Agreement and Contractual Intention

Question 1

Goods on display: when does offer take place?

Answer 1

The customer offers to buy the goods when he presents them at the payment point and acceptance takes place when the shop takes payment for the goods

Pharmaceutical Society of GB v Boots Cash Chemists

Question 2

Postal Rule

Answer 2

A letter of acceptance which is posted is complete on posting and the contract will be formed at that point

Adams v Lindsell (1818)

Question 3

Goods in shop window?

Answer 3

Goods on display in shop window are an invitation to treat

Fisher v Bell [1961]

Question 4

Advertisement?

Answer 4

An advertisement is treated as an invitation to treat

[Partridge v Crittenden]

Question 5

Advertisements for rewards?

Answer 5

Adverts for rewards treated as offer as there is an intention to be bound as soon as the information is given

[Williams v Cawardine (1833)]
R v Clarke

Question 6

Carlill v Carbolic Smoke Ball Co [1893]

Answer 6

Court dismissed the plea as a mere puff because the defendant claimed to have deposited 1000 with alliance bank as evidence of its sincerity. As a result of that claim, a reasonable person reading the advertisement would treat the promise to pay 100 as seriously and one which would create a binding obligation. The advert was an offer

Question 7

Auction: when are the offers and acceptances?

Answer 7

Bids are offers, fall of the auctioneers hammer = acceptance. Bids can be withdrawn at anytime before acceptance. Auctioneers requests for bids are invitation to treat.

S 57(2) Sale of Goods Act 1979

Question 8

Advertised as being without reserve

Answer 8

S 57(3) SoGA mentions reserve price

Barry v Davies ( t/a Heathcote Ball) 2000 - 2 machines list price of 14000 each advertised as without reserve. Barry bids 200 each. Auctioneer refused to accept bid and withdrew the machines from sale. Court said there was offer of unilateral contract which was accepted by the highest bidder. If auctioneer refuses, bidder only has a claim against the auctioneer and not the owner.

Question 9

Scammell v Ousten

Answer 9

There must be certainty in offer and acceptance, or court may not uphold contract

Question 10

Hillas v Arcas

Answer 10

“timber of fair specification” was too vague

Question 11

Definition of an offer?

Answer 11

Professor Treitel has defined an offer as ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.” (Treitel, The Law of Contract)

Confirmed in Allied Marine Transport v Vale do Rio Doce Navegacao SA (Leonidas)

Question 12

Tender where unilateral contract?

Answer 12

Harvela Investments Ltd v Royal Trust Company of Canada Ltd [1986]

Two parties (the claimant and the second defendant) were invited to tender for the first defendant’s shares in a co. Telexes sent saying they would accept highest bidder. House of Lords: the telexes were offers of a unilateral contract to sell to the highest bidder

Question 13

Blackpool & Flyde Aero Club v Blackpool Borough Council [1990]

Answer 13

Although invitation to tender is normally no more than an invitation to treat, in this case the defendant should have specified the terms on which tenders would be considered. They had not done so and accordingly were bound by the reasonable expectations of the tenderers to have their bid considered. Council had impliedly offered to consider all tenders, and was thus liable to the Aero Club for damages in lost opportunity.

Question 14

Methods of termination of offer?

Answer 14

Revocation of the offer by the offeror
Rejection by the offeree
Lapse of time

Question 15

Gratuitous Promise to keep offer open?

Answer 15

Routledge v Grant [1828] - gratuitous promises to keep an offer open are not binding. Therefore, in general, a promise to keep an offer open is not binding.

Question 16

Offer revocable if consideration has been given to keep it open?

Answer 16

No - Mountford v Scott [1975] - Claimant paid £1 for the option to buy V’s house for £10,000. Option exercisable in 6 months. V purported to revoke the offer. Court held that as consideration was given, the offer was irrevocable for six months.

Question 17

Was there an agreement?

