brought an action against them to enforce the promise to pay €5 per tyre, for each breach.

It was held that while Selfridge had committed to breach the contract between him and the dealer, Dunlop was not a party to this contract and had furnished no consideration for the defendant’s promise.

Citation: [1903] 19 TLR 434

This is one of the cases under Mistake as a topic in contract law. In Griffith v Brymer, a contract was made for the hire of a room on 26 June 1902, the day fixed for the coronation of King Edward VII, for the purpose of viewing the coronation procession.

At the time the contract was made, it was unknown to the parties, the decision to postpone the coronation had already been taken. Since the contract was merely for the hire of the room on 26 June to view the coronation procession, performance was impossible. The contract was held to be void.

Must read : The case of Mojekwu v Mojekwu: Case Summary

Citation: [1916] 1 KB 566.

This contract case explains the principle that where a party who performed his obligation defectively but substantially can sue for the contract price, but he will be liable to have deducted from the price the cost of making good the deficiency.

In Darkin v Lee, the plaintiff contracted to carry out repairs on the defendant’s house. He carried out the repairs but the work was not done in accordance with the contact’s specification. It was held that the plaintiff was entitled to be paid the agreed sum subject to a deductive equal to the cost of putting the defect right.

Citation: [1843] 6 M & G 593.

The rule of law in Startup v Macdonald is that; where the obligation under a contract is to deliver goods or render services, tender of such goods and services which is refused, discharges the party making the tender from any further obligation and enables him to sue for a breach of contract.

In Startup v Macdonald, the plaintiff agreed to sell 10 tonnes of oil to the defendant within the last 14 days of March. Pursuant to this agreement, the plaintiff delivered the oil to the defendant at 8:30pm on 31 March, a Saturday, but the defendant refused to accept the delivery because of the lateness of the hour.

It was held that the plaintiff made a valid tender of the goods and therefore discharged his obligations under the contract and the defendant was therfore liable in damages for non-acceptance of the goods.

Also read: How to become a successful lawyer in your country Best law firms in Nigeria: Top 10 Cheapest universities in Nigeria to study law

Final words

Those are some of the leading contract law cases you should know. Hope this article was able to give you exactly what you wanted. If you have any case you were really expecting to be in this list but was not mentioned here, kindly let us know using the comment section. Accordingly, share you comments and questions in the comment section too. I will be very glad to give you a reply.

Edeh Samuel Chukwuemeka, ACMC, is a lawyer and a certified mediator/conciliator in Nigeria. He is also a developer with knowledge in various programming languages. Samuel is determined to leverage his skills in technology, SEO, and legal practice to revolutionize the legal profession worldwide by creating web and mobile applications that simplify legal research. Sam is also passionate about educating and providing valuable information to people.

Share this:

• Click to share on Twitter (Opens in new window)
• Click to share on Facebook (Opens in new window)
• Click to print (Opens in new window)
• Click to email a link to a friend (Opens in new window)
• Click to share on LinkedIn (Opens in new window)
• Click to share on WhatsApp (Opens in new window)

Leave a Comment Cancel Reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Notify me of follow-up comments by email.

Notify me of new posts by email.

Online Access

Australian contract law: a recent case study – sui v jiang [2021] nswca 285.

By Anthony Willis , Patrick Collins

Lost in translation: when the legal effect of a contract departs from its literal meaning

What was this case about?

This case illustrates the complications that can arise when the parties to a contract prepare the contractual document themselves, without any legal training, in a language other than English; leading to disputes over the English translation of the contract and its intended effect, as properly construed.

Ultimately, the plaintiff’s claim did not turn on a point of translation. Rather, the key issue for the courts to determine, at first instance and then on appeal, was whether to give the parties’ choice of words their literal meaning or a different legal effect based on the broader context and business objectives of the contract as a whole.

In a two-to-one majority decision, consistent with recent judgments in the High Court that stress the importance of context, the Court of Appeal upheld the primary judge’s decision to favour a legal effect that departed from the literal meaning of the contract, notwithstanding such an interpretation was ‘somewhat strained’. However, the minority opinion of Brereton JA sought to emphasise the primacy of the words chosen by the parties in determining a contract’s legal effect.

What happened?

Mr Guangyi Sui ( Sui ) was a Chinese businessman pursuing investment opportunities in Australia as a requirement of his visa. Sui met Mr Zhaoquing Jiang ( Jiang ), a fellow businessman and prominent member of the Australian Dongbei Chinese Association. Together Sui and Jiang met with representatives of the Northern Territory Government to discuss a potential investment in two particular plots of land in the Northern Territory, each being 10 square kilometres ( Land ), to grow Chinese herbs.

To that end, in May 2017, Sui and Jiang entered into a written agreement to develop the Land ( Contract ). The Contract was:

• drafted almost entirely in Chinese Mandarin
• only five clauses long
• drafted by Sui without the involvement of a lawyer
• perhaps unsurprisingly, the subject of proceedings before the Supreme Court of New South Wales, at first instance, and subsequently the Court of Appeal.

The contract

Both parties accepted the Contract provided that Sui would:

• invest $1.5 million AUD in a company, Australian Fulin Agriculture Pty Ltd ( Fulin ) which owned interests in the Land
• acquire a 40% shareholding in Fulin
• receive a 10% return on the funds invested, each year for three years.

