CONTRACT LAW (week 1)
• Contract law is the body of rules which governs the making and enforcement of contracts
• Part of Private Law (relationship between individuals)
What is a contract?
“An agreement giving rise to obligations which are enforced or recognised by law.” – Treitel
- A contract is an agreement enforceable by a court of law.
- If a party fails to perform as promised the other can use the court system to enforce the contract
and recover damages or other remedy
• Distinguishing a contract from a tort:
➢ Contract – obligations are created as a result of a voluntary agreement.
➢ Tort – obligations are created by imposition of law.
• Three different types of contracts:
1. Verbal contract
2. Written contract
3. Contract made by deed (mainly for sale land)
(N.B. It is not necessary for a contract to be written in order to be valid. Oral contracts can be just as
binding as a written one but harder to prove!)
Bilateral Contract Unilateral Contract
A promise in return for a promise A promise in return for an act
Offer and acceptance are both promise An ‘if…’ contract-offer promise
Both parties are immediately bound (provided Offeror is bound only if the specific act is
there is consideration and intention to create performed (provided there is consideration and
legal relations) intention to create legal relations)
• What is the use of a contract?
• The allocation of risk
• The establishment of each party’s obligations
• The creation of an environment of certainty
• The determination of outcome in the event of something going wrong
• Six elements of a contract:
1. An agreement
2. An intention to create legal relations three core elements.
3. Valuable consideration
, 4. Capacity to contract
5. Genuine consent
6. Legality of the subject matter
1. AGREEMENT
• A contract is a (voluntary) binding agreement between two parties.
• External evidence is required to prove the existence of a contract (OBJECTIVE TEST)
Intentions or thoughts of the parties are not enough!
“In contracts you do not look into the actual intent of a man’s mind. You look at what he said
and did. A contract is formed when there is, to all outward appearances, a contract”.1
• Lord Denning (in Storer v Manchester City Council [1974])
• Two requirements for an agreement!
1. Offer
2. Agreement
1. OFFER:
“An offer is an expression of willingness to contract on specified terms made with the intention that it is
to become legally binding as soon as it is accepted by the party to whom it is addressed”.
– Treite
Must be:
1. Sufficiently specific in terms of the main obligation and price to be capable of immediate
acceptance.
2. Made with the intention to be bound by the mere fact of acceptance (based on language used)
- Objective test as to the offeror’s intentions
If a reasonable person believed that the alleged offeror implied by their words or conduct that they
intended to be bound this may be sufficient for the offer to be valid in law, regardless of their actual
state of mind.
1
Storer v Manchester City Council [1974] 1 WLR 1403, Lord Denning
, - Examples:
• a university that made an unconditional offer of a place to an applicant in error (Moran v
University College Salford (No. 2) [1994] ELR 187);
• a solicitor who mistakenly offered to settle a claim for £150,000 rather than the $155,000
that he had been instructed to offer by his client (OT Africa Line Ltd v Vickers plc [1996] 1
Lloyd's Rep 700).
Gibson v Manchester City Council
Facts
• The Manchester City Council (D) decided to sell council houses to their tenants
• Gibson (C) applied for details and D’s treasurer replied stating that D ‘may be prepared to sell’ at a certain price and on
certain mortgage terms, but stated that C still had to ‘make formal application to buy’
• C returned the application form for purchase to D
• After local elections, the Labour Party took over D and decided to discontinue the policy of selling council houses
• C sued D for breach of contract but D alleged that there had been no binding contract
Issue
• Was there a binding contract?
Held (House of Lords)
• Appeal allowed; there was no offer made in the letter and hence no binding contract.
Analysis
• The House of Lords affirmed the conventional approach to contract formation: there must be an offer and corresponding
acceptance before a contract can be established.
c/f Storer v Manchester City Council
Facts
• The City Council (D) refused to proceed with the sale of a council property to C under an arrangement which had been
agreed with its predecessor.
• All of the terms of the contract had been agreed but for the date on which the lease was to end and the mortgage
payments were to begin.
• C alleged that the contract was completely concluded and sought specific performance of the agreement.
Issue
• Whether the contract had been concluded, despite the fact that the date on which the claimant became a purchaser rather
than a tenant was still to be determined.
Held
• Contract was complete despite the absence of this term.
Analysis
• In distinguishing between an offer and an invitation to treat, it is necessary to look not to the subjective intentions or
beliefs of the parties, but rather on what their words and conduct might reasonably and objectively be understood to
mean.
• In this case the defendant had made clear by their conduct and language that they intended to be bound upon the
1.2 INVITATION TO TREAT
acceptance of the offer despite the fact that some terms remained to be agreed.
• “In contracts, you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed
when there is, to all outward appearances, a contract” (p. 827).
, - Is a preliminary statement expressing a willingness to receive offers.
- Is a mere declaration of willingness to enter into negotiations.
A statement made by a party inviting offers which that party is then free to accept or reject.
• Always precedes an offer!
• It is not an offer and cannot be accepted so as to form a binding contract.
