Everyday contracts (2)

Knowing at what point the contract is formed is important because as above, it could mean non-compliance of a statute, or have some other serious consequences.

The case of Thornton v Shoe Lane Parking, [1970] EWCA Civ 2, is another example of an everyday contract where the time of formation was important in determining what terms were included in the contract. In that case, Thornton used an automatic parking garage and whilst on the premises, he was injured (fault partly attributed to the parking garage). One of the conditions of the parking garage was that all customers were deemed to be fully insured and the garage would take no responsibility whatsoever for any injury or loss/damage to property suffered on the premises, howsoever caused. These conditions were printed on the back of the parking ticket that Thornton received from the ticket machine after he paid the fee.

Although vehicle insurance would cover damage to his car, by their conditions, Thornton would be left with no remedy as to his physical injury because unless you are Heidi Klum with the million-dollar legs, people do not typically insure themselves against injury. It was important to determine how the contract was formed.

Lord Denning said, when dealing with an automatic machine, as opposed to a parking attendant, “the customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. [Thornton] was committed at the very moment when he put his money into the machine. The contract was concluded at that time. It can be translated into offer and acceptance in this way: the offer is made when the proprietor of the machine holds it out as being ready to receive the money.

The acceptance takes place when the customer puts his money into the slot. The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made… The ticket is no more than a voucher or receipt for the money that has been paid… on terms which have been offered and accepted before the ticket is issued” (Thornton).

In effect, those conditions limiting the liability of the parking garage were of no effect because they became a part of the story after the contract was formed. If the parking garage wanted the limiting conditions to bind Thornton or other customers, the garage had to bring it to their notice before the contract was formed – a big notice outside the parking garage would be useful to achieve this.

Using our taxi example from before, after negotiations, driver and customer come to an agreement to go from point A to B for a certain price – if in-between point A and B, the customer wants to take a detour for a quick stop at point C, there might be a problem, because a quick stop at point C was not part of the initial contract.

What about service contracts? The plumber? The carpenter? The gardener? These are people that we enter into contract with without the help of lawyers. Issues that come up in such contracts include the payment terms – is the price due on completion of the work or is payment broken up in stages? Another issue that frequently comes up is when the service man is unable to complete the work contracted for on the agreed price and asks for more money.

The general rule is that the service man is bound by the original price because he provides nothing more than he was already contracted to do (in other words, no consideration for the additional money). However, if said service man is acting with honesty, there is no economic duress, and there is a legitimate reason for demanding the extra money, the law will allow that.

A good illustration of this is the English case of Williams v Roffey Brothers, [1989] EWCA Civ 5, where Roffey Brothers had a construction contract to refurbish some flats and subcontracted the carpentry portion of the work to Williams. The main contract had a penalty clause and if the work was not completed on time Roffey Brothers would face the penalty. At some point it became apparent that Williams was behind schedule and they were at risk of missing their deadline so they went into negotiations and agreed to pay Williams more to complete the work. When the work was completed, Roffey Brothers refused to pay the additional money and Williams sued. Glidewell LJ. expressed the law as follows:

“(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and

(ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and

(iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and

(iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and

(v) B’s promise is not given as a result of economic duress or fraud on the part of A; then

(vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding” (Williams).

Basically, if you get a practical benefit from paying the additional money, then that is valid consideration and you will have to pay service man as promised. In the Williams case, there was no fraud or dishonesty on Williams’ part, in fact, he had cut himself short by quoting
under value and Roffey Brothers were aware of this. If Williams had not completed the work on time, Roffey Brothers would have faced a penalty.

Avoiding the penalty was a practical benefit to them just as avoiding the disuse of your kitchen sink for two days would be a practical benefit when your plumber tells you he needs an extra five thousand naira in addition to the agreed sum of one thousand naira to fix the sink. It could be that from when he gave you the quotation and when he went to the market to get the parts, the naira plummeted in value.

Concluded.