1. Formation of a Contract
Agreement
Intention to be
(Offer & Consideration
legally bound
Acceptance)
Offer
Professor Treitel defines offer as:
“An expression of willingness to contract on certain terms, made with the intention that it shall become binding as
soon as it is accepted by the person to whom it is addressed”.
→ ‘objective’ approach to deciding whether there was actual intention (Smith v Hughes (1871))
→ The two requirements for an offer are:
Offer
o Willingness to be bound
o Certainty of terms
→ In Gibson v Manchester City Council “may be prepared to sell” was not certain enough to be
an offer.
R v Clarke Offeree must know of the offer. An informant knew of the offer of reward for info leading to the conviction
of a criminal; by the time he gave the info he had forgotten. He sued for the reward, but claim was dismissed.
(i) Invitation to Treat
“I’m thinking of doing something – make me an offer.”
General rule: advertisements are invitations to treat not offers.
Goods on display in shop window (Fisher v Bell) and self-service shops (Pharmaceutical Society of GB v Boots)
At a fuel station, the pump is the offer and siphoning the fuel constitutes the acceptance.
Harvela Investments Situation where an invitation to tender does constitute an offer – tenders were invited with “we
Ltd v Royal Trust confirm that if any offer made by you is the highest offer received by us we bind ourselves to
Company of Canad Ltd accept such offer…” (unilateral contract).
One party makes an offer, prescribing an act and shows a clear intention to be bound.
Unilateral Contract
Offer is accepted by performing required act. e.g. if you return my pet, I will pay you £200.
General rule does not apply where the advertisement amounts to a unilateral offer (Carlill v Carbolic Smoke Ball Co).
→ Partial performance of a unilateral contract is sufficient to prevent revocation by the offeror (Errington)
→ Offer of reward is accepted when the person does the act specified in the offer (Williams v Cowardine)
,Acceptance
Acceptance is the “a final and unqualified assent to the terms of the offer” – Treitel
→ Generally, requires the acceptance to be communicated to the offeror (Entores) – unless unilateral.
→ Acceptance deemed communicated when it would be reasonable for the client to expect it to be read.
→ With businesses it is reasonable to expect communications to be read during normal office hours.
→ Silence cannot be acceptance (Felthouse v Bindley)
→ Offerees could bind themselves by silence e.g. ‘if you don’t hear from me, assume I accept the offer (Re
Selectmove Ltd)
→ Communication is to be treated as made upon receipt.
(i) The Postal Rule
→ Only applies to letters posted - states that acceptance takes place on posting (Adams v Lindsell)
→ Even if the letter gets lost in the post (Household Fire Insurance v Grant)
→ This rule only applies to acceptances (i.e. not revocation)
→ Only if reasonable to have sent the acceptance by post.
→ Letter must be properly stamped, addressed and posted.
→ Rule can always be excluded by the offeror, either expressly or by implication.
→ The rule will not apply if the offeror stipulates that he needs to be notified of acceptance (Holwell Securities
v Hughes) e.g. ‘need to hear from you’.
Termination of an offer
Revocation
→ Where the offeror takes the offer off the table.
→ Generally, can be withdrawn any time before acceptance.
→ Must be communicated to the offeree i.e. upon receipt of the communication (Byrne & Co v Van
Tienhoven & Co)
→ Email – if received within reasonable working hours it is communicated upon receipt.
→ If letter sent to last known address without offeree having informed of new address this is considered
communicated.
→ May be communicable by a reliable third party (only revocation) (Dickinson v Dodds)
Rejection
→ Offeree sweeps it off the table.
→ Express rejection brings the offer to an end.
→ Counter-offer kills the original offer (Hyde v Wrench).
→ Enquiry for more information is not rejection and original offer stands (Stevenson Jacques v McLean)
Lapse
→ Disappears from the table.
