Contract - Semester 1 - Lecture notes All PDF

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AgreementOfferIdentifying an offerNew Zealand law asks two questions:  Is there a contract?  What are the terms of the contract? It is the external appearance of a contract that&...

Description

Agreement

Offer

Identifying an offer New Zealand law asks two questions:  Is there a contract?  What are the terms of the contract? It is the external appearance of a contract that matters. It is preferable to view a contract as being made where the facts, externally judged, indicate a sufficient contract. This is concerned not with the presence of an inward and mental assent, but with its outward and visible signs. Objective approach - Used to identify the offer and its context

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There are 5 matters which the courts are concerned with in determining the existence of a contract: The making of an offer The fact of acceptance of an offer so that an agreement has been reached The communication of that acceptance Whether the creation or continuance of the obligations so undertaken is expressly or impliedly conditional on some on some event or some action by some person AN offer may be made to a single person, or to a class of persons, or as in advertisements for rewards, to the public at large 

Smith v Hughes (1871) LR 6 QB 597 The Plaintiff was a racehorse trainer who was offered oats by a farmer The famer subsequently left a sample for the trainer and the trainer then offered to buy some oats in a letter o The offer was accepted, but when the oats arrived he discovered that they were new oats as opposed to the old oats he desired o The sample that he had been given were the new oats o He failed to pay for these oats o The question here is what the content of the offer to purchase? Was it old or new oats?  The sample contained new oats and the letter did not specify that the trainer wanted old oats o o

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Blackburn J: "If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms." Essentially the intention of a party does not matter, if a reasonable person believes their conduct to be assenting to the terms and upon that belief enters in to contract with them, they are then bound by that contract. So it is essentially an objective reasonable person test from the shoes of the offeree.

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*OT Africa v Vickers [1996] 1 Lloyd's Rep. 700 Case of a breach of contract by Vickers which lead to OT Africa having a large claim for damages There was a settlement conference where Vickers offered $155,000 but OT said that they would only accept $210,000 Subsequent to the meetings, Vickers offered to pay 150,000 pounds (which is roughly equivalent to $210,000) via fax, and this was quickly accepted by fax The offer was intended to be $150,000 What then is the offer? Applying Smith v Hudges, the reasonable person in the place of OT Africa would believe it was an offer to settle for 150,000 pounds o However, if Vickers could prove that OT Africa knew, or ought reasonably to have known, it was a mistake then the contract (offer) was not valid o Decided that it wasn’t reasonable for them to have known as it was so close to what they had previously asked. If a larger sum had been offered, then it would have been a different story Mance J: In the present case, on any objective approach there was an agreement to settle at £150,000. … Vickers would not be bound if they could show that OTAL, or those acting for OTAL, either knew or ought reasonably to have known that there had been a mistake by Vickers or those acting for Vickers.

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Offer Distinguished from an Invitation to Treat: Bowen LJ in Carhill o It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell or houses to let, in which cases there is no offer to be bound by any contract. Such advertisements are offers to negotiate, offers to receive offers, offers to chaffer (haggle). AN offer must consist of a definite promise to be bound provided that certain specified terms are accepted. The offeror must have completed his/her share in the formation of a contract by finally declaring a readiness to undertake an obligation upon certain conditions, leaving the offeree the option of acceptance or refusal. Offers can be accepted so as to give rise to a contract, and invitations to treat cannot When determining whether a statement amounts to an offer or an invitation to treat, the court must consider whether there is both an indication of a willingness to undertake legal liability on defined terms, and a sufficiently clear indication of the terms of the prospective conduct o IN the absence of either, the statement is an invitation to treat - not an offer

Willingness to contract 

An offer involves a manifestation of a willingness to contract upon acceptance. The question is as what point there is an act which amounts to an offer 

Harvey v Facey [1893] AC 552

“Will you sell us Bumper Hall Pen? Telegraph lowest cash price” “Lowest price for Bumper Hall Pen £900” “We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you.”

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Lord Morris: Their Lordships are of opinion that the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the inquiry. This was not enough to amount to an offer The second telegram was not an offer, but only an indication of the minimum price if the defendants ultimately decided to sell

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*Grainger & Sons v Gough [1896] AC 325

Concerned a London wine merchant who supplied wine from a French wine maker. A customer would go into the London shop, peruse a wine list, request quantities and give their details. This was then sent to the wine maker and the wine maker would then contact the customer directly to organise the purchase

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But where is the contract formed here? The Taxman claimed that the handing over of the wine list was the offer and the giving of details was the acceptance. However this was held to be wrong. The key point was that there was no obligation to supply the wine when the wines were chosen at the London shop, as the availability of that quantity of wine was not certain This lack of obligation provided the winemaker with a right of rejection and this there is no willingness to contract If the number of products is specified in an advertisement however, then it may amount to an offer