The controversy in this case concerned what the parties had agreed would happen in the fourth year. The relevant provision of the Contract (translated into English) stated:

From the fourth year onwards, [Sui] is entitled to request an increase in the return on his investment, or choose to take part in the company's operation and become a true 40% shareholder, or choose to leave the company, but [Sui] is entitled to transfer the 40% equity in the 20 square kilometres to others at the then market price. In the event the sale price is for less than AUD1.5 million, [Jiang] shall make up the difference. Prior to the transfer of the land, [Jiang] guarantees that [Sui] has legal ownership of 8 square kilometres of the agricultural land and shall provide [Sui] with relevant legal documents.

The controversy arose as a result of Fulin’s failure to comply with the conditions of the Crown leases that Fulin had acquired from the Northern Territory Government for the Land ( Lease ). The Lease required Fulin to:

• clear and cultivate with agricultural crops at least 1% of the Land in each year of the five years of the term of the Lease
• construct sufficient infrastructure on the Land as to enable the Land to be worked, within five years of the commencement of the Lease.

If Fulin satisfied these conditions, the Lease entitled Fulin to convert the Crown lease to a freehold.

However, after two years from the commencement of the Lease, no crops had been planted and no infrastructure had been constructed on the Land. After learning this, Sui commenced proceedings claiming that Jiang had repudiated the Contract.

Sui claimed that Fulin’s failure to comply with the conditions of the Lease prevent the conversion of the Crown leases into freehold interests and, by extension, prevented Jiang from transferring a freehold interest in 40% of the Land to Sui pursuant to the Contract, if Sui elected to exit the arrangement and leave the company in the fourth year. Sui commenced proceedings in the third year of the Contract and, accordingly, claimed damages for anticipatory breach.

In Jiang’s defence, he submitted that the Contract merely gave Sui a right to sell his 40% shareholding in Fulin; rather than 40% of the Land itself.

Competing translations

Incidentally, the parties dedicated significant efforts to arguing over the English translation of a clause in the Contract that was found to be ‘essentially irrelevant’ to Sui’s principal claim (as his counsel admitted in oral submissions to the appellate court). The clause contained the Mandarin word 'gu quan' (股权), which has a variety of meanings including:

• ‘shareholding’
• ‘equity’ (including both an interest in land or an interest in a company)
• ‘legal ownership’; or
• ‘shareholder’s rights’.

The court considered evidence provided by expert translators to determine which possible meaning of ‘gu quan’ was the best fit for the proper construction of the Contract.

However, in respect of the clause set out above, upon which Sui based his claim for anticipatory breach, there were few salient differences between the translations advanced by each party’s expert witnesses.

The judgement

The primary judge found that the Contract did not entitle Sui to acquire a freehold interest in the Land, and the Court of Appeal upheld that judgement in a two-to-one majority decision. In dismissing Sui’s construction of the Contract, Leeming JA (with whom Gleeson JA agreed) reasoned that:

• the Contract did not identify which particular eight square kilometres were to be transferred to Sui, or any mechanism for doing so, and some parts of the Land were presumably more valuable than others. Accordingly, it would not make commercial sense if the Contract entitled Jiang to choose the least valuable eight square kilometres to transfer to Sui, at the time when the parties were separating their commercial interests;
• if Sui became entitled to legal ownership of eight square kilometres of the Land, he would have to somehow relinquish his 40% shareholding in Fulin but the Contract was silent in that regard;
• if Sui’s shareholding was a security interest in the Land analogous to that of a mortgagee (as Sui contended), the Contract was conspicuously silent about repayment of the $1.5 million;
• evidence of the background to the parties’ transaction showed that Sui had bought out a minority shareholder in Fulin (with whom Jiang had been ‘having some personality difficulties’). His Honour concluded that Sui’s right to sell in the fourth year of the Contract correlated to what he had bought in the first place; that is, a minority shareholding in Fulin rather than the Land itself; and
• Sui’s translator admitted under cross-examination that she thought that the parties’ words, translated literally as ‘ prior to the transfer ’, implicitly referred to the transfer of the Land but the Contract did not include an express reference to the Land in the relevant sentence. The Court of Appeal majority held that the parties’ choice to not mention the Land made Jiang’s construction of the Contract more plausible than that argued by Sui.

In reaching its decision, the Court of Appeal majority relied upon the well-established legal principles for construing commercial contracts: [1]

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Leeming JA conceded that the majority judgment’s interpretation of the Contract departed from the literal meaning of the words chosen by the parties, lamenting that ‘ there is no way of construing this admittedly imperfectly drafted contract without there being some distortion from the literal meaning ’.

However, in his dissenting judgement, Brereton JA held that the last sentence of the relevant clause (which clearly and explicitly envisaged the transfer of ownership of the Land to Sui) was ‘ intractable ’ and consistent with the Contract as a whole, which was primarily focussed on the Land – being Fulin’s only real asset.

