Contracts 1! Semester Contracts 1 LAWS1071. Rose! 1! Vassel

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1 Contracts 1 LAWS1071 Rose! 1! Vassel

2 AGREEMENT: OFFER The Basis of Contracts 1. Offer + acceptance +communication = agreement 2. Consideration 3. Intention to be legally bound 4. Certainty Agreement pg. 53 txt. When acceptance of the offer has been communicated to the offeror. Acid test in cases where offer and acceptance cannot be identified. Meates v Attorney General [1983] NSWLR 308, 377 (pg. 41 cb) Acid Test' is whether viewed objectively and as a whole the dealings seem to demonstrate a 'concluded bargain'. Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 ( Heydon JA: Where the traditional approach to acceptance is unviable: Can an agreement be inferred in all instances; Has mutual assent been manifested; Would a reasonable person in the position of each of the parties think there was a concluded bargain (objective test). Acceptance can be found without offer and acceptance if mutual assent is manifested. Offer pg. 54 txt. When one party indicates to another that they are willing to enter into a contract with specific terms and that acceptance is invited and will conclude the bargain. Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 ( Heydon JA (obiter) An offer has to have the form of a proposal for consideration which allows the offeree to chose bt. acceptance/rejection. Therefore, communication using 'language of command' and 'peremptorily requests' the other party to perform in a certain way is not an offer. To determine if an offer was made use: Objective test: If a reasonable person in the shoes of the offeree would think an offer had been intended. Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (2) Contract had been formed between the P and the D, obliging the payment of 100lbs. 1. Statement relating to the bank deposit made it clear that a promise was intended. The ad was read objectively, according to what an ordinary person would think. 2. Offer was made to the whole world and could be accepted by any person who performed the conditions on the faith of the advertisement. 3. Offeror may dispense with notification of acceptance. May accept by performance. 4. A reasonable construction must be placed on the ad, making it sufficiently certain. Could be construed in 3 ways but each was satisfied by the Ps situation. 5. Good consideration as use of smoke ball benefit to D and detriment to P. Rose! 2! Vassel

3 Elements of an offer: Certain and clear Communicated Definite, not tentative and not qualified. There is a distinction between and offer, inquiry, and an expression of interest. The language of an offer needs to be certain and unqualified. Conventional approach Gibson v Manchester City Council [1975] 1 WLR 295 HOL (1) Communication that invited a formal application for the purchase of land was not an offer. Objective test to construe an advertisement as it would be perceived by the reasonable person. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 Court of Appeal (2) Language of the advertisement was certain and clear, due to the security of 1000lbs in bank - objective test - offer to the whole world. Not an offer to all the world but an offer may become liable to anyone who, before it was withdrawn, accepted the offer. No offer unless the offeror assumes or offers to assume legal obligations. MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR HCA Barwick CJ and Jacobs J: Conditions in ticket had the effect of exempting the entirety of any possible obligation, thus bc. the airline did not assume/offer to assume any obligations there was no offer. Stephen and Jacobs JJ: Ticket was merely an offer by the airline to carry the passenger which was accepted by conduct. Unilateral contracts pg. 56 txt. Most contracts are bilateral HOWEVER where the offeree accepts the offer by performing his/her side of the bargain. Consideration is executed by one party and executory by the other. Communication of acceptance can be dispensed with by the offeror. Perf. as acceptance implied. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 Court of Appeal (2) Distinguishing conditional gift from unilateral contract Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 ( Cwlth agreed to subsidise purchases of wool by manufacturers - over next 2 yrs AWM purchased large quantities of wool - Cwlth announced discontinuation but would ensure each manufacturer had a certain amount in stock - stockpile of AWM exceeded this so Cwlth required it repay excess subsidy - AWM sued to recover + 3mths of unpaid subsidy. AWM claimed each announcement by Cwlth constituted an offer to pay the subsidy. Distinguish unilateral contract from conditional gift. Three different ways of stating this: 1. Whether offeror expressly or impliedly requested the doing of the act by the offeree ; 2. Whether the offeror has stated the price which the offeree must pay for the promise; 3. Whether the offer was made in order to induce the doing of the act. Could not est quid pro quo or that, viewed objectively, the offer was intended to give rise to a contractual obligation. PC upheld it on appeal but expressed dissatisfaction about request - said not required. Offer only effective if identifies a valid consideration and manifests an intention to create a legal obligation. Lead to binding agreement only if identifies terms of proposed agreement w/ sufficient certainty. Rose! 3! Vassel

