part one: the formation of a contract 1. …... the formation of a contract 1. offer and acceptance...

ContentsContents

Contents

Acknowledgements viiPreface ixTable of Cases xxvTable of Legislation li

PART ONE: THE FORMATION OF A CONTRACT

1. OFFER AND ACCEPTANCE 31. Introduction 3

(1) What is a Contract? 3(2) Offer and Acceptance 4

2. Offers and Invitations to Treat 4(1) Two General Illustrative Cases 5

Harvey v Facey 5Gibson v Manchester City Council 5

(2) Display of Goods for Sale 7Fisher v Bell 7Pharmaceutical Society of Great Britain v Boots Cash Chemists

(Southern) Ltd 8(3) Advertisements 10

Partridge v Crittenden 10Carlill v Carbolic Smoke Ball Company 11

(4) Auction Sales 15Barry v Davies 15

(5) Tenders 19Spencer v Harding 19Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd 20Blackpool and Fylde Aeroclub Ltd v Blackpool Borough Council 22

3. Acceptance 25(1) Acceptance by Conduct 26

Brogden v Metropolitan Railway Co 26(2) ‘Battle of the Forms’ 27

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd 27(3) Communication of Acceptance 33

(a) The General Rule: Acceptance Must Be Received by Offeror 33Entores Ltd v Miles Far East Corporation 33Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH 35

(b) Acceptance by Post 37Household Fire and Carriage Accident Insurance Co Ltd v Grant 37

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Holwell Securities Ltd v Hughes 39(c) Waiver by Offeror of the Need for Communication of Acceptance 41

Felthouse v Bindley 41(4) Prescribed Mode of Acceptance 43

Manchester Diocesan Council for Education v Commercial and General Investments Ltd 43

(5) Acceptance in Ignorance of an Offer 45R v Clarke 45

(6) Acceptance in Unilateral Contracts 47Errington v Errington 47Soulsbury v Soulsbury 48

4. Termination of an Offer 49(1) Revocation 50

Byrne & Co v Van Tienhoven & Co 50Dickinson v Dodds 51

(2) Rejection 54Hyde v Wrench 54Stevenson, Jacques & Co v McLean 54

5. Problematic Offer and Acceptance 55The Satanita 56

Additional Reading 57

2. CERTAINTY AND INTENTION TO CREATE LEGAL RELATIONS 61

1. Certainty 61(1) Vagueness 61

Hillas & Co Ltd v Arcos Ltd 61Scammell and Nephew Ltd v Ouston 64

(2) Price Not Fixed 66May and Butcher Ltd v R 66Sudbrook Trading Estate Ltd v Eggleton 68

(3) Agreements to Negotiate 71Walford v Miles 71

(4) A Non-contractual Solution 75British Steel Corporation v Cleveland Bridge and Engineering Co Ltd 75

2. Intention to Create Legal Relations 78(1) Social and Domestic Agreements 79

Balfour v Balfour 79Jones v Padavatton 81

(2) Commercial Agreements 82Esso Petroleum Co Ltd v Commissioners of Customs and Excise 82


3. CONSIDERATION AND PROMISSORY ESTOPPEL 871. Consideration 87

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(1) The Consideration Need Not Be Adequate 88Chappell & Co Ltd v Nestlé Co Ltd 88

(2) Past Consideration Does Not Count 91Eastwood v Kenyon 91PaO On v Lau Yiu Long 93

(3) Consideration and the Promise to Perform, or Performance of, a Pre-existing Duty 95

Collins v Godefroy 95Glasbrook Brothers Ltd v Glamorgan County Council 96Ward v Byham 98Williams v Williams 99

(b) Pre-existing Duty under a Contract with a Third Party 100Shadwell v Shadwell 100Scotson v Pegg 102PaO On v Lau Yiu Long 103

(c) Pre-existing Duty under a Contract with the Promisor 104Stilk v Myrick 104Williams v Roffey Bros & Nicholls (Contractors) Ltd 105Foakes v Beer 112Re Selectmove Ltd 115

