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Complete lecture notes on elements of contract law...

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Contract Law lecture notes Contract Law notes - Oxford law Trove - Orc Contract Law Elements of Contract Law: Offer and Acceptance Definition of contract: “An agreement // Giving rise to legal obligations // Which are enforced or recognized by law” - Contract Law insists on the presence of certain elements to create a binding enforceable contract. - An agreement, or two open discussion does not necessarily lead to legal obligations -> for a contract to be formed, one party must make an offer, and the other party must accept such said offer. - Agreement, legal obligation, which is legally enforceable.

Offer and Acceptance What is required for Contract Law? 1) First there must be an offer or invitation to treat - it must be made with the intention to be bound in the contract - To make an offer, the offeror must make a clear, unequivocal statement, which them legally bounds him to his said offer (so to fulfil it), IF the offeree accepts the offer. There is a distinction between an offer and an invitation to treat: an invitation to treat are the initial steps in the pre-contractual process: the negotiating process. - The intention to be bound is what makes the distinction between an offer and invitation to treat.

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The cases are the law, not the concepts: cases make the law: this makes the distinction between invitation to treat and offer harder (however, cases determine the distinction).

1) Gibson v Manchester City Council (1979) - “May be prepared to sell” – no intention of selling, effectively the council had not made an offer (the House of Lords in fact decided that an offer had not been made). - Gibson had received a letter by the council with an application to be completed and sent again to the council in order to be able to purchase the house: Gibson completely the application and sent it back. - The council was then re-elected and it was decided that they no longer wanted to sell the house to Mr Gibson: the plaintiff sued the council for the breaching of the contract. Ratio Decidendi: The court decided that no contract had been breached, as the letter sent, with the application, was not an offer. HOWEVER; the application sent by Mr Gibson was itself an offer that the council refused to accept. 2) Storer v Manchester City Council (1974) - This case involved the council tenant’s right to buy his property – the council had sent a letter entitled “Agreement to sale”, which promised to have the agreement signed by the council if Storer signed it and returned it before. - Storer complied and signed the agreement, returning it to the council – however, the labour party had been elected and refused to return a council signed copy, hence refusing to sell the property: Storer sued the council for breaching of the contract. Ratio Decidendi: The court of appeal found that there was a binding obligation on behalf of the council to sell the property, at the condition that a “reasonable man”

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Contract Law lecture notes signed and returned the letter to the council: Storer had done so, and therefore, as the action by the offeree had been made (return a signed copy of the letter), then a legal binding contract had been made, and the council was legally bound to respect it (so sell the house to Mr Storer). - Intention of the council changed in both cases: In the Gibson v Manchester City Council (1979) there was no intention to sell on behalf of the council: the council had not made an offer, therefore no contract had been breached. - In the Storer v Manchester city council, the council did initially make an offer, only to later be refused: the labour party changed idea and no longer wanted to sell the council house to Mr Storer, even though Mr Storer had accepted the offer and followed the terms of the contract – he had sent the signed copy of the “ Agreement of Sale”, only this was not sent back to him signed by the council. Difference: the council worded the letters differently – not an offer in the case of Mr Gibson – the intention of selling the property was unclear and an offer had not been properly worded and made. Contracts: A contract is a legally binding or valid agreement between two parties. The law will consider a contract to be valid if the agreement contains all of the following elements: 1. offer and acceptance; 2. an intention between the parties to create binding relations; 3. consideration to be paid for the promise made; 4. legal capacity of the parties to act; 5. genuine consent of the parties; and 6. legality of the agreement. An agreement that lacks one or more of the elements listed above is not a valid contract. Must contracts be in writing? Not all contracts need to be in writing. Contracts that are required by law to be in writing include contracts to buy and sell land or to buy a motor car and door-to-door sales contracts. However, it is always useful to have the terms agreed between the parties written down and attached to or kept with any other relevant papers; for example, copies of quotations, brochures, pamphlets, etc. that were supplied at the time the contract was entered into. Receipts for money paid should always be kept. If a dispute arises, these documents will assist in resolving differences between the parties. A written contract can be drawn up by listing all the terms agreed between the parties and getting each of the parties to sign and date the document at the end.

