Case List Contract Law Revision PDF

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Contract Law FHS NotesOutline of Topics1. Offer and acceptance, Certainty & Intention2. Consideration and Promissory Estoppel3. Breach & Remedies for Breach4. Privity5. Contents including exemption clauses; legislative control of unfair contract §terms CRA6. Mistake &...

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Contract Law FHS Notes Outline of Topics 1. Offer and acceptance, Certainty & Intention 2. Consideration and Promissory Estoppel 3. Breach & Remedies for Breach 4. Privity 5. Contents including exemption clauses; legislative control of unfair contract §terms CRA 6. Mistake & Frustration

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OFFER & ACCEPTANCE, CERTAINTY & INTENTION

1. Offer & Acceptance (i)

Offer & Invitation to Treat

General rule that adverts are invitations to treat rather than offers. (Partridge v Crittenden). o But in Carhill v Carbolic Smoke Ball, the advert was a unilateral offer. General rule that invitations to tender are invitations to treat. o But in Blackpool Aero Club, an invitation to tender was held to be an offer.

Carlill v Carbolic Smoke Ball Co [1893] CoA

  

OFFER



Advert = an offer in a unilateral contract to anyone who performs the conditions. Claimant completing performance = acceptance of the offer Consideration was present o the company obtained the confidence of the public; o the claimant was inconvenienced by having to use the ball. No communication of the acceptance of the offer was necessary. o The offer said (expressly or impliedly) that performance was sufficient.

Boots v PSGB [1953] CoA

The display of goods in a shop is an invitation to treat.  Offer : putting the goods in your basket and taking them to the checkout o (an offer by the customer to buy)  Acceptance : cashier selling the goods at the till.

ITT

Boots was not in breach of the Pharmacy and Poisons Act 1933.

Partridge v Crittenden [1968] High Court

An advert for the sale of wild birds is an invitation to treat, not an offer.  D was not liable under the Protection of Birds Act 1954 for ‘offering for sale a wild live bird’.  Link to Fisher v Bell o Display of knives in a shop window with a price tag was an invitation to treat.

ITT Gibson v Mancheste r CC [1979] HoL ITT

No concluded contract because the words ‘may be prepared to sell to you’  constitute an offer  Council house purchase  Whether there was a concluded contract between Mr Gibson & CC o letter from the CC, ‘the corporation may be prepared to sell the house to you’, request to complete an application form. HoL found NO CONCLUDED CONTRACT.  Majority found that there was not a concluded contract. o Looked at the correspondence as a whole and at the conduct of the parties to see whether the parties came to an agreement on everything material. The words ‘may be prepared to sell the house to you’ were not found to constitute an offer. Similarly, the offer of a mortgage cannot be regarded as a firm offer to sell.

Harvela

Referential offer is invalid. Bound to offer the lower offer.

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Investment s [1986] HoL

  

Blackpool Aero Club [1990] CoA

Bids for a block of shares in a company. Two separate ‘offers’ were made by sealed tender. o Referential offer, i.e. ‘£X or £Y in excess of any other offer, whatever is higher’. HoL held that the referential bid was invalid and that Ds were bound to accept the other offer made.

An invitation to tender (for the new concession of an airport) was held to be an offer because of the circumstances. o This goes against the general rule that invitations to tender are invitations to treat. Circumstances included: o The council approached the club and other invitees; all were connected with the airport; o The club had held the concession for 8 years previously; o There was a clear intention on the part of both parties that all timely tenders would be considered.

OFFER

Obligation on the part of the council to consider all timely tenders. C’s tender was on time but not considered.

Carlill v Carbolic Smoke Ball Co [1893] Facts Advert provided that the Carbolic Smoke Ball Company would pay £100 to anyone who caught influenza after buying and using the smoke ball as directed. C bought one of the carbolic smoke balls and used it as directed but still caught influenza. The company refused to pay out £100. Sued for payment of the £100. Q: was there an offer? Was it accepted? Was there consideration? Held (CoA) CoA held that there was a binding contract which was enforceable by the claimant. The advert constituted an offer in a unilateral contract to anyone who performs the conditions. The claimant’s completion of performance (used the ball) constituted acceptance of the offer. Consideration was present: the company obtained the confidence of the public and the claimant was inconvenienced by having to use the ball 3 times daily for 2 weeks. No communication of the acceptance of the offer was necessary because the offer said (expressly or impliedly) that performance was sufficient. Offer and Invitation to Treat Carlill v Carbolic Smoke Ball Co [1893] PSGB v Boots [1952] Partridge v Crittenden [1968] Gibson v Manchester CC [1979] Harvela Investments v Royal Trust Co of Canada [1986] Blackpool & Fylde Aero Club Ltd v Blackpool BC [1990]

