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Whether you are a company, partnership or sole trader acting in the course of business or an individual consumer our experienced Disputes and Litigation Department can advise you in relation to all aspects of contractual disputes relating to the supply of services and/or goods.

Please contact our Disputes and Litigation Department on our mobile friendly number 033 33 22 1000 or 0800 987 8156 to arrange a meeting and speak to a Solicitor. Alternatively, you can email us at info@kewlaw.co.uk for more information. 

What are the Requirements of Valid Contract Formation?

A valid contract requires that there be:-

  • An offer (which must be distinguished from an invitation to treat)
  • Acceptance
  • Consideration (the giving of something of some value (this does not have to be monetary or even adequate and can be incurrence of a detriment) in exchange for the goods or services to be supplied or other obligation of the seller under a contract)
  • Mutual intention to create legal relations (as presumed in commercial situations)
  • Certainty of terms. 

A contract can be written or oral (or both) and can be implied by conduct (in relevant circumstances terms may be incorporated by a course of dealing) or entered into electronically. 

A battle of the forms may arise where both parties seek to incorporate their standard terms into the contract. 

Issues as to the validity of a contract may also arise in respect of issues such as illegality of object, lack of capacity or lack of authority. Each of these non-exhaustive factors can give rise to and complicate contractual disputes. 

Even if there does not appear to be a valid contract it may still be possible to rely on the law of restitution for a remedy as an action for Quantum meruit (often in respect of services supplied) or Quantum valebat (for goods supplied). Such claims may also be relevant where the contract does not fix the price to be paid and a reasonable price is due or works outside the contract are carried out at the customer’s request.

It is no defence for a party to state at a later time that they did not read the written terms of a contract. A written contract is binding even if the contracting party signed without reading it or its terms were missing but clearly stated to be available on request. Similarly mistakes will often have no impact on a contract’s formation or terms. Parties will be held to the bargain they have made (even if it is a commercially bad bargain) despite any alleged misunderstanding as to the legal effect or any underlying rights. The Court may correct a mistake to bring the terms of the contract inline with what it determines to have been the parties’ intentions so as to do justice in the case. The situation may be different where one party has misled the other in which case the contract may be voidable where the innocent party acts promptly. 

What are some of the types of contract disputes that we are able to assist with?

Distance selling and electronic contracts

Businesses entering into off premises and distance contracts with consumers via a website (or otherwise) will need to comply with additional rules and regulations such as The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Terms and conditions (or at the very least their existence) must be brought to the attention of the customer to ensure incorporation such as by way of link and acceptance button and available in a way that allows the consumer to store and reproduce them in a durable form.

For the purposes of online purchases business websites must:-

  • Identify the trader;
  • Identify the main characteristics of the goods or services, to the extent appropriate to the medium of communication and to the goods or services i.e. by way of photograph and written description;
  • Provide the total price of the goods or services (inclusive of taxes) or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance the manner in which the price is to be calculated;
  • Provide (where applicable) all additional delivery charges and any other costs or, where those charges cannot reasonably be calculated in advance highlight the fact that such additional charges may be payable;
  • Confirm the arrangements for payment, delivery, performance, and the time by which the trader undertakes to deliver the goods or to perform the services;
  • Give any conditions for ending rolling contracts or contracts with no clear end date and details of the minimum duration of the consumer’s obligations;
  • Give notice if a right to cancel exists together with details of the conditions, time limit and procedures for exercising that right (the right to cancel will not apply for example where goods ordered are perishable or personalised);
  • Make clear the steps required to conclude the contract and with explicit acknowledgement that the order entails an obligation to pay with any order activation button being labelled ‘order with obligation to pay’ or similar;
  • Make clear the technical means for identifying and correcting input errors prior to the placing of the order.

The contract must be confirmed and a durable copy thereof provided as soon as possible for example with by way of email and in any event no later than the date of delivery of goods or commence of the supply of services. Unless the express terms of the contract provide otherwise goods must be delivered without undue delay and in any event not more than 30 days after the date the contract is entered into.

A trader must not begin the supply of a service before the end of the cancellation period unless the consumer has made an express request (in a durable format). In the case of a service other than supply of water, gas, electricity or district heating the consumer will no longer have a right to cancel a service contract if the service has been fully performed, and performance of the service began after a request by the consumer for the supply to begin before the end of the cancellation period with the acknowledgement that they would lose that right once the contract had been fully performed by the trader. Proportionate payment will be due in respect of any services supplied as requested during the cancellation period up to the point when the trader is informed of the consumer’s decision to cancel the contract.