Answer 17

The courts adopt an objective approach to deciding whether there was agreement between the parties (Smith v Hughes 1871).

Corroborated in Allied Marine Transport v Vale do Rio Doce Navegacao (the Leonidas) [1985] - although offeree must believe that the offeror actually intended to make an offer

Question 18

How can an offer be terminated?

Answer 18

Revocation of the offer by the offeror

Rejection by the offeree

Lapse of time

Question 19

Should revocation be communicated to the offeree?

Answer 19

Yes, withdrawal of the offer must be given and must be communicated. This was implicit in the decision in Byrne and co v van tienhoven (1880), in which the withdrawal of an offer by telegram was held to take effect only on receipt.

Question 20

Exceptions to rule that revocation must be communicated to the offeree

Answer 20

Treitel, the law of contract, 13th ed., p 43:

If sent to last known address of the offeree.

Withdrawal that reaches the offeree may be effective if he simply chooses not to read it.

Question 21

How can an offer made to the public be revoked?

Answer 21

The company must publish a sufficiently prominent notice of withdrawal in the relevant newspapers, eg by a notice that was at least as prominent as the original advertisement and in the same section of the newspapers.

Shuey v United States (1875)

Question 22

When is notice of revocation effective, if sent to a business during normal office hours?

Answer 22

Notice will be effective on receipt where it is reasonable to expect a member of staff to be available to read a notice of revocation.

If revocation not read due to oversight of staff this does not make the revocation ineffective.

The Brimnes [1975] - a telex arrived between 5:30pm and 6pm but was not read until the next day. The Court of Appeal decided that it was communicated on arrival. (Megaw LJ)

Ultimately also depends upon what is reasonable

Question 23

Revocation may be communicated by a reliable third party.

Answer 23

Dickinson v Dodds (1876) - revocation can be communicated by a reliable third party.

Need not have been authorised by offeror, but must objectively be perceived as being reliable.

Question 24

When can an offer of unilateral contract be revoked?

Answer 24

Normally completion of the act signifies acceptance. However a number of judicial authorities indicate partial performance of a unilateral contract is sufficient to prevent revocation by the offeror.

Harvard Law Review: two offers: express and implied. Implied promise not to revoke if the specified act is started within a reasonable time.

Question 25

Errington v Errington and Woods [1952] Court of Appeal or HC?

Answer 25

Father buys a house; son and daughter in law live there; said if they pay mortgage instalments he will transfer the house to them; a unilateral contract as they did not promise to pay off; father dies and widow sought possession; fathers promise held irrevocable so log as couple pay mortgage instalments. Denning says there was an implied promise.

Question 26

Rejection by the offeree - how can the offeree reject?

Answer 26

If the terms of acceptance differ from those of the offer then there is no contract. There is a counter offer

Hyde v Wrench (1840) - counter offer is implied rejection of the original offer. Facts: D offered to sell farm for 1000 pounds. Claimant at first made a counter offer of 950 then after said he would take for 1000. D refused to sell. Held: no contract as offer to buy at 950 was an implied rejection of original offer and destroyed it.

Question 27

Is query for information revocation of offer?

Answer 27

No, simple request for information does not affect the offer. It still stands and can be accepted.

Authority for this principle is Stevenson Jacques and co v McLean (1880).

Question 28

Termination through lapse of time?

Answer 28

The offeror may specify that the offer will stay open only for a particular time. If not, the offer will terminate after a reasonable time.

Question 29

Definition of acceptance?

Answer 29

Treitel: “a final and unqualified expression of assent to the terms of an offer”

Question 30

Must the offeree be aware of the offer in order to accept?

Answer 30

Yes. R v Clarke (1927) Australian case. The Australian govt advertised offer of reward for info leading to the arrest of certain murderers. Clarke saw the offer but subsequently gave info when he himself was suspected.