(ii)

Acceptance

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Mirror image rule – the acceptance and the offer must exactly coincide. o Hyde v Wrench: Wrench offered his farm for sale @ £1,000. Hyde said he’d buy for £950. o No acceptance of Wrench’s offer. o

Hyde’s response was a counter-offer. Wrench was free to accept it or not.

A counter offer  acceptance (Hyde v Wrench). (a) Felthouse v Bindley [1862]

Communication of Acceptance

Silence does not constitute acceptance.  Uncle and nephew.  Nephew owned a horse, the uncle sent him a letter offering to buy it. o Nephew never replied to the letter, but excluded the horse from the auction of the rest of his property.  An auctioneer mistakenly sold the horse. o The uncle brought an action against him (tort of conversion). Uncle’s action failed; there was no contract between the nephew and the uncle because the nephew’s silence did not constitute acceptance.

Entores [1955] CoA

Acceptance must be communicated to the offeror. Upheld general rule, not postal rule. o No contract unless the acceptance is communicated, e.g. if the line goes dead, no contract until the words are repeated and both parties are on the same page. o Offeror in London made an offer to the offeree in Amsterdam by telex. o Acceptance of the offer was sent by telex from Amsterdam to London. Q: whether the contract was concluded when the acceptance was sent or received. o CoA held that the contract was made when the acceptance was received. (Upheld general rule for communication of acceptance, not the postal rule exception).

Holwell Securities v Hughes [1974] CoA

Parties may contract out of the postal rule and require ‘notice in writing’ Acceptance of an offer for the sale of land was required in writing (agreement required ‘notice in writing’), and a letter was posted but it never arrived. Held that no contract of sale was concluded because the offer required notice in writing, which had not been given.

Brinkibon [1983]

Upheld Entores, Receipt/communication of the acceptance telex is necessary for a contract to be included. The postal acceptance rule is the exception to that rule. Lord Brandon: instantaneous  non-instantaneous forms of communication o Telex = instantaneous; post  instantaneous form of communication o

The postal rule is necessary to uphold commercial expediency

Acceptance by Post Cases 4

o

o

Acceptance by post takes effect when posted ( Adams v Lindsell).  This is contrary to the general rule that acceptance of an offer must be communicated to the offeror. Revocation by post takes effect when received (Bryne v Van Tienhoven) o Gardner has argued that there is no convincing explanation of the postal acceptance rules.  His argument is based on the fact that in the 19 th century (when the post was invented and the postal rules arose), the popular view was that posting equated to delivery.  However, once the telephone was invented and more instantaneous communication was possible, people no longer equated posting with delivery.

Adams v Lindsell

Household Fire v Grant [1879] CoA

Early case for the postal rule (acceptance is valid when the letter is sent). Not necessary for the letter to be received; acceptance is valid when it is sent. (This case isn’t on the reading list but it is important) An acceptance by post is valid when it is sent o Don’t need to wait until the letter of acceptance is received o Postal rule applies even where the letter is lost. Facts: D offered to buy 100 shares from a company. C sent a letter of acceptance to D but it was lost in the post and never arrived. Q: was there a valid contract? YES! Reasons for preferring the postal rule: (i) The post office is a common agent; (ii) The offeror can choose to displace the rule by requiring receipt of acceptance; (iii) Otherwise, the acceptor could not safely act until receiving notice that the acceptance had been received.

Bryne v Van Tienhoven [1880]

The postal acceptance rule does not apply to letters of revocation. o Letters of revocation have to be received by the offeree to be effective. o The withdrawal was inoperative, so there was still a valid contract.