What if it is not an offer? Defendant: The defendant is the person against whom an action is filed. Respondent: The respondent is the person who responds the appeal or petition filed against them. Plaintiff: The plaintiff is the person who brings the case against another in the court of law. Claimant: The person making a claim, therefore the suitor. 1) Invitation to treat: Goods on display in a shop – treated as invitations to treat, however, the timing of the acceptance is the central factor: the contract is concluded once the offeree accepts the offer (bringing it to the checkout).

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Contract Law lecture notes - A customer selects a product, but he is not obliged to buy it until he brings it to the till: at this point, the customer is making the offer to pay for the selected goods, and the store accepts the payment. - Counter intuitively the court of appeal decided that the offer is made by the client, at the till, where the contract is clear: the customer wants to purchase such product, and the store accepts the offer of payment for the product. - This is done so to protect the shopper: if it was that when they take a product off the shelf, then they would be bound to a contract (they have accepted the offer) and would have to buy it. - A display of the product is not always an invitation to treat 1) Pharmaceutical Soc of GB v Boots (1953) - Regulations require a registered pharmacist to supervise the sale of certain drugs: boots does not offer this – medicinal is put on shelves for sale, and the customer is free to buy the product, without the supervision of a registered pharmacist. - In Boots, the customers select items from shelves and take it to checkout to purchase: even though there is not a pharmacists supervising the sell of medicinal, it does have suitably qualified persons at the pay point in the stores. Issue: when was the contract of sale concluded? Ratio decidendi: the contract was not concluded until the customer brought the medicinal to the check out point, where there was a suitable qualified person there – this means that the contract was not breached and Boots did not commit an offence. 2) Self service shop: Fisher v Bell (1960) - In a self-service shop, who makes the offer? Items displayed for sale in a shop window are generally an invitation to treat. - This is a criminal case involving the sale of restricted weapons: had a knife displayed in his shop window, with the sale price: the sale of that knife was prohibited under Restriction of Offensive Weapon Act 1959. Issue: was the display of the product (knife) an offer for sale? Ratio decidendi: The knife in the window was an invitation to treat, not an offer: one was free to buy it (contract) or not – Bell was acquitted (freed from criminal charges). It is the general rule that Advertisements are treated as invitations to treat and not offers. - It is reasoned that if an advertisement was considered an offer, the anyone responding to an advertisement and asking about or for the item, would be accepting, meaning the seller would be bound and could cause difficulties: if the advertiser intended to be bound, then there would be issues with the limited supplies. - Courts consider whether the wording is sufficiently clear in the offer - Cases are determined on objective intention behind the advertisement. 3) Advertisement: Partridge v Crittenden (1968) - An advertisement was placed in the periodical regarding a bird contrary to Protection of Birds Act 1954. Issue: (D) was offering for sale a wild bird, contrary to the act for the protection of birds. Ratio decidendi: the advertisement in itself was merely an invitation to treat, and not an offer: this meant that (D) was acquitted and released of charges. EXCEPTION: Thornton v shoe lane parking (1971) - The claimant was injured in a car park, partly due to its own negligence: the claimant was given a ticket upon entering the car park, after putting money into a machine. The ticket itself meant that the contract of parking was subject to terms and conditions,

