Contract: Cheat Sheet - A summary of the first few lectures of the module including offer and acceptance PDF

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Contract - Revision Cheat SheetFormation of a contract If there is valid consideration, ICLR and agreement (offer and acceptance), a contract will be formedOffer and AcceptanceWhat are the three essential elements required to form a legally binding contract?Consideration + Intention to Create Legal ...

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Contract- Revision Cheat Sheet Formation of a contract If there is valid consideration, ICLR and agreement (offer and acceptance), a contract will be formed!

Offer and Acceptance What are the three essential Consideration + Intention to Create Legal Relations and Capacity + elements required to form a legally Agreement (Offer and Acceptance) binding contract? An offer must be…

i. Valid (clear, certain, addressed to offeree) ii. Communicated to the offeree iii. Not rejected, revoked or lapsed

Acceptance must be…

i. A mirror image of the offer ii. Made by the offered in response to the offer iii. Communicated to the offeror

Bilateral Contract

Both parties assume an obligation to each other

Unilateral Contract

One party

Requirements of a valid offer

i.

Clear and certain ! (‘If you will sign the agreement and return it to me I will send you the agreement signed on behalf of the council’ Storer v MCC)!

ii. Intention to be bound! Gibson v Manchester City Council: ‘may’ was not clear enough! Storer v Manchester City Council: ‘will’ was clear enough

“Invitation to Treat” What is an invitation to treat?

The preliminary stage of negotiations e.g. advertisements It is not an offer

Adverts General Rule

An advert is an invitation to treat, not an offer

Partridge v Crittenden

An advert offering for a ‘live bird’ for sale contained too few details so was not legally an “offer” but was an invitation to treat. An advert will generally be an invitation to treat not an offer

Fisher v Bell

The display of goods in a shop window is an invitation to treat

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd

Placing goods on a supermarket shelf is an invitation to treat. The offer is made by the customer at the till

Adverts EXCEPTION 1: Grainger v Gough

Obiter: an advert may be an offer if it is clear and certain enough to demonstrate an intention to be bound. A wine list with prices was not an offer because the supplier would not be able to satisfy demand from an infinite number of people

EXCEPTION 2: **Carlill v Carbolic Smoke Ball Co

An advertisement may be a unilateral offer. An advert promoting a smoke ball alleged to protect against illness offered £100 to anyone using it and becoming ill. The manufacturers deposited £1,000 as proof of their promise

Invitations to Tender General Rule

An invitation to tender is an invitation to treat, not an offer (Spencer v Harding)

Spencer v Harding

Spencer sent in the highest offer, but this was not accepted. Harding did not commit to selling to the highest bidder and so was free to choose which offer to accept or to accept none. When the requester invited tenders from those interest in supplying the goods or service, this is deemed an invitation to treat

EXCEPTION: (Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd [1985] Ch 103)

If the party calling for bids makes a commitment in relation to the tender ie where the invitation to tender expressly contains an ! undertaking to accept the highest or lowest bid ! (Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd [1985] Ch 103)

Blackpool v Fylde Aero Club v Blackpool BC

Held that an invitation to tender could give rise to a binding contractual obligation to consider tenders in circumstances where:! I.

The tenders had been solicited from specific parties who were known to the requesting party!

II. There was an absolute deadline for submission! III. The party requesting tenders had laid down absolute and nonnegotiable conditions for submission (Bingham LJ held the there was a contractual duty to consider those tenders which had complied with the conditions for submission) Auctions General Rule

The auctioneer's request for bids is an invitation to treat. The bidder makes an offer which the auctioneer is free to accept or reject. Acceptance of the bidder's offer will be indicated by the fall of the auctioneer's hammer. This is consistent with the rules of revocation of an offer (ie the bidder may revoke their offer at any time before the hammer falls)

s 57 Sale of Goods Act 1979

“a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid”

Auctions Harris v Nickerson

The advertisement of the holding of an auction was a mere declaration and not an offer to contract

Payne v Cave

An auction offers are made by bidders and are accepted by use of the auctioneer's hammer (confirmed by s 57) Items can be withdrawn at the auctioneer’s or bidder's discretion at any time before the hammer falls. There is a ‘bilateral’ contract at this point

