On Sunday 26th August 1928 May Donoghue sat in a café with a friend. The friend ordered and paid for some ginger beer, which came in a bottle made from dark opaque glass. Donoghue drank some of the contents then her friend proceeded to pour the remainder of the contents of the bottle into the tumbler when a snail, which was beginning to rot, floated out of the bottle. As a result of the sickening sight of the snail and the impurities in the ginger beer, Donoghue suffered from shock and severe gastro-enteritis. She argued that the ginger beer was manufactured by the defendant (Stevenson) to be sold as a drink to the public; that it was bottled with a label bearing his name; and that the bottles were then sealed with a metal cap by the defendant. Donoghue’s lawyer, Walter Leechman, claimed that it was the duty of the defendant to provide a system of working his business which would not allow snails to get into ginger beer bottles, and that it was also his duty to provide a system of inspection of the bottles before the ginger beer was filled into them, and that he had failed in both these duties and had so caused the accident. The case went all the way to the House of Lords where the Law Lords ruled for Donoghue. It was the speech of Lord Atkins that was most influential. He said: “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.” This ‘neighbour principle’ was, and to a certain extent still is, the foundation of the modern law of negligence. The above report is taken from http://www.brightknowledge.org/knowledge-bank/law-and-politics/features-and-resources/famous-cases-donoghue-v-stevenson Donoghue v. Stevenson shows us that negligence establishes liability regardless of whether a contract exists or not. The impact of this case is still felt today in areas such as product liability, consumer protection laws and in negligent misrepresentation. Certainly, in contract and contract negotiation situations most people tend to link liability with the issue of the contract, whether it exists, and the exact nature of the agreement. The idea that most business people have seems to be that all liability starts and ends with a contract. It is often forgotten that legal responsibility or liability may exist totally independently from the law of contract. So our modern...

The interaction of a rather slow creature of nature and a bottle of ginger beer would not normally be suspected as being capable of lighting the fuse for a dramatic legal explosion. But in the case of Donoghue v. Stevenson (a landmark decision that every common law student is confronted with) the painfully slow movements of a snail result in the creation of the tort of negligence and herald the birth of several major areas of modern law. The case is remarkable not only for its explosive impact but also for the fact that a judge had to refer to the bible and principles of loving thy neighbour in order to adapt the law to modern realities. We should now always remember what the snail proved: even without a contract there can be liability! Happy reading Stuart...

time is of the essence. Contractual requirement specifying that the date, deadline or time period referred to is a material term and that in case of breach (a delay) the innocent party has a right to terminate the contract. a Romalpa clause. Provision of a contract (named after a particular party in a case) retaining title or ownership in property until payment is made for the goods. without prejudice (in an offer of settlement). The related information or offer may not be used in court as evidence. an invitation to treat. Invitation to make an offer. garden leave. In employment contracts, the period after giving notice of termination during which the employer may require the employee not to come to work i.e. stay at home (or in the garden!) a unilateral contract. Contract formed when an offer (in the form of a promise) to a person or group of persons is accepted not by a counter-promise, but is accepted by performance e.g. a reward. an adhesion contract. A “take-it-or-leave-it” contract the individual terms of which are not available for negotiation. the construction of a contract. The interpretation of a contract. a Himalaya clause. A provision in a transportation contract extending liability limitations which benefit the carrier to others (third parties) who act as agents for the carrier. a Chinese wall. Internal organizational and information barrier within an organization to prevent exchanges of information that could cause conflicts of interest. pro rata . In proportion, accordingly. rescission (of a contract). Ending of a contract ab initio (ex tunc) so that the parties are returned to the position they were before the contract started. cancellation (of a contract). Termination of a contract for breach. in camera. To the exclusion of the general public, in secret. et al. And others, etc., and so on. a non-reliance clause. A provision stating that in deciding to enter into a contract a party has not relied on any statements except those contained in the contract document. avoid a contract. To render a contract void. misrepresentation. False statement of fact made to the other party made before a contract is entered into and upon which the other party relies. warranty. 1.Undertaking of fact (e.g. of quality or specifications) made under a contract or, 2. a non-material term. rectification. Equitable remedy of correcting the wording of a contract document to reflect the true intentions of the...

As much as the unfettered entrepreneur would like to act otherwise, the fact is that contracts do not exist in a vacuum. In all legal systems the principles of justice (dressed up in common law jurisdictions as the white knight of equity) as well as statute and case law try to impose standards of reasonableness in contracts. It is critical that we can avoid or minimise the impact of any challenges to contract provisions by staying within those standards. This month’s discussion covers exactly that point. In addition, on page 2 you will also find the solutions to the quiz in the last issue. Have fun with your contracts! Stuart...

Throughout common law there are numerous references to a test of “reasonableness” or, as judges used to still call it at the beginning of the 20th century, the position of “the man on the Clapham omnibus.” But there is a difference between the Law of Torts and the Law of Contract: The key element of the tort of negligence is a duty to take reasonable care. This duty is usually established in each specfic case by court judgment and can arise from a variety of situations. In short, torts lived traditionally from case law. By contrast, under the Law of Contract, it is the agreement of the parties itself which has traditionally imposed the obligations. Contracts, in a laissez-faire world, set out bargains freely negotiated between parties, so only the parties can voluntarily agree to exercise a particular level of care. However, in the 20th century the imposition of external, social standards and statutory obligations of “reasonableness” in both torts and contract have become crucial. This is particularly true for contracts under the Unfair Contract Terms Act 1977 (UCTA)¹ which, under English law, prevents any “unreasonable” limitations of liability being effective in contracts. But what is “reasonable” and “unreasonable” ? Well, the statute has a general response and states that judges in deciding this issue must have 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. And the relevant circumstances are set out (in a non-exhaustive list) in Schedule 2 to UCTA 1977 and include: The relative bargaining strength of the parties. How common this type of clause is in the market. Whether the buyer was aware of the clause, or should reasonably have been so aware. Whether the parties were legally advised. Whether the clause was open to negotiation. Certainly, in contract negotiations we must be careful that in promoting our own interests we do not overstep the boundary of “reasonableness” and risk resulting ineffective or unenforceable clauses in a contract. In this regard we are often well-advised to expressly agree in the contract, in cases of doubt, that the respective clauses are “fair and reasonable” and provide information to support this. In this regard English law is not unique. ¹The UCTA has a limited impact on international contracts as it does not apply to cross-border sales of...

Do you understand the following? Can you explain these terms in simple plain English to your clients? (The solutions are in the February edition of Lawspeak…) So, you had better sharpen up your pencils and get started: 1. time is of the essence 2. a Romalpa clause 3. without prejudice (in an offer of settlement) 4. an invitation to treat 5. garden leave 6. a unilateral contract 7. an adhesion contract 8. the construction of a contract 9. a Himalaya clause 10. a Chinese wall 11. pro rata 12. rescission (of a contract) 13. cancellation (of a contract) 14. in camera 15. et al 16. a non-reliance clause 17. avoid a contract 18. misrepresentation 19. warranty 20....