Henthorn v Fraser [1892]

A postal acceptance will only be valid at the time of posting if it is reasonable for the offeror to expect an acceptance by post. Here, it was reasonable for D to expect that a letter of acceptance would be sent via post. o D made an offer to sell houses. o Claimant sent a letter of acceptance and the defendant sent a letter of revocation of the offer at the same time. o The postal rules would provide that the letter of acceptance is valid upon sending and so trumps the revocation. CoA held that the claimant was entitled to specific performance, i.e. houses to be sold

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Communication of acceptance (including acceptance by post) Felthouse v Bindley (1862) 11 CBNS 869 Household Fire Insurance v Grant (1879) 4 Ex D 216 Byrne v Van Tienhoven (1880) 5 CPD 344 Henthorn v Fraser [1892] 2 Ch 27 Entores v Miles Far East Corp [1955] 2 QB 327 Holwell Securities v Hughes [1974] 1 WLR 155 The Brinkibon case [1983] 2 AC 34 (b)

Acceptance by Conduct Brogden v Metropolitan Railway (1877) 2 App Cas 666

Brogden v Metropolitan Railway [1877] HoL

Although C did not sign the draft contract given to him by D, HoL held that there was acceptance by conduct of the offer. C’s conduct which constituted acceptance: supplying coal in accordance with the terms of the contract (as C had done previously) for 2 years. Lord Blackburn: “when an offer is made to another party, requesting that to accept he do some particular thing, as soon as he does that thing, he is bound”.

(c)

Acceptance in a prescribed way Manchester Diocesan Council for Education v Comm. & Gen. Investments [1970] 1 WLR 242

Manchester Diocesan Council for Education [1970]

Prescribed mode of acceptance: I. II.

An offeror may stipulate that the offer must be accepted in a particular manner. However, in the absence of such a particular manner being provided by the offeror, another mode which is no less advantageous will suffice.

Here, (i) the mode supplied by the offeror was not mandatory. Secondly (ii) the mode used (sending the acceptance to D’s solicitor rather than D) was no less advantageous; it therefore sufficed to give rise to a contract. If a particular mode is necessary: o A contract will arise as soon as the offeree does the stipulated act, whether the offeror notices or not. o There is no need for communication in such a case; the offeror waived his right to have acceptance communicated. The agreement provided that ‘the successful tenderer shall be informed of the acceptance of his tender by letter by post’ etc. After D’s successful tender, a letter of acceptance was sent to D’s solicitor rather than to D. Months passed. Q: Whether there was still a valid contract (i.e. did the acceptance still count?) The Chancery Court that that there was a valid contract. No less advantageous to D to send the acceptance to D’s solicitor than to D.

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(d)

Acceptance in ignorance of offer Gibbons v Proctor (1891) 4 LT 594

Gibbons v Proctor (1891)

Weak authority for the proposition that a party can accept in ignorance of an offer. C gave information to a Superintendent before a £25 reward was offered for such info. C then claimed that he was entitled to the reward. Held that he was entitled to the reward. BUT the law report suggests that C was aware of the reward at the time he gave the info (accepted the offer). Therefore Gibbons v Proctor is weak authority for the proposition that it is possible to accept in ignorance of the offer.

(e)

Acceptance in unilateral contracts Carlill v Carbolic Smoke Ball Co Errington v Errington [1952] 1 KB 290 Daulia v Four Millbank Nominees Ltd [1978] Ch 231, 239

Carlill v Carbonic Smoke Ball Errington v Errington [1952] CoA

Acceptance did not need to be communicated because of the wording of the advert/offer, which said (expressly or impliedly) that performance was sufficient. A unilateral offer cannot be revoked after the offeree starts performance.   



Daulia v Four Milbank Nominees [1978]

Father, son and daughter-in-law. Father told the son & daughter in law that the house would be theirs if they paid off the mortgage. They started to pay the instalments, then the father died. They kept paying the repayments, son left, then the widow sought to eject the daughter in law from the house. CoA held that the daughter in law could not be ejected because the father’s offer of a unilateral contract could not be revoked after the couple had started to pay off the mortgage instalments.

Upheld Errington: Goff LJ: the offeror cannot revoke a unilateral offer once performance has been started. Goff LJ found an implied obligation on the offeror not to prevent the condition becoming satisfied. This obligation arises as soon as the offeree starts to perform. The offeror may revoke their offer until performance is commenced, but not after the offeree has embarked on performance. Too late. Does starting performance constitute acceptance of the offer of a unilateral contract? Possibly...but that would require consideration for the promise to be starting rather than completing performance, which is problematic. Instead, the offeror promises not to revoke the offer of the main contract once the offeree has started to perform.