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Contract Law lecture notes which were displayed inside the car park: one of the terms excluded liability to personal injuries. Issue: was the term incorporated into the contract: was this term brought to the attention of the claimant before or at time of the time the contract was made? - This depends upon where the offer and acceptance took place, in relation to the machine. Ratio Decidendi: The machine constitutes the offer itself, while the acceptance is made when the money is put into the machine. - The ticket was dispensed after the acceptance took place (money was put into the machine), and therefore the term was not incorporated in the contract. Clear notice as to the terms of the proposed contract must be provided by the offeror and the offeree for a contract to arise. - Commissioners for Her Majesty’s Revenue and Customs v Debenhams Retail (2005) - Warwickshire County Council v Johnson (1993) 2) Supply of information: The supply of information may simply be a statement of information: purely the price of a car, or any other indication of information. - A statement may simply be a statement of information: this is neither an offer nor an information to treat. 1) Harvey v Facey (1893) - Harvey telegraphed a letter to Facey, asking the lowest price of the bumper hall pen, with the outcome of Facey answering this of being of $900. - Harvey sued Facey for breach in contract: Harvey argued that Facey’s telegraph was an offer, of asking $900 for the property: Harvey argued the telegraph was a contract, and his telegraph in answer agreeing to by the property accepted the offer. Issue: Harvey claimed that there was a contract on Facey’s behalf, with Harvey’s answer telegraph agreeing to buy the property. Ration decidendi: It was found that there was no existing contract – this was because Facey’s telegraph (answering the stated question of what would be the lowest price) was given, however, this was simply a supply of information and not an offer. - When you give a price when asked, this is not an offer, but rather just a supplying of information 2) Clifton v Palumbo (1944) - The plaintiff wrote to the defendant a letter in which he stated that he was considering/preparing to sell his estate for £600,000. - The court of appeal decided that this was not a “definite offer to sell”, but rather just a supplying of information: solely a preliminary statement as to price and the transaction was going be, but this was an indication of many things to be considered overall. Issue: With such letter, was the plaintiff effectively making an offer, and therefore making a contract with the defendant, and hence therefore breached the contract? Ratio decidendi: The letter was not a “definite offer to sell”, and therefore there had not been made a legal contract, and hence this was not breached: there was no legal obligation to sell the estate at that price, as this had not been an offer, but merely a supply of information. 3) Pitt v PHH Asset Management (1993) - PHH accepted Pitt’s offer to buy a house, which was subject to contract: PHH later sold the same house to a third party, even after agreeing to sell the house to Pitt (this was done to stop his attaining an injunction: an injunction is applied when a relationship has broken down and one party is harassing, threating or assaulting the other).

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Contract Law lecture notes Issue: The issue was whether PHH could sell the house to a higher bidder as a contract had not been completed: had Pitt provided consideration for the completion of the sale? Ratio decidendi: The decision made was that PHH could not sell the house to a third party: this was because a lock agreement had been made between the two parties, therefore this prevented PHH to sell the house to a third party. - Pitt had provided consideration in not proceeding with his action for an injunction, despite the fact that this would likely fail. 3) Statement of intention: Parties sometimes communicate that they intend to do something – the communication is not intended to be binding and thus there is no offer, however, it is more than just information of whatever is on sale. 1) Harris v Nickerson (1873) - The defendant advertised that there would be an auction of certain goods occurring at a stated time and place: the plaintiff travelled to the auction just to find that the items he was interested in (and had been advertised) had been withdrawn. - The plaintiff sued for the breaching of a contract (the items were advertised, however, they were then withdrawn and were no longer on sale): he claimed that the advertisement constituted the offer, and his action of travelling represented an acceptance by conduct. Issue: Was the advertisement effectively an offer towards the public? Ratio decidendi: The court of appeal found that the advertisement was not an offer, but only merely a declaration of intention, and therefore there was no contract that had been breached.