Further, Brereton JA found that the absence of any provisions in the Contract dealing with the various commercial matters that the majority of the appellate court counted against the construction argued by Sui (e.g. the retransfer of his shares and subdivision of the Land) was ‘ unremarkable ’; given that the Contract was drafted by laypersons and provided that ‘ matters not covered by this agreement may be dealt with through friendly negotiation ’.

Key takeaways

This is not the first time the Chinese language has vexed commercial dealings in Australia. [2] However, in an increasingly global market, contracts can be expressed in a variety of languages and Australian courts have shown a willingness to scrutinise translations.

While Australian government entities rarely enter into contracts written in a language other than English (aside from international treaties, which are frequently stated to be authoritative in multiple languages), there are often substantial parts of commercial contracts drafted by government officials who have no particular expertise in contract drafting or Australian contract law. For example, detailed specifications of the goods or services being procured are often set out in a Statement of Requirements or Statement of Work prepared by technical subject-matter experts ( SMEs ), sometimes without any legal review.

The words typically chosen by SMEs may be commonplace amongst those in the industry, but might not necessarily be intended to connote the ordinary meaning of the word (which is what a court might understand such terms to mean) nor carry any special meaning recognised by the industry, to which an expert witness might attest.

Further, with a focus on the relevant goods or services themselves, SMEs might not think to address in their drafting the context of other relevant provisions of the contract or the broader commercial purposes of the parties, to which the courts will have regard when construing the objective meaning of contractual terms.

This case study demonstrates how the application of legal skills to the art of contract drafting, based on an expert understanding of the principles of contract interpretation, would have helped to ensure that the legal effect given to the words chosen by the parties (as determined by the courts) matched up with the parties’ actual intentions as to the meaning of those words.

[1] Sui v Jiang [2021] NSWSC 435 at [49] citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]. [2] Southcorp Brands Pty Ltd v Australia Rush Rich Winery Pty Ltd [2019] FCA 720

Need assistance with drafting contracts or guidance on contract law and understanding constructional rights and obligations?

Contact our team

Key contacts

Anthony willis, patrick collins.

Special Counsel

Keep up to date with our legal insights and events

Related capabilities

Related sectors, related services, recent articles.

How important is wording when it comes to a reasonable opportunity to respond?

By Catherine Dunlop , Taboka Finn

The High Court provides guidance on what is required when a party is invited to respond to ‘adverse material’

Privacy Perspectives: Inside the EU’s Artificial Intelligence Act

By Katherine Armytage , Indi Prickett , and Clarissa Kwee

The AI Act is expected to become EU law in May 2024 - setting a global benchmark for AI regulation.

Can that document be attached to a section 173 agreement?

By Rebekah Parikh

The Land Registry has recently implemented a new policy limiting the attachment of annexures to section 173 agreements.

Small second dwellings – the short term accommodation of the future?

By John Rantino

We examine the extent to which the proposition that a small second dwelling can be used for short term accommodation...

Maddocks Digital

A gateway for clients to interact and share documents.

Transparent live access to your complete conveyancing portfolio.

Maddocks Recoveries

Check progress, manage cases and respond.

Delegations & Authorisations

Delegations & Authorisations Service for Victorian Local Government.

Employment Contracts

Suitable, legally compliant, effective employment contracts.

• Browse Topics
• Executive Committee
• Affiliated Faculty
• Harvard Negotiation Project
• Great Negotiator
• American Secretaries of State Project
• Awards, Grants, and Fellowships
• Negotiation Programs
• Mediation Programs
• One-Day Programs
• In-House Training and Custom Programs
• In-Person Programs
• Online Programs
• Advanced Materials Search
• Contact Information
• The Teaching Negotiation Resource Center Policies
• Frequently Asked Questions
• Negotiation Journal
• Harvard Negotiation Law Review
• Working Conference on AI, Technology, and Negotiation
• 40th Anniversary Symposium
• Free Reports and Program Guides

Free Videos

• Upcoming Events
• Past Events
• Event Series
• Our Mission
• Keyword Index

PON – Program on Negotiation at Harvard Law School - https://www.pon.harvard.edu

Team-Building Strategies: Building a Winning Team for Your Organization

Discover how to build a winning team and boost your business negotiation results in this free special report, Team Building Strategies for Your Organization, from Harvard Law School.

Teach by Example with These Negotiation Case Studies

By Lara SanPietro — on January 17th, 2024 / Teaching Negotiation

Negotiation case studies use the power of example to teach negotiation strategies. Looking to past negotiations where students can analyze what approaches the parties took and how effective they were in reaching an agreement, can help students gain new insights into negotiation dynamics. The Teaching Negotiation Resource Center (TNRC) has a variety of negotiation case studies to help students learn by example.

Negotiating About Pandas for San Diego Zoo – Featured Case Study 

The  Negotiating About Pandas for San Diego Zoo case study centers on the most challenging task for a negotiator: to reach a satisfactory agreement with a tough counterpart from a position of low power—and to do so in an uncommon context. This case focuses on the executive director of a zoo in the U.S. who seeks two giant pandas, an endangered species, from their only source on the planet: China. Compounding the difficulty, many other zoos are also trying to obtain giant pandas—the “rock stars” of the zoo world. Yet, as if relative bargaining power were not enough to preoccupy the zoo director, it is not his only major challenge.