→ After a stated time or after a reasonable time (depending on a number of factors)
Intention to Create Legal Relations
Rebuttable presumptions:
Commercial agreements – always an intention (Edwards v Skyways)
Domestic agreements – no intention (rebuttable, must look at the facts - Balfour v Balfour)
(i) Capacity
The legal power to make a contract – will not bind a party if they lacked the necessary capacity.
Only parties to a contract can sue or be sued on it.
, Minors are not bound but the other party is and can be sued.
Contracts for ‘necessaries’ bind minors
o Goods ‘suitable to the condition in life of the minor and to his actual requirements at the time of sale
and delivery’)
o Contracts of service which are on the whole beneficial to them (employment as long as the contract is
more favourable to the minor (the ‘Wayne Rooney case’)
Mental incapacity covers persons suffering from mental impairment and those who are drunk when the
contract is made.
Corporations may also lack capacity.
(ii) Tenders
Tenders –businesses may invite contractors to submit written tenders – these are the offers which may or
may not be accepted by the business owner.
In Blackpool and Fylde Aero Club there was held to be an implied offer of a unilateral contract i.e. an implied
promise to consider all conforming tenders there may also be an express promise to do so. In which case if
all tenders are not considered the tenderer will could be awarded damages for breach of unilateral contract.
(iii) Auctions
At an auction, the bids are the offers, the fall of the hammer is the acceptance (s57 SOGA 1979) – each bid
destroys the earlier bid.
Auctions with reserve – there is a contract on the drop of the hammer.
Without reserve – there is a unilateral contract when the highest bid is made.
o Promise to sell to the highest bidder (Barry v Davies)
The auctioneer must act within the authority granted by the seller. If they act outside this authority, they may be
personally liable for any resulting losses.
E.g. Ruby’s bid of £20 is the highest offer. The auctioneer was not entitled to sell the goods for bids under £300
(their original valuation). The auctioneer has breached the unilateral contract conditions that he has offered. But
there is no contract between him and Ruby as he withdrew. Ruby is not entitled to the goods but she is entitled
to the value of them. Ruby can claim damages for breach of unilateral contract – the original valuation £300
minus the £20 she paid.
1. Consideration
In order to be able to enforce a promise made to you, you must be able to show that you agreed to provide
something in return for that promise.
What is provided by way of consideration should either be a benefit to the person receiving it, or a detriment to the
person giving it. Often both will be present (Currie v Misa).
→ Executory consideration: contracting parties make promises to each other to perform something in the
future after the contract has been formed.
→ Executed consideration: at the time of the formation of the contract, the consideration has already been
performed (unilateral contract)
Key Principles
Consideration need not be adequate but must be sufficient.
A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good
consideration if it is established that the promisee does not like pepper and will throw away the corn.
Chappell & Co Ltd v
C owned the copyright in a piece of music. Nestlé arranged for copies of this tune to be made into records and
Nestlé Co Ltd
offered these records to the public for 1s.6d. plus three wrappers from their 6d chocolate bars. The issue before
the court involved copyright. The HOL held that the wrappers were part of the consideration.
Promising to give up, a liberty such as the right to swear or moan – not sufficient
White v Bluett A father promised not to enforce a debt against his son, on condition that the son stopped moaning about the
distribution of his father’s property. The court decided that the son had not provided consideration for the father’s
, promise. The public policy reason is that to allow this might open the floodgates to litigation
Abstaining from a legal right may be sufficient consideration.
Hamer v Sidway William had promised his nephew that if he would stop drinking alcohol, smoking, swearing and gambling until he
(American case) was 21 years of age, William would pay him $5,000. His nephew agreed and performed his part of the said
agreement. The nephew had a legal right to do all the things he abstained from doing. He had abandoned that
right in consideration of the promise of $5,000.
Past consideration not sufficient
Roscorla v Thomas Roscorla bought a horse from the defendant. Afterwards, D assured Roscorla that the horse was ‘sound and free
from vice’. This proved to be untrue, and Roscorla sued for breach of contract. The assurance was held to be
unenforceable as Roscorla had not given any consideration for it. Roscorla had already bought the horse.
