LAW

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Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915) HL
This case hinges on the principles of privity of contract and consideration. Understanding these is crucial to grasping the judgment.
I. The Facts:
  • Dunlop (Plaintiffs): Tyre manufacturer.
  • Dew & Co (Intermediary): Purchased tyres from Dunlop at a discount, promising not to sell below Dunlop's list price. Allowed to offer discounts to customers only if those customers also promised to maintain the list price.
  • Selfridge & Co (Defendants): Purchased tyres from Dew & Co at a discount, promising to maintain the list price, but subsequently breached this promise.
  • The Issue: Can Dunlop sue Selfridge directly for breach of contract, even though there was no direct agreement between them?
II. The Core Legal Principles:
A. Privity of Contract: Only a party to a contract can sue on it. This is a fundamental principle of English contract law. Dunlop and Selfridge did not have a direct contract; their relationship was indirect, through Dew & Co.
B. Consideration: For a contract to be enforceable, consideration must be given by the promisee (the person receiving a promise) to the promisor (the person making the promise), or to someone else at the promisor's request. Consideration is the price paid for a promise.
III. The Court's Reasoning:
  1. No Privity: The House of Lords unanimously agreed that Dunlop could not sue Selfridge because there was no direct contract between them. The argument that Dew & Co acted as Dunlop's agent was debated, but ultimately irrelevant to the main issue.
  2. Lack of Consideration from Dunlop: Even if Dew & Co had acted as Dunlop's agent, Dunlop provided no consideration to Selfridge for their promise to maintain list prices. All consideration flowed from Dew & Co. Only Dew & Co could sue Selfridge for breach of contract.
IV. Viscount Haldane LC's Key Statements (Summarized):
  • Principle 1 (Privity): Only a party to a contract can sue.
  • Principle 2 (Consideration): For a contract to be enforceable, consideration must be given by the promisee (or someone acting on their behalf).
  • Principle 3 (Agency): A principal (not named in the contract) can sue if the promisee acted as their agent. However, the principal still needs to provide consideration (directly or through the agent).
V. Key takeaway:
This case powerfully illustrates the importance of both privity and consideration. A lack of either will prevent a party from enforcing a contract, even if there is an apparent agreement. Dunlop failed because they were not a party to the agreement between Dew & Co and Selfridge, and even if they had been, they had given no consideration to support Selfridge's promise.
VI. Study Questions:
  1. Define "privity of contract" and "consideration." Explain their importance in this case.
  2. Why did the court reject Dunlop’s argument about Dew & Co acting as their agent?
  3. Explain how the lack of consideration from Dunlop to Selfridge was crucial to the judgment.
  4. Could the outcome have been different if Dunlop had directly negotiated with Selfridge and received a promise from them in exchange for a discount? Why or why not?
  5. What are the implications of this case for businesses seeking to control resale prices of their products?
  6. ​
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Scruttons Ltd v Midland Silicones Ltd (1961) HL
This case establishes the fundamental principle of privity of contract: only parties to a contract can sue on it or claim its benefits. Let's break down the key aspects for effective study:
I. Case Facts:
  • Plaintiffs (Scruttons): Owners of a drum of chemicals shipped from New York to London.
  • Defendants (Midland Silicones): Stevedores (independent contractors) hired by the ship owner to unload the cargo.
  • Ship Owner: Not a party to the lawsuit, but central to the dispute. Had a contract with the plaintiffs (bill of lading) limiting liability to $500 per package.
  • Negligence: The defendants negligently damaged the plaintiffs' chemicals, causing damage exceeding the $500 limit.
  • Central Issue: Can the defendants, who were not parties to the contract containing the limitation clause, benefit from that clause to limit their liability?
II. The Ruling (Majority Opinion):
The House of Lords held that the defendants could not benefit from the limitation clause. The majority reasoned as follows:
  • (I) "Carriers" Definition: The term "carriers" in the bill of lading referred solely to the ship owner, not the stevedores.