His zoo’s initiative attracts attention from a wide range of stakeholders, from nongovernmental (NGO) conservation groups to government agencies on both sides of the Pacific Ocean. Several of these organizations ardently oppose the zoo’s efforts, while others change their positions over time. All of this attention influences the zoo’s negotiations. Therefore, a second challenging task for the zoo director is to monitor events in the negotiating environment and manage their effects on his negotiations with Chinese counterparts.

This three-part case is based on the actual negotiations and offers lessons for business, law and government students and professionals in multiple subject areas. Preview a Negotiating About Pandas for San Diego Zoo Teacher’s Package to learn more.

Camp Lemonnier Case Study – Featured Case Study 

In the spring of 2014, representatives from the United States of America and the Republic of Djibouti were in the midst of renegotiations over Camp Lemonnier, the only permanent U.S. base on the continent of Africa. Djibouti, bordering Somalia, Ethiopia, Eritrea, the Red Sea and the Gulf of Aden, has been home to Camp Lemonnier since the September 11, 2001 attacks prompted the United States to seek a temporary staging ground for U.S. Marines in the region. Since then, Camp Lemonnier has expanded to nearly 500 acres and a base of unparalleled importance, in part because it is one of the busiest Predator drone bases outside of the Afghan warzone.

Tensions between the United States and Djibouti have flared in recent years, due in large part to a string of collisions and close calls because of Djiboutian air-traffic controllers’ job performance at the airport. Americans have complained about the training of air-traffic controllers at the commercial airport. Additionally, labor disputes have arisen at the base where the United States is one of the largest non-government employers within the country.

Major lessons of this case study include:

• Defining BATNA: what is each party’s BATNA?
• Understanding the Zone of Possible Agreement (ZOPA)
• The impact of culture in negotiation.
• Uncovering interests.
• Principal-agent dynamics.
• Uncovering sources of power in negotiation.

This case is based on the real 2014 negotiations between the United States of America and the Republic of Djibouti. Preview a Camp Lemonnier Case Study Teacher’s Package to learn more.

A Green Victory Against Great Odds, But Was It Too Little Too Late? – Featured Case Study 

This case study provides an intimate view into the fierce battle among major US nonprofit environmental groups, Members of Congress, and industry over energy policy in 2007. The resulting law slashed pollution by raising car efficiency regulations for the first time in three decades. For negotiators and advocates, this case provides important lessons about cultivating champions, neutralizing opponents, organizing the masses, and using the right message at the right time.

This case is based on the actual negotiations and offers lessons for business, government, climate change, sustainability, corporate social responsibility, and more. Preview A Green Victory Against Great Odds Teacher’s Package to learn more.

Negotiating a Template for Labor Standards – Featured Case Study

Negotiating a Template for Labor Standards: The U.S.-Chile Free Trade Agreement is a detailed factual case study that tracks the negotiation of the labor provisions in the U.S.-Chile Free Trade Agreement signed into law on January 1, 2004. It draws upon a range of published and unpublished sources and interview with some of the primary players to give a true inside look into a challenging international negotiation. Written primarily from the point of view of the lead U.S. negotiator for the labor chapter, the case study discusses the two countries’ interests and positions on the labor provisions, the possible templates available from prior agreements, the complex political maneuvering involved, and the course of the negotiations themselves – from the opening talks to the various obstacles to the final post-agreement celebration. Preview a Negotiating a Template for Labor Standards Teacher’s Package to learn more.

______________________

Take your training to the next level with the TNRC

The  Teaching Negotiation Resource Center  offers a wide range of effective teaching materials, including

• Over 250 negotiation exercises and role-play simulations
• Critical case studies
• Enlightening periodicals
• More than 30 videos
• 100-plus books

TNRC  negotiation exercises and teaching materials are designed for educational purposes. They are used in college classroom settings or corporate training settings; used by mediators and facilitators seeking to introduce their clients to a process or issue; and used by individuals who want to enhance their negotiation skills and knowledge.

Negotiation exercises and role-play simulations introduce participants to new negotiation and dispute resolution tools, techniques and strategies.  Our videos, books, case studies, and periodicals are also a helpful way of introducing students to key concepts while addressing the theory and practice of negotiation.

Check out all that the TNRC has in store >>

Related Posts

• Check Out Videos from the PON 40th Anniversary Symposium
• Check Out the All-In-One Curriculum Packages!
• Teach Your Students to Negotiate Cross-Border Water Conflicts
• Asynchronous Learning: Negotiation Exercises to Keep Students Engaged Outside the Classroom
• Planning for Cyber Defense of Critical Urban Infrastructure

Click here to cancel reply.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Negotiation and Leadership

• Learn More about Negotiation and Leadership

NEGOTIATION MASTER CLASS

• Learn More about Harvard Negotiation Master Class

Negotiation Essentials Online

• Learn More about Negotiation Essentials Online

Beyond the Back Table: Working with People and Organizations to Get to Yes

• Download Program Guide: March 2024
• Register Online: March 2024
• Learn More about Beyond the Back Table

Select Your Free Special Report

• Negotiation and Leadership Fall 2024 Program Guide
• Negotiation Essentials Online (NEO) Spring 2024 Program Guide
• Beyond the Back Table Spring 2024 Program Guide
• Negotiation Master Class May 2024 Program Guide
• Negotiation and Leadership Spring 2024 Program Guide
• Make the Most of Online Negotiations
• Managing Multiparty Negotiations
• Getting the Deal Done
• Salary Negotiation: How to Negotiate Salary: Learn the Best Techniques to Help You Manage the Most Difficult Salary Negotiations and What You Need to Know When Asking for a Raise
• Overcoming Cultural Barriers in Negotiation: Cross Cultural Communication Techniques and Negotiation Skills From International Business and Diplomacy

Teaching Negotiation Resource Center

• Teaching Materials and Publications

Stay Connected to PON

Preparing for negotiation.