Past consideration sufficient if:
a) The act has been done at the promisor’s request (Lampleigh v Brathwait)
b) The parties have understood from the outset that the act was to be rewarded in some way (Re Casey’s Patents,
Stewart v Casey); AND
c) The conferment of other benefit, must have been legally enforceable had it been promised in advance.
Lampleigh v D had asked C to seek a royal pardon for D, in relation to a crime which D had committed. C made considerable
Brathwait efforts to do this, and D later promised the claimant £100 for doing it. The promise was held to be enforceable.
Re Casey’s Patents, D had asked C (Casey) to manage certain patents for them, which C did. Ds later promised Casey a one-third share
Stewart v Casey of the patents for the work. The court held that it must always have been assumed that Casey’s work would be
paid for in some way; D’s promise simply crystallised that reasonable expectation.
Performance of Existing Duties
PUBLIC DUTIES
Performance of an existing public duty will not amount to consideration (Collins v Godefroy).
If C exceeds their public duty, this will usually be consideration (Glasbrook Bros v Glamorgan CC).
Collins v Godefroy The question arose as to whether someone who had been ordered to attend court as a witness (and therefore had
a legal duty to attend) could enforce a promise of payment made by the person on whose behalf the testimony
was to be given. Such a promise was held to be unenforceable on the basis that there was no consideration for it
Re Casey’s Patents, the owners of a mine, during a coal strike, sought assistance from the police in protecting those workers who had
Stewart v Casey continuing responsibility to maintain the mine. The owners insisted that officers must be billeted at the premises,
and they agreed to pay the council for this service. Later, the owners denied any legal obligation to pay, on the
basis that the police had carried out their obligation to keep the peace. The HOL held that they had exceeded their
public duty, and this was consideration for the agreed sum.
CONTRACTUAL DUTY OWED TO THIRD PARTY
If a person is already bound to perform a particular act under a contract, it seems that the performance of this act can amount to
sufficient consideration for a separate contract with someone else (Scotson v Pegg)
EXISTING CONTRACTUAL DUTY OWED TO CONTRACTING PARTY
→ Simply performing an existing contractual duty owed to the other party will not be sufficient consideration in exchange for a
promise by the other party to pay more money (Stilk v Myrick).
→ If you exceed a contractual obligation which you owed, that will be consideration as you will have conferred an extra benefit
(Hartley v Ponsonby).
Stilk v An action for seaman’s wages on a return voyage from London to the Baltic. At Cronstadt, two of the 11-man crew
Myrick deserted, and the captain promised to split the wages of the deserters equally among the rest of the crew if they would
work the ship home. They did so, but the captain did not pay them the extra money. The court held that the captain’s
promise was unenforceable for want of consideration.
Hartley v Almost half of the crew members of a ship deserted, and only a few were able seamen. The continuation of the voyage
Ponsonby was exceptionally hazardous for the remaining crew. On that basis they were not bound by the terms of the original
contract to proceed with the voyage. By agreeing to continue the voyage, the remaining crew had given good
consideration for the promise of extra payment (this would be considered a variation, and the variation is binding).
Williams v D promised to pay C extra money (i.e. £575 per flat) to complete carpentry work on time. On this basis C continued to
Roffey work on the flats but in the event were not paid the extra money promised and sued. The defendants had secured
practical benefits (i.e. avoiding liability under the compensation clause in the main contract and the cost and expense of
finding other carpenters to finish the job). This was significant that there was no evidence of duress or fraud.
Part Payment of Undisputed Debts
Part payment of a debt is not usually consideration for a promise by the creditor to forgo the balance due unless the debtor can show
that they gave something different for the creditor’s agreement to accept the lesser sum in settlement e.g. goods or early payment
(Pinnels confirmed by Foakes v Beer).
Promissory Estoppel
Promissory estoppel is an equitable doctrine that may provide a defence to a claim brought under Foakes v Beer.
→ Under it, a creditor may be stopped from going back on a promise to accept part payment (even if not supported by
consideration) if in all the circumstances it would be unfair for them to do so (High Trees).
