Contract Law: Analyzing Agreement Validity and Restoration Options

This report provides an in-depth analysis of contract law, focusing on the elements required for a valid agreement and the potential remedies available when a contract is breached. It examines a specific scenario involving David and James, evaluating whether a concluded agreement exists based on the information provided by David. The report further explores options for restoring both parties to their original positions before contracting, considering factors like misrepresentation and vitiating elements. The discussion covers various ways a contract can end, including expiration, termination due to breach, and vitiation, with a particular emphasis on the implications of misrepresentation. It concludes by highlighting the potential for James to seek damages and remedies due to misleading information provided by David, which led to financial losses after taking over the business.

CONTRACT LAW

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK...............................................................................................................................................2
Question1- There is a concluded agreement between the parties based upon the information
provided by David?.....................................................................................................................2
Question 2- Are there any options in terms of restoring both parties to the position they were
in before Contracting?.................................................................................................................5
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
With the emergence of Business the need for its regulation and conduct was also felt thus
laws governing contracts and agreements were developed. Contract law of UK governs the
legally binding agreements in the country. A contract law binds various businesses and
organisations with promises and obligations created by the statement of terms and facts between
the parties. These are thus enforced by the law of Contracts which duly protects the interest of
the parties. A contract takes place when something of value is exchanged. With the creation of
this law, it also gave rise to legal obligations which are essential to be followed on the part of
parties. This statute law thus governs the environment of a business where contracts happen
between people who as subjects are governed by the act. Reaching an agreement is the primary
requisite of making a contract1. The following project will discuss and explain in detail about
Contract, its essential elements and conditions which are needed for the contract to be formed,
about the rights and responsibilities under the contract and the remedies for breach of contract.
TASK
Question1- There is a concluded agreement between the parties based upon the
information provided by David?
Contract:
An agreement between two parties is known as a contract. Obligations and
responsibilities arise when a contract is enforceable by law. A contract is said to take place
between the parties when one party makes the offer and the other party accepts it. A contract
makes a person do something or refrains someone from doing something. There is ease in
governing any business environment when contract law rules and procedures are followed. The
business operations can be effectively carried out when there is awareness about the conditions
and elements of contract formation2. Thus if a party fails to keep up with the promise in the
agreement, the other party gets restoration on the part of fulfilment of the promises of the
1 'Contracts. Remedies On Contract. Breach Of Alternative Promises' (2018) 42 Harvard
Law Review
2 'Damages: Breach Of Contract: Measure Of Damages' (2018) 9 Michigan Law Review

contract which is called as creation of legal obligations on the parties. Both the parties of the
contract have rights and also responsibilities which should be performed by them for successful
enforcement of contract.
Elements for formation of Contract:
 OFFER- It is type of a promise which the offeror makes to the other party with specific
conditions and terms. Here, offeror is the party who proposes the terms of an agreement
and the other party to whom the offer is made is the offeree. The specific terms are
willingly expressed in an offer so the parties can accept it and recognise it when they
enter into a contract. Then the contract is pronounced to be valid and binding on the
partie3.
 ACCEPTANCE- A contract or agreement is said to become complete when it gets
accepted by the other party. Expression of assent to the statement of terms of agreements
is regarded as acceptance. Communication of the acceptance to the offeror is important
for the legal fulfilment and effectiveness. It is regarded as the final step in the completion
of contract.
 CONSIDERATION- This element is essential for a contract to become binding. Without
the exchange of something of value a contract cannot be established. For the fulfilment of
a promise and its enforcement this factor is important.
 INTENTION- Legal intention is necessary for a contract to become lawful. A legal
relationship is created with lawful intent. This is the reason that social arrangements are
not called as contracts due to the very fact that there is no legal intention involved in it.
Legal purpose and intention is thus an important component of Contract formation4.
3 'Inevitable Accident–Termination Of Contract' (2020) 37 Scientific American
4 Review: Commercial Law: Stevens And Borrie—Elements Of Mercantile Law' (2018)
3 Anglo-American Law Review

