Contract law final notes PDF

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Formation of Contract Offer – proposal to make a contract which one party (offeror) makes to the offeree – must show the offerors intention to be bound on the terms and must comprise the key terms of the contract so that the parties do not need further negotiation on key terms o Gibson v Manchester...

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Formation of Contract 

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Offer – proposal to make a contract which one party (offeror) makes to the offeree – must show the offerors intention to be bound on the terms and must comprise the key terms of the contract so that the parties do not need further negotiation on key terms o Gibson v Manchester City Council [1979] – applied to buy a council house – council responded saying they may be prepared to sell the house at the purchase price and that the C would have to apply using the enclosed form – C returned the completed form – labour took over the council and didn’t want to sell – held there was no concluded contract and the council was not legally bound to sell Acceptance – An unconditional consent to the offer made by the offer o Hyde v Wrench (1840) -D offered to sell a farm for £1,000, C responded offering £950 and was refused – C then sought to accept the original £1,000, held that there was no contract as a counter offer destroys the original offer Consideration – “some right, interest, profit or benefit accruing to one party or some forbearance detriment, loss or responsibility, given suffered or undertaken by the other” Currie v Misa (1875) Intention to Create Legal Relations – no contract if the parties did not intend to create legal relations o Baird Textile Holdings Ltd v Marks and Spencer Plc [2001] – supplied clothes to M&S for 30 years – M&S said they were cancelling – Baird sued claiming that there had been a contract implied via the course of dealing – Held that a contract could not be implied – lacked an intention to be legally bound Additional Points o Bilateral contract – 2 promised – promise to sell and item and the promise to provide X amount of money o Unilateral Contract – contains a promise and a performance – such as promising x amount of money to whoever finds my dog o Objective test – seeks to examine what a reasonable person in the position of the party would intend to do – is used for deciding the formation of a contract

Offer   

Statement of willingness to enter into a contract on stated terms made with the intention that the offeror will be bound once the offer is accepted Must show intention to be bound Must contain the unambiguous key terms o Gibson v Manchester City Council [1979] – applied to buy a council house – council responded saying they may be prepared to sell the house at the purchase price and that the C would have to apply using the enclosed form – C returned the completed form – labour took over the council and didn’t want to sell – held there was no concluded contract and the council was not legally bound to sell

Invitation to Treat 

Proposal made by one party to solicit an offer from the other party

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Invitation to treat does not lead directly to a contract – Invitation to treat  offer  Acceptance  Contract o Partridge v Crittenden [1968] – D placed an avert offering bramble finches for sale – was an offence to offer such birds for sale – Held it was an invitation to treat not an offer How to Distinguish an Offer from an Invitation to Treat? o If it does not show intention to be bound or contains the unambiguous key terms then it is likely to be an invitation to treat o Carlill v Carbolic Smoke Ball co [1893] – Newspaper ad - £100 reward to anyone who catches influenza after having used the ball three times daily for 2 weeks according to the directions provided with each ball - £1000 was deposited into the bank to show sincerity – C got influenza while using the ball – CA held it was an offer of a unilateral contract despite being an advert  Deposit of £1k showed intention and not just a sales puff  It is possible to make an offer to the world  In unilateral contracts there is no requirement that the offeree communicates an intention to accept since acceptance is through full performance  May be some ambiguity in the wording but this could be resolved by applying a reasonable time limit  D would have some value in people using the balls even if not purchased by them directly Shops and Display of goods – general rule is that display of goods in a shop amounts to an invitation to treat rather than an offer o Pharmaceutical Society v Boots [1953] – D ran a self service shop were nonprescription drugs were covered by Pharmacy and Poisons Act 1933 – required the supervision of a registered pharmacist for the sale of any of these items – customers could pick them up and take them to the till in their basket – held that the display of goods was not an offer that was accepted by the customer when they put it in their basket – rather the customer made an offer to the cashier upon arriving at the till which was accepted when payment was taken Advertisements are generally treat as an invitation to treat o Invitation to treat – Partridge v Crittenden [1968] – D placed an avert offering bramble finches for sale – was an offence to offer such birds for sale – Held it was an invitation to treat not an offer o Example of an offer - Carlill v Carbolic Smoke Ball co [1893] – Newspaper ad - £100 reward to anyone who catches influenza after having used the ball three times daily for 2 weeks according to the directions provided with each ball - £1000 was deposited into the bank to show sincerity – C got influenza while using the ball – CA held it was an offer of a unilateral contract despite being an advert  Deposit of £1k showed intention and not just a sales puff  It is possible to make an offer to the world  In unilateral contracts there is no requirement that the offeree communicates an intention to accept since acceptance is through full performance  May be some ambiguity in the wording but this could be resolved by applying a reasonable time limit

