Topic One Agreement (Offer).

Transcription

1 Topic One Agreement (Offer). Introduction: Central requirement of a contract is the existence of an agreement between two parties concerning the promise in question. Nature of an agreement: Agreement is an understanding b/w two parties that one of them will do something, or will promise to do so, in return for the other doing something, or promising to do something. o 2 elements:! Meeting of the minds (agreement referred to as consensus ad idem)! At least one promise Agreement must be entered into voluntarily; therefore it must not be the result of illegitimate pressure being exerted by one party to the other. Whether parties have reached an agreement is determined objectively. Agreement is required only about entering into the contract and its terms; it is not concerned with the desirability or motives of parties. Agreement can exist even if one felt they were obligated to agree because of their economical or personal circumstances. Agreement can exist even though one party is not happy with the terms and entered into the contract reluctantly. Where one party is in a superior bargaining position to the other, generally the law does not prevent them from using that power to drive a bargain that is overwhelmingly in their favour ACCC v CG Berbatis Holdings Pty Ltd o AT 64: good conscious does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests o 2 general qualifications to this rule; firstly the unwritten rule will render a contract voidable at the instigation of the weaker party if the agreement was induced by the use of illegitimate pressure. And second; the ACL creates a number of consumer guarantees in favour of consumers, which cannot be excluded by an agreement b/w parties. (ss 51-64) ACL is set out in schedule 2 of the Competition and Consumer Act 2010 (Cth). Smith v Hughes: Smith wanted to sell oats to Hughes. Hughes agreed to buy believing that he was purchasing old oats when in fact they were new oats. Hughes returned the oats when he discovered this, Smith sued. Court found on appeal that the question was not whether the parties had a common understanding but about their conduct and communication to one and other. Ordering a new trial, ultimately in Smiths favour. (buyer beware) International perspectives: Concept of a contract being voluntary is reproduced in both Indian and Chinese law. Although China seems to go further in regards to implying fairness and good faith in the formation and performance of contracts The nature and duration of offers: An offer can be made to a particular person, to a group, or to the world. Carlill v Carbolic Smoke Ball Company: Held that you cannot contract with everybody. It is not a contract made with the whole world. It is an offer made to the world to become liable to anyone who, before it is retracted, performs the condition resulting in a contract between the company and the limited proportion of the company who come forward and perform that condition on the faith of the advertisement. o If this is an offer to be bound, then it is a contract the moment the person fulfils the condition. Offers are distinguished from invitations to deal as a communication will be considered an offer if the party making it intended that an affirmative response would immediately give rise to an agreement. If on the other hand the communication was to merely initiate negotiations it will be characterised as an invitation to deal. Displaying goods: Is considered to be an invitation to deal, even thought the display is accompanied by a price tag of some kind. (Fisher v Bell [1961]) Pharmaceutical Society of Great Britian v Boots Cash Chemists: Contract is not completed until the customer having indicated the products they wish to purchase then go

