Contract Law Case Summaries PDF

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Contract Law Case Summaries Contract Formation I: Offer, Acceptance and Consideration  Offer o Invitation to treat GIBSON V MANCHESTER CITY COUNCIL [1979] HOUSE OF LORDS CITATION: Gibson v Manchester City Council [1979] WLR 294. PROCEDURAL HISTORY: There was a trial and Manchester City Council lost, so they appealed. They appealed to the Court of Appeals then again to the House of Lords. FACTS: Conservative ruling party of Manchester City Council had adopted a scheme in which allowed tenants of council houses to purchase their homes. After government elections were held the control of the council was passed over to the labour party, in which they concluded to abandoned the scheme, and follow through with those sales for which a binding contract had been finalised. The Council denied that there was a binding contract confirming the sale of Gibson’s property. Gibson was in the negotiation stage and provided a formal letter from the council in which they stated, “may be prepared to sell at a price of $2725 less 20% freehold, providing that the letter was not a firm offer of mortgage. ISSUE/RESULTS: Was there a binding contract? There was no binding contract - no offer and acceptance so Manchester City Council did not owe Gibson the purchasing of his house. REASONING: There was no acceptance, as the Language was too vague expressed through the statement; “may be prepared”. It Didn’t meet terms and conditions for that type of transaction It was just part of the process of negotiation – there was no final agreement concluded. Since the council’s reply did not consist of an affirmative statement declaring a contract, and instead uses the wording of “may be willing to sell”, no contract was established. -The court held that the Council's letter was not an offer as the letter stated that "The Corporation may be prepared to sell the house to you" and that "If you would like to make formal application to buy your Council house, please complete the enclosed application form and return it to me as soon as possible." As

there was never an offer available to be accepted, no contract had been formed and by extension the council had not been in breach. DECISION: Ruled that this was an invitation to treat, which is only a step in the negotiation process of a contract.

PHARMACEUTICAL SOCEITY OF GREAT BRITAN V BOOTS CASH CHEMISTS (SOUTHERN) LTD [1953] COURT OF APPEAL CITATION: Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401. FACTS: Boots Cash Chemists sold goods in a self-service fashion. That is, customers were allowed to pick good from a shelf and take them to a cash register for payment. Section 18(1)(a)(iii) of the UK Pharmacy and Poisons Act 1933 made it an offence to sell certain products unless the sale was ‘effected by, or under the supervision of, a registered pharmacist’. Boots was charged with breaching the Act. It was claimed that the displaying of the goods on the shop shelves amounted to an offer to sell the product, which was therefore conducted without the required supervision. ISSUE/RESULTS: was there an offer to sell goods? When was the contract of sale concluded? If it was before the pay point, then the defendant would be committing an offence.

It was found by the court that the contract was not concluded until the sale at the pay point.

DECISION: in finding for Boots, the court made it very clear that, ordinarily, a passive display of goods on shop shelves did not amount to an offer to sell goods; instead it constituted to an invitation to treat. Therefore, the customer would offer to buy the product when they took then item to the cash register, at which point was located a pharmacist who could either accept or reject the offer.

o Invitation to treat: ticket cases MACROBERTSON MILLER AIRLINE SERVICES V COMMISSIONER OF STATE TAXATION (WA) [1975] HIGH COURT OF AUSTRALIA CITATION: MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) [1975] 133 CLR 125. PROCEDURAL HISTORY: The case was appealed from the Supreme court of Western Australia to the High Court of Australia. FACTS: A person wishing to fly on Mac Robertson miller airline services was told what seats were available and the fare. Passenger was handed a ticket in return for the fare Passenger was presented the take to board the flight Airline reserved the right to abandon any flight, or cancel any ticket or booking. Passenger would be entitled to a refund equal to the proportion of the cancelled flight. Airline was under no other liability to the passenger for the failure to carry her or him at the scheduled time. ISSUE/RESULTS: Is a prepaid ticket an agreement (contract) or a 'memorandum of agreement' of a contract for the purposes of stamp duty? The issuing of a ticket is not the conclusion of an agreement. Barwick CJ said that a ticket is a receipt of payment. If the airline carried the passenger, then the airline would be entitled to retain the fare as a reward If the passenger was not carried, the airline incurred no obligation other than to refund the fare On that basis, there were no contractual obligations between the airline and the passenger until the airline provided the passenger with a seat on the plane DECISION: It was held by the Supreme court that the ticket in these circumstances was not an agreement but was merely an offer that was only accepted after the passenger examined the terms contain on it or failed the reject them after a reasonable time. There was also a failure of consideration. The ticket is an offer, the contract being made upon acceptance of that offer by the passenger, usually by conduct.

