Contract Law 1 -- Revision Notes
TOPIC ONE
What are Contracts? – Formation
of a contract
Contracts are legally enforceable agreements. Contracts are not legally required to be in writing.
They can be made orally. A major exception of this is Law of Property (Miscellaneous Provisions)
Act 1989 section 2 subsection 1 “A contract for the sale or other disposition of an interest in land
can only be made in writing and only by incorporating all the terms which the parties have expressly
agreed in one document or, where contracts are exchanged, in each.”
How do you form a contract?
Formation analysed in terms of offer and acceptance. There must be agreement, consideration and
intention to create legal relation.
- Consideration is the negotiation part of the contract.
- Intention to create legal relations distinguishes contracts from agreements not meant to be
of legal significance.
Merritt v Merritt (1970) An agreement intended to create legal relations
Facts
- Husband left the matrimonial home, left a note to the wife saying he would transfer the
property to the wife’s sole ownership.
Held
- Court of Appeal Civil Division held this agreement was intended to create legal relations
- Agreements between husband and wife while in the process of separating, have the
intention to create legal relations
- The wife was entitled to a declaration that she was the sole owner of the property.
Balfour v Balfour (1919) An agreement not intended to create legal relations
Facts
- Husband and wife agreed he would pay her £30 a month and she would not seek further
maintenance
- Wife sued for the money her husband owed her
Held
- Court of Appeal Civil Division held that the agreement was not a contract, it was merely a
domestic arrangement
, - Wife could not sue the husband as it was merely a domestic arrangement
Contracts may be bilateral or unilateral.
- Bilateral = both parties undertake obligations
- Unilateral = only one party is bound
An objective approach
Contracts take an objective view of agreement, despite consensus ad idem (meeting of minds). This
mean it is not what the parties intend that matters. What matters is what they appear to intend.
Smith v Hughes (1871)
Facts
- Claimant purchased a quantity of what he thought were old oats which he needed to feed
his horse
- Defendant was aware the claimant was buying new oats instead of old ones but said nothing
Held
- Defendant’s silence cannot be misrepresentation
- Defendant did not mislead the claimant into thinking he was buying old oats
“If, whatever a man's real intention may be, he so conducts himself that a reasonable man would
believe 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.” Blackburn J.
Storer v Manchester City Council (1974)
“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.” Lord Denning.
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (2010)
The Supreme Court made a declaration that, inter alia, on the evidence there had been a binding
agreement between the parties on terms that had been agreed between them, although no contract
had been signed and the terms of the letter of intent had stated that agreement was subject to
contract.
Gibson v Manchester City Council (1979)
“My Lords, there may be certain types of contract, though I think they are exceptional, which do not
fit easily into the normal analysis of a contract as being constituted by offer and acceptance, but a
contract alleged to have been made by an exchange of correspondence between the parties in
which the successive communications other than the first are in reply to one another is not one of
these.”
Is there an offer?
TOPIC ONE
What are Contracts? – Formation
of a contract
Contracts are legally enforceable agreements. Contracts are not legally required to be in writing.
They can be made orally. A major exception of this is Law of Property (Miscellaneous Provisions)
Act 1989 section 2 subsection 1 “A contract for the sale or other disposition of an interest in land
can only be made in writing and only by incorporating all the terms which the parties have expressly
agreed in one document or, where contracts are exchanged, in each.”
How do you form a contract?
Formation analysed in terms of offer and acceptance. There must be agreement, consideration and
intention to create legal relation.
- Consideration is the negotiation part of the contract.
- Intention to create legal relations distinguishes contracts from agreements not meant to be
of legal significance.
Merritt v Merritt (1970) An agreement intended to create legal relations
Facts
- Husband left the matrimonial home, left a note to the wife saying he would transfer the
property to the wife’s sole ownership.
Held
- Court of Appeal Civil Division held this agreement was intended to create legal relations
- Agreements between husband and wife while in the process of separating, have the
intention to create legal relations
- The wife was entitled to a declaration that she was the sole owner of the property.
Balfour v Balfour (1919) An agreement not intended to create legal relations
Facts
- Husband and wife agreed he would pay her £30 a month and she would not seek further
maintenance
- Wife sued for the money her husband owed her
Held
- Court of Appeal Civil Division held that the agreement was not a contract, it was merely a
domestic arrangement
, - Wife could not sue the husband as it was merely a domestic arrangement
Contracts may be bilateral or unilateral.
- Bilateral = both parties undertake obligations
- Unilateral = only one party is bound
An objective approach
Contracts take an objective view of agreement, despite consensus ad idem (meeting of minds). This
mean it is not what the parties intend that matters. What matters is what they appear to intend.
Smith v Hughes (1871)
Facts
- Claimant purchased a quantity of what he thought were old oats which he needed to feed
his horse
- Defendant was aware the claimant was buying new oats instead of old ones but said nothing
Held
- Defendant’s silence cannot be misrepresentation
- Defendant did not mislead the claimant into thinking he was buying old oats
“If, whatever a man's real intention may be, he so conducts himself that a reasonable man would
believe 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.” Blackburn J.
Storer v Manchester City Council (1974)
“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.” Lord Denning.
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (2010)
The Supreme Court made a declaration that, inter alia, on the evidence there had been a binding
agreement between the parties on terms that had been agreed between them, although no contract
had been signed and the terms of the letter of intent had stated that agreement was subject to
contract.
Gibson v Manchester City Council (1979)
“My Lords, there may be certain types of contract, though I think they are exceptional, which do not
fit easily into the normal analysis of a contract as being constituted by offer and acceptance, but a
contract alleged to have been made by an exchange of correspondence between the parties in
which the successive communications other than the first are in reply to one another is not one of
these.”
Is there an offer?