EXCEPTION Auctions ‘without reserve’

In an auction without reserve the seller promises to sell the highest whatever the bid turns out to be. The auctioneer may be sued for breach of contract if they refuse to sell to the highest bona fide bidder

Barry v Davies

Items with no reserve put up for auction constitute unilateral offers (put up for "sale without reserve”) the auctioneer cannot withdraw the item after the bidding starts. NOTE: this is a contract with the auctioneer not the seller. The claimant is entitled to damages, not to the goods

Warlow v Harrison

Obiter! Where the sale is expressed to be without reserve , there are in fact two contracts: i. Bilateral contract proceeds on the usual analysis of an auction sale whereby the bidder makes an offer which is capable of the acceptance or rejection by the auctioneer. The contract determines who is entitled to the goods ii. Unilateral contract based on the promise that the auction will be without reserve. If the reserve is not applied and the goods are withdrawn from sale there is a breach of contract and the highest bona fide bidder is entitled to be compensated by payment of damages. The bidder is NOT entitled to the goods.

Termination of an offer When can an offer be terminated?

Between Offer and Acceptance

An offer can be terminated in three a. Rejection ways b. Lapse c. Revocation In each case the offer loses its legal effect and becomes incapable of acceptance

Rejection A counter offer is an attempt to accept an offer on new terms and therefore a rejection of the first offer. It constitutes a second offer from the former offeree to the former oferror- this new offeree chooses whether to accept.

Counter Offer Hyde v Wrench

The counter-offer terminates the original offer Hyde v Wrench: a counter-offer was rejected. The Court ruled that the original offer was no longer open for acceptance. Stevenson, Jacques & Co v McLean: a request on the timing of payments was insufficiently specific to constitute a counter offer capable of acceptance. A request for information typically uses interrogatory language, asks about a matter ancillary to the contract and does not change any of the material terms

NOTE: Requests for further information are distinct from counter offers because the original offer remains open Stevenson, Jacques & Co v McLean Revocation (by offeror, before acceptance)

Payne v Cave: can occur any time before acceptance.! Must be communicated. Revocation is only effective upon receipt by the offeree Byrne v Van Tienhoven! ! Dickinson v Dodds: revocation can be communicated indirectly by a 3rd party. An offer can be revoked even if the offeree has indicated that it will be open for a specific period- there is no consideration for the promise to keep the offer open

Revocation of a unilateral offer

Great Northern Railway Company v Witham: a unilateral offer may be revoked any time before complete performance! ! BUT, Denning argued in…! ! Errington v Errington and Woods: if an offeree has begun to accept a unilateral offer and if that offeree would suffer inequity in the event of revocation, then the offeree must be allowed to try to complete the act (here try to pay off the mortgage) and the offeror cannot meanwhile withdraw the offer) Shuey v United States: it is possible to communicate to revoke a unilateral contract made to the world if steps are taken to bring the revocation to the attention of those interested (NOTE there is only US authority on this point

Lapse

i.

Passage of time- after a reasonable period (Ramsgate Victoria Hotel v Montefiore) ii. Non-fulfilment of a condition (Financings Ltd v Stimson- a car was damaged after the offer to buy was accepted, but the purchases had taken delivery of it) iii. Death (Reynolds v Atherton)

NOTE: Option Contracts Option Contracts

i.

Where party A makes an offer and the offeree, party B, asks A to keep the offer open for longer while B makes up their mind, in return for additional consideration. ! If agreed, then this forms an option contract, which is separate from the main contract (Dickinson v Dodds ; Routledge v Grant) ii. If A does not keep the offer open (e.g. because A sells the subject matter of the main contract to a third party before the agreed extension of time is up) then A is in breach of the option contract with but not in breach of the main contract formed (B was yet to have accepted the original offer)

Conditions for acceptance Must be a mirror image of the offer

Hyde v Wrench

Must be made by an offeree

Boulton v Jones

In response to the offer / being aware of the offer

R v Clarke

Motive for acceptance is irrelevant

Williams v Carwardine

General Rule: an acceptance must be communicated

i.