  • (II) Agency Argument Rejected: The ship owner did not act as an agent for the defendants when contracting with the plaintiffs.
  • (III) No Implied Contract: No implied contract existed between the plaintiffs and the defendants providing the defendants with the benefit of the limitation clause.
  • (IV) Fundamental Principle of Privity: The court reaffirmed the fundamental principle (established in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd and Tweddle v Atkinson) that only a party to a contract can sue on it or claim benefits under it. Exceptions are rare and narrowly construed.
III. Lord Denning's Dissenting Opinion:
Lord Denning argued that:
  • (i) Extension of Benefit: Exemption clauses should extend to the servants or agents of the party to whom the clause benefits.
  • (ii) Implied Sub-Bailment: The ship owner acted as a bailee (holding goods for another), and implicitly authorized the transfer of the goods to the stevedores under similar terms, creating a sub-bailment. This, he suggested, would allow the stevedores to claim the benefit of the limitation clause.
IV. Key Concepts to Understand:
  • Privity of Contract: Only parties to a contract can enforce its terms or claim its benefits. This is a cornerstone of contract law.
  • Exemption Clauses (Limitation of Liability Clauses): Clauses attempting to limit or exclude liability for breach of contract. Their enforceability is subject to various rules, including the rules of privity.
  • Agency: One person acts on behalf of another. The majority rejected the idea that the ship owner acted as agent for the stevedores.
  • Bailment: The delivery of goods from one person to another for a particular purpose, without transfer of ownership.
V. Significance of the Case:
  • This case strongly reinforces the principle of privity of contract.
  • Lord Denning's dissent highlights the tension between strict application of privity and fairness, particularly where third parties are clearly intended to benefit (or be protected) by a contractual provision. His approach attempted to find a practical solution to protect stevedores but ultimately failed to persuade the majority.
  • Subsequent cases have attempted to circumvent the strict rule of privity, particularly in the context of insurance and other situations where a third party is clearly intended to benefit from the contract. This case remains central in understanding those attempts and the ongoing debate around its application.
VI. Study Tips:
  • Understand the facts thoroughly. Who are the parties? What was the contract? What was the negligence?
  • Compare and contrast the majority and dissenting opinions. What are the key arguments on each side?
  • Consider the policy implications of the decision. Why is privity of contract important? What are the potential downsides of relaxing the privity rule?
  • Review other cases cited, particularly Dunlop Pneumatic Tyre and Tweddle v Atkinson, for a deeper understanding of the principle of privity. Research how later cases have attempted to refine or modify the privity rule.
By thoroughly understanding these points, you'll have a solid grasp of this crucial case in contract law.
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Beswick v Beswick (1967) HL
Case Summary: This landmark case revolves around a contract where a coal merchant (the plaintiff's husband) transferred his business to his nephew (the defendant) in exchange for weekly payments to himself and, after his death, to his wife (the plaintiff). The nephew stopped payments to the widow after the merchant's death. The case explores the doctrine of privity of contract.
Key Issue: Can a third party (the wife) enforce a contract to which they were not a party?
Facts:
  • Contract: A contract existed between the husband (deceased) and the nephew. The nephew promised to pay the husband and, subsequently, the wife.
  • Breach: The nephew breached the contract by refusing to pay the wife.
  • Plaintiff's Claim: The plaintiff sued in two capacities:
    • Personal Capacity: As the intended beneficiary of the payment.
    • Representative Capacity: As administratrix of her husband's estate.
Decision of the House of Lords (HL):
  • Personal Capacity (I): The HL ruled against the plaintiff in her personal capacity. The traditional doctrine of privity of contract holds that only parties to a contract can enforce it. The Law of Property Act 1925, §56(1) did not abolish this doctrine, rejecting Lord Denning's view in the Court of Appeal. Crucially, the plaintiff was not a party to the original contract.