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.

Articles & Insights

• Negotiation Examples: How Crisis Negotiators Use Text Messaging
• For Sellers, The Anchoring Effects of a Hidden Price Can Offer Advantages
• BATNA Examples—and What You Can Learn from Them
• Taylor Swift: Negotiation Mastermind?
• Power and Negotiation: Advice on First Offers
• How to Negotiate in Good Faith
• How to Deal with Cultural Differences in Negotiation
• Dear Negotiation Coach: Coping with a Change-of-Control Provision
• The Importance of Negotiation in Business and Your Career
• Negotiation in Business: Starbucks and Kraft’s Coffee Conflict
• Advanced Negotiation Strategies and Concepts: Hostage Negotiation Tips for Business Negotiators
• Negotiating the Good Friday Agreement
• Communication and Conflict Management: Responding to Tough Questions
• How to Maintain Your Power While Engaging in Conflict Resolution
• Conflict-Management Styles: Pitfalls and Best Practices
• Negotiating Change During the Covid-19 Pandemic
• AI Negotiation in the News
• Crisis Communication Examples: What’s So Funny?
• Crisis Negotiation Skills: The Hostage Negotiator’s Drill
• Police Negotiation Techniques from the NYPD Crisis Negotiations Team
• Managing Difficult Employees, and Those Who Just Seem Difficult
• How to Deal with Difficult Customers
• Negotiating with Difficult Personalities and “Dark” Personality Traits
• Consensus-Building Techniques
• Ethics in Negotiations: How to Deal with Deception at the Bargaining Table
• Understanding Exclusive Negotiation Periods in Business Negotiations
• Perspective Taking and Empathy in Business Negotiations
• Dealmaking and the Anchoring Effect in Negotiations
• Negotiating Skills: Learn How to Build Trust at the Negotiation Table
• How to Counter Offer Successfully With a Strong Rationale
• What is Alternative Dispute Resolution?
• Alternative Dispute Resolution Examples: Restorative Justice
• Choose the Right Dispute Resolution Process
• Union Strikes and Dispute Resolution Strategies
• What Is an Umbrella Agreement?
• The Pros and Cons of Back-Channel Negotiations
• Overcoming Cultural Barriers in Negotiations and the Importance of Communication in International Business Deals
• Managing Cultural Differences in Negotiation
• Top 10 International Business Negotiation Case Studies
• Hard Bargaining in Negotiation
• Paternalistic Leadership: Beyond Authoritarianism
• Advantages and Disadvantages of Leadership Styles: Uncovering Bias and Generating Mutual Gains
• The Contingency Theory of Leadership: A Focus on Fit
• Servant Leadership and Warren Buffett’s Giving Pledge
• How to Negotiate in Cross-Cultural Situations
• Alternative Dispute Resolution (ADR) Training: Mediation Curriculum
• What Makes a Good Mediator?
• Why is Negotiation Important: Mediation in Transactional Negotiations
• The Mediation Process and Dispute Resolution
• Negotiations and Logrolling: Discover Opportunities to Generate Mutual Gains
• Finding Mutual Gains In “Non-Negotiation”
• Appealing to Sympathy When Dealing with Difficult Situations
• Negotiation Skills: How to Become a Negotiation Master
• The Benefits of Coalitions at the Bargaining Table
• Identify Your Negotiation Style: Advanced Negotiation Strategies and Concepts
• Negotiation Journal celebrates 40th anniversary, new publisher, and diamond open access in 2024
• Ethics and Negotiation: 5 Principles of Negotiation to Boost Your Bargaining Skills in Business Situations
• 10 Negotiation Training Skills Every Organization Needs
• Trust in Negotiation: Does Gender Matter?
• Use a Negotiation Preparation Worksheet for Continuous Improvement
• How to Negotiate Pay in an Interview
• How to Negotiate a Higher Salary
• Renegotiate Salary to Your Advantage
• How to Counter a Job Offer: Avoid Common Mistakes
• Salary Negotiation: How to Ask for a Higher Salary
• What is a Win-Win Negotiation?
• How to Win at Win-Win Negotiation
• Labor Negotiation Strategies
• How to Create Win-Win Situations
• For NFL Players, a Win-Win Negotiation Contract Only in Retrospect?

PON Publications

• Negotiation Data Repository (NDR)
• New Frontiers, New Roleplays: Next Generation Teaching and Training
• Negotiating Transboundary Water Agreements
• Learning from Practice to Teach for Practice—Reflections From a Novel Training Series for International Climate Negotiators
• Insights From PON’s Great Negotiators and the American Secretaries of State Program
• Gender and Privilege in Negotiation

Remember Me This setting should only be used on your home or work computer.

