CONTRACT LAW:
AGREEMENT:
DO NOT USE OFFEREE IN EXAM
STATE: This is an issue of agreement – chronologically discussed
BINDING CONTRACT: Is there a contract?
For there to be a legally binding VALID contract, there must be 3 elements: provide definitions for all in the exam and then apply below
1. Agreement (offer and acceptance) – to establish a contract, one party must make an offer which the other party accepts
2. Consideration: exchange of value (has this been satisfied?) – promise in exchange for promise of money (not likely to be an issue in this section)
a. Does not have to be reasonable, any exchange will suffice
3. Intention to create legal relations [contractual intention] (look to presumptions) – are they commercial parties? (not likely to be an issue in this section)
INTENTION TO CREATE LEGAL RELATIONS?
1. Commercial agreements
a. In a commercial context, there is a very strong presumption of contractual intention (Edwards v Skyways) which is difficult to rebut but is possible (Rose and Frank co
v Crompton Bros) state in the exam: there Is no evidence to rebut this presumption
2. Non-commercial agreements
a. In social and domestic situations (involving family) there is a presumption that the parties did not intend to create legal relations (Balfour v Balfour) which may be
rebutted on the facts (Merritt v Merritt) how close is family tie? Does the exercise require professional skill? How substantial is the task? How informal is the
communication? Is there a promise to buy in consideration of a promise to sell?
*If there is intention to create legal relations, state that the issue in the case concerns agreement…
VALID AGREEMENT? / CONTRACTUAL CERTAINTY
There is agreement if there is a valid offer and acceptance. There MUST be certainty in offer and acceptance, or court may not uphold contract (Scammell v Ouston)
For example, ‘timber of fair specification’- worked because of custom, trade usage and previous dealings (Hillas v Arcos)
Usual conditions of acceptance apply- too vague a statement (Nicolene v Simmonds)
IS A PARTY MAKING AN OFFER OR INVITATION TO TREAT?
OFFER INVITATION TO TREAT
Offer= ‘an expression of willingness to contract on certain terms made with the intention Invitation to treat= a willingness to enter into negotiations. It is made without
that it shall become binding as soon as it is accepted by the person to whom it is addressed’ intention to be bound by specific terms (preliminary stage)
Objective test: would a reasonable person think it to amount to an offer? (Smith v
Hughes)
The offeror must intend to make the offer (The Leonidas) EXAMPLES
Goods displayed in shop windows and inside shops will normally be invitations to
*In the exam, look out for words like ‘looking treat (Fisher v Bell; Pharmaceutical society)- usually offer when customer at
to/leave the offer open/I’ll take it off your payment point and acceptance when shop takes payment for the goods
hands/ could offer/ let you have’ to determine Advertisement in paper that goods are to be sold without more is merely an
how clearly a proposal is expressed – does the invitation to treat (Partridge v Crittenden)
wording show a willingness to be bound?
Auctions:
EXAMPLES An auctioneer’s request or solicitation for bids is an invitation to treat
A display may amount to an offer in very limited circumstances where there is a clear Tenders:
intention to be bound (display of goods in a special sale) Requests for tenders (when businesses outsource a function like cleaning, they
Advertisement can amount to an offer in exceptional cases where there is a clear invite contractors to submit written tenders for the job) will be invitations to
intention to be bound by an acceptance (Carlill v Carbolic Smoke Ball) treat (Spencer v Harding)
o Unilateral: promise in return for an act
A typical type of unilateral contract is an offer of reward (Williams v Carwardine; R v
Clarke)
Auctions:
Standard auction between seller and buyer
The bid is an offer which the auctioneer may accept or reject, according to s57 (2) Sale
of Goods Act 1979 – auctioneer is selling on behalf of seller
S57(3): ‘Reserve price’ is agreed between auctioneer and seller as the lowest price that
may be accepted for the lot
If an auction is advertised ‘without reserve’, there is an offer of a unilateral contract by
the highest bidder (in this case there is a contract between auctioneer and buyer). If
auctioneer refuses, bidder can claim damages (Barry v Davies)- the difference between
the highest amount bid and the market value (do calculations)
Tenders:
Tenders submitted to public companies after invitation will be offers, which may or
may not, be accepted by the business which has invited them (Harvela)
o Building of motorways, police stations, hospitals
Consideration of all tenders in a unilateral contract was an implied promise (Blackpool
& Fylde Aero Club)
ACCEPTANCE OF OFFER: Has an offer been accepted? [Assuming there to be an offer]
Acceptance= definite/ unqualified/total/ unconditional expression of assent to all the terms of an offer (unqualified acceptance of all the terms of the offer). Is it acceptance or a
counter-offer?