Agreement
Intention to be
(Offer & Consideration
legally bound
Acceptance)
Offer
Professor Treitel defines offer as:
“An expression of willingness to contract on certain terms, made with the intention that it shall become binding as
soon as it is accepted by the person to whom it is addressed”.
→ ‘objective’ approach to deciding whether there was actual intention (Smith v Hughes (1871))
→ The two requirements for an offer are:
Offer
o Willingness to be bound
o Certainty of terms
→ In Gibson v Manchester City Council “may be prepared to sell” was not certain enough to be
an offer.
R v Clarke Offeree must know of the offer. An informant knew of the offer of reward for info leading to the conviction
of a criminal; by the time he gave the info he had forgotten. He sued for the reward, but claim was dismissed.
(i) Invitation to Treat
“I’m thinking of doing something – make me an offer.”
General rule: advertisements are invitations to treat not offers.
Goods on display in shop window (Fisher v Bell) and self-service shops (Pharmaceutical Society of GB v Boots)
At a fuel station, the pump is the offer and siphoning the fuel constitutes the acceptance.
Harvela Investments Situation where an invitation to tender does constitute an offer – tenders were invited with “we
Ltd v Royal Trust confirm that if any offer made by you is the highest offer received by us we bind ourselves to
Company of Canad Ltd accept such offer…” (unilateral contract).
One party makes an offer, prescribing an act and shows a clear intention to be bound.
Unilateral Contract
Offer is accepted by performing required act. e.g. if you return my pet, I will pay you £200.
General rule does not apply where the advertisement amounts to a unilateral offer (Carlill v Carbolic Smoke Ball Co).
→ Partial performance of a unilateral contract is sufficient to prevent revocation by the offeror (Errington)
→ Offer of reward is accepted when the person does the act specified in the offer (Williams v Cowardine)
,Acceptance
Acceptance is the “a final and unqualified assent to the terms of the offer” – Treitel
→ Generally, requires the acceptance to be communicated to the offeror (Entores) – unless unilateral.
→ Acceptance deemed communicated when it would be reasonable for the client to expect it to be read.
→ With businesses it is reasonable to expect communications to be read during normal office hours.
→ Silence cannot be acceptance (Felthouse v Bindley)
→ Offerees could bind themselves by silence e.g. ‘if you don’t hear from me, assume I accept the offer (Re
Selectmove Ltd)
→ Communication is to be treated as made upon receipt.
(i) The Postal Rule
→ Only applies to letters posted - states that acceptance takes place on posting (Adams v Lindsell)
→ Even if the letter gets lost in the post (Household Fire Insurance v Grant)
→ This rule only applies to acceptances (i.e. not revocation)
→ Only if reasonable to have sent the acceptance by post.
→ Letter must be properly stamped, addressed and posted.
→ Rule can always be excluded by the offeror, either expressly or by implication.
→ The rule will not apply if the offeror stipulates that he needs to be notified of acceptance (Holwell Securities
v Hughes) e.g. ‘need to hear from you’.
Termination of an offer
Revocation
→ Where the offeror takes the offer off the table.
→ Generally, can be withdrawn any time before acceptance.
→ Must be communicated to the offeree i.e. upon receipt of the communication (Byrne & Co v Van
Tienhoven & Co)
→ Email – if received within reasonable working hours it is communicated upon receipt.
→ If letter sent to last known address without offeree having informed of new address this is considered
communicated.
→ May be communicable by a reliable third party (only revocation) (Dickinson v Dodds)
Rejection
→ Offeree sweeps it off the table.
→ Express rejection brings the offer to an end.
→ Counter-offer kills the original offer (Hyde v Wrench).
→ Enquiry for more information is not rejection and original offer stands (Stevenson Jacques v McLean)
Lapse
→ Disappears from the table.
→ After a stated time or after a reasonable time (depending on a number of factors)
Intention to Create Legal Relations
Rebuttable presumptions:
Commercial agreements – always an intention (Edwards v Skyways)
Domestic agreements – no intention (rebuttable, must look at the facts - Balfour v Balfour)
(i) Capacity
The legal power to make a contract – will not bind a party if they lacked the necessary capacity.
