Contract Law
Contract law:
1. Offer - Acceptance that match
2. Consideration
3. Intention – presumption of intention to create legal relations
1. Offer and acceptance
a) Offer
One party must make an offer (= a definite promise to be bound by specified terms) which is
accepted by the other.
Offer = 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.
Person makes the offer = offeror
Person to whom the offer is made = offeree
Expression can take several forms (paper, letter, fax etc)
Courts adopt an objective approach to deciding whether there was agreement between the
parties Smith v Huges 1871
Offeree must believe that the offeror actually intended to make an offer (adds a subjective
approach)
Offer must be distinguished from an invitation to treat = inviting into negotiation. Ex:
supermarkets and self-service shops: Pharmaceutical Society of GB v Boos cash chemists
1953 or Fisher v Bell 1961
Advertisements generally regarded as invitations to treat Partridge v Crittenden 1968
↳ However advertisement of a reward traditionally treated as an offer Williams v Carwardine
1833
Bilateral contracts pg 16
↳One party makes a promise in return for a promise from the other party.
Unilateral contracts
↳A promise in return for an act. Ex: Offer of reward
,Auctions
↳ s.57 Sale of Goods Act 1979: sale by auction is complete on the fall of the auctioneer’s
hammer.
With reserve = there Without reserve
is a minimum price.
Call for bids Invitation to treat Unilateral offer “if
(basically make you make highest bid
offers) I will sell you this
vase”
Bids Offers Acceptance
Fall of Hammer Acceptance s.57 Has no effect legally
Sales of Goods Act
1979
Tenders pg 19
Tenders = put in an offer.
↳ Businesses decide to outsource a function (like cleaners) they will invite a number of
contractors to submit written tenders for the job.
Request for tenders = invitations to treat
Tenders = Offers
b) Termination of offer
Can be terminated 3 ways :
☞ Revocation
☞ Rejection by the offeree
☞ Lapse of time
i) Revocation
Offers can be withdrawn any time before acceptance.
Notice of withdrawal must be given and must be communicated to the offeree to be effective.
Byrne & Co v Van Thienhoven & Co 1880.
Revocation of offers made to the public
↳ Offer made to the public at large may be revoked through the same channel as it was made,
provided the revocation is given the same prominence Shuey v US
If a notice of revocation is received but not read until the following day, the Crt will have to
decide when communication takes place = depends on reasonable expectation of the sender.
The Brimnes 1975 (this was a business).
Revocation may be communicated by a reliable third party Dickinson v Dodds 1876
,For unilateral contacts = offeror cannot revoke once the offeree has started to perform the act
of acceptance Errington v Errington and Woods 1952 (there is an implied promise not to
revoke if the specified act is started with a reasonable time).
ii) Rejection by offeree
If offeree rejects the offer (expressly or by implication (eg: counteroffer) the offer will
terminate Hyde v Wrench 1840. Request for information does not terminate the offer
Stevenson v McLean 1880.
iii) Lapse of time
Offeror may specify that the offer will stay open only for a particular tile. If not; the offer will
terminate after a reasonable time.
c) Acceptance
A final and unqualified expression of assent to the terms of an offer.
➪ Acceptance must be “unqualified” = must correspond exactly with the terms of the offer.
Counteroffer destroys the original offer Hyde v Wrench 1840
Battle of forms = 2 businesses who are in negotiation purport to contract on their own
standard terms which are likely to be different = exchange of standard terms. Butler
Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd 1979
➪ Certainty in offer and acceptance = courts can refuse to enforce agreement if there
appears to be uncertainty about what has been agreed or if important matter is left to be
determined.
➪ Communication of acceptance
↳ Acceptance must be communicated Entores Ltd v Milnes Far East Corp 1955 and
communicated either by the offeree or his duly authorized agent Powell v Lee 1908.
↳ Possible to waive the need for communication in certain situations. Carlill v Carbolic
Smoke Ball 1893
➪ Silence: Felthouse v Bindley 1862 = mere silence is not consent.
➪ Acceptance by post / The postal rule
↳ Adams v Lindsell 1818
↳ Household Fire and Carriage accident insurance Co v Grant 1879 : Acceptance was
posted but never arrived = postal rule applied and acceptance was valid on positing (contract
formed at this point). Postal rule still applied even if letter is lost or delayed.
Limits to postal rule:
- Only applies to acceptances
- Only applies where it was reasonable for acceptance to be sent by
post
- Letter must be properly stamped, addressed and posted
, - Rule can be excluded by offeror (express or implied)
Retraction of the postal rule
Can be argued either way since there is no authority on this matter. See page 41.
Acceptance by Electronic communication
Entries v Miles Far East Corp 1955 : Acceptance must be communicated.
The Brimnes: Notice telexed during normal office hours but not read until the next day may
be effective on receipt.
See pg 42
d) Intention to create legal relations
Parties must have intended an agreement to be legally enforceable.
- Formal requirements;
- Parker v Clark 1960: intended the arrangement to be legally
binding;
- Simpkins v Pays 1955: mutual understanding;
Domestic ands social agreements
Presumption is that there is no intention to create legal relations. Balfour v Balfour 1919
Merritt v Merritt: Presumption can be rebutted
Commercial agreements
Presumption that the parties intended the agreement to be legally binding.
Edwards v Skyways 1964
Rose and Frank co v Compton Bros 1925: presumption rebutted (this is harder to do in
commercial agreements
2. Consideration
Currie v Misa 1875: provides definition of Consideration
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.
Price one party pays for the other party’s promise.