1. Acceptance must be communicated
a. GENERAL RULE: acceptance must be communicated by the offeree + received (Entores v Miles Far East Corp Ltd) or by an authorised agent (Powell v Lee) always
start with general rule first (look for phrases such as ‘we accept the deal’)
b. Must know of offer (R v Clarke) and motive for accepting is irrelevant (Williams)
c. Exceptions:
i. There is a unilateral contract- acting is acceptance (Carlil v Carbolic Smokeball Co)- impliedly waived the need for communication
ii. Silence will not normally amount to acceptance by offeror (Felthouse v Bindley)
iii. BUT, offerees (person who is accepting the offer) can bind themselves by silence, waiving communication (Re Selectmove Ltd) = obiter comments
*No universal rule can cover cases with regard to instantaneous modes of communication (electronic)- Brinkibon
2. Acceptance or counter offer
a. Counter offer: if the offeree introduces a new term or provision, it will be a counter offer which acts as an implied rejection of the offer, destroying the offer (Hyde v
Wrench) – has this been accepted? (the phrase ‘but on our standard terms of purchase’ is a new proposal introducing a new term)
b. A request for information: this does not destroy the original offer, which can still be accepted – can be an enquiry about delivery times/ details for example
(Stevenson v McLean)- this will not terminate an offer/ can be alongside acceptance
3. Battle of forms
a. Following an exchange of incompatible terms by the parties (both trying to impose their own standard terms), the last shot rule applies presiding terms (when
party does not reimpose standard terms- two sets of standard terms usually involves this situation- conduct can act as acceptance)
AGREEMENT:
DO NOT USE OFFEREE IN EXAM
STATE: This is an issue of agreement – chronologically discussed
BINDING CONTRACT: Is there a contract?
For there to be a legally binding VALID contract, there must be 3 elements: provide definitions for all in the exam and then apply below
1. Agreement (offer and acceptance) – to establish a contract, one party must make an offer which the other party accepts
2. Consideration: exchange of value (has this been satisfied?) – promise in exchange for promise of money (not likely to be an issue in this section)
a. Does not have to be reasonable, any exchange will suffice
3. Intention to create legal relations [contractual intention] (look to presumptions) – are they commercial parties? (not likely to be an issue in this section)
INTENTION TO CREATE LEGAL RELATIONS?
1. Commercial agreements
a. In a commercial context, there is a very strong presumption of contractual intention (Edwards v Skyways) which is difficult to rebut but is possible (Rose and Frank co
v Crompton Bros) state in the exam: there Is no evidence to rebut this presumption
2. Non-commercial agreements
a. In social and domestic situations (involving family) there is a presumption that the parties did not intend to create legal relations (Balfour v Balfour) which may be
rebutted on the facts (Merritt v Merritt) how close is family tie? Does the exercise require professional skill? How substantial is the task? How informal is the
communication? Is there a promise to buy in consideration of a promise to sell?
*If there is intention to create legal relations, state that the issue in the case concerns agreement…
VALID AGREEMENT? / CONTRACTUAL CERTAINTY
There is agreement if there is a valid offer and acceptance. There MUST be certainty in offer and acceptance, or court may not uphold contract (Scammell v Ouston)
For example, ‘timber of fair specification’- worked because of custom, trade usage and previous dealings (Hillas v Arcos)
Usual conditions of acceptance apply- too vague a statement (Nicolene v Simmonds)
IS A PARTY MAKING AN OFFER OR INVITATION TO TREAT?