2. Promissory Estoppel 117(1) The Emergence of Promissory Estoppel 118

Hughes v Metropolitan Rly Co 118Central London Property Trust Ltd v High Trees House Ltd 119Collier v P & MJ Wright (Holdings) Ltd 121

(2) Promissory Estoppel Not a Cause of Action 123Combe v Combe 123Crabb v Arun District Council 125Amalgamated Investment & Property Co Ltd v Texas Commerce

International Bank Ltd 129Waltons Stores (Interstate) Ltd v Maher 132Baird Textiles Holdings Ltd v Marks & Spencer plc 137

(3) Promissory Estoppel Requires a Clear and Unequivocal Promise 141Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd 141

(4) Does Promissory Estoppel Require Reliance or Detrimental Reliance? 143WJ Alan & Co Ltd v El Nasr Export and Import Co 143Société Italo-Belge pour le Commerce et l’Industrie SA v Palm and

Vegetable Oils (Malaysia) Sdn Bhd, The Post Chaser 145(5) Promissory Estoppel Cannot be Founded on a Promise Induced by the

Promisee’s Inequitable Conduct 147D & C Builders Ltd v Rees 147

(6) Does Promissory Estoppel Extinguish or Suspend Rights? 149Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd 149


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PART TWO: THE TERMS OF A CONTRACT

4. IDENTIFYING THE TERMS 1571. Terms or Mere Representations? 157

Oscar Chess Ltd v Williams 158Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd 162Esso Petroleum Co Ltd v Mardon 164

2. Incorporation of a Party’s Written Terms 166(1) Signature 166

L’Estrange v F Graucob Ltd 166Curtis v Chemical Cleaning and Dyeing Co 168

(2) Reasonable Notice 170Parker v The South Eastern Railway Company 170Chapelton v Barry Urban District Council 172Olley v Marlborough Court Ltd 173Thornton v Shoe Lane Parking Ltd 175Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd 178AEG (UK) Ltd v Logic Resource Ltd 181O’Brien v MGN Ltd 186

(3) Course of Dealing 188McCutcheon v David MacBrayne Ltd 188Hollier v Rambler Motors (AMC) Ltd 190

(4) The Parties’ Trade Practice 192British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd 192

3. Implied Terms 194(1) Terms Implied by the Courts 194

(a) Terms Implied by Fact 195The Moorcock 195Attorney-General of Belize v Belize Telecom Ltd 199Yam Seng Pte Limited v International Trade Corporation Limited 203

(b) Terms Implied by Law 211Liverpool City Council v Irwin 211Shell UK Ltd v Lostock Garage Ltd 216Scally v Southern Health and Social Services Board 218

(2) Terms Implied by Statute 222(a) Contracts for the Sale of Goods 222

Sale of Goods Act 1979, sections 12–15 222(b) Contracts for Services 226

Supply of Goods and Services Act 1982, sections 13–15 226Additional Reading 226

5. INTERPRETING THE TERMS 2291. The Modern Approach to Construction 229

Investors Compensation Scheme Ltd v West Bromwich Building Society 229

Chartbrook Ltd v Persimmon Homes Ltd 232

Contents xv

2. Construction of Exemption Clauses 238(1) Excluding or Limiting Liability for Negligence 238

Alderslade v Hendon Laundry Ltd 238Canada Steamship Lines Ltd v R 240Hollier v Rambler Motors (AMC) Ltd 243

(2) Excluding or Limiting Liability for Fundamental Breach 246Photo Production Ltd v Securicor Transport Ltd 246

(3) Construing Limitation Clauses 251Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd 251George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd 253


6. STATUTORY CONTROL OF UNFAIR TERMS 2591. The Unfair Contract Terms Act 1977 260

The Unfair Contract Terms Act 1977, sections 1–14, 26–27, 29,Schedules 1 and 2 260

(1) Overview of the Central Scheme of UCTA 1977 267(2) Excluding Liability for Breach of the Statutory Implied Terms in

