Contract Law Final Revision PDF

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Contract Law Final Revision0. Intention to create legal relationsa. General ruleo There is a presumption that parties in domestic agreements do not intend to create legal relations Balfour v Balfour Facts Judgement The wife sought to enforce the promise by her husband to pay 30p per month Action fai...

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Betty Zhou Contract Law Final Revision 0. Intention to create legal relations a. General rule o

There is a presumption that parties in domestic agreements do not intend to create legal relations Balfour v Balfour

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Judgement Action failed as she has not provided any consideration - The parties did not intend to be attended by legal consequences Commercial agreements are presumed to created legal relations

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The presumption is rebuttable

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Facts The wife sought to enforce the promise by her husband to pay 30p per month

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1. Offer & Acceptance Offer: a. Offer vs. Invitation to treat o

Offer: a statement of showing the willingness to enter into and be bound by a contract (oral/ writing/ conduct)

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Invitation to treat: an expression of willingness to enter into negotiation

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Difference of intention

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Offer is binding once it is accepted by the other party

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General rule: the display of goods in a shop window are invitation to treat Pharmaceutical Society v. Boots M. p30 Facts Judgement - D organized their shop on a - No breach of the Act self-service basis - Or else the customer will be - They were charged with a bound by the contract once breach of Pharmacy and he picks up the good Poisons Act s18(1) - Makes no commercial sense - Pharmacists present at the - Problems of limited stock cash desk, but not near the and mispriced tags may arise shelf

Critiques/ Remarks Before this case, it was held that display of goods are offers, which is accepted when they are picked up This would take away the shopkeeper’s power to bargain

b. Bilateral contracts vs. unilateral contracts o

Bilateral contracts: reciprocal arrangement that each party will perform an act in exchange for another party’s act

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Unilateral contracts: form by an express offer stating that the offer will be accepted by performance

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General rule: newspaper advertisement of bilateral contracts are invitation to treats rather than an offer Partridge v. Crittenden M. p31 Facts - P advertised birds for sale at a stated price - Charged with the offence of "offering for sale" wild

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Judgement The selling of birds is an invitation to treat The advertiser may find himself obliged to sell

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Critiques/ Remarks Reason of the judge is not conclusive because it implied that the offer is

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Betty Zhou Contract Law Final Revision

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live birds breaching more good than he only capable of acceptance Protection of Birds Act actually have "while stocks last" Exception: newspaper advertisements in the form of unilateral contracts are offers Carlill v. Carbolic Smoke Ball M. p31 Facts - The manufacturer of Carbolic Smoke Balls (D) issued an advertisement that offers to pay 100p to people who caught flu after using the smoke balls in specific manner - D deposited 1000p in the bank to show their good faith - P caught flu and sued for 100p

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Judgement The terms in the advertisement is sufficiently definite to amount to an offer Contract was made to those who performed the conditions on the faith of the advertisement There was acceptance by conduct P is entitled to the 100p

Acceptance: An unqualified expression of assent to the terms proposed by the offer a. How is it accepted? o

(1) by notice General rule: an acceptance must be validly communicated to the offeror “Validly communicated”: when it is actually brought to the attention of the offeror Entores Ltd v Miles Far East Corp M. p36 Facts - P is in London and D is in Amsterdam o - P sent an offer by telex for the purchase good from D - D sent an acceptance by telex - Contract was not fulfilled and P attempted to sue D for damages - P wanted to prove that contract was formed within the UK rather than Amsterdam in order to bring the action

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Judgement As the contract was only formed when and where the telex was received, the place of formation was London

(2) by conduct General rule: conduct will only amount to acceptance if it is clear than the offeree did the act in question with the intention, objectively assessed, of accepting the offer Exception: acceptance may not be communicated Carlill v. Carbolic Smoke Ball M. p26 Brogden v Metropolitan Rly Co M. p43 Facts - P supplies coals to D - They have been dealing for some years on an informal basis without any written contract - The parties agreed to have a written contract - D drafted the contract and send to P, P made some changes and send back