Higgins: “there cannot be assent without knowledge of the offer”

Williams v Cawardine (1833) - reward for info leading to conviction of a murderer. Claimant knew of the reward but in fact provided the information because she was dying and wanted to ease her conscience. The court held this did not preclude valid acceptance of the offer

Question 31

Battle of Forms - acceptance or counter offer?

Answer 31

Butler Machine Tool v Ex-Cell Corporation [1979]

Facts: claimant offered to sell machinery to claimant delivery in 10 months price 75000. Claimant sent the offer on its usual standard form. Form said claimants terms to prevail over any terms on the defendant’s standard form.

Claimants terms had price variation clause which allowed them to increase price of machinery to keep pace with inflation.

Def sends form purporting to accept the claimant’s offer but theirs said price fixed at 75000.

Question 32

Was there an agreement?

Answer 32

The courts adopt an objective approach to deciding whether there was agreement between the parties (Smith v Hughes 1871).

Corroborated in Allied Marine Transport v Vale do Rio Doce Navegacao (the Leonidas) [1985] - although offeree must believe that the offeror actually intended to make an offer

Question 33

How can an offer be terminated?

Answer 33

Revocation of the offer by the offeror

Rejection by the offeree

Lapse of time

Question 34

Should revocation be communicated to the offeree?

Answer 34

Yes, withdrawal of the offer must be given and must be communicated. This was implicit in the decision in Byrne and co v van tienhoven (1880), in which the withdrawal of an offer by telegram was held to take effect only on receipt.

Question 35

Exceptions to rule that revocation must be communicated to the offeree

Answer 35

Treitel, the law of contract, 13th ed., p 43:

If sent to last known address of the offeree.

Withdrawal that reaches the offeree may be effective if he simply chooses not to read it.

Question 36

How can an offer made to the public be revoked?

Answer 36

The company must publish a sufficiently prominent notice of withdrawal in the relevant newspapers, eg by a notice that was at least as prominent as the original advertisement and in the same section of the newspapers.

Shuey v United States (1875)

Question 37

When is notice of revocation effective, if sent to a business during normal office hours?

Answer 37

Notice will be effective on receipt where it is reasonable to expect a member of staff to be available to read a notice of revocation.

If revocation not read due to oversight of staff this does not make the revocation ineffective.

The Brimnes [1975] - a telex arrived between 5:30pm and 6pm but was not read until the next day. The Court of Appeal decided that it was communicated on arrival. (Megaw LJ)

Ultimately also depends upon what is reasonable

Question 38

Revocation may be communicated by a reliable third party.

Answer 38

Dickinson v Dodds (1876) - revocation can be communicated by a reliable third party.

Need not have been authorised by offeror, but must objectively be perceived as being reliable.

Question 39

When can an offer of unilateral contract be revoked?

Answer 39

Normally completion of the act signifies acceptance. However a number of judicial authorities indicate partial performance of a unilateral contract is sufficient to prevent revocation by the offeror.

Harvard Law Review: two offers: express and implied. Implied promise not to revoke if the specified act is started within a reasonable time.

Question 40

Errington v Errington and Woods [1952] Court of Appeal or HC?

Answer 40

Father buys a house; son and daughter in law live there; said if they pay mortgage instalments he will transfer the house to them; a unilateral contract as they did not promise to pay off; father dies and widow sought possession; fathers promise held irrevocable so long as couple pay mortgage instalments. Denning says there was an implied promise.

Question 41

Rejection by the offeree - how can the offeree reject?

Answer 41

If the terms of acceptance differ from those of the offer then there is no contract. There is a counter offer

Hyde v Wrench (1840) - counter offer is implied rejection of the original offer. Facts: D offered to sell farm for 1000 pounds. Claimant at first made a counter offer of 950 then after said he would take for 1000. D refused to sell. Held: no contract as offer to buy at 950 was an implied rejection of original offer and destroyed it.

Question 42

Is query for information revocation of offer?

Answer 42

No, simple request for information does not affect the offer. It still stands and can be accepted.

Authority for this principle is Stevenson Jacques and co v McLean (1880).