Contracts for the Sale of Goods and Analogous Contracts 269(3) Cases on UCTA 1977 269

(a) What is Meant by ‘Dealing as Consumer’? 270R & B Customs Brokers Co Ltd v United Dominions Trust Ltd 270

(b) What Counts as an Exclusion of Liability, or as Equivalent to such an Exclusion, so as to Fall within the Act? 273Phillips Products Ltd v Hyland 273Thompson v T Lohan (Plant Hire) Ltd 276Smith v Eric S Bush 278Stewart Gill Ltd v Horatio Myer & Co Ltd 280Tudor Grange Holdings Ltd v Citibank NA 282

(c) Does the Clause Pass, or Fail, the Reasonableness Test? 284George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd 284Phillips Products Ltd v Hyland 287Smith v Eric S Bush 290Stewart Gill Ltd v Horatio Myer & Co Ltd 292St Albans City and District Council v International Computers Ltd 294Watford Electronics Ltd v Sanderson CFL Ltd 297

2. The Unfair Terms in Consumer Contracts Regulations 1999 301Unfair Terms in Consumer Contracts Regulations 1999 301

(1) Overview of the Central Scheme of the 1999 Regulations 308(2) What is the Relationship Between the 1999 Regulations and

UCTA 1977? 308(3) Case-law on the 1999 Regulations 309

Director General of Fair Trading v First National Bank Plc 309(4) A Note on Good Faith 315

3. Reform of the Legislation on Unfair Terms 316Additional Reading 317

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PART THREE: REMEDIES FOR BREACH OF CONTRACT

7. TERMINATION 3211. The Meaning of Termination for Breach 321

Photo Production Ltd v Securicor Transport Ltd 3222. Conditions, Warranties and Innominate Terms 324

Sale of Goods Act 1979, sections 12–15 324Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd 324Maredelanto Compania Naviera SA v Bergbau – Handel GmbH,

The Mihalis Angelos 328L Schuler AG v Wickman Machine Tool Sales Ltd 331Cehave NV v Bremer Handelsgesellschaft mbH, The Hansa Nord 334Bunge Corporation v Tradax Export SA 336Sale of Goods Act 1979, section 15A 339

3. Termination Clauses 340Lombard North Central plc v Butterworth 340Rice v Great Yarmouth Borough Council 343

4. Anticipatory Breach 347Hochster v De La Tour 347

5. Restitution after Termination for Breach 349Additional Reading 350

8. DAMAGES 3531. Compensatory Damages 353

(1) Basic Issues in Applying the Compensatory Aim 354(a) The Precise Aim of Contractual Compensation: Protecting the

Expectation Interest 354Robinson v Harman 354

(b) Difference in the Value of Property or Cost of Cure? 355Radford v de Froberville 355Ruxley Electronics and Construction Ltd v Forsyth 358

(c) Assessment According to the Chances 363Chaplin v Hicks 363

(d) Contractual Damages Protecting the Reliance Interest? 366Anglia TV v Reed 366C & P Haulage v Middleton 368CCC Films (London) Ltd v Impact Quadrant Films Ltd 370Omak Maritime Ltd v Mamola Challenger Shipping Co,

The Mamola Challenger 372(e) The Date for Assessment of Damages 376

Golden Strait Corp v Nippon Yusen Kubishika Kaisha, The Golden Victory 376

(2) Limitations on Compensation 381(a) Remoteness 381

Hadley v Baxendale 381

Contents xvii

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd 382Koufos v C Czarnikow Ltd, The Heron II 385Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd 388Brown v KMR Services Ltd 393Jackson v Royal Bank of Scotland plc 396Transfi eld Shipping Inc v Mercator Shipping Inc, The Achilleas 398

(b) Intervening Cause 410Quinn v Burch Bros (Builders) Ltd 410Galoo Ltd v Bright Grahame Murray 411

(c) The Duty to Mitigate and Mitigation 413British Westinghouse Electric v Underground Electric Railways Co of