D would have some value in people using the balls even if not purchased by them directly Auctions – General rule is that a bidder makes an offer by bidding which may be accepted by the auctioneer by the fall of the hammer o British Car Auctions v Wright [1972] – Auctioneer was charged with offering to sell a car that was unfit to be on the road – appealed claiming it was not an offer – auctioneer makes an invitation to treat Tenders – an invitation to tender does not normally constitute an offer but it may do so in an exceptional case o Spencer v Harding (1869)- D advertised a sale by tender of stock – advertisement specified where the goods could be viewed – the time of opening for tenders and that the goods must be paid for in chase – no reserve was stated – C submitted the highest tender but the D refused to sell to him. Held that unless the advertisement specified that the highest tender would be accepted then there was no obligation to sell to the person submitting the highest tender o Blackpool and Flyde Aero Club v Blackpool BC [1990] – D had granted the flight club a concession to operate casual flights out of the airport – came up for review and the tender invitation was released to the Club and 6 others – tender had a clause saying the tender would not be considered if they missed the time and date stipulated – Clerk failed to empty the letterbox on time and so missed the tender and accepted a lower one – brought an action for damages and for breaching contract – held that usually the invitation to tender was no more than an offer to receive bids but in this instance it created a clear intention to create a contract and thus failure to consider the application made them liable 

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Acceptance 

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An unconditional consent to the offer, if the offeree introduces additional terms it will not be a valid acceptance – Mirror image rule o Hyde v Wrench (1840) -D offered to sell a farm for £1,000, C responded offering £950 and was refused – C then sought to accept the original £1,000, held that there was no contract as a counter offer destroys the original offer Counter offer – a response to the original offer that seeks to alter or introduce a new term – kills off or terminates the original offer (Hyde v Wrench) A mere inquiry into further information is not a counter offer o Jaques & Co v Mclean (1880) – D offered to sell iron and the offer was to remain open until Monday – C sent a telegram asking if they would accept payment of 40 over a 2 month period – did not respond – D sold iron to another party – on Monday morning the C sent a telegram to accept the offer – held that the C was only inquiring for more information and there was no specific wording to indicate it was a counter offer – and had not revoked the offer after selling to another party Acceptance By Conduct – Acceptance can be made by conduct and does not have to be in words – especially if the parties have been in the previous course of dealing o Brogden v Metropolitan Railway (1877) – C was a supplier of coal to the D, had been dealing for some years on an informal basis with no written contract – decided to make a formal contract – D drew one up – C made some minor amendments – D then filed it but never communicated acceptance – continued to supply the coal –