Silence is inadequate and an offeror cannot stipulate that silence amounts to acceptance (Felthouse v Bindley) ii. Can be communicated by a 3rd party authorised by the offeree (Powell v Lee) iii. Acceptance by conduct is possible (Brogden v Metropolitan Railway)

EXCEPTIONS to the above i. For unilateral offers, only performance of the act is necessary requirements for communication of (Carlill v Carbloic Smoke Ball Co) acceptance ii. Where the failure to communicate acceptance is the offeror's fault (Entores v Miles Far East) iii. The Postal Rule (Adams v Lindsell)

Prescribed mode of acceptance It may be necessary to follow a prescribed mode of acceptance Manchester Diocesan Council for Education v Commercial and General Investments

Buckley J explained that it is open to the offeror to prescribe a mode of acceptance 'in terms insisting that only acceptance in that mode shall be binding’ Where a mode of acceptance is specified the requirements may be waived for an acceptable alternative

Prescribed mode of acceptance Tinn v Hoffman

Unless the prescribed mode is made mandatory, another mode of acceptance which is no less advantageous to the oferror will bind them

Yates Building Co Ltd Pulleyn (registered / recorded post) Reveille v Anotech (signature)

If the prescribed method is for the benefit of the offeree, then the offeree may waive that requirement

Postal Rule For an acceptance sent by post, acceptance occurs at the moment of posting

Adams v Lindsell London and Northern Bank ex.p. Jones

Offeror cannot revoke their offer after the acceptance is posted, even if they are unaware of its posting, as their offer has already been accepted

Byrne v Van Tienhoven

Must be property posted- in a Royal Mail postbox or given to a postal employee authorised to received letters

London and Northern Bank ex.p. Jones

The acceptance is still valid, even Household Fire and Carriage Accident Insurance Co v Grant if the letter is lost or destroyed in the post EXCEPTIONS The offeree's carelessness can deprive him of the benefit of the postal rule. If a letter is addressed incorrectly by the offeree then it is only valid from the moment that it arrives

Getreide-Import Gesellschaft v Contimar

If it is not reasonable to use the post

e.g. postal strike ; Henthorn v Fraser

There is an implied condition or actual condition that prompt acceptance is required Where an offer is made by telegram it is implied that acceptance should be in the same way

Quenerduaine v Cole

If the application of the postal rule would cause ‘manifest inconvenience and absurdity’

Holwell Securities v Hughes

Postal Rule Ouster clauses

If the postal rule is ousted by the offeror (e.g. acceptance does not bind until it reaches me or acceptance by notice in writing to me Holwell Securities v Hughes

Where the offeree attempts to revoke their own posted acceptance

The law is unclear. There are two conflicting authorities i. One Scottish case suggested that provided the offeror were contacted by the offeree before the offer’s postal acceptance arrived, then that acceptance could be revoked (Dunmore v Alexander) ii. A New Zealand case was decided in the opposite way (Wenkheim v Arndt)

Instantaneous Communications Opposite to the postal rule

Acceptance occurs when the communication is received Entores v Miles Far East Corporation

Non-receipt

Where the offeror does not receive the acceptance and the offeree is aware they did not, the offeree is responsible for resending their acceptance. If the oferee is unaware that their acceptance has not been received, and the offerror does not ask for it again, the offeror is responsible and will be estopped from denying the existence of a contract. It may not rely on its own failure (Denning in Entores v Miles)

Office Hours

If acceptance is received within office hours but the offeror does not read it, that still counts as communication as the offeror is to blame for ignoring it The Brimnes

What are ‘ordinary office hours’? The context of the parties' negations and previous relationship is relevant Thomas v BPE Solicitors If acceptance is received outside of It counts as having been received at the beginning of the next office hours? working day Mondial Shipping BV v Astarte Shipping! ! As a general rule, contracts are formed in the place where the instantaneous communication is received Brinkibon Ltd v Stahag Stahl (confirmed in Entores v Miles)