  • Representative Capacity (II): The HL ruled for the plaintiff in her representative capacity. As the administratrix of her deceased husband's estate, she could enforce the contract. The court ordered specific performance, meaning the nephew was compelled to fulfill his contractual obligation to make the payments.
Key Legal Principles:
  • Privity of Contract: Only parties to a contract can sue or be sued on it. This case reinforces the traditional understanding of this doctrine.
  • Exception for Administration: Administrators of an estate can enforce contracts made by the deceased if it benefits the estate. This is a key exception to the privity rule.
  • Specific Performance: A court order requiring a party to perform their contractual obligations. This was granted to the wife in her representative capacity.
Study Questions:
  1. Define "privity of contract." Explain its significance in Beswick v Beswick.
  2. What were the two capacities in which the plaintiff brought her claim? Why was she successful in only one?
  3. How did the HL decision differ from the Court of Appeal's decision? What was the significance of Lord Denning MR's dissenting opinion?
  4. Explain the concept of specific performance. Why was it an appropriate remedy in this case?
  5. What are the limitations of the rule of privity of contract, and what exceptions exist (like the one seen here)?





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Les Affréteurs Réunis SA v Leopold Walford (London) Ltd (1919) HL
Case Summary: This case concerns a dispute over brokerage commission. Ship owners (Les Affréteurs Réunis SA) chartered their ship through brokers (Leopold Walford (London) Ltd) to charterers (a third party). The charterparty explicitly stated that a 3% commission was due to the brokers upon signing, regardless of the ship's fate. Before the charter began, the French government requisitioned the ship, preventing any hire charges from being paid. The ship owners refused to pay the brokers their commission, arguing a trade custom existed where commission was only payable from received hire charges.
Key Issues & Holdings:
  1. Enforceability of the Broker's Commission despite lack of direct contractual relationship: The House of Lords held that the brokers could recover their commission. Even though they weren't a party to the main charterparty agreement between the ship owners and charterers, the promise to pay them (the commission clause) was considered enforceable. This is because the charterers, who were parties to the agreement, held the obligation to pay the commission on trust for the brokers. The brokers were effectively appointed by the charterers to act on their behalf in negotiating the charter.
    • Key Legal Principle: A third party beneficiary to a contract can enforce a promise made for their benefit if the promise is held on trust by a contracting party.
  2. Conflict between Custom and Express Contractual Terms: The court rejected the ship owners' argument based on trade custom. The express term in the charterparty clearly stipulated commission payment regardless of the ship's fate (ship lost or not lost). This clear, express term superseded any conflicting trade custom.
    • Key Legal Principle: An express term in a contract overrides any conflicting trade custom or usage.
Study Points:
  • Third Party Beneficiaries: Understand the principles of third-party beneficiary contracts and when a third party can enforce a promise made for their benefit. Consider the role of trust in this context. How does the "trust" mechanism allow the brokers to sue successfully even though they weren't a party to the original contract?
  • Contractual Interpretation: Learn how courts interpret contracts, particularly the hierarchy between express terms and implied terms (like trade customs). Why is an express term considered superior to a trade custom in this instance?
  • Application of Principles: Practice applying the principles learned to hypothetical scenarios. Could a similar outcome be reached in different factual situations? What if the charterparty contained a clause explicitly excluding payment if the ship was requisitioned?
Key terms: Charterparty, Brokerage Commission, Trade Custom, Third Party Beneficiary, Trust, Express Term, Implied Term.



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In Re Flavell (1883) CA
Case Summary: This case centers on the disposition of an annuity payable to the executors/administrators of a deceased partner (Mr. Flavell) under a partnership agreement. The agreement stipulated that the annuity, upon the partner's death, should be used as directed in the partner's will or deed, or, in default of such direction, paid to the surviving widow.
Key Facts:
  • Partnership Agreement (1875): Established an annuity payable to the executors/administrators of a deceased partner. Crucially, the agreement included a mechanism for directing the use of the annuity (will or deed) or, failing that, payment to the widow.
