Contract Law, Fourth Edition (Law Cards) by Law Cards

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Sample text

In Reardon Smith v Hansen Tangen (1976), an oil tanker was described as ‘Osaka No 354’, where in fact it was ‘Oshima No 004’, but was otherwise exactly as specified. Because the market for oil tankers had collapsed, the charterers sought to argue that the number was a 48 3 Contents of a Contract Ü condition which would enable them to repudiate the contract. The House of Lords rejected this argument. Held—the statement was an innominate term, not a condition; since the effect of the breach was trivial, it did not justify termination of the contract.

A majority of the House of Lords believed that the presumption in favour of legal relations had not been rebutted. Examples of rebuttals Ü This arrangement is not entered into ... as a formal or Ü Ü legal agreement, and shall not be subject to legal jurisdiction in the law courts’ (Rose and Frank v Crompton Bros (1925)). Agreement to be binding ‘in honour only’ (Jones v Vernon Pools (1939)). Letters of comfort, for example, statements to encourage lending to an associated company. It was held in Kleinwort 33 Cavendish LawCards: Contract Law Benson Ltd v Malaysia Mining Corpn (1989) that the defendant’s statement that ‘it is our policy to ensure that the business is at all times in a position to meet its liabilities to you’ was a statement of present fact and not a promise for the future.

He was induced to sign by a statement that this clause did not apply to him and that he could continue to sleep on the premises. The court found that his signing the contract was consideration for this promise, thus creating a collateral contract. In Evans & Son Ltd v Andrea Merzario Ltd (1976), Lord Denning considered the oral statement to be a collateral contract. In Esso Petroleum Co v Mardon (1976), the court held that the statement by a representative of Esso with regard 39 Cavendish LawCards: Contract Law Ü to the throughput of a petrol station was covered by an implied collateral warranty that the statement had been made with due care and skill.

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