Breach of contract

Contractual disputes often arise where one party has breached an express of implied term of a contract by failing to perform wholly or partly their obligations under the contract such as:-

  • Failure to make payment of an invoice in relation to goods and/or services supplied;
    • The price may be fixed by the contract, or may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties otherwise the buyer must pay a reasonable price (which falls to a question of fact dependent on the circumstances of each particular case).
    • Unless a different intention appears from the terms of the contract payment of an invoice must be made within 30 days of its delivery and stipulations as to time of payment are not of the essence of a contract of sale. 
  • Failure to supply good and/or services within a specified or reasonable period of time;
  • Failure to supply goods fit for a known particular purpose;
  • Failure of goods to match description;
  • Failure to install goods correctly;
  • Failure to supply goods of satisfactory quality which includes their state and condition having regard to factors such as fitness for all purposes for which they are commonly supplied, freedom from minor defects, safety and durability; 
  • Bulk supply of goods does not correspond with the quality of a sample;
  • Failure to carry out a service with reasonable skill and care;
  • Failure to make good to the Owner all loss of or damage to the goods under a contract for hire;
  • Digital content does not comply with a contract to supply

Remedies for breach of contract

Under the mitigation principle a party must take reasonable steps to mitigate their losses if possible. However a party that has suffered foreseeable loss as a consequence of a breach of contract having regard to the scope of an implied assumption of responsibility by the Defendant in the contract may be able to seek:-

  • Unliquidated damages:-
    • The burden of proof lies with the Claimant to prove its losses however some element of speculation does not disentitle a Claimant to a compensatory award.
    • To compensate the Claimant in relation to the losses incurred and place the innocent party in the same position as if the contact had been performed / but for the breach (the award is not punitive against the wrongdoer). 
    • Monetary loss may include liabilities incurred by the Claimant to third parties (i.e. to cure the breach subject to the test of reasonableness), diminution in market value or loss of profits (above the rebuttable presumption of breaking even).
    • In certain circumstances damages may be awarded for inferred loss of revenue where the breach has caused substantial diversion of staff time from their usual tasks to investigate and/or deal with the breach.
    • A seller may be able to seek damages for non-acceptance where the buyer refuses to accept or pay for the goods. The starting point of quantification will be the difference between the contract price and the market value having regard to the mitigation principle. The same considerations will apply in respect of a buyer’s entitlement to damages for non-delivery and likewise the measure of damages for supply of defective goods will be the difference between the value of the goods at the time of delivery and the value if they had not been defective. The presumptive measure of loss under each of these heads of damages is rebuttable and the actual measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of contract.
    • In more limited circumstances damages for non-monetary loss such as distress and loss of amenity may be available where the main object of the contract was to give pleasure, relaxation, peace of mind or freedom from non-molestation.
  • Liquidated damages:-
    • Often a debt claim to recover sums quantified in or in accordance with the terms of the contract such as the purchase price for the supply of goods or services;
  • Restitutionary damages :-
    • In exceptional circumstances where the Claimant has not suffered measurable loss or other damages are inadequate restitutionary damages may be awarded to address any benefit gained by the wrongdoer;
  • Declaratory relief:-
    • A declaratory judgment is a binding judgment from a court defining the legal relationship between parties and their rights;
  • Specific performance;
    • The Court has equitable jurisdiction and discretion to order specific performance compelling a party to perform its positive obligations under a contract where it considers damages would not be a sufficient remedy;

Are there any Restrictions in Relation to Recovery of Damages?

Just because a loss would not have occurred but for the breach does not mean it will always be recoverable. Rules relating to the following factors may reduce of defeat a claim for damages:-

  • Mitigation
    • Under the principle of mitigation the Court will consider whether the Claimant has unreasonably failed to act to mitigate (or acted to increase) its loss so as to break the chain of causation. In those circumstances damages will be assessed as if the Claimant had acted reasonably. The rationale behind the rule is that in the interests of commercial fairness a Claimant should not be permitted to rely on its own unreasonable conduct to increase the liability of the Defendant. 
    • The burden of proof falls on the Defendant to show that the Claimant failed to take all reasonable steps to minimize its losses. When considering what was reasonable the Court may take into account the following:-
      • Less will be expected of a Claimant acting in a situation of urgency.
      • The Claimant’s resources and the expense of any mitigation.
      • The Claimant need not take financial risk and is not required to waive its rights.
      • There is no obligation on the Claimant to commence proceedings against third parties.

A refusal to accept an offer made by the Defendant may constitute a failure to mitigate. 

  • Remoteness of Damage
    • Damages are not recoverable if even though caused by the Defendant’s breach the loss falls outside the scope of the Defendant’s responsibility.
    • Only foreseeable losses that are not unlikely to result from a breach will be recoverable, that is where the kind of loss was in the contemplation of the parties as at the time of entering into the contract. This includes imputed knowledge of the ordinary course or things and actual knowledge of special circumstances communicated between the parties. 
    • More recently the Courts have expressed remoteness as establishing the scope of an implied assumption of responsibility for losses by the Defendant under the contract.
  • Contributory negligence
    • In cases of breach of duty of care where there is a contractual duty of care concurrent with a tortious duty of care the Court may order an apportionment so as to reduce the damages recoverable to such extent as it thinks just and equitable having regard to the Claimant’s share in the responsibility for the damage:

Retention of title clauses

A seller may seek to include a retention of title clause in its terms and conditions which provides that title to the goods is retained by the seller until it has received full payment for the goods. The purpose of such a clause is to give the seller priority to the goods over secured and unsecured creditors of the buyer if the buyer fails to make payment by reclaiming possession of the goods.