HARVEY V FACEY [1893] PRIVY COUNCIL CITATION: Harvey v Facey [1893] AC 552. FACTS: this case revolved around the potential sale of a property called Bumper Hall Pen located in Jamaica. During the negotiations, Harvey sent Facey a telegram that stated: “will you sell us Bumper Hall Pen? Telegram lowest cash price-answer paid”. Facey responded: “lowest price for Bumper Hall Pen €900”. Harvey replied: “we agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession”. Facey did not respond and refused to proceed with the sale, arguing that there was no contract. ISSUE: was there an offer and an acceptance between the parties? DECISION: the court found for Facey, stating that no contract had been formed between the parties. The first telegram sent by Harvey was a request for information, not an offer. The court took the view that the telegram sent by Facey did not constitute either an offer or an acceptance; it was merely a supply of information. That information was the minimum price at which they were prepare to sell, and this did not amount to an offer. In this situation, Harvey was the offeror and Facey was the offeree. The telegram that was sent by Harvey stating that he agreed to buy the property for €900 constituted the offer in the arrangement between the parties, and this offer was never accepted.

o Mere Puffery CARLILL V CARBOLIC SMOKE BALL CO. [1893] COURT OF APPEAL CITATION: Carlill v Carbolic Smoke Ball Co. [1893] 1QB 256. PROCEDURAL HISTORY: The defendant appealed the case to the court of Appeals claiming that they did not have a contractual obligation as there was no evidence of a contractual agreement having been bound though offer and acceptance. FACTS: carbolic made and supplied a product called “the carbolic smoke ball”. Following an influenza pandemic, the company advertised in newspapers that it would pay €100 reward to any person who purchased its product and used it in accordance with the instructions and then contracted influenza. To demonstrate the sincerity of the reward, Carbolic deposited €1000 with a prominent British bank and also advertised this fact. Mrs. Louisa Elizabeth Carlill saw the advertisement and purchased the product. She used the product in accordance with the instructions and caught the flu. She contacted Carbolic and sought to make a claim for the reward. Carbolic argued that no contract had been formed. ISSUE: was there a contract between the parties or was it mere puff? It was ruled that the plaintiff had accepted the defendants offer and it wasn’t mere puff. REASONING: By finding that a unilateral contact existed, the court found for Carlill. A unilateral contract was described as a contract in which only one party makes a promise in return for the performance of an act, rather than securing a reciprocal agreement from the other party. The court also stated that offers could be made to the whole world and did not need to be directed towards specific individuals. Although a passive display of goods or an advertisement might normally not amount to an offer, the court found that the advertisement was not “mere puff” as the defendant had explicitly stated money had been set aside to make such payments. DECISION: Therefore, the case established that advertisements can constitute an offer to the world and Contractual offers waive the requirement to notify acceptance prior to performance. In determining whether there is a contractual offer, it is important to apply the objective test of whether a reasonable person wold view the

statement as meaning that the offeror intended to make an offer that would create a contract.