In the case, the conditions of Offer and Acceptance were fulfilled when an offer was
made by David to James for formation of Contract and it was accepted by James. When the
business was bought by the respective party it led to the making of contract between the two. But
the presence of Vitiating elements in the presentation of the agreement has led to existence and
non-existence of certain facts. If the occurrence of a situation is not according to the agreement
then it is said to be vitiated. Contracts can be declared void with the application of Vitiating
factors5.
One of the major factor of Vitiation is Misrepresentation. Here the facts were
misrepresented by David to James when the statement of facts were falsely represented at the
time of explanation of the terms of agreement. The truth was misleadingly represented saying
that there was no competitor of it in the market area. The misrepresentation is regarded as
fraudulent when it is made after knowing all the information and having all knowledge. This case
can be said to be based on this fact when the truth was negligently presented with half truth to
the other party. It can also be said as Innocent Misrepresentation of facts because it is unclear
from the case that if David was aware of the emerging competition in the market6.
Businesses are free to contract upon the terms they choose for themselves and the other
party. A contract can be in writing or it can be an oral agreement but certainty of terms is
important in the contract. A binding agreement was formed between David and James due to the
presence of essential elements in their formation of Contract. It is said that a contract finalisation
is not essential before starting any work but it is always beneficial to have a contract before
starting anything. Because if any defect is found in the terms of the agreement the party can sue
the other party for the same. Which can also be done by James against David if he wants to
restore the losses he has faced after taking over the business in accordance to the contract7.
Thus, according to the information given by David in the formation of contract with
James, can be said to be statement of terms that make up the agreement. So an agreement was
definitely concluded between both the parties. But what is essential to understand is the fact that
presentation of false information or misrepresenting facts is where the terms of the agreement
5 Hamson C, 'Contract—C.I.F.—Frustration—Closure Of Suez Canal' (2018) 19 The
Cambridge Law Journal
6 Hill J, 'Choice Of Law In Contract Under The Rome Convention: The Approach Of The
Uk Courts' (2020) 53 International and Comparative Law Quarterly
7 Landis J, and Morawetz V, 'An Essay On The Elements Of A Contract And A
Statement Of Principles Governing Its Formation' (2020) 40 Harvard Law Review

were not abided by David. Fulfilment of all four conditions of contract were present which are
Offer, Acceptance, Consideration and Intention did happen which successfully led to the
completion of Contract.
But breach of contract can be said to have happened when the promise was not
delivered by the party to another party as said before formation of the contract. Non use of clear
words by David can also be implied in the case between the parties of agreement when whatever
information given by him was believed to be untrue because when James started managing the
business all the opposite things happened which badly impacted James and his business. He
suffered losses due to the emergence of the competitor and due to the unreliable nature of the
employees8. The proposed contract and its fairness can only be judged by the parties to the
agreement. James being the party of the agreement is thus liable to get the compensation for the
losses he suffered due to being part of the concluded agreement. Misleading and misrepresenting
information provided by David was against the the act of fairness on parts of the contract.
The profitable information given by David was only the reason why James entered into a
Business contract with him. But the business did not serve the purpose when it failed to garner
profits and was unable in generating revenues for James. The fact that the employees of the
business were hard working and reliable was also a false fact because after the business takeover
the employee did not work for twelve months proving that fact to be false and leading the
business towards suffering losses. The serious and bad impact on the business and its suffering in
the market area among the competitors makes James liable to get Damages and Remedies on
part of creation of a contract and concluding of an agreement between them9.
Question 2- Are there any options in terms of restoring both parties to the position they
were in before Contracting?
Mainly, there are four ways in which any contract, which the parties have entered into can come
to an end. The contract can be ended in both the ways either be it by the voluntary act of the
parties or by the result of fault at the end of one of the party.
8 McBryde W, 'Remedies For Breach Of Contract' (2020) 1 Edinburgh Law Review
9 Riley C, 'The Not-So-Dynamic Quality Of Corporate Law: A UK Perspective On
Hansmann's ‘Corporation And Contract’' (2018) 21 King's Law Journal

