AGREEMENT = OFFER + ACCEPTANCE + CERTAINTY Clarke v Duncan

Transcription

1 CONTRACTS A AGREEMENT = OFFER + ACCEPTANCE + CERTAINTY Clarke v Duncan Offeror: Person who makes the offer (Promisor) Offeree: Person who receives the offer (Promisee) (accepts) 1. Was (insert method of communication) an offer? OFFER: The expression or willingness of another to be legally bound by sated terms. Australian Woollen Mills v Commonwealth If terms do not leave room for negotiation: Go to communication of offer, otherwise go to Invitation to Treat. NOT OFFERS: Mere puff: exaggerated or often unsubstantiated claim about a product Carlill v Carbolic Smoke Ball co. Supply of information: Asking questions about product or service and providing terms party may enter. Harvey v Facey INVITATION TO TREAT A request to negotiate or make an offer with a contract in mind Carlill v Carbolic Smoke Ball co Advertisements in catalogue/ circular: Grainger v Gough Newspaper/ magazine/ periodical: Partridge v Crittenden UNLESS: Nothing left to be negotiated Carlill v Carbolic Smoke Ball co. (OBJECTIVE TEST) Goods in shops: Pharmaceutical Society of Britain v Boots Cash Chemists Call for Tenders: Spencer v Harding UNLESS: Indication lowest/highest tender will be accepted: Hughes Aircraft Systems v Airservices Australia Invitation to tender indicates all tenders submitted in correct form by the due date will be considered. Blackpool & Fylde Aero Club Ltd v Blackpool Burrow Council Auction with reserve: Call for bids ITT. Each bid is offer that can be accepted or rejected. Payne v Cave Auction Without Reserve: Conditional acceptance upon bidder being highest Warlow v Harrison Internet Auction: ITT Smyth v Thomas Boarding Bus: Wilkie v London Passenger Transport Board Options: Routledge v Grant Statement of price (I would sell for $200) Harvey v Facey

2 Offers Automatic vending machines Thornton v Shoe Lane Parking A notice to the entrance to an automatic car park Thornton v Shoe Lane Parking Placing order on advertised goods. Grainger v Gough Was offer communicated? COMMUNICATION OF OFFER Offer is only effective when communicated to offeree Taylor v Laird The communication must be made by the offeror or someone authorised by the offeror. Cole v Cottingham Offer can be made to the whole world Carlill v Carbolic Smoke Ball Co. Offeror may expressively or impliedly prescribe the method of communicating acceptance. Failure to adopt that method is at the oferee s risk. However, in the appropriate case, equally expeditious method of communication may be acceptable Tinn v Hoffman & Co Offeror can waive communication of acceptance, but it must be shown: a) There is an expressed or implied intimation from the offeror that a particular mode of acceptance will suffice and particular mode doesn t involve communication b) Must be some overt act or conduct on part of offeree which evidences an intention to accept and which conforms to mode of acceptance indicated by offeror Carlill v Carbolic Smoke Ball Co. Standing offer: An offer to supply goods for a period up to a certain amount as required. Offer is accepted each time an order is placed Standing offers can be revoked at any time Colonial Ammunition Co. v Reid Can the offer be terminated? (If applicable) TERMINATION OF OFFER An offer may be terminated at any time before it has been accepted. Once an offer is accepted, the offer is irrevocable. Great Northern Railway Co v Witham Where the offer takes the form of an option, then the offer cannot be terminated before the time of the option has expired. Goldsborough Mort v Quinn Withdrawal by offeror An offer can be withdrawn by an offeror at any time before acceptance, unless promised to keep open for fixed period Routledge v Grant To be a valid withdrawal of offer there needs to be communication of withdrawal to offeree and must be received. Byrne & Co v Van Tierhoven Can be made by reliable third party but NOT RUMOUR Dickinson v Dodds Offer to the world at large If offer is to world at large, the withdrawal may not need to be received. Shuey v United States An offeror should, use same medium to advise withdrawal as used to communicate offer Unilateral contract withdrawal:

3 An offer may not be withdrawn after the promisee has begun to perform the necessary conditions to enable acceptance of the contract to be completed Abbott v Lance An offer can be revoked after acceptance if in reasonable time Mobil Oil Australia v Lyndel Nominees Pty Ltd Rejection by offeree If the offeree rejects the offer and rejection is communicated to offerror, offer is terminated Stevenson Jacques & Co v McLean Lapse of Time An offer must be accepted within the time prescribed or, if there is no time prescribed within a reasonable time. Ramsgate Victoria Hotel Co v Montefiore Matters taken into account are the nature of the subject matter and the means used to communicate offer. J Buckley Manchester Diocesan Council for Education v General Investments ltd By failure of a condition subject to which the offer is made If the offeree does not comply with the condition, offer will cease. Gilbert J McCaul v Pitt Club Ltd Death An offeree cannot accept an offer after she or he has had notification of the death of the offeror Coulthart v Clementson If Offeree dies, offer lapses automatically Reynolds v Atherton (unless property sale) Has offer been accepted? (In unilateral contract acceptance is consideration) ACCEPTANCE: Acceptance of an offer is the expression, by words or conduct, of assent to the terms of the offer in the manner prescribed or indicated by the offer HBF Dalgety v Morton Acceptance of terms: Acceptance must be unqualified and must correspond to the terms of the offer. Tinn v Hoffman & Co Once offer is accepted it is final Great Northern Railway Co v Witham The acceptance must be in reliance of the offer rather than for some other reason R v Clarke There is no contract if two offers identical in terms, cross in the post. As there is no knowledge of the offer: Tinn v Hoffman & Co Counter offer: - Counter offer is not acceptance of original offer Brogden v Metropolitan Railway - A counter offer causes the original offer to terminate. Original offer cannot be accepted unless it is renewed Hyde v Wrench - A purported offer that departs from the terms of the offer, in a minor, non-material way may be effective Turner Kempson v Camm - Courts may allow divergence from terms for benefit of offeror. Ex Parte Fealey

