Contract Law Lecture Handout – Cases and Legislation Compilation
1. Categorised Compilation by Area of Contract Law
Introduction / Nature of Contract
Robertson v Anderson (2003) SLT 234: Intention to create legal relations; presumption of
social context can be rebutted if there is enough evidence to the contrary
Morgan Utilities Ltd v Scottish Water Solutions Ltd [2011] CSOH 112: Objective test:
whether parties intended to be legally bound ‘there and then’. (per Lord Hodge at para 52)
(i) Did the parties manifest an intent to be legally bound ‘there and then’?
(ii) Objective approach: what would the reasonable and honest person in the position of
the parties have intended or what would have been the reasonable expectation of the
sensible business person in the position of the parties?
(iii) The court should consider not only the events as they unfolded but also the parties’
behaviour after the alleged agreement.
(iv) The court should take a neutral approach.
WS Karoulias v Drambuie Liqueur Co Ltd 2005 SLT 813: Parties may agree terms but can
stipulate not to be bound until a written contract is signed.
Regus (Maxim) Ltd v Bank of Scotland [2011] CSOH 129: reaffirmed that A promise must
clearly show an intention to be legally binding. (per Lord Menzies at para 46)
Requirements of Writing (Scotland) Act 1995 s1(2)(a)(ii): Gratuitous unilateral
obligations require writing unless undertaken in business.
Formation
Muirhead & Turnbull v Dickson (1905) 7F 686: Contracts are a result of what people say
and do, not what they think. (Objective test)
Mathieson Gee (Ayrshire) Ltd v Quigley 1952 SC (HL) 38: No contract where offer and
acceptance refer to different subject matter.
Wolf and Wolf v Forfar Potato Co 1984 SLT 100: Qualified acceptance kills the original
offer; no contract.
Thomson v James (1855) 18 D 1 offer can be revoked before acceptance received, however
it must be delivered before the revocation stands
,Harvey v Facey [1893] AC 552: Statement of price alone is not an offer. (English case,
persuasive)
Adverts
Fisher v Bell [1961] 1 QB 394: Display of goods in a shop is an invitation to treat. (English
case, persuasive)
Partridge v Crittenden [1968] 1 WLR 1204: Advertisements are invitations to treat, not
offers. (English case, persuasive)
Philp v Knoblauch [1907] SC 994: Advert inviting custom may constitute an offer if
expressly stipulating price, subject matter etc.
Sale of Goods Act 1979 s57(2): Defines when auction bids form binding contracts, namely
each bid is an offer, and can
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256: Unilateral contract can be formed when
performance of conditions occurs via advert, however terms must be explicit (English case,
persuauvive)
Revocation
McMillan v Caldwell 1991 SLT 325: Offer effective on communication; but can be revoked
before acceptance, communication is assessed explicitly
Burnley v Alford 1919 2 SLT 123: Revocation effective when communicated, even if unread.
Thomson v James (1855) 18 D 1 death
Postal Acceptance
Thomson v James (1855) 18 D 1: Postal acceptance rule: contract forms when acceptance
posted.
Countess of Dunmore v Alexander (1830) 9 S 190: a offer can be revoked, after acceptance
has been sent, but only if sent via a quicker form of communication
In this case, the acceptance and revocation (sent via express mail was received in the same
lot of post)
Tinn v Hoffmann & Co (1873) 29 LT 71: Cross offers do not form a contract. (English case,
persuasive)
2/2/71: A writes to B – “I wish to buy X for £1,000”
2/2/71: B writes to A – “I wish to sell X for £1,000”
Acceptor must be aware of offer to accept – held no contract
, Interpretation
Charter Reinsurance Co Ltd v Fagan [1997] AC 313: Literal approach – apply ordinary
meaning of words. (English case, persuasive)
“I believe that most expressions do have a natural meaning, in the sense of their meaning
in ordinary speech…. The inquiry will start, and usually finish, by asking what is the
ordinary meaning of the words used.” - per Lord Mustill (at 384)
Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896: Contextual
approach – interpret language in light of background knowledge.
(English case, persuasive)
1. Interpretation is the ascertainment of the meaning which the document would convey
to a reasonable person having all the background knowledge which would
reasonably have been available to the parties in the situation in which they were at
the time of the contract.
2. The background was famously referred to by Lord Wilberforce as “the matrix of
fact”, but this phrase is, if anything, an understated description of what the
background may include. Subject to the requirement that it should have been
reasonably available to the parties … it includes absolutely anything which would
have affected the way in which the language of the document would have been
understood by a reasonable man.
3. …
4. The meaning which a document (or any other utterance) would convey to a
reasonable man is not the same thing as the meaning of its words. The meaning of
words is a matter of dictionaries and grammars; the meaning of the document is
what the parties using those words against the relevant background would
reasonably have been understood to mean….
5. The “rule” that words should be given their “natural and ordinary meaning”
reflects the common sense proposition that we do not easily accept that people have
made linguistic mistakes, particularly in formal documents. On the other hand, if one
would nevertheless conclude from the background that something must have gone
wrong with the language, the law does not require judges to attribute to the parties
an intention which they plainly could not have had.”
