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ACCA LW考点： Key aspects of the law of contract

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发布时间：2021-08-09 14:56

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This article is relevant to LW-ENG

Together,contract and the tort of negligence form syllabus area B of the LW-ENG syllabus:the law of obligations.As this indicates,the areas have a certain amount in common:

they are both areas of civil law

the claimant will bring an action against the defendant and must prove the case on the balance of probabilities

remedies may be awarded provided that the claimant’s loss is not too remote a consequence of the defendant’s breach

the remedies are generally intended to compensate the claimant rather than to punish the defendant.

Until relatively recently,tort was one of the areas on Corporate and Business Law that caused candidates the most difficulty.In recent sessions,the tort answers have tended to be stronger,but there is also evidence of some confusion between tort and contract,with negligence-based material frequently arising in answers to contract questions.

The aim of this brief article is to set out some key aspects of contract and the tort of negligence using the following headings:

The relationship between the parties

The nature of the obligation

Causation and remoteness of damage

The measure of damages.

Using the same headings should remind you of the key aspects of each of the two areas in such a way that you are less likely to confuse them.(The words‘contract’and‘negligence’are deliberately repeated in each heading so that you get into the habit of distinguishing between the rules for each area,rather than having a general set of notes on,say,remoteness of damage,which confuses material from both areas.)

Key aspects of the law of contract

Contract–the relationship between the parties

A contract is a legally binding agreement formed by the mutual consent of the parties.The parties may be known to each other,as with a client and an accountant,or they may be strangers,as with a software company and a person who downloads and installs the software.In either case,there is a clear relationship between the parties and this relationship is both formed and governed by the contract.(The rules governing the formation and content of contracts are set out in syllabus areas B1 and B2 of LW-ENG syllabus.)

Contract–the nature of the obligation

In a contractual relationship,the nature of the obligation is determined by the terms of the contract.By entering into the contract,the parties agree to accept the resulting obligations.That is not to say that there is complete freedom of contract,since certain contractual terms may be restricted by statute–for example,under the Unfair Contract Terms Act 1977.Nevertheless,in order for a contract to be binding,the parties must intend to create legal relations and their contractual obligations are based on mutual consent.【点击免费下载>>>更多ACCA学习相关资料】

Contract–causation and remoteness of damage

This issue concerns the extent of the defendant’s liability for the chain of events set in motion by the breach of contract.The leading case is Hadley v Baxendale(1854)in which the defendant was contracted to transport a broken mill shaft from the claimant’s mill to the repairers.The defendant was late in delivering the shaft and the mill was idle for a longer period as a result.The claimant sought damages for loss of profits during the delay.The court found for the defendant,setting out a two-stage test for remoteness of damage.In order to be recoverable,the loss must be:

either a normal result of the breach,or

one which,at the time of the contract,both parties would have contemplated as a probable result.

Here,given how important a drive shaft was to a mill,neither test was satisfied,since it was reasonable to expect that the mill would have a spare shaft.Another useful case here is Victoria Laundry v Newham Industries(1949).Here,the defendant’s delay caused the defendant loss of profit,including the loss of an unusually lucrative contract.The defendant was liable for normal loss of profit under the first limb of the Hadley test,but not for the loss from that particular contract.He would only have been liable for that had he known about it when the contract was formed.

Contract–the measure of damages

The remedies available for breach of contract include the common law remedies of damages,action for the price and quantum meruit,as well as the equitable remedies of injunction and specific performance.

Remember that a breach of contract is a breach of a legal obligation,so the aim of the remedies is to put the claimant in the position that they would have been had the defendant fulfilled the obligation.This means putting the claimant in the position that they would have been in had the contract been performed.In relation to damages,this may be divided into expectation loss(benefits that might have been gained from the performance of the contract)and reliance loss(expenses incurred by the claimant in his side of the contract).

The conduct of the claimant may also affect the amount of damages payable,since the claimant is under an obligation to take reasonable measures to mitigate the loss,as in Payzu v Saunders(1919).For example,if the buyer refuses to accept or pay for the goods,the seller must recover what they can by selling the goods to a third party.The damages will be the difference between the contract price and the amount that the seller receives.If the seller receives the contract price or higher from a third party,only nominal damages will be claimable.A claimant who does not attempt to mitigate their loss may have their damages reduced by the amount by which they could have done so.It is for the defendant to prove that the claimant failed to mitigate the loss.

We will now use the same headings in relation to the tort of negligence.

【ACCA LW考点：Key aspects of the tort of negligence】

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