2 up to the cashier and offer to buy what they have decided and the shopkeeper accepts that offer. Auctions: Includes three parties the seller, the auctioneer and the bidder. AGC (Advances) Ltd v McWhirter: A bid is considered an invitation to treat where there has not been a reserve price. Meaning the auctioneer has the right to accept or reject any bids (Payne v Cave 1789) as the offer is not a bidding contract until the bid is accepted usually by the fall of the hammer. Ascent from both parties is required; signified by the hammer. There is debate also about whether advertising the auction without reserve constitutes an definite intention to sell to the highest bidder. Rejected by Scottish court (Fenwick v McDonald 1904). Although Warlow v Harrison basically solidified the decision in Payne v Cave. Advertisements: Are the most typical forms of invitations to deal Otherwise each person that responds to the advertisement would create a contract with the company. Which may result in the company obtain more contracts than they could honour. Which is why advertisements are only invitations to deal meaning response towards the advert are offers that can be rejected when supply is exhaust (Grainger v Gough 1896) This is not always the intention of advertises as seen in the Smoke Ball Case which is why it is important to always look at the individual facts of the case. Lefowitz v Great Minneapolis Surplus Store: There are a number of authorities that state that a particular advertisement can constitute an offer, where acceptance will create a binding contract. The test for whether a binding obligation may result from an advertisement addressed to the general public is whether the facts show that some performance was promised in positive terms in return for something requested I Williston, Contracts. Emphasizing that where the offer is clear, definite and explicit, and leaves nothing open to negotiation, it constitutes an offer, acceptance of which will complete the contract. Bait advertising: Bait advertising is the process of advertising certain goods at extremely low prices to attract customers to the store with the intention of selling them other goods, at normal prices, rather than, or in addition to, those advertised. By ensuring these adverts constitute and invitation to deal not an offer retailers were able to avoid exposing themselves to having to supply any or many of the product at that low price. This specific practice is now prohibited by the ACL under section 35(1). S35(1): A person must not, in trade and commerce, advertise goods or services for supply at a specified price if: 1) There are reasonable grounds for believing that the person will not be able to offer for those goods or services at that price for the period that is, and in the quantities that are, reasonable having regarded to: i. The nature of the market in which the person carries on business and ii. The nature of the advertisement; and 2) The person is aware or ought to be aware of those grounds. Calls for tender: A call for tender will usually be regarded as merely an invitation to make an offer, which can be accepted or rejected by the person making the call. Although in some cases the call for tender may be considered an offer because of the circumstances of the case. In such case by submitting the tender, the invitee accepts the offer and thereby creates a contract in the terms of the undertaking, regardless itself of whether the actual tender is accepted or not. Termination of offers: Once an offer is terminated it can no longer be accepted. Revocation: This is where the offer is withdrawn and the offeror communicates this decision to the offeree. An offer can be revoked at any time before it is accepted. Once acceptance has occurred an offer cannot be revoked. Revocation also cannot occur if the offeror promises to include a term, which states he cannot revoke the offer. This is made in exchange for consideration. (Board of Control of Eastern Michigan University v Burgess)

3 Dickinson v Dodds: Revocation will not be effective unless and until it is communicated to the offeree. This does not have to be communicated directly by the offeror, just as long as the offered is aware that the offer is no longer available. o Postal rule also does not apply in connection to this, only applies to the communication of acceptance. Byrne v Van Tienhoven: Where the offeror has indicated in some way that using mail as a method of communication is acceptable, acceptance of the offer is complete at the moment the offeree posts the letter of acceptance. And a revocation is not valid until communicated directly to the offeree. (eg, when they receive the letter of revocation not when it is sent). In cases such as the smoke ball case where the offer is made to the world, requiring this level of communication is impractical, so it is sufficient to publish a notice of revocation that is at least as prominent as the notice making the original offer. (Shuey v United States) In relation to the international sale of goods a more flexible approach is taken. This is governed by what is known as the Vienna Convention. United Nations Cnvention on Contracts for the International Sale of Goods 1980: Article 16: 1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has despatched an acceptance. 2) However, an offer cannot be revoked: i. If it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or ii. If it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. Rejection, or counter-offer, by the offeree: Rejection in effect is saying no to an offer. A counter offer is indicating that the offer is acceptable in substance, but seeking to vary the terms of the proposed contract. Although different within their intent both have the same effect of terminating the previous offer. (Hyde v Wrench) Counter offer must be distinguished from a mere request by the offeree for information, or clarification. (Stevenson, Jaques and Co v Mclean) If the terms of acceptance differ in any meaningfully way from those of the original offer, at common law this would appear to amount to a counter-offer, terminating the original offer. This contrasts from the view of the Vienna Convention. United Nations Cnvention on Contracts for the International Sale of Goods 1980: Article 17: 1) An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror. Article 19: 1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter offer. 2) However, a reply to an offer which purports to be an acceptance but contains addition or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or despatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance. 3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially. Lapse of time: If the offer specifies a time in which it must be accepted, acceptance after that time will be ineffective unless the offeror agrees to waive the stipulation. Although if the offeror deliberately avoids receiving acceptance during that time, acceptance after that will still be effective (Bragg v Theophilos) If duration of offer is not stipulated, the offer will come to an end after a reasonable time; what is reasonable depends on the facts of each case. (Balla v Theophilos)