  • Mr. Flavell's Death (1883): Mr. Flavell died insolvent, leaving insufficient assets to satisfy all creditors. He made no specific direction regarding the annuity in his will, but bequeathed his entire estate to his wife.
  • The Dispute: The receiver appointed for Mr. Flavell's creditors argued that the annuity formed part of the deceased's estate and should be distributed to creditors. Mrs. Flavell contended it was held on trust for her.
Legal Issue: Did the annuity form part of Mr. Flavell's general estate (available to creditors), or was it held on trust for his widow?
Holding: The court held that the annuity was held on trust for Mrs. Flavell.
Reasoning: The partnership agreement created a trust. The annuity, from its inception, was not considered part of Mr. Flavell's assets but rather held in trust for the benefit of his widow, either directly under the default provision or indirectly per his will. Even though Mr. Flavell didn't explicitly direct its application in his will, the trust was already established by the partnership agreement, making the payment to his wife outside the scope of his general estate available to creditors. The money came to his representatives "impressed with a trust".
Key Concepts:
  • Trust: A fiduciary relationship where one party (trustee) holds property for the benefit of another (beneficiary).
  • Constructive Trust: A trust imposed by law, even without express agreement, to prevent unjust enrichment. In this case, the court effectively viewed the partnership agreement as creating a constructive trust, ensuring the annuity wouldn't fall into the hands of creditors despite Mr. Flavell's insolvency.
  • Trust vs. Debt: The distinction between money owed as a debt (part of the estate) and money held on trust (outside the estate) is critical in insolvency.
  • Will vs. Contract: The court prioritised the contractual obligation (partnership agreement) over the provisions in Mr. Flavell's will regarding his entire estate, emphasizing the pre-existing trust arrangement.
Study Questions:
  1. What was the crucial clause in the partnership agreement? How did it impact the court's decision?
  2. Explain the difference between a trust and a debt in the context of insolvency.
  3. Why did the court find that the annuity was not part of Mr. Flavell's estate despite not being explicitly assigned to his wife in his will?
  4. What is the significance of the term "impressed with a trust"? What does it mean in this context?
  5. How does this case demonstrate the importance of carefully drafting partnership agreements, particularly in relation to death benefits?



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In Re Schebsman (1943) CA
This case concerns the bankruptcy of a debtor and whether payments promised to his widow under a contract between the debtor and his employers formed part of his bankrupt estate.
Key Facts:
  • Debtor's Employment: The debtor worked for two companies, his employment ending March 31, 1940.
  • Post-Employment Agreement (September 20, 1940): The debtor and the companies entered a written agreement. This agreement promised the debtor annual payments for several years. Upon his death, specified sums would be paid to his widow.
  • Bankruptcy & Death: The debtor was declared bankrupt in March 1942 and died in May 1942.
  • Legal Action: The debtor's trustee in bankruptcy sought to include the payments to the widow as part of the debtor's estate for distribution to creditors.
Central Issue: Did the payments promised to the widow under the contract constitute part of the debtor's estate?
Holding: No, the payments were not part of the debtor's estate.
Reasoning: The Court of Appeal based its decision on two key points:
(I) Absence of a Trust:
  • The agreement didn't create a trust. The court emphasized that the intention to create a trust must be clearly expressed in the language of the agreement and supported by the circumstances. The language used in the agreement did not meet this high standard, even though it benefited a third party (the widow). Lord Justice du Parcq explicitly stated the court shouldn't be quick to find evidence of an intended trust.
(II) Lack of Debtor's Proprietary Interest:
  • The debtor never owned the promised payments. He had no right to direct the companies to pay anyone other than as stipulated in the contract. Because the debtor lacked any beneficial interest in the funds, his trustee in bankruptcy also lacked the right to claim them.
Key Legal Principles Illustrated:
  • Intention to Create a Trust: The court highlighted the strict standard for establishing an intention to create a trust. Mere benefit to a third party is insufficient. Clear and unambiguous language demonstrating trust intention is required.