4 Invitations to treat pg. 58 txt Shop sales pg. 58 Invitation to others to make offers or begin negotiation. Displays of goods are usually invitations to treat. Fisher v Bell [1961] 1 QB 394 (pg. 58 txt) Shop owner displaying flick knife in shop window not committing offence bc not offer. A customer needs to be able to substitute goods so offer occurs at the checkout. Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd [1953] 1 QB 401 ( Australian courts tend to take a less technical approach to deciding whether goods have been offered for sale for purpose of determining if a statutory provision has been breached. Goodwins of Newtwon Pty Ltd v Gurrey [1959] SASR 295 (pg. 59 txt) Auctions pg. 59 txt D was offering goods for sale in breach of Early Closing Act, although conduct merely invitation to treat. Displayed TV sets w/ marked prices then told purchases couldn t but ones in display but an equivalent set could be purchased from D at a marked price. Usually considered to be an invitation to treat, even without reserve. Each bid constitutes an offer. There are two contracts: Preliminary contract: terms of auction conduct and details. W/ potential buyers + auctioneer. Main contract: relating to the actual sale of goods. AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 (pg. 59 txt.) Tenders pg. 60 txt Announcement that auction to be held w/o reserve didn t change general rule. Holding of auction w/o reserve doesn t constitute offer + didn t bind vendor to sell to highest bidder. Each interested party submits a tender (offer) but does not know what the other parties tenders are. Call for written submissions = invitation to treat. HOWEVER if stipulates conditions = offer. Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 ( Call for tenders said "we bind ourselves to accept" the "highest offer" for the purchase of shares. Outerbridge made referential tender by saying would pay more than others. On appeal to HOL that referential bids outside of intention of contract so Harvela won. In several casess govts. and govt. instrumentalities calling for tenders have owed contractual obligs. to tenderers under prelim. contracts governing tender process. Also imposed obligs. on tenderers. Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 (pg.61) ECA: council was under an implied contractual obligation to consider complying tenders. The call for tenders was an offer, which was accepted by the submission of a complying tender. Council liable for damages under prelim. contract when mistakenly failed to consider P's complying tender. Rose! 4! Vassel

5 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FLR 151 (pg. 61 txt) Finn J - tender process of Civil Aviation Authority governed by 2 "process contracts". 1st by signature of letter in which CAA + 2 tenderers committed themselves to participate in process. 2nd terms set out in a request for tenders, which amounted to an offer accepted by the tenderer's lodgement of a tender. CAA obliged to conduct process in accordance with those contracts. Ticket cases pg. 61 txt Tickets usually considered offers which passenger can accept/reject after having considered the Discovery of offer + acceptance necessary to determine when contract was made + what jurisdiction applies. MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 Ticket does not show terms of agreement but terms of an offer which was later accepted by conduct. Lack of any obligation imposed on airline prevented it from being an enforceable agreement. Where the buyer is not the passenger, 2 contracts arise: (1) the purchase of ticket results in executory agreement between the purchaser of the ticket and the airline; (2) issue of ticket also constitutes an offer made to the passenger, which the passenger can accept by appearing for transportation. Electronic transactions pg 63 txt. Common law rules still apply. Electronic Communications Acts ( ) In response to the UN models for international trade: General proposals to make a contract over electronic communications are invitations to treat until clear intentions to be bound on acceptance are shown. Contract bt. natural person and automated person are not invalid. A natural person has the right to correct an input error and if given no opportunity to do so can withdraw that portion of communication in which the error was made. This has the effect of invalidating the contract. Termination of an offer pg. 65 txt. An offer will no longer be available for acceptance when it is withdrawn by the offeror, lapses or is rejected by the offeree. (1) Withdrawal pg. 65 txt. An offer can be revoked at any time before acceptance. To withdraw: 1. The offer must not have been accepted (otherwise there is breach of contract and damages are payable) 2. Withdrawal of an offer must be communicated - Dickenson v Dodds (1876) LR 2 Ch D 463; 3. No exception is made for a withdrawal sent by post - Byrne & Co v Leon van Tienhoven & Co (1880) LR 5 CPD 344. Options: pg. 65 txt. When the option holder and grantor agree that the option holder can enter into a contract with the grantor on certain terms at a specified time or within a specified period. Option holder then free to chose. Under common law a promise to hold an offer open is binding if consideration has been given for it. A conditional contract - must have consideration. Goldsbrough Mort & Co v Quinn (1910) 10 CLR 674 HCA Rose! 5! Vassel