4 Topic Two Agreement (Acceptance) Acceptance: The relationship between offer and acceptance is an affirmative response to an offer. Key element of this definition is that the offeree s conduct occurs in response to the offer; merely doing what the offeror asks is not sufficient. (Crown v Clarke) o he was not acting on or in pursuance of or in reliance upon or in return for the consideration contained in the proclamation. o Starke J Suggests that where the offeree knew of the offer it will be presumed that their action was in response to it (also see Port Jackson Stevedoring Pty Ltd v Salmon & Spraggon) o This view is also adopted by USA and India (s4 of the Indian Contract Act 1872) Cross offers do not amount to acceptance (Tinn v Hoffmann & CO) Who may accept an offer?: An offer can accepted only by the person to whom it is addressed. (Bolton v Jones) An acceptance of the purported offer would amount to a counter offer on the original terms in which the original offeror can accept or refuse. (Lang v James Morrison & Co Ltd) o It is important to look at the substance of the offer before making this decision. If the offer was made directly to the person then they can only accept it. Acceptance by conduct: Acceptance may occur through conduct of the party or parties (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd) o Even though the documents where not signed, by paying Paull Machon by the terms set out in the contract this amounted to acceptance of the offer. o taking the benefit of an offer with the knowledge of its terms and knowledge of the offerors reliance on payment being made in return for his work Also non-return of unsolicited goods has the potential to be seen as acceptance by conduct. With the dispatch of goods being seen as an offer and the retention of the goods being seen as acceptance. To prevent people from falling into contracts because of their inactivity the following provision is contained in the ACL: SECTION 41(1): If a person, in trade or commerce, supplies unsolicited goods to another person, the other person: a) Is not liable to make any payment for the goods; and b) Is not liable for the loss of or damage to the goods, other that loss or damage resulting from the other person doing a wilful and unlawful act in relation to the goods during the recovery period. Contracts much be considered in whole when multiple negotiations have been made b/w the parties. (Butler Machine Tool Co Ltd v Ex- Cell-O Corp (England) Ltd. o Also see Maxitherm Boilers Pty Ltd v Pacific Dunlope Ltd o In determining whether and when a contract is made in the course of an ongoing series of communications, it is necessary to consider the communications as a whole. Article 19(2): of the Vienna Convention allows an affirmative response to an offer to constitute acceptance, even though it differs from the terms of the offer, as long as it does not materially alter those terms and the offeror does not object without undue delay.

5 Communication of acceptance: As a general rule, an acceptance will not be effective unless and until it is communicated. For acceptance to be operative it must be operative, it must be communicated to the offeror. Also communication must be by the offeree or someone they have authorised to communicate the acceptance. Communication by an unauthorised third party will not be effective. (Powell v Lee) Felthouse v Bindley: Acceptance must be communicated Exceptions to this rule: o Offeror wavies the need to communicate o Silence of offeree in special circumstances of the case constitutes acceptance. o Offeror is estopped from denying acceptance o The postal acceptance rule applies. o Offeror indicates a mode for acceptance not evolving communication. Waiver: The offeror may indicate to the offeree that if they decide to accept the offer there is no need to communicate the acceptance. Only disadvantages the party who initiates this method. I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or implied intimates a particular made of acceptance it is only necessary for the person to whom such an offer is made to follow the indicated method of acceptance. Bowen LJ (Smoke Ball Case) if the person making the offer, expressly of impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance performance of the condition is sufficient acceptance without notification (Smoke ball case) The only problem with this is if the offeree s acceptance is called into question it would be difficult for the offeree to prove when and where acceptance occurred. As the acceptance is effective once the offeree has decided to accept the offer. Silence: Waiver does not allow the offeror to place the burden of communication of rejection onto the offeree. In short, silence alone cannot be treated as assent. Although when silence is combined with other factors such as conduct it then can amount to acceptance. (Rust v Abbey) an offer may not impose a contractual obligation upon an offeree by stating, that if the latter does not expressly reject the offer made, it will be taken to have accepted it Kirby J (Empirnall Holdings v Machon Paull Partners) o Courts do not like to impose legal liability upon individuals for omissions. o CL protective attitude towards liberty of conduct. o under the common law theory of contract, the silent acceptance of an offer is generally insufficient to create any contract The objective theory of contract requires an external manifestation of assent to an offer. McHugh J A Cannot assert that he will regard silence as acceptance (Felthouse v Bindley (1892) Cases in the states have held that the custom of the trade, the course od dealing, or the previous relationship b/w the parties imposed a duty on the offeree to reject the offer or be bound. More often or not the offeree will be bound because, knowing of the terms of the offer and the offerors intention to enter into a contract, he has exercised a choice and take the benefit of that offer. (Laurel Race Course Inc v Regal Construction Co Inc (1975) o An offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances, which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms.