  • Proprietary Rights: A trustee in bankruptcy can only claim assets that belong to the bankrupt estate. The debtor must have a vested interest (proprietary right) in the assets.
  • Privity of Contract: Only parties to a contract can enforce its terms. The widow, as a third-party beneficiary, could not enforce the contract against the companies. However, this case goes further than merely acknowledging this principle, directly addressing whether the contract indirectly placed the money within the bankrupt's estate.
Study Tips:
  • Focus on the high standard required to establish a trust. Memorize Lord Justice du Parcq's quote highlighting the court's reluctance to find indications of trust intent unless clearly expressed.
  • Understand the difference between a contractual right and a proprietary right. The debtor had a contractual right to receive payments, but he lacked a proprietary right (ownership) over the future payments destined for his widow.
  • Distinguish between a third-party beneficiary and an intended trustee. The widow was a third-party beneficiary, but not a trustee. The agreement didn’t create a trust relationship in her favor.
  • Practice applying the principles of this case to hypothetical scenarios. Consider similar agreements and analyze whether they would create a trust or a mere contractual benefit for a third party.​



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Morris v CW Martin & Sons Ltd (1965) CA: Study Guide
Case Summary: This case concerns the liability of a sub-bailee (CW Martin & Sons) for the loss of goods (a mink stole) entrusted to them. The plaintiff (owner of the stole) sent it to a furrier (Beder) for cleaning. Beder, in turn, sent it to the defendants (CW Martin) for cleaning under a contract containing exclusion clauses limiting liability. CW Martin's employee stole the stole. The plaintiff sued CW Martin for the loss.
Key Issues & Holdings:
  1. Sub-Bailment and Bailor's Rights: The court held that handing over goods for cleaning constitutes a bailment. CW Martin, receiving the stole from Beder, became a sub-bailee for reward. Crucially, a sub-bailee owes duties to the original bailor (the plaintiff) independent of the contract between the bailee (Beder) and the sub-bailee (CW Martin). This duty was breached when CW Martin's employee stole the stole (conversion of bailed goods). Therefore, CW Martin was liable to the plaintiff for breach of their duty as sub-bailee.
  2. Exclusion Clauses: The court found that the exclusion clauses in CW Martin's contract with Beder did not cover the theft. Therefore, they did not protect CW Martin from liability.
  3. Obiter Dicta on the Effect of Valid Exclusion Clauses (Highly Debatable): Lord Denning MR offered an obiter dictum (opinion not essential to the decision). He suggested that if the exclusion clauses had covered the theft, they would have been effective because the plaintiff, by sending the stole to Beder for cleaning, implicitly consented to a sub-bailment under standard industry terms. Diplock LJ explicitly avoided commenting on this point, and Salmon LJ expressed strong attraction to Denning's view but stated he hadn't formed a conclusive opinion.
Key Concepts:
  • Bailment: The temporary transfer of possession of goods, without transfer of ownership, from one person (bailor) to another (bailee).
  • Sub-Bailment: When a bailee transfers possession of the goods to a third party (sub-bailee).
  • Bailee's Duty of Care: A bailee has a duty of care to the bailor to take reasonable care of the goods. This duty includes preventing their loss or damage. A sub-bailee inherits this duty.
  • Conversion: The unauthorized assumption of ownership rights over another's goods.
  • Exclusion Clauses: Contractual terms that aim to limit or exclude liability. Their effectiveness depends on their wording and whether they are incorporated into the contract and cover the specific breach.
Study Questions:
  1. Explain the difference between a bailment and a sub-bailment. Why is the concept of sub-bailment crucial in this case?
  2. What duty did CW Martin owe to the plaintiff as a sub-bailee? How was this duty breached?
  3. Analyze the court's reasoning regarding the ineffectiveness of the exclusion clauses.
  4. Critically evaluate Lord Denning MR's obiter dicta on the potential effect of valid exclusion clauses. Why did the other judges hesitate to endorse this view? What are the arguments for and against its validity?