Lord Herschell: The transmission of such a price-list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity. Parker CJ in Partridge v Crittenden I think that when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being constructed as invitations to treat and not offers for sale 

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*Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 Boots Cash Chemist became a self service store The Pharmaceutical Society brought action against them as the law required that pharmaceuticals were sold by pharmacists and they claimed that the display of goods under a certain price on shelves was an offer to sell at that price According to this logic, picking up the good and putting it in your trolley was thus the acceptance and the contract was complete upon that This was held to be wrong, that the customer could still change their mind and there is still a right of redemption on the part of the shop o The offer is actually when the item is brought to the shop keeper o An offer to buy was made when the customer put an article in the basket, and this offer the defendants were free to accept or reject o The listed price is just an offer to treat

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If goods are exhibited in a shop window at with a price attached, does this constitute an offer to sell at that price? No it does not It is clear that according to the ordinary law of contract, the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract  The application of this rule to self service has been criticised.

Termination of the offer Rejection Revocation     

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Payne v Cave (1789) 3 TR 148 Concerned the sale of pewter jewellery at an auction Payne bid but after getting annoyed at the auctioneer, took back the bid However, it was the last bid

The auctioneer claimed that the putting of the item up for auction was an offer and the bud was an acceptance, conditional of the bidding of someone else o The court held that it was the other way around and the bid was offer to purchase and the acceptance was the fall of the hammer o This is backed up by the Sale of Goods Act 1908 o The same applies to an electronic auction through an internet based site o The listing of goods for sale constitutes an invitation to treat, each bid is an offer, and the fall of the hammer is the acceptance Revocation may occur at any time prior to acceptance o In this instance revocation occurred prior to the fall of the hammer and thus no contract was formed Furthermore, an advertisement to hold an auction at a certain time does not constitute to bidders that the actual sale will be held. If a plaintiff travels for an auction and this does not take place then he has no claim for damages

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The Two Contract Approach The first or primary contractual relationship related to the possible sale of the goods in question. Since the advertisement was not itself an offer to sell the goods 

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Sommerville v Rice (1912) 31 NZLR 370 The offeror tried to revoke their offer via mail, however, the offeree accepted prior to receiving the letter, but after it was sent o The revocation was not effective as it has to be communicated

Lapse of time   

If an offer states that it is open for acceptance until a certain day, a later acceptance will be ineffective If there is no express time limit then an offer will be open for a reasonable time o Kean v Dunfoy [1952] NZLR 611 Kean agreed to buy a section of land from Dunfoy for agreed price. Paid a ten pound deposit to the agent, but there was no agreement actually made at that point. Kean signed

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agreement and gave it to his lawyer along with 50 pounds which was required. Unfortunately the lawyer lost the money and so did not send it on to Mr Dunfoy. This took place in September 1950. Lawyer found money and sent it on in September 1951. o This means there was a year between the offer and the tendered acceptance Court found that the offer had lapsed because it was not accepted within a reasonable time Stanton J: The usual rule is that, when an offer has been made, no contract results unless its acceptance is communicated to the offeror; and, where no time for acceptance stipulated, the offer lapses unless acceptance is communicated within a reasonable time.

Failure of condition  

No Particular authority. So an offer can be conditional, open until a particular event occurs, when the event occurs the offer ends. An offer can be made on condition and terminated if not met

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When there is a fundamental change in circumstances then the offer must be taken to have lapsed, as no objective bystander would consider the offeror intended to be bound in the different circumstances Often very difficult for courts to determine what makes a fundamental change *Dysart Timbers Ltd v Nielson [2009] 3 NZLR 160  Involved litigation between these two parties. Court of appeal awarded Dysart around $300,000. Nielson had applied for leave to appeal to the supreme court. Neilson then offered to settle the dispute  Following is the message that was sent between the two parties: “John, 'Without prejudice' I have been instructed to put forward an offer of $250,000 in full and final settlement of the above matter. The sum can be paid on Monday at which time the leave application to the Supreme Court will be discontinued. Can you please take urgent instructions. Regards, Andrew Swan” - Offer of settlement which is in itself a contract  Before this offer was accepted the supreme court granted leave to appeal  This was communicated to the parties at 12.30pm  Dysart attempted to accept this offer at 1.12  Was this offer still in play after the supreme court had offered leave to appeal?  (after the supreme court granted leave to appeal the position of Neilson was significantly stronger, and the amount of money that may have been offered could be expected to change)  Supreme court held that a fundamental change in circumstances might cause an offer to end Tipping J: What the offeror meant to happen must be objectively assessed. Whether it is appropriate to infer that the offer was meant to lapse in the events which have occurred will depend on the terms of the offer itself and all the relevant circumstances in which it was made. If an offer is

made on a particular factual basis or assumption the court may be justified in finding an implied condition that the offer will lapse should that basis or assumption cease to apply. But that finding should be made only if the continued existence of the factual basis or assumption was fundamental to the making of the offer or to its terms; otherwise it cannot be said to be inherent in the terms of the offer. Put more generally, a condition that an offer lapse upon the occurrence of a particular change of circumstances should be implied into the offer only if it is objectively apparent that the willingness of the offeror to be bound by the offer has been fundamentally undermined by the change of circumstances.  Tipping described it as an 'Implied Condition'  Offers are made on facts and conditions that underlie it and so if those conditions change significantly then we could assume that the offeror intended that offer to end (Example:  Offered to buy a car for $5000  The car becomes significantly damaged  The offer to buy becomes invalid, because the circumstances have changed so fundamentally )    