o Mere Supply of Information STEVENSON, JACQUES, AND CO V MCLEAN (1880) COURT OF QUEEN’S BENCH CITATION: Stevenson, Jacques, and Co v McLean (1880) 5 QBD 346. FACTS: McLean was an iron merchant. Via telegram, McLean offered to sell Stevenson, Jacques and Co 3800 tonnes of iron for ‘40s, nett cash per ton, open till Monday’. On Monday morning, Stevenson, Jacques, and Co sent a telegram to McLean that stated: ‘Please wire whether you would accept forty for delivery over two months, or if not, longest limit you would give’. A few hours later, after not receiving any response, Stevenson, Jacques and Co sent another telegram accepting the original offer. In the time between the two telegrams, McLean had sold the iron to another party and then notified this to Stevenson, Jacques and Co, who were not aware of this until after they had sent their second telegram. McLean claimed that he did not have a contract with Stevenson, Jacques and Co, first, because they had revoked his offer and second, because the first telegram amounted to a counteroffer. ISSUE: was the offer revoked by McLean? Were the enquiries made by Stevenson, Jacques, and Co a request for further information or a counteroffer? REASONING: It was held that the plaintiff's first telegram was not a counter-offer but only an enquiry (an inquiry for information) so a binding contract was made by the plaintiff's second telegram – as there was an offer capable of being accepted. The court held that the language used in the claimants telegram was that of an inquiry. There was nothing sufficiently specific to act as either a rejection or a counter offer. Consequently the words were a request for further information and the original offer remained open. DECISION: the court found for Stevenson, Jacques and Co. On the issue of revocation of offer, the court stated that the postal acceptance rule applied only to acceptance and not to revocation. Therefore, revocation was not effective, as notice of it did not occur until after. Stevenson, Jacques and Co had sent their second telegram, which accepted the offer. Acceptance in such circumstances was instantaneous. On the second issue of counteroffer, the court was of the view that the enquiries made by Stevenson, Jacques and Co did not amount to a

rejection of the offer nor to a counter offer; they related simply to a request for further information. In such circumstances, the offer remains open. ……the form of the telegram is one of inquiry…there is nothing specific by way of offer or rejection, but a mere inquiry, which should have been answered and not treated as a rejection of the offer.

o Duration of Offers: Expiry due to Revocation GOLDSBROUGH, MORT AND CO LTD V QUINN (1910) HIGH COURT OF AUSTRALIA CITATION: Goldsbrough, Mort and Co Ltd v Quinn (1910) 10 CLR 674 FACTS: John Thomas Quinn owned land under a Crown leasehold. It could, subject to the payment of a fee, be converted into freehold ownership. Quinn offered to sell the land to Goldsbrough. The offer to Goldsbrough was to be kept open for 1 week in return for Goldsbrough paying 5s. Before the week had expired, Quinn attempted to revoke the offer, as he wanted to sell another party. Goldsbrough accepted the offer and sued for specific performance. The property was to be sold to Goldsbrough for 30s per acre ‘calculated on a freehold basis’. The contract made no mention of who would pay the fee for conversion. In evidence to the court, Quinn stated that he thought that the cost of conversion would be paid by Goldsbrough. ISSUE: could Quinn revoke his offer? REASONING:  Griffith CJ reasoned that there was a contract of the sale of the property, conditional upon the option being exercised within the specified period. Quinn sol Mort time to make a decision about whether to accept the offer. He treated the agreement as a conditional sale which was enforceable by specific performance once the condition was satisfied.  O’connor J treated the option and the contract to sell the land as two different contracts. The original contract gives Mort the entitlement to have the full week to decide whether to accept the offer. Quinn broke this contract by revoking and presented Mort from accepting the second contract. A court of equity would disregard the withdrawal and treat the offer as if it had been accepted. During that week Quinn could not legally withdraw from the contract.  Issacs J reasoned that the option was preliminary contract to hold open an offer to sell the property. The exercise of the option gave rise to a separate contract of sale. He believed damages should be awarded because specific performance of the primary agreement is inappropriate and impossible.

It was held that the option having been given for a value of time was not revocable, and that the acceptance of the offer by the company constituted a binding contract which was enforceable by specific performance. DECISION: the court found for Goldsbrough, stating that the payment of the 5s meant that the offer could not be revoked before the expiration of the stated 1-week period. Therefore, a contract had been formed between the parties, as Goldsbrough had accepted the offer before the end of the week. An offer cannot be revoked if the offeree has provided consideration for an option. The offeree is entitled to the full amount of time given to them to decide whether to accept the offer.