  5. What are the implications of this case for businesses engaging in sub-bailments? What steps could they take to protect themselves from liability?
Remember: Focus on understanding the core principle that a sub-bailee owes a duty of care directly to the original bailor, regardless of any contract between the bailee and sub-bailee. The obiter dicta regarding exclusion clauses is important to understand, but remember it is not binding precedent. Pay attention to the distinctions in the judges' opinions on this point.



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Crabb v Arun District Council (1975) CA
This case establishes the principle of proprietary estoppel in land law. Understanding this case requires grasping the key elements: the facts, the legal issue, the holding, and the broader legal significance.
I. Facts:
  • Land Ownership: Crabb owned a plot of land divided into two parts. Only one had road access.
  • Oral Agreement (July 1967): Crabb reached an oral agreement with Arun District Council (ADC) for access to the public road for the landlocked portion. No payment was exchanged.
  • Council Actions: ADC subsequently erected a fence with gaps for access points, and then gates.
  • Crabb's Reliance: Crabb sold the first portion, relying on the agreed access for the second. He did not reserve a right of way.
  • ADC's Breach: ADC subsequently blocked access to the second portion and demanded £3000 for access.
II. Legal Issue:
Can Crabb enforce the oral agreement for access, even though it was never formalized in writing, and despite the council possessing conflicting rights to the land? This hinges on the application of proprietary estoppel.
III. Holding:
The Court of Appeal held in favour of Crabb. The council was estopped from denying Crabb access.
IV. Legal Principle: Proprietary Estoppel
This case is crucial for its clarification of proprietary estoppel:
  • Definition: Proprietary estoppel prevents a party (B, in this case the Council) from going back on a representation about land rights (the implied promise of access), when another party (A, Crabb) has acted to their detriment in reliance on that representation.
  • Key Elements:
    • Representation: The Council's actions (allowing access, erecting gates) constituted a representation that Crabb had a right of access.
    • Reliance: Crabb relied on this representation when selling the first portion of land.
    • Detriment: Crabb suffered detriment by losing the right to access due to the Council's subsequent actions.
  • Difference from Promissory Estoppel: Unlike promissory estoppel (which usually acts as a defence), proprietary estoppel can create a cause of action, enabling Crabb to positively claim the right of access. It creates a new right in land.
V. Key Distinctions and Application:
  • Oral Agreement: The lack of a written agreement did not prevent the finding of estoppel. The Council's conduct created the representation.
  • Detrimental Reliance: The detriment here wasn't merely financial; it was the loss of access, impacting the value of the second portion of land.
  • Equity: The court's decision reflects principles of fairness and equity. The Council's actions created an unconscionable situation, which estoppel rectifies.




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Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd (1981) CA
This case concerns the interpretation of a guarantee and the application of estoppel. Understanding the key points is crucial.
I. Case Facts:
  • Parties: Amalgamated Investment & Property Co Ltd (AIP) – plaintiff (in liquidation); Texas Commerce International Bank Ltd – defendant.
  • Transaction: AIP wholly owned ANPP (a Bahamas company) which needed a $3,250,000 loan for a property development. AIP guaranteed all loans to ANPP from the defendant bank.
  • Loan Structure: The loan was disbursed by Portsoken, a Bahamas subsidiary of the defendant bank. AIP also separately borrowed from the defendant bank in England. Both loans were secured by properties and guarantees.
  • Default & Sale: AIP defaulted. The bank sold properties in both England and the Bahamas. The Bahamian property sale didn't cover the ANPP loan, resulting in a $750,000 shortfall. This shortfall was covered by the surplus from the sale of AIP's English properties.
  • Dispute: The liquidator of AIP argued that the guarantee only covered loans directly from the bank, not its subsidiary, Portsoken. Therefore, the surplus from the English properties shouldn't cover the Bahamian loan shortfall.
