Chapter 2. Law of Obligations: Making the Contract

• Pages: 36-148

At the heart of any business agreement can be found the contract. Whether oral or written, it

is the contract that regulates the transaction between the parties. Contracts identify the legal

obligations of the parties involved and may often include clauses that allow for third-party

resolution of dierences of opinion and penalties for non-performance. In the business world

contracts regulate employment, sale of goods, carriage, shipping, agency, provision of services,

leases, guarantees and loans, among many other business relationships.

CONTRACT

More specifically, a contract is an agreement, either written or oral, by which two or more

parties having legal capacity agree with sucient certainty in accordance with terms and con-

ditions that are express or implied to perform certain obligations (either for a benefit or a detri-

ment) that are not contrary to law or public policy.

Since the law of contracts is at the heart of most business dealings, it is one of the three or

four most significant areas of legal concern and can involve variations on circumstances and

complexities. The existence of a contract requires finding the following factual elements:

(a) an oer;

(b) an acceptance of that oer which results in a meeting of the minds;

(c) a promise to perform;

(d) a valuable consideration (which can be a promise or payment in some form).

Reproduced with the permission of Stu’sViews

CHAPTER2

LAW OF OBLIGATIONS: MAKING THE CONTRACT

37Chapter2: Law of Obligations: Making the Contract

Terms and conditions of the contract usually include the following:

(a) a time or event when performance must be made (meet commitments);

(b) terms and conditions for performance, including fulfilling promises;

(c) performance, if the contract is ‘unilateral’.1

While it is expected that contracts will contain all relevant information, it often happens

that some of the necessary terms and conditions may not have been specifically documented.

In such cases, the court will objectively assess whether or not a contract was made between two

or more parties on the basis of the facts presented.

Visual Arts Production Limited v Marcus Jean Baptiste (2011) CV2008–01020 (TT)

Facts: The Claimant was a tenant of premises located at Taylor Street, Woodbrook

but vacated the premises in April, 2007, leaving behind an air conditioning unit, an air

conditioning duct, a water tank and a water pump (‘the disputed items’). Thereafter, the

Defendant took possession of the rented premises sometime in June, 2007 and entered into

negotiations with the Claimant, through its agent, Naushad Khan, for the purchase of the

disputed items for the sum of ten thousand dollars ($10,000.00). After the Defendant took

possession of the premises, the Claimant, through its said agent, orally demanded payment

in the agreed sum on several occasions or, in the alternative, that the Defendant deliver up

the disputed items. However, the Defendant has failed and/or refused to pay the agreed

sum or deliver up the disputed items.

Held: Charles,J

It is trite law that to formulate a contract, there must be an oer, acceptance of that oer

and consideration. The evidence before the Court is sketchy at best; the Claimant con-

tends that there were negotiations between its agent, Naushad Khan, and the Defendant

whereby the latter agreed to purchase the disputed items. However, Thomas Mora, the

Chief Executive Ocer of the Claimant Company, conceded in cross examination that

the negotiations did not result in a purchase price being agreed. Rather the Defendant was

to be later contacted by the Claimant’s accountant with a price. There was no further evi-

dence on whether contact was ever made with the Defendant by the Claimant’s account-

ant. While . . . the Defendant denied that any such discussions ever took place. The Court

does not accept that there was acceptance in these circumstances by the Defendant to

purchase the disputed items. An acceptance is a final and unqualified expression of assent

to the terms of an oer; a mere acknowledgment of an oer would not be an acceptance,

nor would a person to whom an oer to sell goods had been made accept it merely by

replying it was his ‘intention to place an order’ or by asking for an invoice. The Court finds

that there may have been some discussions by the Claimant and Defendant regarding the

disputed items that were on the rented premises; items which may have been too arduous

to remove after being on the premises for over six years. In these circumstances, it is easy to

understand how the Claimant would assume that the Defendant would want to purchase

them and why the Claimant did not insist on a written contract for the items. When the

Defendant took possession of the rented premises, however, and admittedly started using

1 Law.com Dictionary [online], ‘Contract’, n.d. [accessed 25 January2015]. Available at: http://dictionary.

law.com/Default.aspx?selected=337.

38 Commonwealth Caribbean BusinessLaw

the disputed items, the Court finds that this was acceptance by conduct for the purchase

of the items. An oer may be accepted by conduct where an oer to sell goods, made by

sending them to the oeree, can be accepted by using them. However, conduct will amount

to acceptance only if it is clear that the oeree did the act of alleged acceptance with the

intention of accepting the oer. It is clear that the Defendant knew that the disputed items

were not part of the rented premises, as it is commonplace when renting premises to ascer-

tain the amenities. Further, that the Defendant knew that the disputed items belonged to

the Claimant and they either were to be paid for, or returned to the Claimant. Therefore,

the Court holds that by utilising, instead of returning, the disputed items the Defendant

agreed to purchase them. The Court therefore holds that there was acceptance of the oral

contract to purchase the disputed items...

Birse Construction Limited v StDavid Limited No.1998 TCC No 419 (GB)

Facts: The claimant, Birse Construction Limited (Birse), carried out certain work required

by the defendant, StDavid Limited (StDavid), for the construction of luxury apartments

at Adventurers’ Quay, Cardi Bay. By a Writ issued on 8 September1998 and a State-

ment of Claim served on 12 October1998, Birse sought to recover payment for the work

upon a Quantum Meruit. Birse contended that by 11 August1998 – the date upon which it

left site – it had executed works to the value of and/or for which a fair commercial price

was £6,759,608.21. StDavid had paid £5,745,518.65 in respect of the works, leaving

an outstanding balance of £1,014,089.56 which was the sum claimed in these proceed-

ings. Birse accepted that there were extensive negotiations with StDavid with a view to

making a contract, but it contended that no contract was made prior to its leaving site in

August1998. StDavid took a dierent view. It contended that a contract, incorporating

JCT Conditions (Private Without Quantities, 1980 Edition) and containing an arbitration

clause, wasmade.

Held: Reese,J

In my judgment, the most helpful statements of the general principles which need to be

considered and applied in this case are to be found in the judgment of Bingham J (as he

then was) and Lloyd LJ in Pagnan (supra). At pp 610–11 of the report Bingham J saidthis:

B. The law. .. The Court’s task is to review what the parties said and did and from that

material to infer whether the parties’ objective intentions as expressed to each other were to

enter into a mutually binding contract. The Court is not of course concer ned with what the

parties may subjectively have intended. As Lord Denning MRput it in Storer v Manchester City

Council [1974] 1 WLR 1403, at p 1408H:

In contracts you do not look into the actual intent in a man’s mind. You look to see what

he said and did. Acontract is formed when there is, to all outward appearances, a contract.

Aman cannot get out of the contract by saying, ‘I did not intend to contract’ if by his words

he has done so. His intention is to be found only in the outward expression which his letters

convey. If they show a concluded contract, that is enough.

It is furthermore clear that where exchanges between parties have continued over a pe-

riod, the Court must consider all these exchanges in context and not seize upon one episode

in isolation in order to conclude that a contract has been made... The parties may by their

words and conduct make it clear that they do intend to be bound even though there are other

terms yet to be agreed, even terms which may often or usually be agreed before a binding

contract is made; see Love and Stewart sup., per Lord Loreburn LC at p 476.. . The parties

are to be regarded as masters of their contractual fate. It is their intentions which matter

and to which the Court must strive to give eect... That is, Ithink, the result of Brogden v