Contract Law Case: Lewis V Averay

The sample essay on Lewis V Averay deals with a framework of research-based facts, approaches and arguments concerning this theme. To see the essay’s introduction, body paragraphs and conclusion, read on.

Public, private, private members and hybrid bills are all forms of what eventually becomes primary legislation – also referred to as an Act of Parliament. Like many proposed laws and law changes primary legislation starts life as a white paper, this is a statement of policy from the government. These white papers are often subject to scrutiny in the House of Commons before being introduced as a bill at the first reading.

Once the bill has been introduced it will pass through both the House of Commons and the House of Lords for consideration.

At the second reading it is open to debate but cannot be amended. If the bill is passed at this stage it then moves through a number of committees in the House of Commons – whole house, standing and select committee.

At these committees the bill can be debated and amended before moving onto the report and third reading stages. If approved at both of these stages the bill will then be presented to the Queen for Royal Assent. This is the final stage of law making and Royal Assent confirms the bill as an Act of Parliament and at this stage it becomes statute. Judges are required to apply primary legislation in court cases without exception, but can use their interpretation of the legislation where applicable.

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Spencer V Harding 1870

Delegated legislation is a term used to describe laws and regulations made by authorised bodies or persons such as ministers or local authorities using powers bestowed on it by an Act of Parliament. Each item of delegated legislation is usually known as a statutory instrument but the Queen by Order in Council can make some delegated legislation. This is often the case in time of emergency i.e. to impose sanctions. Byelaws are made by delegated legislation but generally operate only in the locality of their creation. Delegated legislations can be challenged either in court through judicial review or as part of the defence. One of the reasons to challenge may be because the legislation is deemed to be ultra vires, or beyond the powers of the body or institution that passed the legislation originally.

Judicial precedent is the process by which judges can use the decisions of previous cases as the authority for the basis of their decision, as long as there is sufficient likeness in the facts. There are some key principles that should be followed when using judicial precedent. All courts are bound to follow the decisions of a higher court. This is known as stare decisis – to stand by the decided. The binding principle of judicial precedent is ratio decidendi – the reason of the decision. This is a statement by the judge of the legal principles being applied in the case and it is only this statement that gives ratio decidendi. If there has been no previous precedent set then a judge may declare the law and an original precedent is set. This may then be used in later cases as the precedent.

Legislation formed in the European Community comes in the form of regulations and directives made by the Council of Ministers of the EU – made up of government ministers from member states – or the Commission, which is made up of senior officials from the member states. EU Legislation focuses on a wide range of issues such as trade, agriculture, social policy, employment and the environment. European Union legislation drawn up by a member of the European Parliament and is proposed by the Commission before being discussed and voted on by the Parliamentary committee. Sensitive issues such as agriculture, social policy and taxation need to be agreed unanimously by the Council of Ministers in order to be passed but a system known as Quality Majority Voting is used to decide the majority of issues. Each member state has an allocation of votes according to its size and population.

As long as at least half of the member states and at least half of the EU population are in agreement, the legislation can be passed. Issues decided by unanimity do not need to be agreed by the European Parliament but its advice can be sought and in some instances the legislation cannot be passed until the advice or opinion of the Parliament has been sought. The European Communities Act 1972 gives the UK governing party the ability to change existing legislation to reflect new European legislation.

All of the forms of law previously mentioned are intrinsically linked in various ways. When a judge is presiding over a case in a UK court he must absolutely abide by primary legislation as this the highest form of law in the land. Coupled with this he must consider delegated legislation but the ability to challenge is available if the legislation is considered to be outside the jurisdiction of the body or institution that created the legislation in the first place. This is known as ultra vires. Depending on the level of the courts hierarchy at which the case is being heard, judicial precedent can come into effect if the material facts of the case being heard are close enough to that of a previous case in which a judgement has been set.

An inferior court in the hierarchy must abide by the decision made previously if it was made in a superior court. Alternatively, if the precedent was set in an inferior court to the current one, the judge may make a new decision and this becomes the new precedent for future use. The European Communities Act 1972 gives the UK government the ability to change existing legislation to reflect new European legislation or to ensure that any areas of incompatibility are aligned. This effectively means that all European regulations and directives can be considered in a UK court of law and so sit alongside all UK legislation.

Distinguish between an offer and an invitation to treat.

