Contracts Summary Notes TOPIC ONE: AGREEMENT- OFFER AND ACCEPTANCE There are 4 elements of a contract: Agreement, consideration, intention to create legal relations and certainty The above are all required for a contract to be valid AGREEMENT Underlying issue is whether, viewed as a whole and objectively form the point of view of reasonable persons on both sides, the dealings show a concluded bargain (Meates v A.G (1983)) Offer and Acceptance Objective approach: what intention would be inferred by the uninvolved bystander What would the bystander infer the parties intent by looking at their actions Is both an offer and acceptance present? As both are needed for the agreement to be valid Offer First part of the exchange of promises that creates an agreement It is a proposal to another person which gives them the opportunity to accept or reject Needs to be a valid offer for the agreement to be in turn, valid An offer is the willingness to enter a bargain. So made as to justify another person in understanding that his assent to the bargain is invited and will conclude it Three Components 1) Proposal to another person- must give opportunity to accept or reject it 2) Clear and essential terms- show intent to be legally bound 3) Offeror knows that it will be legally binding if accepted Non-offers Invitation to treat: E.g. advertising, notices, negotiations, shop windows and displays Any proposal to invite customers Where offer to negotiate, in which case, there is no offer to be bound by any contract i.e. classifieds, notices of textbook for sale: except only one copy of text- thus seller not legally bound by everyone who wants the textbook Pharmaceutical society v Boots cash chemist Court asked to find moment of contract in a self-service store Items displayed on shelf- is displaying goods an acceptance of offer? Unlawful to sell certain drugs unless under supervision of pharmacist (pharmacist act) Pharmaceutical society said that the purchase and acceptance is complete when the customer takes item off the shelf- yet if this were true, cant replace the items You are not bound as soon as you pick up an item as you can replace it
Carlill v Carbolic smoke ball Concerns advertisement amounting to an offer Company deposited 1000 pounds to bank to show legitimacy Reward claimed, yet company did not pay Was it an intended offer or mere puffery Deposited money to prove they were willing to compensate Is it too vague to be binding? No, time limits can be inferred Lord justice lindley inferred that it promises protection for a reasonable time Offer can be made to world at large- Lord justice Bowen: why should not an offer be made to all the world, which is to ripen into a contract with anybody who comes forward and performs the condition? An acceptance generally has to be notified but an offeror can waive the requirement of notice Can notice of acceptance be contemporaneous with notice of performance? Yes, according to Lord Justice Lindley Has the P provided any consideration in exchange for the promise of the D? Yes in the form of detriment to offeree Firstly, D gets indirect benefit as the ad and use of smoke balls will increase sales Two, using the ball as directed is an inconvenience to the P Payne v cave (auction case) Auction is an invitation to treat Bids are offers Fall of hammer equals acceptance of highest bid AGC v McWhirter (auction case) Auctioneer said a price had been withdrawn and mcwhirter was the highest bidder- seller didn t want him to have it McWhirter said contract was formed when he became the highest bidder- court did not agree Relied on authority of Payne v Cave- 1789 case which decided that the bids are the offers and the knock down is the acceptance Offer: negotiations: Hard to identify the moment the formation of contract occurred- called battle of the forms Butler v Ex-cell-O: correspondence: how to identify the offer and acceptance verse a series of invitations to treat Gibson v Manchester City council: Mr Gibson was an offeree and argued that the letter was the offer and his reply was the acceptance Offer: Ticket cases Hard to determine offer and acceptance MacRobertson Miller Airlines v Commissioner of State Taxation Ticket contained disclaimer reserving the right to cancel flights and bookings- passenger entitled to full refund
Court had to determine whether the issuing of the ticket was an offer and that acceptance was performance I.e. by travelling on the flight Mere puffery: not an offer Puffery is a promise not intended to be carried out Seen in advertisements for e.g. this washing powder will make your clothes whiter than white Not intended to be taken seriously and not to be legally binding E.g. life s pretty straight without twisties Offer: Duration Lapse: Enforceable only if offer is an option Offer to remain open for specified period: automatically lapses once that time is expired Time limit may be an express term or implied by the court Revoking/withdrawing an offer How can an offer to all the world (e.g. carlill) be revoked? No Australian authority on this US authority- publish in same journal over similar time period More problems arise in the case of a unilateral offer where offeror purports to revoke after offeree starts to perform but before they have completed performance Mobile Oil v Wellcome 1991 franchise convention- six for nine proposal- if franchise achieve 90% in circle of excellence