4 Conditional Acceptance: - Subject to contract Not acceptance. Only binding when formal contract executed. Masters v Cameron When was acceptance effective? Communication of Acceptance: Acceptance has no effect until it is communicated and received by offeror Byrne & Co v Leon Van Tienhoven & Co A mere enquiry will not amount to acceptance. Stevenson Jacques v McLean Acceptance may be communicated only by the offeree or his or her agent Powell v Lee Methods of acceptance: Depends upon whether the offeree has complied with requirements of method of acceptance for particular transaction. If offeror has not specified, appropriate method of acceptance will depend upon the intension of the parties as derived from particular facts. Powell v Lee Offeror may expressly or impliedly prescribe method of communicating acceptance, but if Offeree has equally good method, may be acceptable Tinn v Hoffmann & Co Silence is not acceptance UNLESS: Offeror has waived need for acceptance to be communicated. Carlill v Carbolic Smoke Ball Co. Where formal acceptance (signing) avoided: Empirnall Holdings v Machon Paull Acceptance by conduct. Must be shown: a) There is an express or implied suggestion from the offeror that a particular mode of acceptance will suffice and that the particular mode does not involve communication; and b) There must be some act or conduct of the offeree that evidences an intention to accept, conforming to the mode of acceptance indicated by the offeror. Carlill v Carbolic Smoke Ball Co. Instantaneous communication: ( , telephone, fax, verbal, sms) Contract is formed when acceptance of offer is communicated AND RECEIVED by the offeror Entores v Miles Far East Corporation Postal Acceptance: Contract formed as soon as the letter is posted and is immaterial whether the letter was lost or destroyed in post Henthorn v Fraser Only applies where post might be acceptable communication Bressan v Squires IF A DATE IS SPECIFIED FOR ACCEPTANCE: DISPLACE THE RULE Is agreement complete and certain? CERTAINTY No legally binding contract exists unless what the parties agreed upon can be determined objectively, with reasonable degree of certainty in eyes of third party. Scammel v Ouston Individual terms

5 If agreement is so vague and obscure that it shows parties have no intention to be bound, it s unenforceable York Air Conditioning and Refrigeration v Commonwealth A contract will be unenforceable if it reserves a discretion for one party not to carry out his or her obligations G Scammell and Nephew ltd v HC and JG Ouston Law will imply meanings to make contract certain wherever it can. Hillas v Arcos Agreements to Negotiate (Heads of agreement): Whether an agreement to negotiate is regarded only and an agreement to agree and therefore unenforceable will depend on its terms. If the terms are sufficiently certain, an agreement to negotiate may be enforceable Coal Cliff Collieries v Sijenhama Saving ambiguous, uncertain or meaningless contracts: Link to external standard: Hillas and Co Ltd v Arcos Ltd a) Directly: (Standard hire and purchase terms used by particular entity) Hawthorn Football Club v Harding b) Indirectly: (relying on original or previous contract) Hillas and Co Ltd v Arcos Ltd Link to reasonableness standard (contractual intention is clear, but some detail missing) CANNOT BE USED FOR LAND Hillas and Co Ltd v Arcos Ltd Severance: Uncertain clause may be severed and remainder of contract saved. Fitzgerald v Masters But only if: a) Offending clause is NOT a pivotal part of contract Whitlock v Brew b) Part of remaining clause still reflects intention of parties. New South Wales v Banabelle Electrical Pty Ltd c) If clause is inserted for benefit of party, that party may waive benefit of clause Whitlock v Brew d) Where parties enter into a contract containing different kinds of obligations, and issues of uncertainty arise in relation to one aspect of arrangement, severance of latter part may be possible Life Insurance Co of Australia v Phillips Incomplete agreement: An agreement to agree in the future is incomplete May & Butcher v The King Mechanisms to complete: Reference to a third party: An agreement whereby terms are to be determined by a third party is complete Godecke v Kirwan Discretion retained by contracting party: a contract may purport to leave some matters to the discretion of one of the contracting parties, at a later stage, to finalise one or more terms of an agreement, or may leave to one of the parties a discretion as to the method of carrying out a particular obligation. Godecke v Kirwan UNLESS Discretion of party to contract is so wide that it is illusionary Loftus v Roberts If discretion merely relates to the way a party carries out the contractual obligation, it will be enforceable Thorby v Golberg. Breakdown of mechanism to complete: If the parties have established a mechanism for determining a term and that mechanism fails, the court will not substitute its own view to complete the agreement Milnes v Gery