Question 43

Termination through lapse of time?

Answer 43

The offeror may specify that the offer will stay open only for a particular time. If not, the offer will terminate after a reasonable time.

Question 44

Definition of acceptance?

Answer 44

Treitel: “a final and unqualified expression of assent to the terms of an offer”

Question 45

Must the offeree be aware of the offer in order to accept?

Answer 45

Yes. R v Clarke (1927) Australian case. The Australian govt advertised offer of reward for info leading to the arrest of certain murderers. Clarke saw the offer but subsequently gave info when he himself was suspected.

Higgins: “there cannot be assent without knowledge of the offer”

Williams v Cawardine (1833) - reward for info leading to conviction of a murderer. Claimant knew of the reward but in fact provided the information because she was dying and wanted to ease her conscience. The court held this did not preclude valid acceptance of the offer

Question 46

Battle of Forms - acceptance or counter offer?

Answer 46

Butler Machine Tool v Ex-Cell Corporation [1979]

Facts: claimant offered to sell machinery to claimant delivery in 10 months price 75000. Claimant sent the offer on its usual standard form. Form said claimants terms to prevail over any terms on the defendant’s standard form.

Claimants terms had price variation clause which allowed them to increase price of machinery to keep pace with inflation.

Def sends form purporting to accept the claimant’s offer but theirs said price fixed at 75000. Asked the C to sign and return a tear-off slip which provided that the terms of the defendant should prevail.

C signed and returned the tear off slip. C tried to deliver the machinery and invoke the price variation clause.

Court found a contract on the Ex-Cell-O’s terms. D’s form of acceptance amounted to a counter offer. This had been accepted by the claimant returning the tear-off acknowledgement slip which provided that the terms of the D were to prevail.

Question 47

Battle of Forms - The last shot wins the battle?

Answer 47

Brogden v Metropolitan Railway Co. (1877) - explains why businesses persist in putting forward their own standard terms.

Question 48

Communication of acceptance?

Answer 48

Entores v Miles Far East Corp [1955] - acceptance must be communicated

Powell v Lee (1908) - Can be communicated by a duly authorised agent of the offeree

Exception: Carlill v Carbolic Smoke Ball: Where there is a unilateral contract, performance of the act is sufficient to amount to acceptance

Question 49

Entores v Miles Far East [1955]

Answer 49

Acceptance must be communicated to the offeree. Acceptance must be communicated by the offeree. A Dutch company sent an offer by telex to an English company. The English company sent a counter offer response by telex and the Dutch company responded by telexing an acceptance of the counter offer. The Court of Appeal held that the contract was made in England where the acceptance was received.

Question 50

Can silence constitute acceptance?

Answer 50

No - Felthouse v Bindley (1862) - An uncle offered to buy his nephew’s horse for £30.15s. He said If I hear no more about him I will consider the horse mine at £30.15s. The nephew did not reply. He had previously arranged for the horse to be sold by auction, and so now instructed the auctioneer to withdraw the horse from the sale. Auctioneer sold the horse by mistake. Court held that there was no contract between uncle and nephew. The nephew had not done anything to bind himself, and although he intended to have a contract with the uncle, his silence was not acceptance. (If there had been a contract, the uncle could have sued the auctioneer in the tort of conversion)

Question 51

Exception to silence cannot constitute acceptance

Answer 51

Re Selectmove [1995] - Court of Appeal saw no reason in principle why an offeree should not bind himself by silence (eg. by saying something like ‘if you do not hear from me, assume i accept your offer’)

Question 52

What are the exceptions to the rule in Entores v Miles Far East Corp that acceptance must be communicated

Answer 52

1) Unilateral contract (Carlill v Carbolic Smoke Ball)

2) Postal Rule (Adam v Lindsell 1818)

Question 53

What is the postal rule exception to the rule that acceptance must be communicated?