Judgement The written contract was valid despite no communication of the acceptance The acceptance took place by performing the contract without any objection as to the terms

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Betty Zhou Contract Law Final Revision -

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D did not communicate their acceptance of the contract after amendment but continued to supply coals A dispute aroused on whether the written agreement was valid

(3) by oral acception “If an oral acceptance is drowned out by an overflying aircraft, such that the offeror cannot hear the acceptance, then there is no contract unless the acceptor repeats his acceptance again when the aircraft has passed. When two people make a contract by telephone, and the lines go dead that the acceptance is incomplete, the acceptor must telephone the offeror to make sure that he has heard the acceptance.” (Entores Ltd v Miles Far East Corp) M. p36

b. Battle of forms o

Last shot rule: the contract concluded on the terms submitted by the party who last communicated the terms before performing the contract Butler Machine Tool Ltd v Ex-Cell-O-Corp Facts - Seller offered to sell the machine with standard terms including inter alia (price variation clause) - Buyers send back an order with their version of standard terms stating the price of the machine to be fixed - Buyers' order form contains a slip stating sellers accept the order on buyers' terms - The sellers signed and return the slip with a letter containing note that they are selling on their original offer - Seller sought to invoke price variation clause and buyers refused to pay

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Judgement Not entitled to cover the sum claimed Contract has been concluded on the buyers' terms without the price variation clause The counter-offer is accepted by the seller when they sign the slip sent by the buyer The slip sent by the seller at last is not an attempt to reintroduce the terms of the original offer or a counter-offer It is a means of identifying the order for the machine tool

c. Prescribed method of acceptance o

General rule: the offeror will be bound only if the offer is accepted in a particular way must use clear words to achieve this purposes

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Where the offeror has not used sufficiently clear words, a court will hold the offeror bound by an acceptance which is made in a form which is no less advantageous to him than the form which he prescribed (Manchester Diocesan Council for Education v. Commercial General Investment Ltd M. p38)

d. When was offer accepted? o

By conduct: the precise point is not clear in time at which the conduct is sufficient to evidence the existence of a contract

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Takes place at the moment the acceptance is received by the offeror at the place at which the offeror happens to be (Brinkibon Ltd v. Stahag Stahl) M. p36

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Betty Zhou Contract Law Final Revision o

Cross-offers which are identical do not create a contract unless or until they are accepted (Tinn v. Hoffman & Co. M. p37) as contract law adopts an objective but not subjective approach to agreement, so parties that subjectively agreed is not conclusive evidence that a contract exists

e. Postal rule (acceptance by conduct) o

General rule: acceptance takes place when the letter of acceptance is posted by the oferee Adam v. Lindell M. p40 Facts - Sep 2, D wrote to P offering to sell certain wool and requiring an answer in the form of post - D misdirected the letter so than the plaintiff did not receive until Sep 5 - P posted their acceptance on the same day but it was received on Sep 9 - D sold the wool to someone else on Sep 8 because they did not receive the answer as promised on Sep 7 - D argued that there was not a binding contract until the answer was actually received, until then they were free to sell the wool to another buyer

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Judgement If D were not bound by their offer until the answer was received, P would not be bound until they had received word that D had received their acceptance, this could go infinitely - There was a fictional meeting of minds, which concludes the offer and gives effect to the acceptance - The delay was the fault of D, taken that the acceptance did arrive in form of post - (1) the post office is the agent of the offeror, and so receipt of the letter by the agent is equivalent to receipt by the offer - (2) the offeror has chosen to start negotiations through the post, so the risk of delay or loss in the post should be imposed upon him - (3) the offeree should not be prejudiced once he has dispatched his acceptance/ rely on the efficacy st 1 difficulty: the letter of acceptance is lost in the post -