6 HOWEVER Court may determine a reasonable price and not to regard that determination as completing the agreement. Booker Industries v Wilson Parking (UNLIKELY FOR SALE OF LAND) Purchaser may be required to pay reasonable price if price is not otherwise determined s11(2) Sale of Goods Act 1896 (Qld) Subject to Agreements Finance: An agreement made subject to finance is certain but will come to an end if purchaser can t obtain finance. Purchaser must take all steps reasonably necessary to obtain finance approval and it must be satisfactory Meehan v Jones Contract: Where agreement is made but not concluded, until formal contract executed. Masters v Cameron ONE OF FOUR CATEGORIES 1. The parties have reached finality in arranging all terms and intend to be immediately bound to perform those terms, but propose to have the terms restated as a form which will be fuller or more precise but not different binding contract formed 2. The parties have completely agreed upon all terms and intend no departure from or addition to those terms, but have made performance of one or more of the terms conditional upon the execution of a formal document - binding contract formed 3. The intension of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract - no binding contract formed 4. The parties are content to be bound immediately and exclusively by the terms that they have agreed upon while expecting to make further contract in substitution for the first contract containing, by consent, additional term - Binding Contract Formed Baulkham Hills Private Hospital v GR Securities If the parties intend the agreement to be binding on them even before the entry into the final contract, the contract will fall into either 1 2 or 4 CONCLUSION: CONCLUDED AGREEMENT Y OR N

7 INTENTION TO CREATE LEGAL RELATIONS: Was there intention to create legal relations? To create a contract there must be a common interest of the parties to enter legal obligations, mutually communicated, expressly or impliedly Rose & Frank Co v JR Crompton & Bros To show intention to create legal relations the Court will look at the context in which the agreement is formed, and assess whether from objective perspective, parties could have regarded their agreement to have legal consequences Ermogenous v Greek Orthodox Community of South Australia Analyse: Subject matter Seriousness of conduct Expenses involved, especially if party is not wealthy Relationship Hostility in relationship Closeness of family ties Whether Subject matter is business or commercial in nature. Domestic and Social: Presumption that domestic and social arrangements are not intended to have legal force but presumption is easily rebutted. Balfour v Balfour Business: Commercial agreements were presumed to create legal relations and this presumption is difficult to rebut. Edwards v Skyways Look at whether two parties intended to enter a legally binding contract and context in which agreement was made. Ermogenous v Greek Orthodox Community of South Australia Government: Where Gov. activity relates to policy initiative, court will be less likely to find parties entered contractual arrangements Australian Woollen Mills v Commonwealth. Voluntary associations: In absence of property, income or reputational interests, the court has no jurisdiction to decided issues arising out of a consensual but non contractual relationship. Cameron v Hogen Honour Clauses: expressed words in an agreement that the agreement is not intended to have legal consequences Rose & Frank Co v JR Crompton & Bros Letters of Comfort: No binding promises, question of construction of agreement Kleinwort Benson v Malaysia Mining

8 CONCLUDE: IS THERE INTENTION TO CREATE LEGAL RELAITONS Y OR N

9 CONSIDERATION: Have parties provided adequate consideration? CONSIDERATION: An act or promise of an act which is the price paid for the other s promise Dunlop Pneumatic Tyre co v Selfridge & Co. Executory: Yet to be done, promise to do an act (i.e. Promise to pay for house in 30 days.) Executed: Act that is performed (i.e. finding a lost dog, or using the carbolic smoke ball) Consideration must move from the promisee: Tweddle v Atkinson It need not move to the promisor Where a promise is made to joint promisees, it is enough if consideration is given by one on behalf of all because it is then deemed to move from all Coulls v Bagots Executor & Trustee Co Ltd Third party must be in contract or no consideration Tweddle v Atkinson Consideration must be bargained for The act of forbearance must be done in reliance of the promise and not done for other reasons Combe v Combe Consideration must be Sufficient: Consideration must be something of value in the eyes of the law, even if it lacks intrinsic value. Thomas v Thomas But it need not be adequate. Chappell & Co v Nestle Moral obligation or worthy motive does not constitute consideration Eastwood v Kenyon Consideration must not be past Past consideration is not good consideration Consideration will be regarded as past if it has already flowed from the promisee to the promisor Must be examined from the time the relevant promise is made. If at that time, the act, forbearance or promise that is claimed to be consideration has already occurred or been given, consideration is passed. Roscorla v Thomas EXCEPTIONS BELOW Performance of existing duties: Where a public duty is imposed upon the plaintiff by law, performance of that duty is insufficient consideration for the defendant s promise unless the duty is exceeded. Collins v Godefroy If an act would have been performed in any event, there is no consideration. Stilk v Myrick UNLESS Where the plaintiff is bound by an existing contractual duty to the defendant, performance of that duty will not amount to sufficient consideration to support a further promise made by the promisor, unless the duty is exceeded. Williams v Roffey Bros & Nicholls