Introduction
'a contract is an agreement giving rights to obligations which are enforced by law' (voluntary
agreement that is legally forcible) - no formal definition as it is not part of the law, its used for
understanding only
Contracts are social practices that 'just work' as both parties want to make them work (self-
enforcing)
Part of Common Law (not civil code based) and voluntary as classified as what we owe to one
another
• Private Law (not criminal/public)
• Part of law of obligation (like tort/restitution)
Sometimes legally enforceable agreements are made because:
• Social sanctions not sufficient (reputation irrelevant if no future trade deals coming)
• Need deferred exchange instead of instantaneous contract (credit card needs contract to
ensure reliability of agreement)
• Strangers involved so need more security (saves time/trouble)
Contracts encourage specialisation/division of labour which is essential to functioning of market
economy (coal mine and power station specialise to work with one another in long run to bring
economic stability, eg price fluctuations may make one side want to pull out but CL prevents this)
Conflicting policies/ideologies:
Freedom of contract (partner freedom/market individualism = English CL values that you chose who
you enter contract with)
Consideration of fairness/consumer welfarism
Creating a contract
,Model looks neat but in reality it is more messy (attempt to impose order, not a description of
reality)
2 other requirements for it to be a contract not just an agreement:
• Certainty - must not be vague
• Objectivity - law not concerned with inner intentions so CL looks at outward intentions
o Detached objectivity
o Promisee objectivity
o Promisor objectivity
Lord Clarke: “[45] the general principles are not in doubt. Whether there is a binding
contract between the parties and, if so, upon what terms depends upon what they have agreed. It
depends not upon their subjective state of mind, but upon a consideration of what was
communicated between them by words or conduct, and whether that leads objectively to a
conclusion that they intended to create legal relations and had agreed upon all the terms
which they regarded or the law requires as essential for the formation of legally binding
relations”.
Implications of objective approach:
• Person may be bound by a mistake in offer (Centrovincial Estates v Merchant
Investors Assurance - offeree signed on basis of rent costing £65,000/yr but offeree intended
for it to be £126,000)
• Person may be bound by mistake in acceptance (Smith v Hughes - Smith had no
duty/obligation to sell wrong 'new' oats for horse so sued Hughes for not paying upon
delivery)
If a mistake is made in offer one party can get out if it is obvious enough for a reasonable person to
see the error - people can't 'snap up' an offer with a mistake in (Harlog v Shields) - eg Tesco £50 iPad
error obvious so not bound to sell them
3 different interpretations of the objective test:
1. Standard of detached objectivity - what interpretation would a person watching the behaviour
of the contracting parties place upon their words/actions
2. Interpret the words as they were reasonably understood by the promisee
3. Standard of reasonable person in shoes of person making offer
Identifying the offer:
Definite Promise on specific terms --> Intention to be bound --> Offer (sig last bit as soon as you get
acceptance as the final bit of the circle you have a contract)
Traditional 'mirror image' approach of contractual formation - clear and unequivocal offer matched
by an equally clear and unequivocal acceptance. Courts have some discretion in identifying the offer
and the acceptance and so have some flexibility in applying the rules in a particular factual context
Invitations to 'treat' (negotiate) - shows a willingness to enter into negotiations
Offer - shows willingness to be bound on specific terms (orally/in writing/by conduct)
Gibson v Manchester City Council 1979 (conservative council sold council houses to tennants)
• Gibson enquired about purchase price of CH at offer of £2,180, had to return form but price
left blank because of ambiguity over repairs so they were made and property was taken off list
of maintained CHs.