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(f)

“Battle of the forms” Butler Machines v Ex-Cello Corp [1979]

Butler Machines v Ex-Cello Corp [1979] CoA

‘Battle of the forms’ : Lord Denning considering the documents as a whole Sellers (Cs) and buyers (Ds) of a machine had different terms and conditions. Sellers conditions included a price variation clause. Sellers claimed that the price had increased by a further £2,892 when they delivered the machine. Sellers sued the buyers for the increase when the buyers refused to pay. Q: had a contract been concluded and if so, on whose terms? CoA held that there was a contract for sale on the buyers’ terms. o Buyers were not bound to pay the price increase. This is EVEN THOUGH the sellers provided that their terms and conditions shall prevail over any terms and conditions in the buyer’s order. Reasoning Lawton LJ took the traditional approach o offer by seller, counter-offer by buyer, acceptance by seller via tear-off strip which was returned to buyers, therefore buyers’ terms. Not ad idem because of the sellers’ acknowledgment of the buyers’ terms. Lord Denning took a holistic approach o Considered the documents as a whole. o Found that the sellers’ acknowledgement of the buyers’ terms was the decisive document. Makes clear that the contract was on the buyers’ terms.

(iii) Termination of an Offer Hyde v Wrench (1840) Stevenson v McLean (1880) Dickinson v Dodds (1876) Byrne v Van Tienhoven Hyde v Wrench [1840] Dickinson v Dodds [1876]

Stevenson v McLean [1880]

A counter-offer will terminate the original offer. Original offer to sell the farm for £1,000. Counter offer of £950. Following the counter-offer, the original offer was no longer open for acceptance. No binding contract. In order to be valid, the revocation of an offer must be communicated to the revokee/offeree before the offeree accepts the offer. Here, C could not obtain SP from D for revoking the offer before the offer’s deadline because the offer was revoked before C accepted it. Mere inquiry (won’t terminate original offer) ≠ Counter offer (will terminate) Held that a valid contract had been formed because a mere inquiry does not terminate the original offer, which had been accepted by the claimants. Mere inquiry: “would you accept 40 for delivery over 2 months, or if not, the longest limit you would give”. 8

Finding a mere inquiry o Consider the form of the telegram; o The time it was sent; o The state of the iron market at the time it was sent.

Walford v Miles [1992]

Interesting Q whether Hyde v Wrench would have been different if the counter-offer had been re-phrased as “would you accept £950?” A lock-out agreement must be for a fixed period of time in order to be valid. No valid lock-out agreement here, therefore the sellers could sell to a TP. Cs could not obtain SP of the obligation to sell the business to them. The ‘lock-out’ agreement was held to be invalid because it was too uncertain (no end date). Courts were very reluctant to find an agreement to negotiate in good faith enforceable because: (i) Too uncertain; (ii) Negotiation in good faith is inconsistent with a negotiating party’s entitlement to pursue only self-interest (key aim of contract law).

(iv) Bargain, but Difficulty in Offer and Acceptance Analysis Butler v Ex-Cello – see above (Lord Denning only) – Lord Denning’s holistic approach – look at all of the documents in order to determine on whose terms the contract was concluded. Gibson v Manchester CC – see above 2.

Certainty Hillas v Arcos (1932) 147 LT 503 May & Butcher Ltd v R [1934] British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] Walford v Miles [1992] General rule that the court is wary of filling in uncertain terms to find a valid contract. Delicate balance between: o giving effect to the parties’ intentions (i.e. not finding a contract void for uncertainty); and o not making contracts for the parties.

Old English law maxim applies, ‘verba ita sunt intelligenda ut res magis valeat quam pereat’, ‘words are to be understood so that the object may be carried out and not fail’, EXCEPT not to the extent that the court ends up making a contract for the parties or gong outside the words that the parties have used. Hillas v Arcos [1932] HoL Contract

Russian softwood. HoL found a contract sufficiently certain. The court found a valid contract even though the goods were merely described as ‘of fair speculation’ and there was a further agreement contemplated (uncertainty). HoL showing greater willingness to resolve uncertainty and find a concluded contract than the courts have done later. 9

Factors which led to the court’s willingness to find a concluded contract: (i) The court was satisfied that the parties both intended to make a contract and thought they had done so. (commercial contract – crude) (ii) Both parties were familiar with the course of business in the product (Russian softwood). Criticisms of Hillas v Arcos 1. Blurring of the lines between intention to create LR and certainty; 2. Court making a contract between the parties. BUT : both parties (businessmen) thought th...