MOBIL OIL AUSTRALIA V WELLCOME INTERNATIONAL (1998) FEDERAL COURT OF AUSTRALIA CITATION: Mobil Oil Australia v Wellcome International (1998) 81 FCR 475. PROCEDURAL HISTORY: Wellcome won the prior case in the Federal Court under Wilcox J. All the franchises that had achieved 90% for the past four years should be treated as if they had achieved the same in the remaining years so Mobil appealed to the Full Court of the Federal Court. FACTS: Mobil introduced an incentive scheme, the Circle of Excellence Scheme, to improve franchise performance. The franchises had to achieve 90% improvement in performance or better for six years to get a free nine year renewal of their franchise After 4 years, Mobil abandoned the scheme and the franchises were no longer judged. ISSUE: Can an offer in a unilateral contract be revoked if the other party has already begun performance? Were the terms in the offer by Mobil certain? REASONING: Mobil did not make an offer to franchises. Wellcome lost. On the estoppel claim it was concluded:  There was no one-for-one assurance or promise which activated the principles of estoppel  There was non nine-for-six assurance or promise which activated the principles of estoppel  The general commitment to “find-a-way” was not certain enough to ground an estoppel  The trial judge did not err in concluding that there was no detriment which could attract the application of estoppel



The applicants have not made out any estoppel case against Mobil.

[Estoppel = a collection of common law and equitable protections against detriment (the state of being harmed or damaged) flowing from a party’s change of position. Lockhardt, Lindgren and Tamberlin JJ reasoned that Mobil did not make an offer. Mr Stumbles, the representative, made it clear that the scheme was at the developmental stage. Therefore there was no offer. The commitment to “find a way” was too vague and uncertain to create a contractual obligation. In some unilateral cases a person will be prevented from revoking an offer. Revocation in breach of a contract would be effective. An estoppel may arise where the offeree has acted to their detriment on an assumption that the offer will not be revoked. However, there is no universal principle that the offeror may not revoke once the offeree embarks on performance of the act of acceptance. If there is no contract and no estoppel, the offeror can revoke the offer. The scheme was a benefit to both parties and the franchises had no detriment when the offer was revoked. There is no basis for an implied contract not to revoke the offer. DECISION: The offeror will only be prevented from revoking an offer before acceptance if there is an implied contract or an estopped. An estopped arises when a revoked offer causes the offeree detriment.

DICKINSON V DODDS (1876) ENGLISH COURT OF APPEAL CITATION: Dickinson v Dodds (1876) 2 Ch D 463 FACTS: on Wednesday 10 June, Dodds offered to sell Dickinson some houses located at Croft for the sum of €800. The offer was to remain open until 9am on Friday 12 June. Dickinson intended to accept the offer but initially did nothing to communicate this to Dodds. On 11 June, Dickinson was informed by another party, Mr Berry, that Dodds had already sold the houses to a third party, Thomas Allan. Dickinson then sent a formal notice of acceptance to Dodds. PROCEDURAL HISTORY: The lower court found for the plaintiff that the contract was enforceable, and it was ruled in favour of specific performance for the plaintiff. The defendant appealed the case to the court of Appeals. The Court o Appeals found that for the defendant, there was no contract formed. ISSUE/RESULT: If there is an open offer that has not yet been accepted by the offeree, is the offeror barred from making offers to other parties and is there a binding contract? When there is an open offer that has not yet been accepted by the offeree, there is no binding contract, and the offeror is able to make the same offer to other parties.  An offer to sell real property is revoked when the offeree learns facts inconsistent with the continued existence of the offer. REASONING: The document was nothing but an offer; unless both parties had agreed, there was no concluded agreement made. It was only an offer to sell. The promise was not binding; at any time before a complete acceptance by the plaintiff, and therefore the defendant was free to do whatever he wanted. 

There is no principle that says that there must be an express withdrawal of the offer. To constitute a contract, it must appear that the two minds were at one, at the same moment in time. The plaintiff knew that the defendant no longer wanted to sell him the property - therefore there was no meeting of minds between the two parties. The defendant was neither bound in law nor in equity to the offer until there was an acceptance. The defendants offer contained in the signed document is a mere “nundum pactum” (a promise without consideration). the court found for Dodds. The attempted acceptance made by Dickinson was invalid. The court stated that it was not necessary for Dodds to personally provide notice of revocation. It was not possible for Dickinson to accept an offer that he already knew had been withdrawn. DECISION: An offer (unilateral or bilateral) can be revoked anytime before acceptance An offeror cannot revoke a unilateral contract after the offeree has commenced performance or before the offeree completes performance The acc...