OFFER INVITATION TO TREAT
Offer= ‘an expression of willingness to contract on certain terms made with the intention Invitation to treat= a willingness to enter into negotiations. It is made without
that it shall become binding as soon as it is accepted by the person to whom it is addressed’ intention to be bound by specific terms (preliminary stage)
Objective test: would a reasonable person think it to amount to an offer? (Smith v
Hughes)
The offeror must intend to make the offer (The Leonidas) EXAMPLES
Goods displayed in shop windows and inside shops will normally be invitations to
*In the exam, look out for words like ‘looking treat (Fisher v Bell; Pharmaceutical society)- usually offer when customer at
to/leave the offer open/I’ll take it off your payment point and acceptance when shop takes payment for the goods
hands/ could offer/ let you have’ to determine Advertisement in paper that goods are to be sold without more is merely an
how clearly a proposal is expressed – does the invitation to treat (Partridge v Crittenden)
wording show a willingness to be bound?
Auctions:
EXAMPLES An auctioneer’s request or solicitation for bids is an invitation to treat
A display may amount to an offer in very limited circumstances where there is a clear Tenders:
intention to be bound (display of goods in a special sale) Requests for tenders (when businesses outsource a function like cleaning, they
Advertisement can amount to an offer in exceptional cases where there is a clear invite contractors to submit written tenders for the job) will be invitations to
intention to be bound by an acceptance (Carlill v Carbolic Smoke Ball) treat (Spencer v Harding)
o Unilateral: promise in return for an act
A typical type of unilateral contract is an offer of reward (Williams v Carwardine; R v
Clarke)
Auctions:
Standard auction between seller and buyer
The bid is an offer which the auctioneer may accept or reject, according to s57 (2) Sale
of Goods Act 1979 – auctioneer is selling on behalf of seller
S57(3): ‘Reserve price’ is agreed between auctioneer and seller as the lowest price that
may be accepted for the lot
If an auction is advertised ‘without reserve’, there is an offer of a unilateral contract by
the highest bidder (in this case there is a contract between auctioneer and buyer). If
auctioneer refuses, bidder can claim damages (Barry v Davies)- the difference between
the highest amount bid and the market value (do calculations)
Tenders:
Tenders submitted to public companies after invitation will be offers, which may or
may not, be accepted by the business which has invited them (Harvela)
o Building of motorways, police stations, hospitals
Consideration of all tenders in a unilateral contract was an implied promise (Blackpool
& Fylde Aero Club)
ACCEPTANCE OF OFFER: Has an offer been accepted? [Assuming there to be an offer]
Acceptance= definite/ unqualified/total/ unconditional expression of assent to all the terms of an offer (unqualified acceptance of all the terms of the offer). Is it acceptance or a
counter-offer?
1. Acceptance must be communicated
a. GENERAL RULE: acceptance must be communicated by the offeree + received (Entores v Miles Far East Corp Ltd) or by an authorised agent (Powell v Lee) always
start with general rule first (look for phrases such as ‘we accept the deal’)
b. Must know of offer (R v Clarke) and motive for accepting is irrelevant (Williams)
c. Exceptions:
i. There is a unilateral contract- acting is acceptance (Carlil v Carbolic Smokeball Co)- impliedly waived the need for communication
ii. Silence will not normally amount to acceptance by offeror (Felthouse v Bindley)
iii. BUT, offerees (person who is accepting the offer) can bind themselves by silence, waiving communication (Re Selectmove Ltd) = obiter comments
*No universal rule can cover cases with regard to instantaneous modes of communication (electronic)- Brinkibon
2. Acceptance or counter offer
a. Counter offer: if the offeree introduces a new term or provision, it will be a counter offer which acts as an implied rejection of the offer, destroying the offer (Hyde v
Wrench) – has this been accepted? (the phrase ‘but on our standard terms of purchase’ is a new proposal introducing a new term)
b. A request for information: this does not destroy the original offer, which can still be accepted – can be an enquiry about delivery times/ details for example
(Stevenson v McLean)- this will not terminate an offer/ can be alongside acceptance
3. Battle of forms
a. Following an exchange of incompatible terms by the parties (both trying to impose their own standard terms), the last shot rule applies presiding terms (when
party does not reimpose standard terms- two sets of standard terms usually involves this situation- conduct can act as acceptance)