Expiration- In this way the said contract automatically comes to an end as per the
agreed terms and conditions of the agreement. When the mentioned time period for which the
contract stands in effect gets expired, the concerned parties gets the right to terminate the same
without having any future obligations.
Other way is of the Termination, where there lies three more categories to it, which are
breach, anticipatory breach and termination for breach. A breach is said to be committed when
any party without having any lawful justification, does not perform or fails to perform his part of
obligation or performs something other than the required act or some specific act, then he is said
to commit a breach of contract. Moreover, the anticipatory breach is said to be committed when
any party either enables or repudiates himself from the performance of required obligation. Here
the party who is at fault stands liable to perform his part of performance if the injured party does
not accept the failure. But the mere assertion does not forbids the injured party from terminating
the agreement on result of actual breach. The other form being the termination for breach, it is
the remedy which is available to the injured party for not to perform his part of obligation as a
result of fault of non performance of the other party. In this the choice stands on the part of
injured party, whether to claim or ask for further future performance10.
The other way in which the contract can come to an end is of the Vitiation, where the
validity of the agreement comes into question because of the possibility of existence or non
existence or occurrence or non occurrence of certain events. In simple terms the basis of
agreement for which it was constituted gets diminished or vitiated. Misrepresentation is said to
be one of the ground under this form. It is mainly a facts which have been stated falsely by one
of the party to other which results it to enter in to an proposed agreement. But the mere silence to
the facts does not amount to the act of misrepresentation. It can be done in many ways such as by
fraudulently, negligently or in innocence that is while having the belief of some facts to be true.
Further, there stands a number of remedies which are available at the option of the injured party
are of the Rescission and indemnity.
Moreover, the other sub element being the Mistake where as a result of that the contract
stands either void or voidable at the option of the party. If the contract is void then it is said to be
10 Sella A, '2015/19 Successfully Appealed Pre-Transfer Dismissal Revives Employment
Contract Retroactively, Causing Contract To Transfer (UK)' (2019) 0 European
Employment Law Cases

void ab initio which means the void from the initial level. Whereas in the case of voidable, the
option rises at the part of party whether to continue the same or not as earlier the contract was
valid but on later stage becomes voidable. Moreover, the mistakes are also classified in several
forms, which are mutual, common and unilateral mistakes.
The other way is of Frustration. Where under the doctrine of frustration, the said agreed
contract which bounds both the parties can come to an end because of existence of some
unforeseen and impossible events which further leads to the result of non performance of the said
obligations or acts of the parties. In case of Avery v. Bowden, the doctrine was not said to be
invoked and as a result of that the court held that the said party cannot escape from a bad
bargain. Also the excuse of frustration cannot be entertained where the breach was made by the
result of fault of either of the party. If there exists some express provision which has been made
by the parties for the event of the contract then in such case also the concept of frustration will
not be entertained11.
When a party suffers from breach of Contract then they opt for damages and remedies to
restore their rights which they have and get entitled to after forming a contract. A remedy is a
type of right which gets restored by the enforcement of a law. Because if a party does not get
remedy there is no point of contractual law when it is violated by a party in the case. When
David misrepresented facts which led to the termination and end of contract, that has given
James with remedial measures that are Damages, Specific Performance and Injunction.
Damages are awarded by the Court when breach of Contract is proved. They can be
awarded in two ways Compensatory Damages and Punitive Damages. Damages are
compensated when the injured party suffers losses due to the other party in the course of business
of Contract. Thus the amount awarded in it tries to restore the party to the position it was before
he suffered losses. In this case as well, James can file a suit to get remedy in the form of
compensatory damages and get compensation for all the loss and damage he suffered in the
business due to David's presentation of false facts and statements so that he his business was
bought by James. Compensatory Damages includes General and Special Damages where the
former one covers the losses directly incurred by the innocent party by the way of court's order.
Thus these are most commonly awarded to the injured parties in contractual breach cases. While
11 Som E, 'Does The Law Of Frustration Of Contract Lack Any Principled Justification?'
[2017] SSRN Electronic Journal