London Ltd 413(d) Contributory Negligence 415

Law Reform (Contributory Negligence) Act 1945 sections 1(1) and 4 415Forsikringsaktieselskapet Vesta v Butcher 416Barclays Bank Plc v Fairclough Building Ltd 418

(e) Mental Distress 421Addis v Gramophone Co Ltd 421Jarvis v Swan’s Tours Ltd 423Watts v Morrow 424Farley v Skinner 426

(f) Loss of Reputation 433Mahmud v Bank of Credit and Commerce International SA 433

2. Restitutionary Damages/An Account of Profi ts 436Attorney General v Blake 436Experience Hendrix LLC v PPX Enterprises Inc 442

3. Agreed/Liquidated Damages 448Dunlop Pneumatic Tyre Ltd v New Garage and Motor Co Ltd 448Philips Hong Kong Ltd v Attorney General of Hong Kong 450


9. DIRECT ENFORCEMENT 4591. The Award of an Agreed Sum 459

White and Carter (Councils) Ltd v McGregor 460Clea Shipping Corporation v Bulk Oil International Ltd, The Alaskan

Trader 464Reichman v Beveridge 466

2. Specifi c Performance 468(1) The Primary Restriction—Adequacy of Damages 468

Falcke v Gray 468Sky Petroleum Ltd v VIP Petroleum Ltd 469Beswick v Beswick 471

(2) The Constant Supervision Objection 472Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd 472

(3) Contracts for Personal Service 477

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Trade Union and Labour Relations (Consolidation) Act 1992,section 236 477

Powell v Brent London Borough Council 478(4) Want of Mutuality 479

Price v Strange 4793. Injunctions 483

Lumley v Wagner 484Warner Bros Pictures Inc v Nelson 485Page One Records v Britton 486Warren v Mendy 487LauritzenCool AB v Lady Navigation Inc 491


PART FOUR: PRIVITY OF CONTRACT AND THIRD PARTY RIGHTS

10. PRIVITY OF CONTRACT AND THIRD PARTY RIGHTS 4971. Introduction 4972. Four Cases Establishing or Confi rming the Privity Doctrine (on its Benefi t Side) 498

Tweddle v Atkinson 498Dunlop Pneumatic Tyre Co Ltd v Selfridge 499Scruttons Ltd v Midland Silicones Ltd 501Beswick v Beswick 504

3. Exceptions to Privity (on its Benefi t Side) 509(1) Agency 510(2) Assignment 511(3) Trusts of the Promise 511(4) Statutory Exceptions 511(5) Covenants Concerning Land 512(6) The Tort of Negligence 512(7) Enforcement by Third Parties of Exemption Clauses 512

New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd,The Eurymedon 512

4. The Promisee’s Remedies in a Contract Made for the Benefi t of a Third Party 517

(1) Specifi c Performance and Injunctions 517Beswick v Beswick 517

(2) Damages 517Jackson v Horizon Holidays Ltd 517Woodar Investment Development Ltd v Wimpey Construction UK Ltd 519Darlington Borough Council v Wiltshier Northern Ltd 523Alfred McAlpine Construction Ltd v Panatown Ltd 526

Contents xix

5. The Contracts (Rights of Third Parties) Act 1999 536Contracts (Rights of Third Parties) Act 1999 536

(1) The Tests of Enforceability 541Nisshin Shipping Co Ltd v Cleaves & Co Ltd 543Laemthong International Lines Company Ltd v Artis, The Laemthong

Glory (No 2) 550(2) Variation and Rescission by the Contracting Parties 554(3) Defences Available to the Promisor 555(4) Promisee’s Rights 556(5) Exclusions from the Act 557(6) Existing Exceptions 557(7) The Relationship with the Unfair Contract Terms Act 1977 558(8) The Meaning of ‘Contract’ under the 1999 Act 558

6. Exceptions to the Privity Doctrine on its Burden Side 558(1) Bailment or Sub-bailment on Terms 559

Morris v C W Martin & Sons Ltd 559KH Enterprise v Pioneer Container, The Pioneer Container 560