Unilateral and bilateral contracts Bilateral contracts are those in which there is an outstanding obligation on either side (for example, shopping: I buy something, and the shop sells – each party makes an offer – I promise to pay, the store promise to give me the product). - Usually one party pays, the other receives: a bilateral contract is where one party offers a promise in return for the promise of the other. Unilateral contract are those in which only one party is obligated from the outset (the example of the lost dog: I lost my dog and I offer the money for who finds it. The second party does not have an obligation to look for the dog, but I have the obligation to pay if my dog if it is returned to me). - Rewards are unilateral contracts where the promisor is bound to perform his promise if the other party performed the required acts. 1) Carlill v carbonic smoke ball co (1893): The defendant Carbonic Smoke Ball released an advertisement claiming that £100 would be paid to anybody who contracted influenza after having used the product following the precisely indicated instructions. - To prove the companies sincerity, £1000 were deposited in the Alliance Bank. - Carlill sued the company because she did contract the influenza after having followed the instructions, using the ball for three times a day for two weeks: HOWEVER, the company refused to refund her because they claimed that the payment was “mere puff” and that it was not aimed to specific people, and that Carlill had not communicated notice of her acceptance. Issue: Was the company’s advertisement an offer? Ratio decidendi: the advertisement was not mere puff, as the money had been set back in order to make the payments in case it was needed, and a reasonable person reading the advertisement would take it seriously and therefore assume is it a binding contract.

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Contract Law lecture notes - Although it was true that the advertisement was not specifically addressed to anyone in particular, this was being made to anybody who met the criteria given and this was sufficient. - The wording of the advertisement meant that Carlill did not have the obligation to communicate the acceptance, just as the company did not expect every customer to contact them when the purchased the item, but only those who used the product as indicated and still caught the influenza. - This case illustrated how advertisements can constitute an offer to the large public, and can be waived in order to highlight the need to communicate an acceptance prior to the claim.  This was found to be an offer, and not only an invitation to treat: therefore this is an exception.

2) Bowerman v ABTA (1995) - The customer, Bowerman, booked a school trip in skiing holiday, which was cancelled because the tour operator became insolvent: the tour operator was an ABTA tour operator, therefore ABTA should have re-imburse the client to allow him to book with another operator, however ABTA did not do so. - The plaintiff sued the company and ABTA lost the case, with the outcome of loosing the appeal, which was later done too. Ratio decidendi: The case was lost because the court of appeal said that there was a notice in all tour operate offices setting out ABTA’s financial protection given to all customers if tour operators failed: this was offered to all customers who when they selected that tour operator was like the acceptance of that offer. - The judge claimed that the same principles established in the Carlill v carbonic smoke balls 1893, still applied. 3) Soulsbury v Soulsbury (2007) (Family law case and contract law case) - This case followed the death of Mr Soulsbury: after he had divorced from his wife, the was ordered to make periodical payments to the ex-wife, however, after negotiations between parties, they came to an agreement that instead of making periodical payments, the husband had to leave in his will the sum of 100,000 to his wide. - The agreement was unilateral, they had to pay Elizabeth: he undertook the obligation of leaving in his will the money for Elizabeth. - The husband then remarried, and the same morning of the day of his death, he remarried another women, which would technically mean that every precious will made before marriage was null, and this effectively meant that the 100,000 no longer had to be paid to the ex wife. Issue: with the new marriage, would the other will be overridden, and therefore the sum no longer an obligation to be paid to the ex wife? Ratio decidendi: the court of appeal and judge had been correct in finding that upon the husband’s remarriage, and subsequent death, that the agreement was still valid and binding upon the husband’s estate.

Tenders A request for tenders is normally an invitation to treat: and inviting tenders. - The request for tenders (or quotations) is a negotiating device commonly used in the world of commercial contracts. A company who is interested in purchasing a major item or service will invite tenders from those interested in supplying goods or the services required. - Invitations to tenders are usually published on trade journals or directly circulated to companies that could be interested.

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Contract Law lecture notes - Generally invitations to tender are not considered offers, as they might have other characteristics other than the price to be held in account when terminating the contract. - Sometimes it is the case (such as in Spencer v Harding ) that the tenders themselves made the first offer: this means the person requesting the tenders has the possibility to determine if they will accept. - However, there are two instances that constitute exceptions to the rule that tenders are not offers: Harvela Investments Ltd v Royall Trust Co of Canada (an express contractual promise to accept the most competitive bid) and Blac...