6 Estoppel: Estoppel is applied when the offerors conducts prevents the offerees communication of acceptance from reaching the offeror. In this circumstance the courts will treat the situation as if the offeree s acceptance did reach the offeror. Entores Ltd v Miles Far East applies examples such as if the offeree leaves a message of acceptance but the offeror does not quiet understand the acceptance and decides not to reply the message. Or if the offeree posts an acceptance by fax but the offerors printer is put of ink and they decide not to reprint the letter. Offeror will be estopped from claiming that he didn t receive the letter of acceptance. Postal acceptance rule: The general principle is that acceptance is seen as occurring at the moment the letter is posted, or a telegram is handed in for transmission, rather that when it is received.(bressan v Squires) Also acceptance will be deemed to have occurred even if the letter or telegram becomes lost within the postal system and never actually reaches the offeror, as long as it is not the offerees fault. As it operates primarily to the benefit of the offeree there are some strict limitations o Only applicable if the terms and circumstances of the offer stipulate that acceptance by post is a possible method of communication. Wont apply if there is a contrary stipulation in the offer (Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd). o Will not apply if it was unreasonable to use the post on that day for example the postal employees were on strike. Or if the offer was made by a means of quicker communication (Dicta Howard Smith & Co v Varawa) o Does not apply to instantaneous forms of communication such as telephone, telex (Brinkibon Ltd v Stahg stahl) or (Schib Packaging Srl v Emrich Industries Pty Ltd) o Does not apply to the revocation of an offer. (Byrne v Van Tienhoven) o It does not operate in a way in which allows the offeree to gain an advantage by posting the letter of acceptance after discovering that it is going to be revoked but before it is communicated to him. (Morrison v Thoelke) Mode specified by the offeror: Offeror can specify the mode in which acceptance is to occur. May include wavering the need for communication of acceptance. If the offeror stipulates by the terms of his offer that it may, or may not be accepted in a certain manner acceptance occurs as soon as the offeree does that stipulated act, whether it has come to the attention of the offeror or not. (Manchester Diocesan Council for Education v Commercial & General Investments Ltd) Where the offeror has prescribed a mode of acceptance but not in the terms, any mode of acceptance that is not less advantageous as the mode stipulated will also amount to acceptance. (Manchester Diocesan Council for Education v Commercial & General Investments Ltd) (Allied Steel & Conveyors Inc v Ford Motor Co) Electronic communications: The formation of contracts by means of electronic communication is now governed by legislation in all Australian jurisdictions. Electronic Transactions Act 1999 (Cth): pg 69 of contract book. Agreements reached without offer and acceptance: There are circumstances in which parties may conclude that a contract has taken place even though they never actually communicated with each other. (Clarke v Dunraven) yacht race. Brambles Holdings Ltd v Bathurst City Council: By looking at the complete dealings of the parties involved an agreement can satisfied by viewed as a whole and objectively from the point of view of reasonable persons of each sides, the dealings show a concluded bargain. A manifestation of mutual assent may be made even though neither offer nor acceptance could be identified and even though the moment of formation cannot be determined.