II. Court Holding:
The Court of Appeal held in favor of the bank, based on two grounds:
  • (I) Construction of the Guarantee: The guarantee should be interpreted considering the surrounding circumstances and correspondence. The court found the guarantee implicitly included loans from Portsoken, viewed as the bank's "alter ego" (Lord Denning MR). This interpretation considered the practical reality of the transaction, where the subsidiary acted effectively on behalf of the parent bank.
  • (II) Estoppel: Even if the guarantee didn't explicitly cover Portsoken, AIP was estopped from denying it. For years, both parties acted under a common assumption that the guarantee applied to Portsoken's loan. The bank provided indulgences and forbore from exercising its full rights against AIP based on this assumption. This established a "conventional basis" replacing the original contract (per Lord Denning MR). This shows the development of a new contract based on the parties' actions.
III. Key Legal Principles:
  • Construction of Contracts: Contracts should be interpreted in light of the surrounding circumstances and correspondence (the "factual matrix"). This means looking beyond the bare words of the agreement to understand the parties' intentions.
  • Estoppel: Estoppel prevents a party from going back on a representation, particularly if the other party has acted in reliance on it. This case highlights promissory estoppel where a promise is acted upon and creating inequity.
  • Common Mistake and Subsequent Conduct: Where parties are under a common mistake about the contract's meaning and subsequently act on that mistake, they can implicitly replace the original contract with a new one based on their conduct. This highlights that ongoing conduct can amend initial agreements.
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WJ Alan Ltd v El Nasr Export and Import Co (1972) CA
This case concerns a contract dispute over currency of payment for coffee sales. Understanding the key points is crucial for grasping the concepts of waiver and variation in contract law.
I. Core Facts:
  • Contract: Two contracts for 250 tons of coffee each, priced in Kenyan shillings (KES). Payment stipulated as "confirmed irrevocable letter of credit."
  • Dispute: The buyer provided a letter of credit in British pounds sterling (£), not KES. After two shipments invoiced and paid in £, the seller invoiced the third shipment also in £. Sterling then devalued against the KES. The seller sued for the difference.
II. The Court's Decision: The sellers' claim failed. The court reasoned in three ways:
A. Waiver (Lord Denning MR):
  • The sellers, by accepting payment in £ for the first two shipments, waived their right to payment in KES.
  • This is a classic example of waiver, based on the principles established in Hughes v Metropolitan Railway Company and Central London Property Trust Ltd v High Trees House Ltd.
  • Denning MR clarifies that waiver, while sometimes temporary, can become irreversible if withdrawing it would cause injustice to the other party (buyer). In this instance, it was considered irreversible.
  • Key takeaway: Acceptance of a different payment method than initially contracted can constitute waiver of the original contractual right. The action of the promisee (seller) acting on the belief induced by the other party (buyer) is sufficient, even without demonstrable detriment.
B. Variation of Contract (Megaw LJ):
  • Megaw LJ viewed the shift from KES to £ as a variation of the original contract. Both parties benefitted/risked from this change at the time. This mutual benefit constitutes consideration for the variation.
  • Alternatively, even without variation, Megaw LJ concludes the buyers would still succeed based on the seller's waiver.
  • Key takeaway: A change in a contractual term can be a binding variation if both parties provide consideration (a mutual benefit or detriment).
C. Variation or Waiver (Stephenson LJ):
  • Stephenson LJ agreed that either variation with consideration or waiver explained the outcome.
  • He acknowledged the detriment suffered by the sellers (loss due to devaluation) in supporting the waiver argument.
III. Key Legal Concepts Illustrated:
  • Waiver: The voluntary relinquishment of a known right. It can be express or implied (through actions). It can be temporary or permanent depending on the circumstances and the potential for injustice to the other party.
  • Variation of Contract: A change to the terms of a contract, requiring consideration from both parties to be binding.
  • Consideration: Something of value exchanged by both parties to a contract, creating a legally enforceable agreement.



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