Was the leave to appeal fundamental change of conditions? Court held that no it was not Offer was still valid Reasoning was that the offeror party knew that leave to appeal had been sought however chose not to make that a condition of the offer. Therefore the circumstances had not changed fundamentally

Death of offeror 

Normally the offer will cease when the offeree learns of the death of the offeror

Death of offeree 

If the offeree dies then he/she cannot accept an the offer is void

2. Acceptance  

Acceptance also takes an objective approach, however, unlike with regard to the offer, it need not be so explicit In most cases the courts are seeking to determine if there is an appearance of mutual agreement o Whether the communications between, and the conduct of, the parties is such that a reasonable bystander would consider the offeree to have assented to the terms proposed by the offeror.

Identifying an acceptance *Robinson v Hemachandra (2006) NZCPR 245  Owned a property in Dunedin which Mr R offered to buy for $400,000 in November 2003  Acted through a real estate agent  Singed offer was passed to Mr H which he signed and dated on the first and last pages as 10/12/03, however he returned it on the 17th of November  It seemed he did not intend to be bound until the date that he had signed

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His solicitor warned Mr H that he may be taken to be bound Mr H wrote to Mr R stating that he did not intend to be bound Was taken to court Was him signing and post-dating the document make it a contract? Court considered how it would look in the shoes of a 'reasonable person' in Mr R's shoes Court found that Mr H signed what clearly was an agreement, noted that there was a cover page which points put that it is a binding agreement which once signed. Was found that it would not occur to someone that it was not an agreement in lack of any further explanation. The signing of those dates was not significant enough for the other party to know that he was not intending to be bound. The courts took an objective approach and held it did not matter what Hamachandra intended but how the objective person would see it o Held there was a contract

Acceptance by Conduct 

Acceptance is often by conduct Example: Handshake, signature Looking at an acceptance is not always just the words, but also the conduct Acting on the terms of a contract without formally accepting it can constitute a contract o

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Brogden v Metropolitan Rly Co. (1877) 2 App Cas 666  B had supplied coal to the Metropolitian railway for a number of years  There was to be a new agreement for the supply of coal with a higher price, so Mr B sent in a form with this information on it as was required  Was received by metropolitan railway and was filed away  The custom was to write that up in to a formal contractual document for both of the parties to sign.  However this did not happen  However both of the parties acted upon the new terms for a year  After a year metropolitian claimed that there was no new contract  The letter sent in by B may have amounted to an offer, but both parties knew that in order for a contract to be formed that formal process had to occur  Metro was arguing that there was no acceptance of an offer  Went to House of Lords  HoL held that despite the formalities not being completed there was an acceptance  The acceptance was to be found in the conduct of Metro  Paying the new price for the coal amounted to an acceptance of the offer  Metro were bound by this contract  The House of Lords read acceptance into their conduct of ordering and paying for the coal at the new price  There had been a 'novation' - replacing an obligation to perform with another Airways Corp v Geyserland [1996] 1 NZLR 116  This followed the restructuring the reshuffling of the SOE  Airways corp provided air traffic services  As part of this reshuffling Airways corp sent out new prices  As part of this new pricing this caused some airlines particularly the smaller ones to protest  One of these was Geyserland

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Said it was manifestly excessively priced Airways corp would invoice Geyserland and in turn G would refuse to pay the invoices Airways sued G to return the unpaid amount. In order to do so they had to show that there was a contract to provide services under the new terms Airways corp argued that by conduct (continuing the use their services) G had accepted the contract under the new terms. HC disagreed, said that there was not a contract formed here. Noted the objective approach, The offeror was aware that geyserland did not accept the new terms as they protested at every opportunity Therefore their conduct in continuing to receive services did not constitute an acceptance Because of the nature of the services they were unable to go anywhere else, so were bound to use airways corp If there was an alternative and G continued to use airways then the decision may have been different The court held that this qualification applied here due to the clear protest and refusal to accept the terms It was important that Airways was a monopoly so Geyserland had no other option. It may have been different otherwise

By the offeree  

Only the person or class of person to whom the offer was addressed can accept it. That may be an individual or the whole world An offer to a landlord can not be accepted by that landlords succ...