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subsequently a dispute arose and was questioned if the agreement was valid – held that the contract was valid despite no communication of acceptance – acceptance took place by performing the contract with no objections Prescribed method of acceptance – if the offeror requires acceptance must be made in a particular manner then acceptance must be made in accordance – but he offeror can waive the required method, and does not always mean it is the only valid method of acceptance – offer can be accepted by any other method which is of no less advantage to the offeror o Manchester Diocesan Council for Education v Commercial and General Investments [1970] – C called for tenders, D submitted a tender and that it was stated the acceptance would be via a posted document – C decided to accept – first incorrectly sent it to the D’s solicitor and then later to the D – D argued by the time they received the correct acceptance the offer had lapsed – Court held there was no prescribed mandatory method for acceptance – it would need to be explicit if it were to be mandatory – an equally effective method would be enough to form a binding contract Silence cannot Constitute an Acceptance o Felthouse v Bindley [1862] – Nephew discussed buying a horse from his uncle – offered to purchase it and said if I don’t hear from you by the weekend I will consider him mine – horse was sold by mistake at auction – auctioneer had been asked not to sell the horse but forgot – uncle took auctioneer to court – held that there was no valid contract as silence cannot constitute acceptance

Communication of an Offer  

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As a general principle an offer or acceptance takes legal effect when it is received Instantaneous forms of communication – basic rule is that communication takes effect when received by the offeror – applies to things like telex, fax and email o Brinkibon Ltd v Staghal Stahl [1983] – C was a company based in London – buying steel from the D in Austria – C sent their acceptance by Telex – held that the contract was formed in Austria as that is where the acceptance took place Waiving the Requirement of Communication – Communication is meant for the offerors benefit and so the offeror can dispense with and waive his right to the requirement of acceptance o Carlill v Carbolic Smoke Ball Co [1893] Postal Rule – Where the post is used to communicate acceptance of an offer acceptance will generally be deemed to occur on posting o Adams v Lindsell (1818) – D wrote to the C offering to sell them some wool and asked for a reply in the course of post – letter was delayed – when they received they posted acceptance that day – but due to the delay the D assumed the C was not interested and the wool was sold – held that there was a valid contract which camr into existence the moment the letter of acceptance was sent – establishes the postal rule For the postal rule to apply it should be reasonable to accept the offer by post – if it is not reasonable then the postal rule does not apply o Henthorn v Fraser [1892] – C and D had been negotiating the purchase of a house – original offer was rejected and so an the D sent the C a note offering to sell for £750 which would be valid for 14 days – while this offer was being considered another

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buyer was interested and the D concluded a contract with them instead and the next day the D withdrew via post – reached C at 5pm but C had already responded with acceptance which reached D the next day – held that the offer was valid – posl rule applies to acceptance but not to revocation Acceptance of a Unilateral Offer – as a general principle a unilateral offer is accepted when the offeree has met the conditions in the offer o Carlill v Carbolic Smoke Ball Co [1893]

Termination of an Offer 

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An offer is terminated by withdrawal – withdrawal must be brought to the attention of the offeree o Byrne & Co v Van Tienhoven (1880) – D wrote a letter to C offering sale of 1000 boxes of tin plates – letter took 10-11 days to be delivered – C received this letter on 11th October and accepted it the same day by telegram – and by letter 4 days after – but on the 8th the D had withdrawn the offer which arrived with the C on the 20th – held that the withdrawal was ineffective as the contract had been constructed between the parties on the 11th Withdrawal – Unilateral Contract – Withdrawal of offers to enter into unilateral contracts raises difficulties o Errington v Errington [1952] – father in law purchased a house for his son and daughter to live in – was in his name and he paid the deposit – promised them if they paid the mortgage instalments he would transfer the house to them – father died and the mother didn’t want to continue this anymore – held that the wife was entitled to remain in the house – father had made the couple a unilateral offer and the wife was in the course of performing – couldn’t be revoked as once the performance commenced the mother was estopped from revoking since it was unconscionable for her to do so (also had been an intention to create legal relations despite being a family agreement) o Luxor (Eastbourne) v Cooper [1941] – C had an agreement to provide prospective purchasers for the sale of 2 cinemas on behalf of the D in return for commission – D refused to accept any he found and decided not to sell thus withdrawing the contract – held that there was no binding contract as the agent had not been asked to find a purchaser despite the fact he was promised a reward if he did Rejection and Counter offer – offer will also come to an end where the offeree rejects the offer or responds by making his own counter offer o Hyde v Wrench (1840) Lapse of time – offeror may state explicitly the period during which the offer remains open for acceptance – purported acceptance after this will be ineffective – if there is no express limit it is generally thought the offer must be accepted within a reasonable time for a contract to be formed Death of Offeror or Offeree – death of either will terminate an offer where the personal qualities were important to the offer