competition for 6 years in a row, they are granted 9 years for free In 1994 this competition was cancelled Damages sought Court said should run competition for the franchises to completely accept the proposal Was the proposal an offer? If so, was Mobil entitled to revoke the offer before the 6 years had elapsed? Can an unilateral offer be revoked after the offeree has commenced performance, nut before performance is complete and acceptance is effective? Unclear at what time offer is accepted No general rule to say unilateral offer can t be revoked Will depend on circumstances of each case whether offeror has made an implied promise not to revoke offer Rejection- once rejected offer terminates offeree can t accept unless offer is renewed Conditional offers: offer may stay open so long as specified conditions are met Options Are an agreement to keep an offer open Option must be supported by consideration An exception to the rule is that offers can be revoked any time prior to acceptance Goldsborough Mort v Quinn
Acceptance: second element of agreement Response to an offer can include five ways: accept in its terms, reject, counter-offer, seek further information or do nothing Where an offer has been made, a contract binding the parties will result when and only when the offeree has clearly accepted the offer An offer can be accepted in 10 ways: Offer and acceptance must correspond If the offeree attempts to vary the terms, omit any terms or include any further terms, than the acceptance is not valid An acceptance which changes the terms is a counter-offer Counter-offer is treated as a rejection of the offers Negotiation complicates this rule Battle of the forms Butler machine tool co v Ex-cell-0 corp Denning MR: traditional offer and acceptance model not adequate: 2 nd letter on different terms would be rejection- find points of agreement instead Lawton and Bridge JJ: traditional model- 23 May offer, 27 May counter-offer- sending back acknowledgement slip was acceptance Acceptance must be unequivocal (clear and unambiguous) No terms left to negotiate- idealised model Cases such as Butler clearly show that subjectively the parties may not be ad idem, and that there may be minor issues to be resolved after the contract is in place Acceptance can be implied or express Can accept by conduct- especially if parties have had a previous course of dealings More realistic model Unilateral contract- acceptance is by performance Difficult to find moment of acceptance Courts recognise acceptance can be seen through implied words or conduct E.g. use smoke ball=acceptance of conduct Acceptance should be in the mode, expressly or by implication Acceptance is not effective until it is communicated to offeror General rule: a decision to accept is not enough, communication to third party is not enough, until acceptance is communicated offeror, offer can be withdrawn Exceptions: postal acceptance rule, and the offeror can dispense with the requirement of notice Acceptance should be in the mode prescribed by the offeror i.e. offeror can decide to waive notice of acceptance mode of acceptance can be prescribed expressly or by implication e.g. in Carlill the offeror implicitly prescribed acceptance by performance to waiver of notice
if the offer specifies a mode of acceptance, this doesn t necessarily mean that no other mode is acceptable Bressan v Squires offer was an option this option may be exercised by you by notice in writing addressed to me any time on or before 20 dec 1972 offeree accepted by posting a letter on 18 dec letter arrive 22 dec postal acceptance rule: if the offer anticipates that acceptance will be by post, then date of postage is time acceptance is effective- no need for offeror to receive notice decision: postal acceptance rule didn t reply due to word notice inferred actual communication. The word addressed doesn t necessarily mean an address on a posted envelope Manchester Diocesan Council v commercial and general offer stipulate acceptance by letter posted to offeror s address acceptance was by latter delivered for surveyor hired by offeror was the acceptance valid, even though it didn t comply with the stipulated mode? Yes, because other modes were not excluded Other modes okay as long as they are no less advantageous to the offeror Offeror cannot prescribe silence as a mode of acceptance Silence cannot be prescribed as mode of acceptance Authority is Felthouse v Bindley Case: - Uncle offers to buy horse if I hear no more about him, I will consider the horse mine at 30 pounds and 15 shillings - Nephew accepts - Horse accidently sold at auction - Was there a contract - No cannot require offeree to reject an offer to be bound by it - Inertia selling- no contract due to this silence (s64 trade practices Act) Empirical holdings Silence may be included in contract which comprises acceptance- especially in context where offeree takes the benefit of the conduct Offeror can dispense with the requirement of notice Postal acceptance rule Just because sent by mail, doesn t mean the postal rule will be in operation If it applies, acceptance is effective at the time of posting Applies when it is within the contemplation of the parties that, according to the ordinary usage of mankind, post might be used as a means of communication acceptance Henthorn v Fraiser Court does not like to extend this rule to new technology except telegrams Electronic act