, • Labour Gov came to power, reversed policy and said they'd only proceed with them if it had
become legally binding (court of appeal said there was enough certainty but HofL overturned
it and said contract hadn't been reached as booklet said 'we MAY be prepared to sell…' so it
was just an invitation to treat so Gibson was the one making the offer because he sent off the
form so council needed to formally accept it
Storer v Manchester City Council 1974
• Storer signed and sent back agreement therefore council made the offer so it was a contract
Bilateral - both parties bound to do something (sell car, pay me £1000)
Unilateral - one party has obligation to act (find dog and ill pay you £20)
Carlill v Carbolic Smoke Company 1893 (unilateral agreement)
• CSC claimed flu epidemic would be cured if smoke bomb was used as specified (3 times a day
for 2 weeks)
• £100 was offered if used and you still got flu
• Carlill got it and sued them for not paying as court said there was a contract
• CSC said it was only advertising therefore an invitation to treat as there was no standardising
authority at the time
Displayed goods in shops or supermarkets
Goods are displayed (invitation to treat); consumer takes the goods to
the checkout (offer); shop sells the goods at the checkout (acceptance).
Pharmaceutical Soc v Boots
Fisher v Bell
Advertised goods for sale
Advertisement is placed in the paper (invitation to treat); potential
buyers make the offers (offer); goods are sold (acceptance).
Partridge v Crittenden
Exception - where advertisement is interpreted as creating a unilateral contract
(Carlill) EG an advert stating that the goods will be sold to the first
purchaser (offer in a unilateral contract). The completion of the act (i.e. being first in
the queue in order to purchase the goods) constitutes the acceptance.
Lefkowitz v Great Minneapolis Surplus Stores (1957) USA decision
Auctions
Auctioneer calls for bids (invitation to treat); people make bids (offer);
auctioneer accepts a bid by the strike of the hammer (acceptance).
Harris v Nickerson
Exception - auctioneer calls for bids with no reserve price (offer); highest bidder
(acceptance).
Barry v Davies
Tender
Call for tenders to be submitted (invitation to treat); tenders are
submitted (offer); one of the tenders is accepted (acceptance).
Spencer v Harding
Exception - where call for tenders states that contract will be made with the
highest/lowest bidder (offer in a unilateral contract); highest/lowest bid is submitted
(acceptance).
, Harvela Investments v Canada Royal Trust Co (bid made by
reference to another bid was not a valid acceptance)
Blackpool Aero Club v Blackpool BC (here the circumstances
raised a legitimate expectation that a conforming tender would be considered (not
necessarily accepted). This formed the basis of contractual obligation to consider
conforming tenders.
Termination of an offer
Revocation (withdrawal) of offer
Bilateral contracts
• Can be revoked before accepted
• Must be communicated to offeree (can be done through third party) - Dickenson v Dodds 1876
when housing offer was open until Friday and on Thursday dickenson heard from Dodds'
neighbour that the house had been sold, so on Friday morning Dodds said it was too late
• Offeror can revoke even if the time limit has not expired (unless forming part of separate
contract)
• Postal rule does not apply to letters of revocation
Unilateral Contracts
• An offer can be revoked anytime before it is accepted
• Must be communicated to offeree
• Revocation of general offers needs an equally prominent announcement to original offer
• If acceptance is the performance of the act, the contract is enforceable only when the act has
been performed (contract only complete when acceptance is complete)
• Errington v Errington 1952 - dad died meant his executers didn't believe acceptance was
complete as mortgage wasn't paid for so the house was not to be transferred until this was
complete even though it was part of his estate
Offeror cannot revoke offer when offeree starts the process of acceptance
Other methods of terminating an offer:
• Rejection of offer or offeree makes counter offer
• Occurrence of specified event
• Death of offeror
• Lapse of time (if no time limit stated the offer expires after a reasonable length of time has
passed)
Accepting an offer
Acceptance is the unqualified assent to the final terms of the offer, creating a contract. It has to be
in line with prescribed method in the offer (eg - RTS v Muller) and within time limits given