Party A Party B
Invitation to Treat
(willingness to
accept offers)
OFFER
Contract Formed ACCEPTANCE
• Contract law is the body of rules which governs the making and enforcement of contracts
• Part of Private Law (relationship between individuals)
What is a contract?
“An agreement giving rise to obligations which are enforced or recognised by law.” – Treitel
- A contract is an agreement enforceable by a court of law.
- If a party fails to perform as promised the other can use the court system to enforce the contract
and recover damages or other remedy
• Distinguishing a contract from a tort:
➢ Contract – obligations are created as a result of a voluntary agreement.
➢ Tort – obligations are created by imposition of law.
• Three different types of contracts:
1. Verbal contract
2. Written contract
3. Contract made by deed (mainly for sale land)
(N.B. It is not necessary for a contract to be written in order to be valid. Oral contracts can be just as
binding as a written one but harder to prove!)
Bilateral Contract Unilateral Contract
A promise in return for a promise A promise in return for an act
Offer and acceptance are both promise An ‘if…’ contract-offer promise
Both parties are immediately bound (provided Offeror is bound only if the specific act is
there is consideration and intention to create performed (provided there is consideration and
legal relations) intention to create legal relations)
• What is the use of a contract?
• The allocation of risk
• The establishment of each party’s obligations
• The creation of an environment of certainty
• The determination of outcome in the event of something going wrong
• Six elements of a contract:
1. An agreement
2. An intention to create legal relations three core elements.
3. Valuable consideration
, 4. Capacity to contract
5. Genuine consent
6. Legality of the subject matter
1. AGREEMENT
• A contract is a (voluntary) binding agreement between two parties.
• External evidence is required to prove the existence of a contract (OBJECTIVE TEST)
Intentions or thoughts of the parties are not enough!
“In contracts you do not look into the actual intent of a man’s mind. You look at what he said
and did. A contract is formed when there is, to all outward appearances, a contract”.1
• Lord Denning (in Storer v Manchester City Council [1974])
• Two requirements for an agreement!
1. Offer
2. Agreement
1. OFFER:
“An offer is an expression of willingness to contract on specified terms made with the intention that it is
to become legally binding as soon as it is accepted by the party to whom it is addressed”.
– Treite
Must be:
1. Sufficiently specific in terms of the main obligation and price to be capable of immediate
acceptance.
2. Made with the intention to be bound by the mere fact of acceptance (based on language used)
- Objective test as to the offeror’s intentions
If a reasonable person believed that the alleged offeror implied by their words or conduct that they
intended to be bound this may be sufficient for the offer to be valid in law, regardless of their actual
state of mind.
1
Storer v Manchester City Council [1974] 1 WLR 1403, Lord Denning
, - Examples:
• a university that made an unconditional offer of a place to an applicant in error (Moran v
University College Salford (No. 2) [1994] ELR 187);
• a solicitor who mistakenly offered to settle a claim for £150,000 rather than the $155,000
that he had been instructed to offer by his client (OT Africa Line Ltd v Vickers plc [1996] 1
Lloyd's Rep 700).
Gibson v Manchester City Council
Facts
• The Manchester City Council (D) decided to sell council houses to their tenants
• Gibson (C) applied for details and D’s treasurer replied stating that D ‘may be prepared to sell’ at a certain price and on
certain mortgage terms, but stated that C still had to ‘make formal application to buy’
• C returned the application form for purchase to D
• After local elections, the Labour Party took over D and decided to discontinue the policy of selling council houses
• C sued D for breach of contract but D alleged that there had been no binding contract
Issue
• Was there a binding contract?
Held (House of Lords)
• Appeal allowed; there was no offer made in the letter and hence no binding contract.
Analysis
• The House of Lords affirmed the conventional approach to contract formation: there must be an offer and corresponding
acceptance before a contract can be established.
c/f Storer v Manchester City Council
Facts
• The City Council (D) refused to proceed with the sale of a council property to C under an arrangement which had been
agreed with its predecessor.
• All of the terms of the contract had been agreed but for the date on which the lease was to end and the mortgage
payments were to begin.
• C alleged that the contract was completely concluded and sought specific performance of the agreement.
Issue
• Whether the contract had been concluded, despite the fact that the date on which the claimant became a purchaser rather
than a tenant was still to be determined.
Held
• Contract was complete despite the absence of this term.
Analysis
• In distinguishing between an offer and an invitation to treat, it is necessary to look not to the subjective intentions or
beliefs of the parties, but rather on what their words and conduct might reasonably and objectively be understood to
mean.
• In this case the defendant had made clear by their conduct and language that they intended to be bound upon the
1.2 INVITATION TO TREAT
acceptance of the offer despite the fact that some terms remained to be agreed.
• “In contracts, you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed
when there is, to all outward appearances, a contract” (p. 827).
, - Is a preliminary statement expressing a willingness to receive offers.
- Is a mere declaration of willingness to enter into negotiations.
A statement made by a party inviting offers which that party is then free to accept or reject.
• Always precedes an offer!
• It is not an offer and cannot be accepted so as to form a binding contract.
Party A Party B
Invitation to Treat
(willingness to
accept offers)
OFFER
Contract Formed ACCEPTANCE