Lost your password? Create a new password of your choice.

Copyright © 2024 Negotiation Daily. All rights reserved.

• Dispute Resolution
• Arbitration
• Civil and Commercial Litigation
• Debt Recovery
• Dispute Resolution Case Studies
• Dispute Resolution FAQs
• Financial Negligence
• Commercial Law
• Internet Domain Name Disputes
• Owners Corporation
• Professional Negligence
• Intellectual Property
• Copyright Law
• Copyright Law FAQs
• Intellectual Property Law
• Intellectual Property Case Studies
• Intellectual Property Law FAQs
• Internet Domain Name Law
• Patent Law FAQs
• Privacy Policy and Terms of Use for Websites
• Trademark Law
• Trademark Law FAQs
• Contract Law
• Contract Essentials

Contract Law Case Studies

• Contract Law FAQs
• Contract Termination
• Ending a Contract
• Reviewing and Drafting Commercial Contracts
• Unfair Contracts
• Unfair Contract Terms Case Studies
• Employment Law
• Contractor or Employee
• Employment Contracts
• Employment Law Case Studies
• Employment Law FAQs
• Unfair Dismissal
• Unfair Dismissal FAQ
• Workplace Discrimination
• Workplace Bullying Law FAQs
• Other Services
• Building and Construction Law
• Competition and Consumer Law
• Conveyancing and Property Law
• Corporate Governance
• Data and Privacy Protection
• Insolvency and restructuring
• Insurance Law
• Land Acquisitions
• Leasing and Licensing
• Mergers and acquisitions
• Personal Property Securities
• Planning and Development
• Technology and E-Commerce

Contract law is made up of a variety of regulations and laws enacted to enforce promises made under certain conditions. A contract is a legally binding agreement which requires parties to honour any promises made to another party. Contracts are entered into every day by individuals and businesses alike. A legally binding contract can be as simple as a transaction carried out by purchasing a loaf of bread from a convenience store, or as complex as a million dollar, hundred page credit agreement made between two businesses.

How are contracts formed?

• Agreement – The first step towards establishing a valid contract is an agreement of some sort, usually consisting of an offer made by one party which is accepted by another party or parties. To be legally binding, the contract must be based on an agreement which is not ambiguous, vague, or incomplete. All parties involved must reach consensus on the agreement.
• Consideration – This consists of the price or cost requested by and paid to whichever party has made the offer, in exchange for them performing what was offered. Consideration in this form is required for a contract to be legally binding.
• Intention to create legal relations – All parties to the contract must possess the intention to enter into a legal relationship through that contract. Consideration (price/payment) is usually evidence enough of this intention, though not always. This intention can be detailed in the terms of the contract.
• Capacity – Under law, some persons do not have the ability to enter into enforceable contracts. In this case, the ability to enter a contract or not is known as ‘capacity’, which is based on perceived vulnerability to exploitation. Minors and people affected by psychoactive substances such as alcohol, for example, do not have the legal capacity to enter a legally binding contract (with some exceptions, usually for simple contracts such as minor transactions).
• Formalities – Some types of contracts are subject to certain formalities. For example, a contract for the sale of a house must be issued in writing in order to be legally binding.

Agreement – AGC (Advances Ltd) vs McWhirter, Supreme Court of NSW (1977) 1 BLR 9454

This case relates to the first requirement of any legally binding contract, agreement. In this case, the plaintiff had put up a property for sale at auction, subject to a reserve. The defendant made a bid of $75,000 which was the highest bid. When this bid was not accepted by the plaintiff (based on concerns over the defendants ability to pay), the defendant claimed a legally binding contract had been entered when they made the highest bid.

In this case, the court ruled that bidders at auctions are entitled to make offers, but that offer does not need to be accepted by the seller. Therefore, auctions act as an invitation to treat. This means that agreement was not reached, as the seller refused the bidder’s offer. Therefore a legally enforceable contract was not entered in this case on the basis of lack of agreement.

Capacity – Blomley vs Ryan (1956) 99 CLR 362

This case involved the sale of a farm by Ryan to Blomley. At the time the contract was entered, Ryan was suffering from prolonged and excessive alcoholism. Blomley knew this but went ahead with the contract. Ryan tried to call off the sale but Blomley took him to court, seeking specific performance (an order from the court to carry out the contract).

In this case, it was found that Blomley was aware of Ryan’s persistence problem with alcoholism, and the court noted that Ryan was ‘seriously affected by drink’ when the contract was entered. It was subsequently found that Ryan therefore lacked the capacity to enter a legally binding contract in this case, especially seeing as Blomley was aware of Ryan’s impairment and sought to benefit from it.

Intention to create legal relations – Air Great Lakes Pty Ltd vs KS Easter (Holdings) Pty Ltd, Supreme Court of NSW (1989) 2 NSWLR 309

This case involved the proposed sale of an airline to Easter by Air Great Lakes. Air Great Lakes claimed to have entered into a contract with Easter, which Easter subsequently refused to honour. Air Great Lakes sought damages from Easter, who claimed that they did not intend to create a legally binding agreement and that Air Great Lakes was aware of this.