Household Fire Insurance v. Grant M. p41 Facts Judgement - D applied shares in P - There was a valid contract - P allotted the shares to the - The contract is concluded defendant and addressed to on the posting of the letter him to post a letter of acceptance even where containing the notice of it gets lost in the post - There is a meeting of allotment minds, and by doing that - The letter was lost in the post and P never received decisive act a contract the acceptance should come into effect

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Critiques/ Remarks The justifications for this rule is rather tenuous and creates injustices (1) criticism: the post office should not be considered as the agent of the offeror because it has no power to contract on behalf of the offeror (2) criticism: not necessary the case that the offeror started negotiations through post, so it is not entirely true that the offeror has accepted the risk of delay in the post (3) More promising. Criticism: once the acceptance is posted, the offer cannot be revoked, does not require the acceptance be taking effect when dispatched Gives practical difficulties (1) when the letter of acceptance is lost (2) when the offeree posts acceptance and then rejection, rejection reaches faster than acceptance

Critiques/ Remarks Rejected by Mason v Benhar Coal Co stating that no contract is concluded when the acceptance is posted but never reached to the offeror

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Betty Zhou Contract Law Final Revision However, where the reason for the loss of the letter is that it has been incorrectly addressed by the offeree, acceptance does not take place on posting because, while the offeror may take the risk of delay or loss in the post, he does not take the further risk of carelessness by the offeree nd 2 difficulty: the offeree posts his acceptance and then senda a rejection by a quicker method, so -

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P went bankrupt and asked D for the outstanding payment on the shares D said there was no binding contract

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that the rejection reaches the offeror before the acceptance Logical application of the general rule suggests that the contract was concluded when the letter of acceptance was posted, and so the subsequent communication is not a revocation of the offer but a breach of the contract, which may be accepted or rejected by the offeror o

Postal rule should not to apply “where it would lead to manifest inconvenience and absurdity” Holwell Securities Ltd v Hughes M. p42 Facts - D had granted a call option with respect to his property to P “by notice in writing" within 6 months - P sent a letter purporting to exercise the option of purchasing D's property - The letter was lost in the mail and was never received by D - D refused to complete upon the purchase -

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Judgement Specified by D that actual communication by "notice in writing" has to be received The parties did not intend a binding agreement until notice of acceptance was communicated to the offeror Post may not be an acceptable means of communication There is acceptance when there was the actual communication

General rule on instantaneous and electronic communication o

The acceptance takes place at the moment the acceptance is received by the offeror and at the place at which the offeror happened to be (e.g. telephone and telex)

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Postal rule does not apply

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Electronic Transactions Ordinance: If addressee designated an information system, receipt occurs: •

At the time when electronic record is accepted by the designated system

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If sent to a system not designated by the addressee, accepted when the record comes to the knowledge of the addressee

If addressee did not designate an information system receipt occurs: •

When record comes to the knowledge of the addressee

g. Acceptance by silence

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Betty Zhou Contract Law Final Revision o

General rule: acceptance of an offer will not be implied from mere silence on the part of of the offeree and that an offeror cannot impose an contractual obligation upon the oferee by stating that, unless the latter expressly rejects the offer, he will be held to have accepted it Felthouse v. Bindley M. p38 Facts - P and his nephew entered into negotiation for the sale of the nephew's horse - P states that if he heard nothing further from his nephew then he considered that the horse was his at a certain price - Nephew did not respond but decided to accept the offer - Nephew told the auctioneer that the horse was sold, but the auctioneer mistakenly sold it - P sued the auctioneer and the auctioneer argued that the claimant had no title to sue because (1) he is not the owner of the horse and (2) his offer to buy the horse had not been accepted by the nephew

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Judgement There is no contract between P and his nephew The nephew's silence did not amount to an acceptance

