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Contract Law Questions

Radio station QUES (Station), put an identification tag on a large bass fish it named "Big Bertha" and placed it in a nearby lake (the Lake) as part of a promotional fishing contest. Station advertised the contest during radio broadcasts, but required no formal entry. The advertisement stated that anyone who caught Big Bertha on hook and line and presented it to Station would be entitled to a $5,000 cash price.

Betty and Sam often went boating at the Lake with friends. While driving together to the Lake, Sam said that he was having problems paying his mortgage and owed past due taxes on his property (Blackacre). Sam told Betty, "I will give you a deed to Blackacre if you agree to pay all past due taxes and to make all future mortgage payments due on Blackacre. Betty had always wanted to own Blackacre and she immediately replied, "I agree!" Betty did not intend to fish but while sitting in Sam's boat she picked up an extra fishing pole and decided to drop a fishing line into the Lake to see what might happen. Almost immediately Betty felt a fish bite her hook. Sam saw this and yelled, "You may have hooked Big Bertha! Reel her in and you will win the $5,000 prize offered by QUES." Betty reeled in her catch and saw the Big Bertha identification tag. She called Station and told them she had caught Big Bertha with hook and line. When Betty presented Big Bertha and attempted to claim the $5,000 prize, Station refused to pay her because "she had not actually participated in the contest but was merely on a social outing" when she caught Big Bertha.

After returning from the Lake, Betty paid the past due taxes on Blackacre and immediately moved in where she has continuously and exclusively resided. Besides regularly paying the mortgage, Betty added a new family room and new front yard landscaping to the property that permanently improved Blackacre, greatly enhancing its appearance and value. However, when Betty asked Sam to give her the deed to Blackacre as he had promised, Sam refused to do so.

I. Does Betty have an enforceable contract against Station? Discuss.

II. Does Betty have an enforceable contract against Sam? Discuss.

Answer

Introduction

This paper analyses the stated fact pattern against the matrix of contract law with a view to answering the two specific questions posed. The questions both concern issues of contract formation. Pertinent case law and authority is applied in deconstructing the scenarios and forming sound conclusions.

I. Does Betty have an enforceable contract against QUES (Station)?

It stands to reason that one of the formal components of any enforceable contract is a valid offer. It is submitted that Station made such an offer when it advertised that anyone who caught Big Bertha on hook and line and presented it to Station would be entitled to a $5,000 cash prize. It is settled law that competent offers may be made not only to a specific person or specific group of people, but also to the world at large (as in this case) .

There is a general rule that advertisements constitute invitations to treat rather than offers : see for example Partridge v Crittenden [1968] . However, in cases where the advertisement in question comprises a clear and certain set of terms and a commitment that objectively suggests an intention to establish legal relations, especially in the case of a unilateral contract such as the one under consideration, then an enforceable offer may be found .

Foundation authorities for this principle (and exception to the general rule) include Carlill v Carbolic Smoke Ball Company [1893] , Hunter v General Accident, Fire and Life Assurance Corporation [1909] and Wood v Letrick (1932) . In these cases general offers were made to the world at large by means of advertisement , which were deemed accepted to create binding contracts by individuals who fulfilled the terms of those advertisements .

The offer made and promulgated by Station is essentially a very simple one:

1. The fish, “Big Bertha” must be caught by hook and line.
2. The fish must thereafter be presented to Station.

Leaving all peripheral circumstances aside, Betty has manifestly fulfilled these terms. Station’s reason for refusing to pay Betty, because “she had not actually participated in the contest but was merely on a social outing” when she caught Big Bertha, is materially irrelevant. The original offer contained no stipulation, whether express or implied, concerning the need to engage in formal participation, or concerning the need to in some way register participation (or formally accept the offer). As in Carlill, it is submitted that performance of the terms of the offer will be deemed to constitute its legal acceptance (a rule of policy flowing from Williams v Carwardine (1833) ). Station has only itself to blame, if it wished to run the competition under more specific and formal terms regarding entry and participation, it need only have specified those terms ab initio in its advertisements.

Summary

On the facts presented, it is accordingly advised that Betty will be able to enforce Station’s promise to pay $5000.

II. Does Betty have an enforceable contract against Sam?

It is important to analyse the context and terms of the original discussion between Sam and Betty concerning the transfer of the deeds of Blackacre. It does appear that Sam made a valid offer to Betty and that Betty accepted without equivocation. Certainty of terms and intention to create legal relations are essential components of contract formation. It seems that the terms laid down by Sam are both clear and certain, and thus capable of judicial enforcement . There is one point of ambiguity. Sam said that he would give Betty “a deed to Blackacre”. However it is inferred for the purposes of this analysis that it is the deed of ownership of Blackacre that was intended. This inference is supported by Betty’s subsequent actions in taking up exclusive residence in the property, paying debts connected with it and developing it.