7 Topic Three- Certainty And conditional contracts. Introduction: Agreements will not give rise to contractual obligations unless it is sufficiently certain. Meaning it has to be expressed with clarity to enable the court to determine the intention of the parties and give effect to that intention. An agreement will fail on the ground that it is uncertain where: o Terms are too vague, or ambiguous to show what the parties intended. o Agreement is illusory. o The agreement fails to deal with matters that are essential for agreements of its kind. o Where the agreement amounts to nothing more than to enter into a agreement into the future. By identifying the correct issue through illusory, uncertain, vague or ambiguous will achieve your marks. Types of uncertainty: Vague or ambiguous terms: If the terms of the agreement are so vague, or ambiguous, that meaning cannot be given to them, the agreement will not be enforced. Scammell v Ousten. Although the courts will seek to uphold agreements wherever possible, as it is their duty to resolve uncertainty and correct the defects that lie in the contracts constructed by the parties. To find a common intention. This is especially the case in commercial agreements (Scammell v Ousten) And agreements, which have been partly performed (Foxtel Management Pty Ltd v Seven Cable Television.) A court will not make a contract for the parties though on terms in which they should have agreed upon in the first instances. The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd: Has solidified the concept in Scammell v Ousten where Lord Wright states that so long as the language used by the parties is not so obscure and so incapable of any definite or precise meaning that the court in unable to attribute to the parties any particular contractual intention the contract cannot be held to be void or uncertain or meaningless. Also clarifies that in commercial contracts although the term at cost is broad it is not vague or ambiguous. Illusory agreements: An illusory agreement is one that makes that performance of a parties promises entirely a matter for that party s discretion. Objectively look at the parties language Davis v General Foods Corp: general foods agreed to buy services from Davis at a price solely within [it s] discretion. Such agreements are said tp be void for uncertainty. Biotechnology Australian Pty Ltd v Pace: where the term is to uncertain of content and depends on the fulfilment of one party to the agreement which results in the contract being void. Not creating any contractual obligations. Thorby v Goldburg: a provision for future arrangements not a contract concluded before the parties. Incompleteness: An agreement will not be enforceable as a contract if it does not deal with all essential matters. What is essential depends on the circumstances of each individual case. Eg. Sale of land must have a fixed price in some way (Hall v Busst) An contract though does not have to be determined to great detail before a binding agreement is met. (Anaconda Nickel Lt v Tarmoola Australia Pty Ltd) Goods Act 1958 (Vic): 1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.

8 2) Where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price. What is reasonable is a question of fact dependent on the circumstances of each particular case. Australia and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd: Clarifying that all essential matters within a contract must be settled. It is first principle of law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Godecke v Kirwan: This case was different as the term was not left to the digression of one party. It was left to the digression of a third party. Formula: A formula provision is designed to settle the content of an essential term without the need for further negotiations. For example previously it has been allowed to leave the price to be determined by reference to a particular price list (Hillas & Co Ltd v Arcos Ltd) Machinery: A machinery provision is a mechanism agreed upon by the parties to resolve the precise content of a term sometime in the future. Examples include nominating a particular person, or a designated officer holder, to fix the sale price of land. (Hall v Busst) Or the rent to be paid upon the renewal of the lease (Booker Industries Pty Ltd v Wilson Parking) Where the machinery provision requires the cooperation of the parties and they refuse from cases in Australia and England there is an implied contractual obligation that the parties will cooperate to enable the provision to operate. (Sudbrook Trading Estate Ltd v Eggleton) If a person nominated to determine the price refuses to do so or dies, the England courts have taken a more proactive stance willing to substitute their own machinery into the contract to up hold it. Australian courts on the other hand have not been willing to intervene with contracts as stated in Hall v Busst if the named or prescribed person dies or cannot or will not fix the price or value, the contract cannot, as a general rule, be inforced. Although there are grounds to believing the Australian courts now may be willing to take a more interventionist approach if the principle was challenged. Agreements to agree and agreements to negotiate: When parties wish to form a binding agreement between each other but do not feel as if they are able to finalise the terms of a complete contract immediately, they may seek to enter into an agreement to agree or an agreement to negotiate. It is clear law that this agreement is void for uncertainty. Are these agreements vague or uncertain? These agreements can be saved with the application of formulas Courts will not lend their aid to an incomplete agreement. Eg agree to agree in the future. The attitude of courts towards this and lock out agreements which essentially don t allow parties to deal with third parties are discussed in the next case. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd: Agreements to negotiate will not be enforceable were the terms are not clear. But: o In a case called Hilla s Co v Arcos Ltd provided there was good consideration for an agreement to negotiate the agreement may be enforceable. o Lord Denning said this was bad law. You cant as it was to uncertain, to many variables. Will it even prevail? o J Kirby in this case then agreed with Lord Wright in the first saying I do not share the opinion of Lord Denning. Agreeing with Lord Wright saying that an agreement to negotiate will be enforceable provided there is good consideration. Depending upon the intentions of the parties. Intending to be binding. o My personal view is I agree with Lord Denning. (unsettled law)