Doctrine of Consideration

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Consideration is what makes a contractual promise enforceable – it is based on the idea of reciprocity or exchange – the C may only enforce the Ds promise if the C has given something in return for it – a bare promise by D to pay C £100 lacks consideration and is unenforceable by C – promise to pay C £100 given in return for Cs promise to sing at Ds birthday is unenforceable by C as C has provided consideration for s promise of payment by promising to do something in return o Currie v Misa (1875) – L sold a number of bills of exchange to M drawn from a banking firm owned by C to be paid the next day – L was in debt to Cs bank and was pressed for payment – M learned of Ls stopped payments and debts and instructed his bankers not to honour the cheque – was the cheque payable – especially as to whether the sale of an existing debt formed sufficient consideration for a negotiable security as to render the creditor to whom it was paid – issue was whether the existing debt constituted sufficient consideration for the security as to constitute a legally binding offer – court held consideration had to consist either of some right interest profit or benefit accruing to one party or some forbearance by the other Consideration Must be Sufficient but need not be adequate – courts will insist that the agreement amounts to a bargain even if it is not a fair bargain – as long as the promisee can show he has given something at the promisors request there will be sufficient consideration o Thomas v Thomas (1842) – C agreed with the D that she would have use of the house as long as she did not remarry and would pay £1 a year – it was held that the payment of £1 a year was good consideration for the executors promise The Consideration Must be Requested by the Promisor – Consideration is the act or omission or promise requested by the promisor in return for his promise – a detriment suffered by the promisee or benefit conferred on the promisor will not constitute consideration unless the detriment or benefit was what the promisor expressly or impliedly requested as the price for his promise o Combe v Combe [1951] – husband promised to make maintenance payments to his estranged wife but failed to do so – the wife brought an action to enforce the promise invoking promissory estoppel – held that there was no pre-existing agreement which was later modified by a promise. The wife sought to use promissory estoppel as a sword and not a shield Consideration must move from the Promisee but need not move to the promisor o Thomas v Thomas (1842) – Patterson “Consideration means something which of some value in the eye of the law moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the D, but all events it must be moving from the plaintiff” Executed and Executory Consideration o Executory – where the consideration comprises a counter promise o Executed – where the consideration comprises performance of an act Past consideration – If D promises to give C £1,000 because C helped him in the summer – unlikely to be enforceable as there is no bargain or exchange Forbearance may be good consideration – consideration may comprise forbearance or a promise to forbear (refrain) Existing Duties – Particular difficulty arises where the consideration for D’s promise comprises the performance by C or the promise by C to perform something which C is already bound to do

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Obliged under law – Collins v Godefroy (1831) – C was subpoenaed to attend court as a witness involving the D – C never gave evidence but was required to be on standby for 6 days in case he was called – C gave D an invoice to cover his time in court and demanded payment – Held that C was under a public duty to attend court due to the subpoena – if there is a public duty then this cannot be used as consideration for a new promise D Promises to pay C in Return for C doing something or Promising to do Something which C is already obliged to T to do – Shadwell v Shadwell (1860) – Uncle promised to pay bis nephew £150 a year until his income reached 600 guineas provided the nephew marry his finance – uncle paid 12 instalments then died and the payments stopped – Nephew sued his uncles estate – held that performance of the marriage contract was consideration even though the contract was made with a third party to the agreement – as the uncles promise was an inducement to his nephew to perform the contract – thus it was enforceable

Intention to Create Legal Relations 

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Intention is a legal requirement for a valid contract – must be a mutual assent – there is no valid contra...