6 Option holder exercised the option within the time period specified and was able to force the grantor to selll the land as agreed. An offer is binding on the grantor once it has valuable consideration, which in this case was 5s. Griffith CJ + O Connor J Isaacs J Option to purchase property is a contract for the sale of that property, conditional upon the option being exercised within the specified period. (since been confirmed) Option is a preliminary contract to hold open an offer to sell the property. (2) Lapse pg. 67 txt. An offer lapses at the end of the time period for which acceptance of the offer is expressed as being available. If no period of time is stipulated then the offer will lapse after a reasonable time has passed. A reasonable time according to a reasonable person in the position of the offeree. Identifying duration of offer matter of determining how reasonable person would interpret offer. Bartolo v Hancock [2010] SASC 305 pg. 67 txt. An offer was made at beginning of 5 day trial for litigants to discontinue claims against each other and bear own costs Offer was a 'here and now' offer and could not be accepted on the 5th day of the trial. Death of an offeror or offeree: will terminate the offer. However, such generalisations avoided in: Fong v Cilli (1968) 11 FLR 495 Blackburn J, an offeree cannot accept an offer after the the death of the offeror if the offeree knew of the death before acceptance. Carter v Hyde (1923) 33 CLR 115. With options it is presumed that the death of the option holder does not prevent the option from being realised by the option holders personal representatives. HOWEVER if an option is personal to the option holder, then the offer lapses. Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, 76. Obiter Gibbs J - Given an option is essentially a conditional contract there is no reason why it could not be enforced against the estate of the grantor. (3) Failure of condition and changed circumstances pg. 67 txt. Offers can have an express/implied condition that they will lapse if a certain event occurs; or have a condition that must be fulfilled before acceptance. Express conditions McCaul (Australia) Pty Ltd v Pitt Club (1957) Option to renew lease subject to 2 conditions. Must give at least 3 months notice and pay rent. He did not pay rent and only gave 3 months notice. one of the conditions was not fulfilled so the option did not hold. Rose! 6! Vassel

7 Implied conditions Financings Ltd v Stimson [1962] 1 WLR ECA. D signed offer to hire-purchase car from finance comp - cl. said not binding till accepted on finance comps. behalf. B4 comp. signed D took possession of car, but later returned it as dissatisfied. Car stolen from dealer's and recovered badly damaged. W/o knowing this finance comp. then accepted offer. Sued D for breach of hire-purchase agreement. D's offer had implied cond. that car should cont. in cond. of when offer made and on failure of that cond. offer lapsed. Implication of conditions has important applications to contracts involving more than 2 parties. Neill v Hewens (1953) 89 CLR 1. Only one of two co-vendors signed a contract of sale. Ps signed agreement and later sought specific performance even though second vendor had not signed. No contract had been concluded. When one of co-vendors signed presumption was that she did not intend to bind herself unless her co-vendor also signed. (4) Rejection and counter offer pg. 69 txt. After rejection, offer can no longer be accepted, but can be revived. Counter offer rejects original offer. After an offer has been rejected, it is no longer available for acceptance. Tinn v Hoffman & Co (1873) 29 LT 271, 278. Can be revived/form the basis of a new agreement inferred in absence of valid offer + acceptance. Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 A counter offer extinguishes the original offer. Harris v Jenkins [1922] SASR 59. Difference bt. counter offer and inquiry relating to terms. Stephenson, Jacques & Co v McLean (1880) 5 QBD 346. (5) Unilateral contract pg. 69 txt. Difficulty where offeree has begun to perform but not completed acts of acceptance. Mobil Oil Australia v Wellcome International Pty Ltd (1998) 81 FCR 475 ( General rule: The offeror can revoke the offer at any time before acceptance except when there is an implied condition in the contract or an estoppel and in unilateral contracts the is such an implied condition that the offeror cannot withdraw the offer once performance has commenced. Exceptions: The considerations in Mobil where individual facts of the case might make a prohibition on withdrawal unjust. Rose! 7! Vassel