The court found that the contract was not to be imposed as Air Great Lakes was aware of the fact the Easter did not intend for the agreement to be legally binding.

The above cases illustrate the importance of contract law, in that misunderstandings in this area can have costly consequences. It is the obligation of parties to ensure that they are aware of what constitutes a legally binding agreement should they seek to enter an agreement that is enforceable. For this reason, it is advisable that anyone seeking to create an important or valuable contract should have that contract drafted or reviewed by a contract lawyer to ensure it is legally binding and able to be enforced.

Contract Law: The Case Study Essay

A contract is a mutual agreement of obligation between two people or parties reaching consent. In most cases, such commitments are enforced by the law. The arrangement involves one side making an offer, which the other party accepts. A contract consists of such elements as offer and acceptance, appropriate consideration, and legality (Eisenberg, 2018). The parties involved should also have the contractual capacity to commit to the pact. Applying the law in contracting means that there are consequences if any participant forfeits the rules pertaining to the engagement. Therefore, breach of contract necessitates legal measures for failing to honor the deal or hindering the execution of the promise by the other party. This negligence is a case of punitive damage for which the complainant requires compensation for money and time wastage.

The scenario presented involves two individuals, Johnny, who is not a merchant under the Uniform Commercial Code, and his neighbor Mark, from whom he offers to buy a car for $30,000. The latter requires some time to consider the offer to which Johnny agrees and puts down in writing that his proposition is going to remain open for fourteen days. After a week, Johnny sees another car that fascinates him, buys it and informs Mark of his intention to revoke the initial offer. In response, Mark insists that Johnny’s proposal was in writing and still holds it. Johnny apologizes, saying he cannot keep the agreement but promises to give mark $10,000 for the assistance that he had received from him in the previous year around the house. Appeased, Mark accepts only for Johnny to annul his second pledge after a week. The former decides to sue Johnny for breach of contract on the two commitments, buying the car and the $10,000 offer.

There was a valid contract between the two, but Johnny dissipated both Marks’s time and money. He Hastily offers to buy the car instead of informing him that he hasn’t made a final decision and needs to check more cars before settling on one. Johnny also made the mistake of writing down his promise to Mark. Purchasing a car requires a lot of research and inquiries instead of choosing the first option due to the availability of more varieties that might even be cheaper in the market. After being approached by Mark, Johnny should have told him that he had not made a final decision because he still wanted to look around; therefore, he was unwilling to commit. The promising note written by Johnny caused the car to be withheld from other customers willing to purchase it. Mark, the car owner, had the opportunity to sell the machine, but he had the integrity to hold it. Johnny’s actions concerning the car are wrong, and he deserves to pay for them.

There is evidence of an oral contract between Mark and Johnny, although it is related to the first agreement, which Johnny also broke. He acknowledges Mark’s help on his property and offers to compensate him, making the latter cancel his initial disappointment on the car contract. This agreement makes Johnny legally liable to atone for all the words he fails to honor.

Breach of a contract is concluded when a party involved fails to perform their role and doesn’t give a valid excuse. In this view, the elements of a contract are not fully satisfied; therefore, Mark has an entitlement to take legal action against Johnny (Luntz et al., 2017). Having kept his part of the agreement, Mark deserves compensation for indemnity.

Eisenberg, M. A. (2018). The Theory of Efficient Breach. In Foundational principles of contract law . Oxford University Press.

Luntz, H., Hambly, D., Burns, K., Dietrich, J., Foster, N., Harder, S., & Grant, G. (2017). Torts: Cases and commentary ( 8 th ed.). LexisNexis Butterworths.

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2022, October 13). Contract Law: The Case Study. https://ivypanda.com/essays/contract-law-the-case-study/

"Contract Law: The Case Study." IvyPanda , 13 Oct. 2022, ivypanda.com/essays/contract-law-the-case-study/.

IvyPanda . (2022) 'Contract Law: The Case Study'. 13 October.

IvyPanda . 2022. "Contract Law: The Case Study." October 13, 2022. https://ivypanda.com/essays/contract-law-the-case-study/.

1. IvyPanda . "Contract Law: The Case Study." October 13, 2022. https://ivypanda.com/essays/contract-law-the-case-study/.

Bibliography

IvyPanda . "Contract Law: The Case Study." October 13, 2022. https://ivypanda.com/essays/contract-law-the-case-study/.

• Walk the Line: Johnny Cash's Character
• Historical Role, Function, and Purpose of the Nightingale Pledge
• The Common Good: Justice and Entitlement
• Florence Nightingale: To Pledge or Not to Pledge?
• Classroom Management: Johnny’ Case
• “Double Indemnity”: The Brightest Representative of Genre Noir
• Bede's Historical Account of the Christianization
• Johnny Lombardi: Life and Memorials
• "Double Indemnity": An Exemplary Noir Film
• Nozick’s Entitlement Theory
• Supreme Court's Decision in Tinker vs. Des Moines
• Police Use of Force: An Examination of the Minority Threat Perspective
• Louisiana District Court: Role, Structure, and Jurisdiction
• Relationship of Hip-Hop With Race and Identity
• Age Restrictions Imposed on Judges Worldwide

• Browse All Articles
• Newsletter Sign-Up

Contracts →

• 28 Apr 2022
• Research & Ideas

Can You Buy Creativity in the Gig Economy?