(2) Burden Running with Goods 561Lord Strathcona Steamship Company Ltd v Dominion Coal

Company Ltd 561Swiss Bank Corporation v Lloyds Bank Ltd 564


PART FIVE: FACTORS ALLOWING ESCAPE FROM A CONTRACT

11. MISREPRESENTATION 5731. Requirements of Misrepresentation 574

(1) False Statement of Fact or Law 574(a) Statements of Opinion 574

Smith v Land and House Property Corporation 574Bisset v Wilkinson 576

(b) Statements of Intention 577Edgington v Fitzmaurice 577

(c) Silence: No Duty of Disclosure 578With v O’Flanagan 579

(2) Reliance 580Redgrave v Hurd 580Edgington v Fitzmaurice 583

2. Rescission for Misrepresentation 584(1) What Does Rescission Mean? 584

Whittington v Seale-Hayne 585(2) Bars to Rescission 586

Leaf v International Galleries 586Erlanger v New Sombrero Phosphate Co 589

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(3) How Does One Rescind? 590Car and Universal Finance Co Ltd v Caldwell 590

3. Damages for Misrepresentation 593(1) Fraudulent Misrepresentation: the Tort of Deceit 593

Derry v Peek 593Doyle v Olby (Ironmongers) Ltd 595Smith New Court Ltd v Scrimgeour Vickers (Asset Management) Ltd 596

(2) Negligent Misrepresentation Actionable in the Tort of Negligence 599Hedley Byrne & Co Ltd v Heller & Partners Ltd 599Esso Petroleum Co Ltd v Mardon 600

(3) Negligent and Purely Innocent Misrepresentation under the Misrepresentation Act 1967 602

Misrepresentation Act 1967, section 2 602(a) Overview of Section 2 602(b) Cases on Section 2(1) of the Misrepresentation Act 1967 603

Howard Marine and Dredging Co Ltd v A Ogden & Sons ( Excavations) Ltd 603

Royscot Trust Ltd v Rogerson 604(c) Cases on Section 2(2) of the Misrepresentation Act 1967 608

William Sindall Plc v Cambridgeshire County Council 608Government of Zanzibar v British Aerospace (Lancaster House) Ltd 612

4. Exclusion of Liability for Misrepresentation: Misrepresentation Act 1967, Section 3 614

Misrepresentation Act 1967, section 3 615(1) What Counts as an Exemption Clause Falling Within Section 3? 615

Overbrooke Estates Ltd v Glencombe Properties Ltd 615Cremdean Properties Ltd v Nash 617Government of Zanzibar v British Aerospace (Lancaster House) Ltd 618

(2) Does the Clause Pass or Fail the Reasonableness Test? 620Howard Marine & Dredging Co v A Ogden & Sons

(Excavations) Ltd 620Walker v Boyle 621Cleaver v Schyde Investments Ltd 622


12. MISTAKE 6291. Unilateral Mistake 630

(1) The General Position: No Escape for Unilateral Mistake 630Smith v Hughes 630

(2) Exceptions where Unilateral Mistake Invalidates the Contract 632(a) Objective Ambiguity 632

Raffl es v Wichelhaus 632Scriven Brothers & Co v Hindley & Co 633

(b) Unilateral Mistake as to Terms or Identity Known to the Other Party 635Hartog v Colin & Shields 635

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Cundy v Lindsay 636Phillips v Brooks Ltd 638Ingram v Little 639Lewis v Averay 642Shogun Finance Ltd v Hudson 644

(c) Non Est Factum 654Saunders v Anglia Building Society (sub nom Gallie v Lee) 654

(d) Equitable Rectifi cation for Unilateral Mistake 658Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd 658Commission for the New Towns v Cooper (GB ) Ltd 660

2. Common Mistake 663(1) The Narrow Scope of Common Mistake Rendering a Contract Void 663

Couturier v Hastie 663Bell v Lever Brothers Ltd 664McRae v Commonwealth Disposals Commission 668Associated Japanese Bank International Ltd v Credit du Nord SA 669Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd,