the latter one also referred to as consequential damages are awarded when there are certain
special circumstances when the compensation is to be awarded to the injured party by the
damager party. These conditions are said to be unpredictable because the losses happen in a
manner which not direct but has impacted the party. But to prove and awarded by special
damages the injured party needs to prove in the court of the knowledge of the damager party of
these circumstances which led the party into losses. So, if James can prove in the court that
David knew that new competition of his business was going to be set up in the same locality and
about the unreliable and undependable nature of his employees and he kept that information
hidden from James and in a way misrepresented by stating false statements about the turnover of
the business and the profits and James proves these points, he thus then gets liable to pay
damages in the way of monetary compensation to James for the loss and damage he has suffered
after getting into the business because of the contract. The other type of remedy is punitive
damage which is awarded to punish the party for his negligent and fraudulent act. These are
different from the former discussed damage in the way that it punishes the damager instead of
compensating the innocent party. So getting Compensatory damages is the better option for
James to restore his original position.
Because the basic principle in giving this remedy is to put the injured party into the
position in which he could have been if the promise behind the contract was fulfilled.
But there also situations when damages can seem to be inadequate or unsatisfying as a
remedial measure. Then different and equitable remedies can be awarded by the court by acting
in his discretionary power. They can be as follows:
Specific Performance can also act as a relief measure for the injured party. In this if the
court feels that the compensatory damages are not enough for the injured party or if they are not
fit according to the situation then it can compel the damaging party who has committed breach to
specifically perform certain terms and facts of the contract. In this case, where James has
suffered losses he can also get certain terms of the contract performed if the court feels that it is
just and equitable to do so on the part of Specific performance as a remedy12.
The other remedy is Injunction, it is basically restraining a party from contractual breach
by the order of court. Certain injunctions can also be interlocutory where position is regulated
among the parties for the pending dispute. But the injunctions is basically ordered to prohibit or
12 Webber G, '12 Frustration Of Contract' (2019) 4 Current Legal Problems

to be mandatory. It prohibits when the court order the defending party not to do certain things
and it is mandatory when it orders to do something in breach of contract to restore it. So if James
is able to prove his point that he is the injured party due to the loss and damages he is suffering
in his business then the court can order for Injunction to act as remedial measure and restore his
original position by ordering mandatory performance in contractual breach.
CONCLUSION
It can be concluded from this project that the case of David and James is a part of the
contract law which is a vast document which elaborates on what is needed for the formation of a
contract. It elaborates the conditions for making a valid contract wherein the parties involved are
legally bounded by the agreement. Thus, James is liable to get damages and remedies for breach
of Contract.

REFERENCES
Books and Journals
'Contracts. Remedies On Contract. Breach Of Alternative Promises' (2018) 42 Harvard Law
Review
'Damages: Breach Of Contract: Measure Of Damages' (2018) 9 Michigan Law Review
'Inevitable Accident–Termination Of Contract' (2020) 37 Scientific American
'Review: Commercial Law: Stevens And Borrie—Elements Of Mercantile Law' (2018) 3 Anglo-
American Law Review
Hamson C, 'Contract—C.I.F.—Frustration—Closure Of Suez Canal' (2018) 19 The Cambridge
Law Journal
Hill J, 'Choice Of Law In Contract Under The Rome Convention: The Approach Of The Uk
Courts' (2020) 53 International and Comparative Law Quarterly
Landis J, and Morawetz V, 'An Essay On The Elements Of A Contract And A Statement Of
Principles Governing Its Formation' (2020) 40 Harvard Law Review
McBryde W, 'Remedies For Breach Of Contract' (2020) 1 Edinburgh Law Review
Riley C, 'The Not-So-Dynamic Quality Of Corporate Law: A UK Perspective On Hansmann's
‘Corporation And Contract’' (2018) 21 King's Law Journal
Sella A, '2015/19 Successfully Appealed Pre-Transfer Dismissal Revives Employment Contract
Retroactively, Causing Contract To Transfer (UK)' (2019) 0 European Employment
Law Cases
Som E, 'Does The Law Of Frustration Of Contract Lack Any Principled Justification?' [2017]
SSRN Electronic Journal
Webber G, '12 Frustration Of Contract' (2019) 4 Current Legal Problems