Page 937 - SUBSEC October 2017_Neat

02231020/CAPE/SPEC 2017

5

SECTION B
MODULE 2 - LAW OF CONTRACT

Question 2

Specific Objectives: 2 (b), 4 (a), 6

(a) (i) Presumptions of an intention to create legal relations.
 Arrangements made between family members are not usually
legally binding. [1]
Balfour v. Balfour 1919 [1]

 Commercial agreements in which the intention is presumed
and must be rebutted by the party seeking to deny it. [1]
Esso Petroleum Company Ltd. v. Commissioner of Customs
and Excise 1976 [1]
[4 marks]

(ii) Principle emerging from Carlill v. Carbolic Smoke Ball Co.
 The advertisement is a conditional offer rather than an
invitation to treat.
Performance can amount to acceptance of an offer.

Clear explanation of any one relevant principle [2 marks]
Weak explanation [1 mark]

(b) - Custom or habit
Case: Hutton v. Warren (1836): Local custom meant that on
termination of an agricultural lease the tenant was
entitled to an allowance for seed and labour on the land.
The court held that the lease made by the two parties must
be viewed in the light of this custom. As Baron Parke in
the Court of Exchequer said ”It has long been settled that
in commercial transactions extrinsic evidence of custom
and usage is admissible to annex incidents to written
contracts, in matters with respect to which they are
silent.”

- Terms implied by trade or professional custom
The parties to a contract might be bound by an implied
trade custom when it is accepted as their deemed intention
even though there are no express terms on the matter.
Case: Les Affreteurs Reunis SA v. Walford (Walford’s case)
(1919) In this case that we have already seen in privity
of contract, Walford was suing for a commission of 3% that
he felt he was owed for negotiating a charter party between
Lubricating and Fuel Oils Co. Ltd and the owners of the SS
‘Flore’. One argument of the defendants was that there was
a custom that commission was payable only when the ship
had actually been hired. In this instance the French
government had requisitioned the ship before the charter
party had actually occurred. If the custom was accepted
then it would conflict with the clause in the contract