The Great Peace 672Brennan v Bolt Burdon 676

(2) A Wider Equitable Doctrine of Common Mistake Rejected 678Solle v Butcher 678Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd,

The Great Peace 681(3) Equitable Rectifi cation for Common Mistake 683

Rose (Frederick E) (London) v Pim (William H) Junior & Co 683Joscelyn v Nissen 685Chartbrook Ltd v Persimmon Homes Ltd 687


13. FRUSTRATION 6951. The Early Approach of Absolute Liability 696

Paradine v Jane 6962. The Kinds of Events that Amount to Frustration 696

(1) Physical Impossibility 696Taylor v Caldwell 696Jackson v Union Marine Insurance Co Ltd 698

(2) Legal Impossibility (ie Subsequent Illegality) 699Metropolitan Water Board v Dick Kerr and Co Ltd 699

(3) Cancellation of Events 701Krell v Henry 701Herne Bay Steam Boat Company v Hutton 702

(4) No Frustration Merely because Performance Made More Onerous/Expensive 704

Davis Contractors Ltd v Fareham Urban District Council 704Ocean Tramp Tankers Corporation v V/O Sovfracht, The Eugenia 708

3. Factors Excluding Frustration 710

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(1) Self-induced Frustration 710Maritime National Fish Ltd v Ocean Trawlers Ltd 710J Lauritzen AS v Wijsmuller BV, The Super Servant Two 711

(2) Express Provision 714Metropolitan Water Board v Dick Kerr and Co Ltd 714

4. The Juristic Basis of Frustration 716National Carriers v Panalpina (Northern) Ltd 716

5. The Effects of Frustration 719Law Reform (Frustrated Contracts) Act 1943 720

(1) Overview of the 1943 Act 722(2) Cases on the 1943 Act 723

BP Exploration Co (Libya) v Hunt (No 2) 723Gamerco SA v ICM/Fair Warning (Agency) Ltd 730

6. The Relationship between Common Mistake and Frustration 732Amalgamated Investment & Property Co v John Walker & Sons Ltd 732


14. DURESS 7371. Duress of the Person 738

Barton v Armstrong 7382. Economic Duress 741

(1) Threats to Break (or to Induce Another to Break) a Contract 741North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd,

The Atlantic Baron 741PaO On v Lau Yiu Long 743Universe Tankships of Monrovia v International Transport Workers

Federation, The Universe Sentinel 744B & S Contracts & Design Ltd v Victor Green Publications Ltd 747Atlas Express Ltd v Kafco (Importers and Distributors) Ltd 750Williams v Roffey Bros & Nicholls (Contractors) Ltd 751Dimskal Shipping Co SA v International Transport Workers

Federation, The Evia Luck 752Huyton SA v Peter Cremer GmbH & Co 753

(2) ‘Lawful Act’ Duress 758CTN Cash and Carry Ltd v Gallaher Ltd 759R v Attorney General for England and Wales 762Progress Bulk Carriers Ltd v Tube City IMS LLC 764


15. UNDUE INFLUENCE AND EXPLOITATION OF WEAKNESS 769

1. Undue Infl uence 769Allcard v Skinner 770Barclays Bank plc v O’ Brien 773

Contents xxiii

Cheese v Thomas 777Credit Lyonnais Nederland NV v Burch 778Royal Bank of Scotland plc v Etridge (No 2) 780R v Attorney General for England and Wales 797

2. Exploitation of Weakness 800(1) Exploitation of Mental Weakness 801

Earl of Aylesford v Morris 801Fry v Lane 803Cresswell v Potter 804Boustany v Pigott 806Portman Building Society v Dusangh 808

(2) Exploitation of the Claimant’s Circumstantial Weakness 810The Medina 810Alec Lobb Garages Ltd v Total Oil (GB) Ltd 812

(3) Rejection of a Principle of ‘Inequality of Bargaining Power’ 815Lloyds Bank Ltd v Bundy 815National Westminster Bank v Morgan 818


Index 823

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