An offer can be described as a statement by which the offeror (person making the offer) promises to be bound so long as the terms of the offer are accepted by the offeree (person accepting the offer). When an individual or a company makes an offer it can be made to another individual, a group of persons or to absolutely anyone in the world (Carlill v Carbolic Smoke Ball Co Ltd (1893)). In simple terms, an offer is predominantly in the form of a question – “Will you buy this item for �xx?” A positive decision made by an individual to pay the stated price for the item results in an acceptance of the offer and therefore a contract is formed.

However, this is not always the case. In some cases an offer is preceded by “an invitation to treat”. An invitation to treat is the initial stage at which an individual or a company (invitor) indicate that they are willing to enter into a contract or agreement but that the terms of that contract or are yet to be determined. Some of the ways in which the invitor can invite offers include:-

1. Displays of goods in stores – this merely shows what items are available and on which offers can be made (Pharmaceutical Society of GB v Boots Cash Chemists Ltd (1952)).

2. Advertising – the advert is acting as a shop window to all intents and purposes. As the advertiser may only have a finite amount of stock they could only possibly have intended the advert to be an invitation to treat (Partridge v Crittenden (1968)). Where the advertiser is making a promise, such as a reward, this could be classed as a unilateral agreement and therefore distinguished as an offer as no further negotiation is intended (Carlill v Carbolic Smoke Ball Co Ltd (1893)).

3. Tenders – a tender is an invitation to provide goods or services for a price. The person or persons inviting the tenders will then choose a bid that suits their requirements. Until the person inviting the tender has made a decision to accept a tender there is no contract formed (Spencer v Harding (1870)).

4. Auctions – the lots or items displayed are the invitation to treat. Any bids made by individuals or companies are offers and the auctioneer may decide to accept or reject such offers (Payne v Cave (1789)).

In summary, an offer is a promise by an offeree to enter into a binding agreement, assuming all terms specified by the offeror are accepted. An invitation to treat is the stage prior to an offer in most cases and simply shows willingness by the invitor that they are prepared to enter into negotiations, which may or may not lead to an offer and subsequent acceptance.

‘When two parties have come to a contract – or rather what appears, on the face of it, to be a contract – the fact that one party is mistaken as to the identity of another does not mean that there is no contract, or that the contract is a nullity and void from the beginning’, per Lord Denning MR in Lewis v Averay (1972).

How far is the above statement a true reflection of the law?

In order to claim a case of mistaken identity there must be at least one of two principles proven. Firstly, the party alleging the mistake must show that he has confused the other party with someone else. In addition, he must be able to show that he had a reason to wish to deal with the intended person. Secondly, the party alleging the mistake must be able to show that he had made reasonable attempts to establish the identity of the party with whom they were intending to form a contract.

For a contract to be voided void ab initio, from the beginning, it must be rescinded before the rogue passes the property on to a third party. If this is not the case then the rogue has good title to the property and can pass on the property with good title. In the case of Lewis v Averay (1972) the identity of the rogue was not apparent until after the attempted cashing of the cheque so the rogue had good title throughout the transaction (Phillips v Brooks (1919). The only way Lewis could have voided the transaction would have been to inform the police that the fraud had taken place prior to the goods being passed on and that would have rendered the contract voided. Had Lewis taken further steps at the outset to establish the identity of the rogue he may have been successful in his claim (Ingram v Little (1960)).

According to Lord Denning MR in Lewis v Averay (1972), Mr Lewis was only questioning the creditworthiness of the rogue when asking him for identification and therefore the contract was already formed and valid. Receipts had been written and exchanged, along with the cheque. The issue of the identity of the rogue only came to light when Lewis tried to cash the cheque. Because the contract was not voided prior to the property changing hands, the third party (in this case Averay) has acquired good title to the property (Phillips v Brooks (1919)). Had the rogue not sold the property on to a third party the contract would have been between the rogue and Lewis so therefore the contract would have been voidable for fraudulent misrepresentation (Lake v Simmons (1927)).

This area of the law is subject to debate among many judges but they all do seem to agree that the case of mistaken identity is classed as a unilateral mistake and the effect on the contract is to void it. However, this only true when the person who makes the mistake was actually intending to form a contract with a specific person and for a specific reason (Cundy v Lindsay (1878)). When the person makes a mistake about the identity of the person in his presence (whether misrepresented or not) but was willing to form a contract with the person in his presence, then the law states that the contract is valid (Phillips v Brookes (1919) & Lewis v Averay (1972)).