Our team of litigation solicitors has wide ranging experience of dealing with both domestic and international commercial and consumer contract disputes. We recognise that contract disputes are all different and arise in a variety of circumstances.
We tailor our approach to each individual client according to the strengths of their case and their individual aims, objectives and commercial aims.
A contract is not necessarily a formal written and signed document. Broadly speaking, a contract is simply an agreement between two or more people, where each promises to do something for the other. In most cases, this could be a written or oral agreement.
There are a variety of contractual issues that may arise, including:
Breach of Contract
If one party does not keep to their side of the bargain, and another party suffers loss as a result, then a breach of contract claim may be made. There could be a breach of the express terms of a contract, and in some circumstances there could be a breach of implied terms of the contract. Terms may be implied by statute, – see further information in Sale of Goods and Supply of Services tab below – and the courts also imply terms where it is necessary to give “business efficacy” to a contract.
A party may be able to claim against a third party who is not party to the contract if that party induces or procures a party to the contract to breach the contract.
If a contract confers a benefit on a third party, then under the Contracts (Rights of Third Parties) Act 1999, a third party may bring a claim for breach of contract.
Remedies For Breach of Contract
There are a range of remedies available for breach of contract claims, the principal remedy is an award of damages to compensate for loss. There are also various non-compensatory damages available such as:
- Account of profits.
- “Wrotham Park Damages”.
- Nominal damages.
- Punitive damages.
Further, in some circumstances, parties may agree in advance the remedies available for a specific breach of contract. For example, the parties may agree that a specific sum will be payable upon breach (known as “liquidated damages”), or that any advance payments paid by the party will be forfeited upon breach. In some circumstances an agreed remedy may not be enforceable if it can be shown it is a “penalty clause”, and not a genuine pre-estimate of loss.
Breach of contract and the quantification of damages can be a tricky and elusive concept, there are various restrictions on the recovery of damages. Our specialist solicitors will advise you of the size of your potential claim, or your potential liability (if a claim is being brought against you). We will also advise you from the earliest stage on your likelihood of recovering your legal costs.
Void and Unenforceable Contracts
Disputes often arise over the enforceability of a contract or a specific term in a contract. The key elements for an enforceable contract are:
- Offer
- Acceptance
- Consideration
- Intention to create legal relations
- Certainty of terms
If any of these key elements are missing, then the contract will not be enforceable (unless, in some circumstances, the contract is executed as a deed).
In addition, there are various other ways a contract, or contractual term, may be held to be void or unenforceable, this includes:
- The law of misrepresentation is vast, however broadly speaking a misrepresentation is an untrue statement of fact or law made by Party A, which induces Party B to enter into a contract causing Party B loss. A misrepresentation is not necessarily an express statement and can be implied. There are different types of misrepresentation including fraudulent misrepresentation, innocent misrepresentation and negligent misrepresentation.
- Contracts in restraint of trade. See Restrictive Covenants.
- If a contract is “tainted” by illegality, then it may be void and unenforceable.
- Duress and undue influence. A contract may be held to be void if it was entered into as a result of duress or undue influence.
- In some circumstances a contract can be void as a result of a “mistake”. However, in some circumstances a court may simply rectify the mistake, rather than discharging the contract.
Further, an “unfair” term may be invalid under the Unfair Terms in Consumer Contract Regulations 1999, the Consumer Rights Act 2015 and/or the Unfair Contract Terms Act 1977.
The law in this area is vast and complex. Our specialist lawyers will provide clear advice on your legal position.
Termination and Discharge of Contracts
A contract may be terminated in accordance with contractual provisions, for breach and for certain other events. Legislation may also affect rights to terminate a contract, for example under the Sale of Goods Act 1979 – see further information in Sale of Goods and Supply of Services tab below.
Terminating a contract for a breach can be risky and caution should be exercised. In the absence of an express contractual term to the contrary, a contract may only be terminated for a “repudiatory” breach, that is a serious breach. When a serious breach has been committed, then the other party has a choice to either:
- Affirm the contract, which means carry on with the contract and claim damages; or
- Terminate the contract. The other party will still be able to claim damages but the contract will also come to an end.