Per Lord Hoffman at (912)
*Objective approach, of a reasonable
person*
1. Categorised Compilation by Area of Contract Law
Introduction / Nature of Contract
Robertson v Anderson (2003) SLT 234: Intention to create legal relations; presumption of
social context can be rebutted if there is enough evidence to the contrary
Morgan Utilities Ltd v Scottish Water Solutions Ltd [2011] CSOH 112: Objective test:
whether parties intended to be legally bound ‘there and then’. (per Lord Hodge at para 52)
(i) Did the parties manifest an intent to be legally bound ‘there and then’?
(ii) Objective approach: what would the reasonable and honest person in the position of
the parties have intended or what would have been the reasonable expectation of the
sensible business person in the position of the parties?
(iii) The court should consider not only the events as they unfolded but also the parties’
behaviour after the alleged agreement.
(iv) The court should take a neutral approach.
WS Karoulias v Drambuie Liqueur Co Ltd 2005 SLT 813: Parties may agree terms but can
stipulate not to be bound until a written contract is signed.
Regus (Maxim) Ltd v Bank of Scotland [2011] CSOH 129: reaffirmed that A promise must
clearly show an intention to be legally binding. (per Lord Menzies at para 46)
Requirements of Writing (Scotland) Act 1995 s1(2)(a)(ii): Gratuitous unilateral
obligations require writing unless undertaken in business.
Formation
Muirhead & Turnbull v Dickson (1905) 7F 686: Contracts are a result of what people say
and do, not what they think. (Objective test)
Mathieson Gee (Ayrshire) Ltd v Quigley 1952 SC (HL) 38: No contract where offer and
acceptance refer to different subject matter.
Wolf and Wolf v Forfar Potato Co 1984 SLT 100: Qualified acceptance kills the original
offer; no contract.
Thomson v James (1855) 18 D 1 offer can be revoked before acceptance received, however
it must be delivered before the revocation stands
,Harvey v Facey [1893] AC 552: Statement of price alone is not an offer. (English case,
persuasive)
Adverts
Fisher v Bell [1961] 1 QB 394: Display of goods in a shop is an invitation to treat. (English
case, persuasive)
Partridge v Crittenden [1968] 1 WLR 1204: Advertisements are invitations to treat, not
offers. (English case, persuasive)
Philp v Knoblauch [1907] SC 994: Advert inviting custom may constitute an offer if
expressly stipulating price, subject matter etc.
Sale of Goods Act 1979 s57(2): Defines when auction bids form binding contracts, namely
each bid is an offer, and can
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256: Unilateral contract can be formed when
performance of conditions occurs via advert, however terms must be explicit (English case,
persuauvive)
Revocation
McMillan v Caldwell 1991 SLT 325: Offer effective on communication; but can be revoked
before acceptance, communication is assessed explicitly
Burnley v Alford 1919 2 SLT 123: Revocation effective when communicated, even if unread.
Thomson v James (1855) 18 D 1 death
Postal Acceptance
Thomson v James (1855) 18 D 1: Postal acceptance rule: contract forms when acceptance
posted.
Countess of Dunmore v Alexander (1830) 9 S 190: a offer can be revoked, after acceptance
has been sent, but only if sent via a quicker form of communication
In this case, the acceptance and revocation (sent via express mail was received in the same
lot of post)
Tinn v Hoffmann & Co (1873) 29 LT 71: Cross offers do not form a contract. (English case,
persuasive)
2/2/71: A writes to B – “I wish to buy X for £1,000”
2/2/71: B writes to A – “I wish to sell X for £1,000”
Acceptor must be aware of offer to accept – held no contract
, Interpretation
Charter Reinsurance Co Ltd v Fagan [1997] AC 313: Literal approach – apply ordinary
meaning of words. (English case, persuasive)
“I believe that most expressions do have a natural meaning, in the sense of their meaning
in ordinary speech…. The inquiry will start, and usually finish, by asking what is the
ordinary meaning of the words used.” - per Lord Mustill (at 384)
Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896: Contextual
approach – interpret language in light of background knowledge.
(English case, persuasive)
1. Interpretation is the ascertainment of the meaning which the document would convey
to a reasonable person having all the background knowledge which would
reasonably have been available to the parties in the situation in which they were at
the time of the contract.
2. The background was famously referred to by Lord Wilberforce as “the matrix of
fact”, but this phrase is, if anything, an understated description of what the
background may include. Subject to the requirement that it should have been
reasonably available to the parties … it includes absolutely anything which would
have affected the way in which the language of the document would have been
understood by a reasonable man.
3. …
4. The meaning which a document (or any other utterance) would convey to a
reasonable man is not the same thing as the meaning of its words. The meaning of
words is a matter of dictionaries and grammars; the meaning of the document is
what the parties using those words against the relevant background would
reasonably have been understood to mean….
5. The “rule” that words should be given their “natural and ordinary meaning”
reflects the common sense proposition that we do not easily accept that people have
made linguistic mistakes, particularly in formal documents. On the other hand, if one
would nevertheless conclude from the background that something must have gone
wrong with the language, the law does not require judges to attribute to the parties
an intention which they plainly could not have had.”
Per Lord Hoffman at (912)
*Objective approach, of a reasonable
person*