A retention of title clause may include a right for the seller to enter the buyer’s premises for the purposes of repossessing the goods. Absent such a clause the seller will be committing a trespass. Contractual provision may also include a requirement that the buyer must store the subject goods separately from goods belonging to third parties and marked as being the seller’s property to assist in identification of goods should repossession prove necessary. 

A seller may seek to broaden the ambit of a retention of title clause by way of an “all monies clause” which reserves legal and beneficial title of the goods supplied until the buyer has paid not only for particular goods supplied under a discrete invoice but all other monies owed to the seller in respect of any other goods supplied.

Exclusion and limitation of liability clause – Unfair Contract Terms Act 1977 (“UCTA”)

When both parties are acting during the course of business they may seek to limit their liability in respect of certain matters. Such clauses will be subject to the provisions of UCTA under which:-

  • Liability for death or personal injury resulting from negligence cannot be excluded or restricted.
  • In the case of other loss or damage a term seeking to exclude or restrict liability for negligence must satisfy the requirement of reasonableness. 
  • When a party contracts on its standard terms of business with another party they cannot exclude or restrict any liability for breach of contract or claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him, or in respect of the whole or any part of his contractual obligation to render no performance at all except in so far as the contract term satisfies the requirement of reasonableness. 
  • If a contract (including consumer contracts) contains a term which would exclude or restrict any liability to which a party to a contract may be subject by reason of any misrepresentation made by them before the contract was made or any remedy available to another party to the contract by reason of such a misrepresentation that term shall be of no effect except in so far as it satisfies the requirement of reasonableness. 
  • Generally the requirement of reasonableness is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made. lt is for the party claiming that a contract term satisfies the requirement of reasonableness to show that it does.
  • Where a contract term seeks to restrict liability to a specified sum of money when considering the requirement of reasonableness regard shall be had to:-
  • The resources which the limiting party could expect to be available to him for the purpose of meeting the liability should it arise; and,
  • How far it was open to them to cover themselves by insurance.

Variation, termination of Novation of contracts

It may be possible to avoid a breach of contract and legal proceedings by seeking to vary a contract ensuring that consideration (unless executed as a deed) and formality requirements are satisfied and subject to any third-party rights. Many contracts will provide that they can only be varied in writing. 

Alternatively termination of the contract may be beneficial. Termination excuses all parties from further performance of their primary obligations after the termination date however it should be borne in mind that some duties survive including the duty to pay damages for a breach already committed. Abandonment by each party of their right to enforcement can constitute valid consideration for the discharge. Where the parties wish to continue their business relationship this may give rise to replacement with a new contract. Termination is not the same as rescission which refers to the situation where a contract is undone as though it has never existed which may include provision to reverse performance already delivered, not to enforce obligations accrued under the original contract and/or extinction of existing liabilities.

A third party may be willing to take on the benefits and obligations of a particular contractual relationship. In such circumstances novation may be possible which terminates the original contract and replaces it with another introducing a third party who takes up duplicate rights and obligations of the original contract. The novation agreement must be signed by all the parties to the original agreement plus the incoming party. Express provision should be made setting out who is to be responsible for the outgoing party’s pre-novation liabilities.

It may be necessary to consider whether there has been an assignment of a relevant contract under which a benefit of the original contract has been transferred to another party. It is not possible to transfer the burden of a contract by way of assignment so outgoing parties should seek to protect their position in respect of existing and future liability. 

What are the costs associated with contractual disputes or a breach of contract?

Legal costs incurred as a result of a breach of contract fall within the jurisdiction of the Court’s discretionary costs regime and cannot be claimed as damages at common law notwithstanding that they are caused by the breach. The general rule in relation to is that costs follows the event i.e. the unsuccessful party will be ordered to pay the costs of the successful party. 

Where a contract provides for the recovery of legal costs they are assessed on an indemnity basis meaning that whilst unreasonable costs are irrecoverable disproportionate costs are recoverable. 

Our specialist solicitors can advise you in respect of litigation risks including costs and best practices to adopt in an effort to mitigate the same. 

For more information as to how we can assist you with a contractual dispute or breach of contract please contact our Disputes and Litigation Department on our mobile friendly number 033 33 22 1000 or 0800 987 8156 to arrange a meeting and speak to a Solicitor. Alternatively, you can email us at info@kewlaw.co.uk for more information. 

This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the contents, or for any consequences of relying on it, is assumed or accepted by Kew Law LLP.

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