If a party terminates a contract for what it believes to be a sufficiently serious breach, but a court subsequently holds that the breach was not sufficiently serious, then the terminating party may face a claim by the other party for damages. It is therefore critical that careful thought is put into whether or not a sufficiently serious breach has been committed.
If a party does not immediately terminate, or carries on with the contract before terminating, then it is likely to lose the right to terminate. It is therefore imperative you act quickly and seek legal advice without delay.
In addition to terminating a contract, a contract can be automatically discharged if an event occurs so that the parties are no longer bound to perform their obligations. This is known as “frustration”. A frustrating event is an event which:
- Occurs after the contract has been formed.
- Is so fundamental as to be regarded as striking to the root of the contract and is entirely beyond what was contemplated by the parties when they entered the contract.
- Is not due to the fault of either party.
- Renders further performance impossible.
Examples of this include the destruction of the subject matter of the contract and the personal incapacity in a personal services contract.
Restitution and Unjust Enrichment
A court may intervene if a defendant is unjustly enriched at the expense of the claimant. The court may reverse the unjust enrichment by restoring the relevant benefit or enrichment to the claimant. In broad terms, a claimant must establish three elements:
- The defendant has been enriched or has received a benefit.
- The enrichment of the defendant is unjust.
- The enrichment of the defendant was at the expense of the claimant.
Enrichment may either be positive, for example the receipt of money or goods, or negative, for example the saving of expenditure. Whether the enrichment is “unjust” will be determined on the individual facts of the case, an example would be where a defendant has been enriched as a result of his own wrongdoing.
There are various remedies available for claims in restitution and unjust enrichment, including:
- Claim for return of money paid.
- “Quantum meruit” or a claim for reasonable price in respect of services supplied.
- “Quantum valebat” or a claim for reasonable price in respect of goods supplied.
- Account of profits. This will require the defendant to pay over to the claimant profits enjoyed as a result of wrongdoing.
- Trusts and liens. A party may be able to hold assets pending payment of a debt owed.
- Subrogation allows a third party to step into the shoes of a party. The most common time when subrogation occurs is in insurance contracts where an insurance company may discharge the debt owed to an insured party, and then may be entitled to the benefit of any security held for that debt (despite not being part of the contract).
The law of rectification and unjust enrichment is a very complex area, and our specialist solicitors will provide clear and concise guidance on your legal rights.
Sale of Goods and Supply of Services
In non-consumer contracts, the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982 and the Supply of Goods (Implied Terms) Act 1973 implies certain terms into contracts. The provisions of this legislation is particularly complex and imply terms not only in relation to satisfactory quality and fitness for purpose of goods, but also matters such as the right of an unpaid seller to resell goods.
There are currently two regimes affecting consumer contracts entered into before and after 1 October 2015. The Sale of Goods Act 1979 has been replaced by the Consumer Rights Act 2015. If a contract was entered into before 1 October 2015, then the Sale of Goods Act 1979 will apply, if a contract was entered into on or after 1 October 2015 then the Consumer Rights Act 1979 will apply.
Under the Sale of Goods Act 1979, goods must comply with their description, must be of satisfactory quality and fit for purpose. Goods sold must also match any sample shown or description in a brochure.
If goods are faulty, they can generally be rejected and returned within a reasonable period of time, and a consumer will be entitled to a refund. If it is too late to reject the goods, then a consumer may be entitled to have the faulty goods replaced or repaired. If the seller does not repair or replace the faulty goods, then a consumer will be entitled to claim either a reduction of the purchase price or get money back.
The Consumer Rights Act 2015 introduces, amongst other things:
- Entitlement to a 30 day refund.
- Tiered remedy system which sets out whether you are entitled to a refund, based upon how long a consumer has owned the product.
- Failed repairs. If a retailer fails to repair or replace a faulty item, a consumer is entitled to ask for a refund or price reduction. If a consumer does not want to accept a refund or price reduction, a consumer is entitled to request a second repair or replacement at no extra cost.
- No deductions can be made from refunds in the first six months after purchase.
The law relating to consumer rights and sale of goods is vast and complex. If you have an issue please contact our specialist lawyers who will provide clear advice to you.