Intention to Create Legal Relations Rose & Frank v Crompton Bros

“To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly”

Lord Denning in Merritt v Merritt “To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly” Volumatic Ltd v Ideas for Life

The burden of proof falls on the person asserting that position

Intention to Create Legal Relations Anchor 2010 v Midas Construction

Performance of contract is persuasive in indicating intention to creation legal relations

EXAMPLES of ICLR in a commercial context Bunn & Bunn v Rees & Parker

There is a presumption that ICLR always exists in commercial arrangements

MacInnes v Gross

Clear words were used to indicate that the parties had agreed to be bound “in honour only”

Blue v Ashley

An offer made in a pub was held not to have been made with an intention to be bound

Licenses Insurance Corporation v Lawson

A statement made in anger, or as a joke where the other party is aware that it is not intended seriously,, it is unlikely to be binding

EXAMPLES of ICLR in a social / domestic context Balfour v Balfour

There is no presumption of ICLR in social domestic arrangements A promise to pay wife a retainer whilst abroad did not show ICLR because they were happily married at the time; marital arrangements are not the place of the law

Gould v Gould

A husband left his wife and children promising to make maintenance payments as “long as I can manage it”. HELD: the promise was insufficiently certain to determine ICLR

Jones v Padavatton

A mother promised to pay her daughter $200 a month if she would give up her job and move to England. The mother bought her daughter a house. The parties fell out. HELD: the promise was no enforceable as here was insufficient evidence to rebut the presumption of no ICLR in a domestic arrangement

Merritt v Merritt

A husband promised that he would transfer his house to his wife if she paid of their mortgage. HELD: there was ICLR

Intention to Create Legal Relations Presumptions of ICLR can be i. rebutted providing evidence to the contrary

Evidence to indicate that the parties did in fact intend to be bound by their agreement considering…! ! a) How much reliance the party placed on the agreement (Parker v Clarke)! ! b) Certainty of the agreement (Vaughan v Vaughan)!

ii. Honourable pledge clause: can rebut the presumption of ICLR in a commercial context but the wording must be very clear! iii. An agreement to pay an ex gratia sum was not unequivocal (Edwards v Skyways) but a statement hat the document was not a formal agreement or of legal effect was clear (Rose & Frank v Crompton Bros)! iv. See Blue v Ashley! v. See Licenses Insurance Corporation v Lawson The words “subject to contract” normally indicates that the parties do not intend to be legally bound until the formation of a formal contract

Alpenstow v Regalian Properties: the words "subject to contract” did not necessarily indicate no ICLR because the document had been professionally legally drafted and acted upon

s. 179 Trade Union and Labour Relations (Consolidated) Act 1992

“A collective agreement [between trade unions and employees] shall be conclusively presumed not to have been intended by the parties to be a legally enforceable contract unless it is in writing or states that the parties intend the agreement to be a legally enforceable contract”!

Advertisements: ‘mere puff’ or was there an ICLR?

COMPARE:! Carlill v Carbolic Smoke Ball Company And Esso Petroleum v Commissioners of Customs and Excise

Esso Petroleum v Commissioners of Customs and Excise

Customs and Excise claimed that purchase tax was due on the coins as they had been “sold”. HELD: The House of Lords held that there was no legally binding contract for sale of the coins and that tax was not due. The coins were distributed as a gift

Reasons for lack of capacity Mental Incapacity

Someone who at the time the contract is made is “unable to make a decision for himself in relation to the matter”! ! s. 2(1) Mental Capacity Act 2005 (“MCA”)! ! Imperial Loan Co v Stone

Minority

Contracts with children cannot be enforced against them although the minor can enforce the contract! Nash v Inman! ! Aylesbury Football Club v Watson Association Football Club The rules are similar for mental incapacity for the person who is so drunk that they are no aware of what they are doing!

Drunkeness !

Matthews v Baxter Where a person lacks capacity, the contract may be binding if… It is for necessities

s. 3 Sale of Goods Act 1979 s. 7(2) MCA

As against a minor if the contract is for employment, education or an apprenticeship and the contract is beneficial to the minor

Considera...