An Introduction to Contract Law

An Introduction to Contract Law

Our introduction to contract law is ideal for exam revision and general reference and is a good place to start if you are new to contract law.

Contrasting commercial and consumer needs

Contract as an enabling device:

Sidgwick, Elements of Politics (BBF 46)

‘Suppose contracts freely made and effectively sanctioned, and the most elaborate social organisation becomes possible...’

Controls over contracts and contractual behaviour

Contract and the consumer:

Why might consumers need more “protection” than businesses?

Unfair Contract Terms Act 1977 s.12:

(1) A party to a contract "deals as consumer" in relation to another party if -

(a) he neither makes the contract in the course of a business nor holds himself out as doing so; and

(b) the other party does make the contract in the course of a business; and

(c) in the case of a contract governed by the law of sale of goods or hire purchase, or by section 7 of this Act, the goods passing under or in pursuance of the contract are of a type ordinarily used for private use or consumption.

(1A) But if the first party mentioned in subsection (1) is an individual paragraph (c) of that subsection must be ignored.

European influences

Directive on contracts negotiated away from business premises (“doorstep selling”) 1985 (1985/577/EC)

(implemented by Consumer Protection (Cancellation of Contracts concluded away from Business Premises) Regulations 1987, SI 1987/2117)

Directive on Distance Selling 1997 (1997/7/EC)

(implemented by Consumer protection (Distance Selling) Regulations 2000, SI 2000/2334)

Directive on Unfair Terms in Consumer Contracts 1993 (93/13/EEC) (UTCCD)

(implemented by Unfair Terms in Consumer Contracts Regulations 1994 and 1999, SI  1999/2083 (UTCCR))

Directive on Certain Aspects of the Sale of Consumer Goods and Associated Guarantees 1999 (CSD)

(implemented by Sale and Supply of Goods to Consumers Regulations 2002, SI 2002/3045 (amending SGA and other Acts, except reg 15))

Commercial contracts: planning

The "distributorship problem":

A manufacturer appoints a distributor to cover the UK. From experience the manufacturer knows that most sales are won by the distributor’s reps being “around” and “familiar faces” in the customers’ works, so they want to be sure that the distributor will send a rep to each of a list of potential major clients once a week without fail.  What sanction can the manufacturer use to ensure this does happen?

Specific performance?


Liquidated damages?

Dunlop v New Garage [1915] AC 79 (BBF 689)

Clydebank Engineering v Castenada [1905] AC 6 (noted BBF 691)


          Schuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235 (BBF 599)

SGA s.10(1) (time for payment not of essence)

Financings Ltd v Baldock [1963] 2 QB 104 (BBF 604)

Clause gave F the right to terminate and repossess vehicle if hirer failed to pay any instalment; hirer missed two instalments and F repossessed; held that hirer liable for instalments due but not for further instalments or for damages for non-performance.

Lombard North Central plc v Butterworth  [1987] 2 WLR 7 (McK 951; BBF 605)

Lessee agreed "to pay...the rentals...punctual payment of each of which shall be of the essence of this lease"; L could terminate agreement and claim damages for non-performance.

Empirical work:

Macaulay, "Non-contractual relations in business" (1963) 28 Am. Sociological Rev. 55 (extracted, BBF 389)

Beale & Dugdale, "Contracts between businessmen" (1975) 2 British J. Law & Society 45 (extracts, BBF 81, 223)

Macaulay, "Standardized contracts of US automobile manufacturers" in Int. Encyclopedia of Comparative Law, VII (extract, BBF 117)

Lewis, "Contracts between businessmen: Reform of the law of firm offers" (1982) 9 British J Law & Society 153 (extract, BBF 250)