In terms of intention to create legal relations , the context of the original discussion, being a car journey en route to an outing, does suggest a social and casual situation and this does of itself mitigate against an intention to bind to a contract. Moreover the relationship between Betty and Sam, which is left unspecified on the facts, is also of bearing if the pair are related or, perhaps, close friends. However, these indications can, it is submitted be overridden and swept aside by the actual content and terms of the conversation, which are very clear, precise and unambiguous, and which certainly suggest an indication to bind. Consideration is also a fundamental component of most contracts and Betty supplies this by paying all past due taxes and taking up mortgage payments due on Blackacre. In Thomas v Thomas (1842) consideration is defined as follows:

‘Consideration means something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant, but at all events it must be something moving from the plaintiff.’

In Currie v Misa (1875) , Lush J held:

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given suffered or undertaken by the other…”

It is manifest, on the facts, that a benefit has accrued to Sam as a consequence of Betty paying the past due taxes on Blackacre, because Sam has been relieved of the financial liability to meet these debts himself . It is further manifest that Betty has suffered a detriment, both in paying these taxes and in paying the mortgage on the property over the period since accepting Sam’s offer .

In supplying this consideration it is submitted that Betty has complied with all the terms of Sam’s offer. In this regard it is clear that Betty has paid “all past due taxes”, however, although she is “regularly paying the mortgage” it seems that the mortgage has not yet been discharged and therefore she has not made “all future mortgage payments”, to quote Sam’s original words.

Does this matter? It is argued that it does not. Sam did not say that Betty must make all future mortgage payments before he would transfer the deed to her. He said that she must agree to make all future mortgage payments. This she did, and she has acted accordingly.

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 stipulates that contracts for the sale or disposition of an interest in land must be made in writing. This appears at first sight to block Betty’s claim. Section 40(2) of the Law of Property Act 1925 had preserved a role for the doctrine of part performance which mitigates hardships that would flow from situations such as that which Betty finds herself in . This doctrine is noted by Beale as follows:

“Where the claimant has partly performed an oral contract required by statute to be evidenced in writing, in the expectation that the defendant would perform the rest of the contract, the court will not allow the defendant to escape from his contract upon the strength of the statute, but may order specific performance of the oral contract.”

However, section 2(8) of the 1989 Act vitiated this doctrine, indicating that the courts prefer to preserve certainty rather than prevent hardship. That said, section 2(5) does preserve a role for resulting and constructive trusts and Betty may benefit from the creation of a constructive trust by law on the facts.

In Betty’s case the court is likely to turn to section 2(5) to ensure that the general rule in section 2 is not used as a cloak to conceal fraud. In Yaxley v Gotts [2000] it was held:

“I do not think it inherent in a social policy of simplifying conveyancing by requiring the certainty of a written document that unconscionable conduct or equitable fraud should be allowed to prevail.”

It is advised that the court will probably find that the oral agreement between Betty and Sam is void and unenforceable due to section 2 of the 1989 Act, but that effect could nonetheless be given to the agreement on the basis of a constructive trust as a consequence of Betty’s extensive reliance and performance on the facts.

This is not a case of promissory estoppel, because Sam’s undertaking does not relate to an alteration to a pre-existing contract with Betty (Combe v Combe [1951] ). However, it is confidently advised that Betty will be able to enforce the agreement between them, not under ordinary principles of contract, but by virtue of a constructive trust on the basis of the exception in section 2(5) of the 1989 Act, as articulated and applied in Yaxley.

Summary

Betty is entitled to enforce the agreement made with Sam by means of a constructive trust.

THE END
WORD COUNT : 1452
This count includes only the text of the answer.
Footnotes, Case Table and Bibliography are excluded.

CASE TABLE (full citation footnoted)

Carlill v Carbolic Smoke Ball Company [1893]
Combe v Combe [1951]
Currie v Misa (1875)
Hunter v General Accident, Fire and Life Assurance Corporation [1909]
Partridge v Crittenden [1968]
Thomas v Thomas (1842)
Williams v Carwardine (1833)
Wood v Letrick (1932)
Yaxley v Gotts [2000]

BIBLIOGRAPHY

Atiyah, P.S., ‘Consideration: A Restatement’, in Atiyah, P.S., ‘Essays on Contract’ (Oxford University Press, Oxford, 1986)

Beale H. (ed.), Chitty on Contracts, (29th ed., Sweet and Maxwell, London 2004)

Burrows A., A Casebook on Contract, (2nd ed., Hart Publishing, Oxford, 2009)

Burrows A. (ed.), English Private Law (2nd ed., Oxford University Press, Oxford 2007)

Koffman L., and Macdonald E., The Law of Contract, (6th ed., Oxford University Press, Oxford 2007)

McKendrick, E., Contract Law: Text, Cases and Materials, (3rd ed., Oxford University Press, Oxford 2008)

Poole J., Casebook on Contract Law, (9th ed., Oxford University Press, Oxford 2008)

Simpson A.W.B., ‘Quackery and Contract Law: Carlill v Carbolic Smoke Ball Company’ in, Leading Cases in the Common Law (Oxford University Press, Oxford 1995)

Trietel, G.H., ‘Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement’, (1976) 50 ALJ 439

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