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Critiques/ Remarks It will be unfair to put an offeree to time and expense to avoid the imposition of unwanted contractual arrangements It was criticized that the uncle only waived the need for communication of the acceptance, and the nephew had manifested his acceptance by informing the auctioneer that the horse had been sold The purpose of this general rule is to protect the offeree and thus it should not be applied when it would cause hardship to the offeree

h. Acceptance in ignorance of offer o

Knowledge of the offer is not necessary in the reward type of case

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Knowledge should be required in the case of bilateral contracts R v Clarke M. p37 -

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Facts Clarke tried to claim the reward for giving the information that led to the conviction of a murderer A proclamation stated there would be such a reward He gave the information only to clear himself but not for the reward

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Judgement Not entitled to the reward The offer must have been present to his mind when he did the act which constituted the acceptance He was not intended to accept the offer He had forgotten about the offer and the reward

Termination of offer: a. Five methods of withdrawal: o

(1) Withdrawn by the offeror at any time before it has been accepted The notice of withdrawal must actually be brought to the attention of the offeree (not entirely clear when the revocation is treated as being brought to his attention)

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Betty Zhou Contract Law Final Revision No requirement that the offeror himself must be the one to bring the withdrawal Dickinson v Dodds M. p43 Facts - D offered to sell a house to P for 800p, offer open till Friday - Thursday, D sold the house to a third party, P was informed by another third party - P sent D his letter of acceptance on Friday

Byrne v Van Tienhoven M. p43 Facts - D sent P an offer on Oct 1 - Offer received on Oct 11, an immediate acceptance was sent off - Oct 8, D has sent a letter revoking their offer and reached P on Oct 20

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Judgement No contract had been concluded Because the offer had been withdrawn before it was accepted

Judgement There is a contract concluded between the parties on Oct 11 As postal rule does not apply, the revocation only takes effect when it actually reaches the other party

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Critiques/ Remarks Has started to confine the postal rule within narrow limit A good example of the objective approach which the court adopt to the issue of agreement, because at no time were the parties actually subjectively agreed

(2) terminated by a rejection of the offeree/ counter-offer Machine Tool Ltd v Ex-Cell-O-Corp – see below

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(3) terminated by lapse of time

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(4) If a certain event occurs it cannot be accepted after the event has actually taken place

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(5) terminated by the death of the offeror (the law is not entirely clear) Offeree cannot saccept an offer once he knows the offeror has died but his acceptance may be valid if it is made in ignorance of the fact that the offeror has died

b. Counter-offer o

A purported acceptance which does not accept all the terms and conditions proposed by the offeror but which in fact introduces new terms

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Treated as a new offer which is capable of acceptance or rejection

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The effect is to “kill off” the original offer so that it cannot subsequently be accepted by the offeree Hyde v. Wrench M. p36 Facts - D offers to sell the land for 1000p, - P replied by offering to purchase for 950p, D refuses - P agreed to pay 1000p then, but still got refused

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Judgement 950p is a counter-offer which killed off D's original offer There was no contract between the parties Incapable of subsequent acceptance

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Critiques/ Remarks Given rise to difficulties in the battle of the forms cases, such as Butler v. ExCell-O Corp (England) Ltd M. p36

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Betty Zhou Contract Law Final Revision c. Counter-offer vs. inquiry o

Inquiry does not kill off the original offer Stevenson, Jacques & Co v McLean Facts - P is iron merchants who purchased iron to sell on to third parties - D is the holder of warrants for quantities of irons - D offered to sell irons to P for 40s, open till Monday - P offered to sell iron to D asking whether he would accept 40s for delivery for 2 months - D sent a telegram to P on Monday

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Judgement It is an inquiry but not a counter-offer Distinguished from Hyde v Wrench that there was a clear counter-offer

2. Consideration and estoppel Consideration only contract supported by consideration has these contractual rights a. Deed o

No need to show consideration

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To enforce a unilateral gratutious promise

b. Doctrine of consideration (quid pro quo) Currie v. Misa M. p73 “A valuable consideration may consist either some right, interest, profit or benefit accruing to one party, or some forbea...