Bilateral Contracts
• Mirror-image rule - offeror makes offer and offeree accepts exactly the same terms of offer
• Counter-Offer - If offeree introduces new terms (NOT acceptance) - kills off original offer and
creates new offer which original offeror can either accept or reject
'a contract is an agreement giving rights to obligations which are enforced by law' (voluntary
agreement that is legally forcible) - no formal definition as it is not part of the law, its used for
understanding only
Contracts are social practices that 'just work' as both parties want to make them work (self-
enforcing)
Part of Common Law (not civil code based) and voluntary as classified as what we owe to one
another
• Private Law (not criminal/public)
• Part of law of obligation (like tort/restitution)
Sometimes legally enforceable agreements are made because:
• Social sanctions not sufficient (reputation irrelevant if no future trade deals coming)
• Need deferred exchange instead of instantaneous contract (credit card needs contract to
ensure reliability of agreement)
• Strangers involved so need more security (saves time/trouble)
Contracts encourage specialisation/division of labour which is essential to functioning of market
economy (coal mine and power station specialise to work with one another in long run to bring
economic stability, eg price fluctuations may make one side want to pull out but CL prevents this)
Conflicting policies/ideologies:
Freedom of contract (partner freedom/market individualism = English CL values that you chose who
you enter contract with)
Consideration of fairness/consumer welfarism
Creating a contract
,Model looks neat but in reality it is more messy (attempt to impose order, not a description of
reality)
2 other requirements for it to be a contract not just an agreement:
• Certainty - must not be vague
• Objectivity - law not concerned with inner intentions so CL looks at outward intentions
o Detached objectivity
o Promisee objectivity
o Promisor objectivity
Lord Clarke: “[45] the general principles are not in doubt. Whether there is a binding
contract between the parties and, if so, upon what terms depends upon what they have agreed. It
depends not upon their subjective state of mind, but upon a consideration of what was
communicated between them by words or conduct, and whether that leads objectively to a
conclusion that they intended to create legal relations and had agreed upon all the terms
which they regarded or the law requires as essential for the formation of legally binding
relations”.
Implications of objective approach:
• Person may be bound by a mistake in offer (Centrovincial Estates v Merchant
Investors Assurance - offeree signed on basis of rent costing £65,000/yr but offeree intended
for it to be £126,000)
• Person may be bound by mistake in acceptance (Smith v Hughes - Smith had no
duty/obligation to sell wrong 'new' oats for horse so sued Hughes for not paying upon
delivery)
If a mistake is made in offer one party can get out if it is obvious enough for a reasonable person to
see the error - people can't 'snap up' an offer with a mistake in (Harlog v Shields) - eg Tesco £50 iPad
error obvious so not bound to sell them
3 different interpretations of the objective test:
1. Standard of detached objectivity - what interpretation would a person watching the behaviour
of the contracting parties place upon their words/actions
2. Interpret the words as they were reasonably understood by the promisee
3. Standard of reasonable person in shoes of person making offer
Identifying the offer:
Definite Promise on specific terms --> Intention to be bound --> Offer (sig last bit as soon as you get
acceptance as the final bit of the circle you have a contract)
Traditional 'mirror image' approach of contractual formation - clear and unequivocal offer matched
by an equally clear and unequivocal acceptance. Courts have some discretion in identifying the offer
and the acceptance and so have some flexibility in applying the rules in a particular factual context
Invitations to 'treat' (negotiate) - shows a willingness to enter into negotiations
Offer - shows willingness to be bound on specific terms (orally/in writing/by conduct)
Gibson v Manchester City Council 1979 (conservative council sold council houses to tennants)
• Gibson enquired about purchase price of CH at offer of £2,180, had to return form but price
left blank because of ambiguity over repairs so they were made and property was taken off list
of maintained CHs.