Only parties to a contract can sue or be sued on it.
, Minors are not bound but the other party is and can be sued.
Contracts for ‘necessaries’ bind minors
o Goods ‘suitable to the condition in life of the minor and to his actual requirements at the time of sale
and delivery’)
o Contracts of service which are on the whole beneficial to them (employment as long as the contract is
more favourable to the minor (the ‘Wayne Rooney case’)
Mental incapacity covers persons suffering from mental impairment and those who are drunk when the
contract is made.
Corporations may also lack capacity.
(ii) Tenders
Tenders –businesses may invite contractors to submit written tenders – these are the offers which may or
may not be accepted by the business owner.
In Blackpool and Fylde Aero Club there was held to be an implied offer of a unilateral contract i.e. an implied
promise to consider all conforming tenders there may also be an express promise to do so. In which case if
all tenders are not considered the tenderer will could be awarded damages for breach of unilateral contract.
(iii) Auctions
At an auction, the bids are the offers, the fall of the hammer is the acceptance (s57 SOGA 1979) – each bid
destroys the earlier bid.
Auctions with reserve – there is a contract on the drop of the hammer.
Without reserve – there is a unilateral contract when the highest bid is made.
o Promise to sell to the highest bidder (Barry v Davies)
The auctioneer must act within the authority granted by the seller. If they act outside this authority, they may be
personally liable for any resulting losses.
E.g. Ruby’s bid of £20 is the highest offer. The auctioneer was not entitled to sell the goods for bids under £300
(their original valuation). The auctioneer has breached the unilateral contract conditions that he has offered. But
there is no contract between him and Ruby as he withdrew. Ruby is not entitled to the goods but she is entitled
to the value of them. Ruby can claim damages for breach of unilateral contract – the original valuation £300
minus the £20 she paid.
1. Consideration
In order to be able to enforce a promise made to you, you must be able to show that you agreed to provide
something in return for that promise.
What is provided by way of consideration should either be a benefit to the person receiving it, or a detriment to the
person giving it. Often both will be present (Currie v Misa).
→ Executory consideration: contracting parties make promises to each other to perform something in the
future after the contract has been formed.
→ Executed consideration: at the time of the formation of the contract, the consideration has already been
performed (unilateral contract)
Key Principles
Consideration need not be adequate but must be sufficient.
A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good
consideration if it is established that the promisee does not like pepper and will throw away the corn.
Chappell & Co Ltd v
C owned the copyright in a piece of music. Nestlé arranged for copies of this tune to be made into records and
Nestlé Co Ltd
offered these records to the public for 1s.6d. plus three wrappers from their 6d chocolate bars. The issue before
the court involved copyright. The HOL held that the wrappers were part of the consideration.
Promising to give up, a liberty such as the right to swear or moan – not sufficient
White v Bluett A father promised not to enforce a debt against his son, on condition that the son stopped moaning about the
distribution of his father’s property. The court decided that the son had not provided consideration for the father’s
, promise. The public policy reason is that to allow this might open the floodgates to litigation
Abstaining from a legal right may be sufficient consideration.
Hamer v Sidway William had promised his nephew that if he would stop drinking alcohol, smoking, swearing and gambling until he
(American case) was 21 years of age, William would pay him $5,000. His nephew agreed and performed his part of the said
agreement. The nephew had a legal right to do all the things he abstained from doing. He had abandoned that
right in consideration of the promise of $5,000.
Past consideration not sufficient
Roscorla v Thomas Roscorla bought a horse from the defendant. Afterwards, D assured Roscorla that the horse was ‘sound and free
from vice’. This proved to be untrue, and Roscorla sued for breach of contract. The assurance was held to be
unenforceable as Roscorla had not given any consideration for it. Roscorla had already bought the horse.