Answer 53

A letter of acceptance which is posted is complete on posting and the contract will be formed at that point. [Adam v Lindsell (1818)] if:

. It was reasonable to use the post as a method of communication
. It was properly posted
. The offeror did not exclude the postal rule impliedly/expressly (Howell v Hughes)

NB facts of Adam v Lindsell - Defendants offered to sell wool to the plaintiffs, asking for a reply “in the course of post”. D’s letter got misdirected so that plaintiff’s acceptance was delayed. D sold wool elsewhere. Plaintiff said there was an enforceable contract as they had already posted acceptance. Court held this acceptance to be sufficient.

Question 54

Household Fire and Carriage Accident Insurance v Grant (1879)

Answer 54

If Adams v Lindsell and Howell v Hughes are statisfied, then the post need not arrive. Household Fire and Carriage Insurance v Grant (1879) Court of Appeal - The defendant applied for shares in the plaintiffs’ company. The company allotted the shares to the defendant, and duly addressed to him and posted a letter containing the notice of allotment, but the letter never was received by him. Held, by Baggallay and Thesiger, L.JJ., Bramwell, L.J., dissenting, that the defendant was a shareholder. Powerful critique from Bramwell, who said that it was arbitrary to only apply this rule to the post.

Question 55

Limitations to the postal rule?

Answer 55

1) It only applies to acceptances, and not to any other type of communication which may pass between potential contracting parties
2) it only applies where it was reasonable for the acceptance to be sent by post
3) the letter must be properly stamped, addressed and posted
4) the rule can always be excluded by the offeror, either expressly or by implication (Holwell Securities v Hughes)

Question 56

Holwell Securities v Hughes [1974]

Answer 56

Excludes the postal rule. Defendant granted the claimant an option to buy a house expressed as being ‘exercisable by notice in writing to [the defendant]”

Question 57

Brinkibon v Stahag Stahl

Answer 57

With regards to when acceptance is effective with instantaneous communication: Lord Wilberforce: “No universal rule can cover such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgement where the risks should lie”

Question 58

ITCLR: Domestic agreements

Answer 58

Balfour v Balfour [1919] - Plaintiff was wife, husband is defendant. Husband on government appointment in Ceylon and gave wife 30 l a month so that she would not ask for further maintenance. Wife sued for the money. Held by the court that in domestic agreements the presumption is that there is no intention to create legal relations. Policy reason Atkin L.J. Floodgates

Question 59

ITCLR: Exception to Balfour v Balfour

Answer 59

1) Merritt v Merritt [1970] - The husband had left the wife and was living with another woman. He signed a written agreement to the effect that he would pay his wife £40 a month and in consideration of her repaying the mortgage on the jointly-owned matrimonial home, he woud transfer it to her sole ownership. Couple clearly had not wanted to leave anything to chance. It was a formal agreement which they obviously intended to be legally binding.
2) Consideration involved

Question 60

ITCLR: Commercial Agreements

Answer 60

Presumption that parties intended to create legal relations: Edwards v Skyways [1964]: An airline pilot is made redundant. As part of redundancy package is offered and accepts an ‘ex gratia’ payment. Employer then refuses to make the payment on the basis that there was no intention to be legally bound. Held by the court that the employer had not rebutted the presumption in order to establish that there was in fact no intention to be bound.

Question 61

ITCLR: Exception to presumption of ITCLR in Commercial Agreements

Answer 61

Rose and Frank Co v. Compton Bros [1925] - the agreement between the two companies included an ‘Honorable Pledge Clause’. Clause specifically stated that it was not entered into as a ‘formal or legal agreement,’ but was only a definite expression and record of the intention of the parties. The parties ‘honourably pledged’ themselves to the agreement in the confidence that it will be carried out with mutual loyalty and friendly co-operation. CofA - clear evidence that parties did not intend to be legally bound and this was upheld by the HofL.

Question 62

Lloyds Society v Twin

Answer 62

Acceptance followed by indulgence. Still an acceptance which is valid