‘’ an act of forbearance of one party, or the promise thereof, is the price for which
the promise of the other is bought’’ Sir Pollock
Contract law:
1. Offer - Acceptance that match
2. Consideration
3. Intention – presumption of intention to create legal relations
1. Offer and acceptance
a) Offer
One party must make an offer (= a definite promise to be bound by specified terms) which is
accepted by the other.
Offer = 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.
Person makes the offer = offeror
Person to whom the offer is made = offeree
Expression can take several forms (paper, letter, fax etc)
Courts adopt an objective approach to deciding whether there was agreement between the
parties Smith v Huges 1871
Offeree must believe that the offeror actually intended to make an offer (adds a subjective
approach)
Offer must be distinguished from an invitation to treat = inviting into negotiation. Ex:
supermarkets and self-service shops: Pharmaceutical Society of GB v Boos cash chemists
1953 or Fisher v Bell 1961
Advertisements generally regarded as invitations to treat Partridge v Crittenden 1968
↳ However advertisement of a reward traditionally treated as an offer Williams v Carwardine
1833
Bilateral contracts pg 16
↳One party makes a promise in return for a promise from the other party.
Unilateral contracts
↳A promise in return for an act. Ex: Offer of reward
,Auctions
↳ s.57 Sale of Goods Act 1979: sale by auction is complete on the fall of the auctioneer’s
hammer.
With reserve = there Without reserve
is a minimum price.
Call for bids Invitation to treat Unilateral offer “if
(basically make you make highest bid
offers) I will sell you this
vase”
Bids Offers Acceptance
Fall of Hammer Acceptance s.57 Has no effect legally
Sales of Goods Act
1979
Tenders pg 19
Tenders = put in an offer.
↳ Businesses decide to outsource a function (like cleaners) they will invite a number of
contractors to submit written tenders for the job.
Request for tenders = invitations to treat
Tenders = Offers
b) Termination of offer
Can be terminated 3 ways :
☞ Revocation
☞ Rejection by the offeree
☞ Lapse of time
i) Revocation
Offers can be withdrawn any time before acceptance.
Notice of withdrawal must be given and must be communicated to the offeree to be effective.
Byrne & Co v Van Thienhoven & Co 1880.
Revocation of offers made to the public
↳ Offer made to the public at large may be revoked through the same channel as it was made,
provided the revocation is given the same prominence Shuey v US
If a notice of revocation is received but not read until the following day, the Crt will have to
decide when communication takes place = depends on reasonable expectation of the sender.
The Brimnes 1975 (this was a business).
Revocation may be communicated by a reliable third party Dickinson v Dodds 1876
,For unilateral contacts = offeror cannot revoke once the offeree has started to perform the act
of acceptance Errington v Errington and Woods 1952 (there is an implied promise not to
revoke if the specified act is started with a reasonable time).
ii) Rejection by offeree
If offeree rejects the offer (expressly or by implication (eg: counteroffer) the offer will
terminate Hyde v Wrench 1840. Request for information does not terminate the offer
Stevenson v McLean 1880.
iii) Lapse of time
Offeror may specify that the offer will stay open only for a particular tile. If not; the offer will
terminate after a reasonable time.
c) Acceptance
A final and unqualified expression of assent to the terms of an offer.
➪ Acceptance must be “unqualified” = must correspond exactly with the terms of the offer.
Counteroffer destroys the original offer Hyde v Wrench 1840
Battle of forms = 2 businesses who are in negotiation purport to contract on their own
standard terms which are likely to be different = exchange of standard terms. Butler
Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd 1979
➪ Certainty in offer and acceptance = courts can refuse to enforce agreement if there
appears to be uncertainty about what has been agreed or if important matter is left to be
determined.
➪ Communication of acceptance
↳ Acceptance must be communicated Entores Ltd v Milnes Far East Corp 1955 and
communicated either by the offeree or his duly authorized agent Powell v Lee 1908.
↳ Possible to waive the need for communication in certain situations. Carlill v Carbolic
Smoke Ball 1893
➪ Silence: Felthouse v Bindley 1862 = mere silence is not consent.
➪ Acceptance by post / The postal rule
↳ Adams v Lindsell 1818
↳ Household Fire and Carriage accident insurance Co v Grant 1879 : Acceptance was
posted but never arrived = postal rule applied and acceptance was valid on positing (contract
formed at this point). Postal rule still applied even if letter is lost or delayed.
Limits to postal rule:
- Only applies to acceptances
- Only applies where it was reasonable for acceptance to be sent by
post
- Letter must be properly stamped, addressed and posted
, - Rule can be excluded by offeror (express or implied)
Retraction of the postal rule
Can be argued either way since there is no authority on this matter. See page 41.
Acceptance by Electronic communication
Entries v Miles Far East Corp 1955 : Acceptance must be communicated.
The Brimnes: Notice telexed during normal office hours but not read until the next day may
be effective on receipt.
See pg 42
d) Intention to create legal relations
Parties must have intended an agreement to be legally enforceable.
- Formal requirements;
- Parker v Clark 1960: intended the arrangement to be legally
binding;
- Simpkins v Pays 1955: mutual understanding;
Domestic ands social agreements
Presumption is that there is no intention to create legal relations. Balfour v Balfour 1919
Merritt v Merritt: Presumption can be rebutted
Commercial agreements
Presumption that the parties intended the agreement to be legally binding.
Edwards v Skyways 1964
Rose and Frank co v Compton Bros 1925: presumption rebutted (this is harder to do in
commercial agreements
2. Consideration
Currie v Misa 1875: provides definition of Consideration
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.
Price one party pays for the other party’s promise.
‘’ an act of forbearance of one party, or the promise thereof, is the price for which
the promise of the other is bought’’ Sir Pollock
