Contract Advice

An agreement is reached in contract when a clear offer is met by an unequivocal acceptance. This isn’t as straightforward as it might seem, as the law recognises something called an ‘invitation to treat’. This is simply an indication of a willingness to accept offers.

The most common example of an invitation to treat is an item on display in a shop. The price tag is an indication of the price the seller may accept, not an offer. The ‘offer’ is actually made when you take the item to the cashier who decides whether or not to accept your offer. So, to answer the common question, a shop assistant isn’t obliged to sell you an item at the price on the tag, even if it’s wrong!

Advertisements are normally invitations to treat, unless they are so specific in their terms that they can be accepted outright, for instance by complying with a specific term in the advertisement.

A breach of contract can occur in several ways. A breach occurs when: one party fails to perform their side of the contract in whole or in part; their performance is late or when the performance is defective in some way.

When a breach of contract occurs, the aggrieved party can seek a remedy. This can be monetary compensation or a court order which compels the contract breaker to perform their side of the bargain.

Some contracts will contain provisions which dictate what is to happen in the event of a breach. If no such provisions exist there are a number of remedies available to the aggrieved party. Some of these are ‘self help’ remedies which allow the wronged party to take matters into their own hands. Self help remedies include:

• Withholding performance of your end of the bargain, for instance by withholding payment for defective or incomplete performance.
• Walking away from the contract – ‘rescission’. Under this remedy, the wronged party refuses to perform any future obligations which may be due under the contract. A note of caution – before rescission will be allowed, the breach in question must be ‘material’ – that is to say it must be sufficiently serious to warrant bringing the contract to an end. Walking away without justification can leave the aggrieved party in breach of contract.

If the contract dispute proceeds to court, there are a number of remedies the courts can award. The most common breach is a failure to pay monies due under the contract. As such, the most common judicial remedy is an order to pay the sum due. If it is performance of the contract that is sought, the court can make an order compelling the contract breaker to perform their half of the bargain. This remedy is only available when performance is possible and the order is not unfair on the breaching party or out of proportion to the breach.

A party will not be compelled to perform their half of the bargain when personal relationships are involved, nor will the court make an order to perform a contract if the subject matter is of no particular significance e.g. it is a contract involving goods which can be readily purchased elsewhere.

An award of damages is one of the most common remedies for breach of contract.

The object of an award of damages is to provide monetary compensation to the party who has suffered as a result of the breach. The amount is designed to put the innocent party in the position they would have been in but for the breach of contract, insofar as this is possible.

The amount awarded will normally be the difference in value between the performance rendered and the performance originally contemplated in the contract, or the cost of curing the defect in performance.

Damages will only be awarded for losses which arise as a direct result of the breach. The court will not award damages for losses which are not directly linked to the breach, nor will they award damages for losses which occur as a result of circumstances which were not known to the party in breach of the contract.

Based in Glasgow, East Kilbride and Edinburgh, our commercial solicitors advise businesses across Scotland, including those from Ayrshire, Renfrewshire, Lanarkshire, Edinburgh, Lothian, Dundee, Stirling and many other Scottish towns and cities.