It's possible, but creators need more of a stake. A study by Feng Zhu of 10,000 novels in the Chinese e-book market reveals how tying pay to performance can lead to new ideas.

• 26 Jun 2020
• Working Paper Summaries

Weak Credit Covenants

Prior to the 2020 pandemic, the leveraged loan market experienced an unprecedented boom, which came hand in hand with significant changes in contracting terms. This study presents large-sample evidence of what constitutes contractual weakness from the creditors’ perspective.

• 13 May 2019

The Unexpected Way Whistleblowers Reduce Government Fraud

Even unfounded allegations by whistleblowers can force government contractors to renegotiate their terms, say Jonas Heese and Gerardo Perez Cavazos. Open for comment; 0 Comments.

• 23 Jan 2018

Transaction Costs and the Duration of Contracts

When buyers transact with sellers, they select not only whom to transact with but also for how long. This paper develops a model of optimal contract duration arising from underlying supply costs and transaction costs. The model allows for the quantification of transaction costs, which are often unobserved, and the impact of these costs on welfare.

• 20 Oct 2015

Internalizing Global Value Chains: A Firm-Level Analysis

Manufacturing activities that used to be performed in close proximity are increasingly fragmented across firms and countries. This paper provides strong evidence that considerations driven by contractual frictions critically shape firms' ownership decisions along their value chains.

• 27 Feb 2006

When Rights of First Refusal Are a Bad Deal

Contracts that include a right of first refusal usually benefit the holder of that right. But not always. New research by professor Alvin E. Roth and colleague Brit Grosskopf explains when it's wise to say no. Closed for comment; 0 Comments.

• 03 Mar 2003

Top Ten Legal Mistakes Made by Entrepreneurs

The life of a startup can be precarious, a wrong turn disastrous. Harvard Business School professor Constance Bagley discusses the most frequent legal flops made by entrepreneurs, everything from hiring the wrong lawyer to puffing up the business plan. Closed for comment; 0 Comments.

• Personal Injury

[email protected]

Breach of Contract Case Study from TonaLaw

TonaLaw helps business parties reach amicable, confidential settlements, before trial.

Is someone you worked with in “Breach of contract”?  This is is a  legal   cause of action  and a type of  civil wrong , in which a  binding agreement  or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. Breach of Contract occurs when a party to a contract fails to fulfill his or her obligation as described in the contract or communicates an intent to fail the obligation or otherwise appears not to be able to perform his or her obligation under the contract.

CASE STUDIES:

1: Represented Defendant in a Suit for Breach of Contract on Promissory Note 

TonaLaw represented a not-for-profit charitable organization being sued by a former member on a breach of a promissory note. It was a frivolous action as the defendant was not in breach of the promissory note and it was paid in full. The suit was for approximately half a million dollars.

After two years of extensive pretrial motions and negotiations, Tonalaw settled the case for our client for $7,500, when the client was being sued for $1,000,000.

2: Represented Plaintiff in a Suit for Breach of Contract on a Promissory Note 

We represented the plaintiff’s estate in this action where the decedent lent approximately $125,000.00 to the defendant. When the plaintiff died, the defendant had not repaid the debt, resulting in a breach of contract.

TonaLaw filed a summary judgment motion in order to have the judge rule that the defendant was liable for the debt, and the motion was granted. The only unresolved issue was how much the defendant owed. TonaLaw negotiated a confidential settlement between the two parties and the case did not have to go to trial.

3: Subcontractor Vs. General Contractor

TonaLaw represented the plaintiff, a subcontractor, in an action against the defendant, who was a general contractor. The defendant subcontracted close to $139,000.00 worth of work to the plaintiff but defaulted on approximately $60,000.00 worth of payments. TonaLaw helped the parties reach an amicable, confidential settlement before trial.

“Tom has been my litigation lawyer for my construction business since 2009 when he took on a certification appeal that was difficult, tedious, and involved countless paperwork. He successfully won the certification for me and I have kept him on ever since. He has assisted in money collection and contract negotiations with positive results . . . Most recently he aided my company in obta ining the proper representation in an intricate workers comp case we became involved in and was the motivating factor in putting together the legal defense to mitigate culpability and costs. I trust Tom implicitly for both my business and personal needs. He is always available for help, advice, and is genuinely invested in who he represents not just as a client but as a person. I commend his staff as well for always being friendly, courteous, and again genuine with what they do. I would highly recommend him!!!!” – Diana A.

We can help you too! Contact us to see if we are the right firm to take your case and get you what you are owed.

What Our Clients Are Saying

Contact Us Today For Your Free Consultation

152 Islip Ave. Suite 18, Islip, NY 11751

1-833-TONALAW

Mon-Fri: 24 hours

" * " indicates required fields

• Subject guides
• Legal problem solving
• Example 1 (Contract)

Legal problem solving: Example 1 (Contract)

• Application
• Example 2 (Negligence)
• Find out more
• Back to Law research and writing guide
• << Previous: Conclusion
• Next: Example 2 (Negligence) >>