, • Labour Gov came to power, reversed policy and said they'd only proceed with them if it had
become legally binding (court of appeal said there was enough certainty but HofL overturned
it and said contract hadn't been reached as booklet said 'we MAY be prepared to sell…' so it
was just an invitation to treat so Gibson was the one making the offer because he sent off the
form so council needed to formally accept it
Storer v Manchester City Council 1974
• Storer signed and sent back agreement therefore council made the offer so it was a contract
Bilateral - both parties bound to do something (sell car, pay me £1000)
Unilateral - one party has obligation to act (find dog and ill pay you £20)
Carlill v Carbolic Smoke Company 1893 (unilateral agreement)
• CSC claimed flu epidemic would be cured if smoke bomb was used as specified (3 times a day
for 2 weeks)
• £100 was offered if used and you still got flu
• Carlill got it and sued them for not paying as court said there was a contract
• CSC said it was only advertising therefore an invitation to treat as there was no standardising
authority at the time
Displayed goods in shops or supermarkets
Goods are displayed (invitation to treat); consumer takes the goods to
the checkout (offer); shop sells the goods at the checkout (acceptance).
Pharmaceutical Soc v Boots
Fisher v Bell
Advertised goods for sale
Advertisement is placed in the paper (invitation to treat); potential
buyers make the offers (offer); goods are sold (acceptance).
Partridge v Crittenden
Exception - where advertisement is interpreted as creating a unilateral contract
(Carlill) EG an advert stating that the goods will be sold to the first
purchaser (offer in a unilateral contract). The completion of the act (i.e. being first in
the queue in order to purchase the goods) constitutes the acceptance.
Lefkowitz v Great Minneapolis Surplus Stores (1957) USA decision
Auctions
Auctioneer calls for bids (invitation to treat); people make bids (offer);
auctioneer accepts a bid by the strike of the hammer (acceptance).
Harris v Nickerson
Exception - auctioneer calls for bids with no reserve price (offer); highest bidder
(acceptance).
Barry v Davies
Tender
Call for tenders to be submitted (invitation to treat); tenders are
submitted (offer); one of the tenders is accepted (acceptance).
Spencer v Harding
Exception - where call for tenders states that contract will be made with the
highest/lowest bidder (offer in a unilateral contract); highest/lowest bid is submitted
(acceptance).
, Harvela Investments v Canada Royal Trust Co (bid made by
reference to another bid was not a valid acceptance)
Blackpool Aero Club v Blackpool BC (here the circumstances
raised a legitimate expectation that a conforming tender would be considered (not
necessarily accepted). This formed the basis of contractual obligation to consider
conforming tenders.
Termination of an offer
Revocation (withdrawal) of offer
Bilateral contracts
• Can be revoked before accepted
• Must be communicated to offeree (can be done through third party) - Dickenson v Dodds 1876
when housing offer was open until Friday and on Thursday dickenson heard from Dodds'
neighbour that the house had been sold, so on Friday morning Dodds said it was too late
• Offeror can revoke even if the time limit has not expired (unless forming part of separate
contract)
• Postal rule does not apply to letters of revocation
Unilateral Contracts
• An offer can be revoked anytime before it is accepted
• Must be communicated to offeree
• Revocation of general offers needs an equally prominent announcement to original offer
• If acceptance is the performance of the act, the contract is enforceable only when the act has
been performed (contract only complete when acceptance is complete)
• Errington v Errington 1952 - dad died meant his executers didn't believe acceptance was
complete as mortgage wasn't paid for so the house was not to be transferred until this was
complete even though it was part of his estate
Offeror cannot revoke offer when offeree starts the process of acceptance
Other methods of terminating an offer:
• Rejection of offer or offeree makes counter offer
• Occurrence of specified event
• Death of offeror
• Lapse of time (if no time limit stated the offer expires after a reasonable length of time has
passed)
Accepting an offer
Acceptance is the unqualified assent to the final terms of the offer, creating a contract. It has to be
in line with prescribed method in the offer (eg - RTS v Muller) and within time limits given
Bilateral Contracts
• Mirror-image rule - offeror makes offer and offeree accepts exactly the same terms of offer
• Counter-Offer - If offeree introduces new terms (NOT acceptance) - kills off original offer and
creates new offer which original offeror can either accept or reject