Past consideration sufficient if:
a) The act has been done at the promisor’s request (Lampleigh v Brathwait)
b) The parties have understood from the outset that the act was to be rewarded in some way (Re Casey’s Patents,
Stewart v Casey); AND
c) The conferment of other benefit, must have been legally enforceable had it been promised in advance.
Lampleigh v D had asked C to seek a royal pardon for D, in relation to a crime which D had committed. C made considerable
Brathwait efforts to do this, and D later promised the claimant £100 for doing it. The promise was held to be enforceable.
Re Casey’s Patents, D had asked C (Casey) to manage certain patents for them, which C did. Ds later promised Casey a one-third share
Stewart v Casey of the patents for the work. The court held that it must always have been assumed that Casey’s work would be
paid for in some way; D’s promise simply crystallised that reasonable expectation.
Performance of Existing Duties
PUBLIC DUTIES
Performance of an existing public duty will not amount to consideration (Collins v Godefroy).
If C exceeds their public duty, this will usually be consideration (Glasbrook Bros v Glamorgan CC).
Collins v Godefroy The question arose as to whether someone who had been ordered to attend court as a witness (and therefore had
a legal duty to attend) could enforce a promise of payment made by the person on whose behalf the testimony
was to be given. Such a promise was held to be unenforceable on the basis that there was no consideration for it
Re Casey’s Patents, the owners of a mine, during a coal strike, sought assistance from the police in protecting those workers who had
Stewart v Casey continuing responsibility to maintain the mine. The owners insisted that officers must be billeted at the premises,
and they agreed to pay the council for this service. Later, the owners denied any legal obligation to pay, on the
basis that the police had carried out their obligation to keep the peace. The HOL held that they had exceeded their
public duty, and this was consideration for the agreed sum.
CONTRACTUAL DUTY OWED TO THIRD PARTY
If a person is already bound to perform a particular act under a contract, it seems that the performance of this act can amount to
sufficient consideration for a separate contract with someone else (Scotson v Pegg)
EXISTING CONTRACTUAL DUTY OWED TO CONTRACTING PARTY
→ Simply performing an existing contractual duty owed to the other party will not be sufficient consideration in exchange for a
promise by the other party to pay more money (Stilk v Myrick).
→ If you exceed a contractual obligation which you owed, that will be consideration as you will have conferred an extra benefit
(Hartley v Ponsonby).
Stilk v An action for seaman’s wages on a return voyage from London to the Baltic. At Cronstadt, two of the 11-man crew
Myrick deserted, and the captain promised to split the wages of the deserters equally among the rest of the crew if they would
work the ship home. They did so, but the captain did not pay them the extra money. The court held that the captain’s
promise was unenforceable for want of consideration.
Hartley v Almost half of the crew members of a ship deserted, and only a few were able seamen. The continuation of the voyage
Ponsonby was exceptionally hazardous for the remaining crew. On that basis they were not bound by the terms of the original
contract to proceed with the voyage. By agreeing to continue the voyage, the remaining crew had given good
consideration for the promise of extra payment (this would be considered a variation, and the variation is binding).
Williams v D promised to pay C extra money (i.e. £575 per flat) to complete carpentry work on time. On this basis C continued to
Roffey work on the flats but in the event were not paid the extra money promised and sued. The defendants had secured
practical benefits (i.e. avoiding liability under the compensation clause in the main contract and the cost and expense of
finding other carpenters to finish the job). This was significant that there was no evidence of duress or fraud.
Part Payment of Undisputed Debts
Part payment of a debt is not usually consideration for a promise by the creditor to forgo the balance due unless the debtor can show
that they gave something different for the creditor’s agreement to accept the lesser sum in settlement e.g. goods or early payment
(Pinnels confirmed by Foakes v Beer).
Promissory Estoppel
Promissory estoppel is an equitable doctrine that may provide a defence to a claim brought under Foakes v Beer.
→ Under it, a creditor may be stopped from going back on a promise to accept part payment (even if not supported by
consideration) if in all the circumstances it would be unfair for them to do so (High Trees).
