Agreement to Contract

Question 1

What is a contract?

Answer 1

A contract can be described as:

“A legally binding agreement made between two or more parties, by which rights are acquired by one or more to acts or forbearances on the part of the other(s)”

Question 2

What are the FIVE essential elements of a valid simple contract?

Answer 2

1. Offer
2. Acceptance
3. Consideration
4. Intention to create legal relations
5. Capacity

Question 3

Do the courts look for objective or subjective indicators of a contract?

Answer 3

The court looks for objective indications of an agreement to decide whether a binding contract exists.

Question 4

Which case defined the approach of the courts to look objectively for the presence of a contract?

Answer 4

Kennedy v Lee (1817)

Lord Eldon

Question 5

What is an “Offer”?

Answer 5

An offer may be defined as:

“An expression of willingness to contract on clear terms”.

Question 6

What is the difference between an Offeror and an Offeree?

Answer 6

Offeror = person making the offer

Offeree = person receiving/accepting the offer

Question 7

What is an “Invitation to Treat”?

Answer 7

An invitation to treat is not an offer.

It is a notification that the statement maker is willing to start a negotiation.

Question 8

Invitation to Treat:

Is an Invitation to Treat binding on the person making the invitation?

Answer 8

No, an invitation to treat is made by a person who has no intention to be legally bound by a particular set of terms.

Invitation’s to Treat cannot be accepted directly; an offer must be made which in turn must be accepted.

Question 9

Pre-contract negotiations

Which case involved pre-contract negotiations that did not result in a contract?

Answer 9

Harvey v Facey (1893) - Bumper Pen Hall

Harvey contacted Facey asking “will you sell BPH, lowest cash price”

Facey responded “lowest cash price £900”.

Harvey responded “we agree to buy BPH for £900”.

Court held that no binding contract was made. The original communication asked two questions:

1. Will you sell; and
2. At what price?

Facey only responded to question two on the price, but did not confirm they were agreeing to sell BPH.

Question 10

Is an Advertisement an “Offer” or an “Invitation to Treat”?

Answer 10

The general rule is that advertisements are treated as an Invitation to Treat.

Question 11

Invitation to Treat

Which case involving an advert was held to be an Invitation to Treat?

Answer 11

Partridge v Crittenden (1968)

Appellant advertised in a paper that he was selling Bramblefinch Hens.

The sale of live birds was a criminal offence.

It was held on appeal that the advert was an invitation to treat and not an offer, therefore the Appellant was not in breach of the law nor had a contract been created.

Question 12

Why are adverts generally treated as invitations to treat?

Answer 12

1. Negotiation - some sales may require negotiation.
2. The seller may wish to reserve their rights of service due to matters such as legal restrictions e.g. they may not be able to sell alcohol to an underage person.
3. Limitation of Stock - the seller may not be able to fulfill the order.
4. Sales Hype - adverts often include “sales hype/sales puff”, such as “it gives you wings”

Question 13

Why was the advert in Carlill v Carbolic Smoke Ball Co (1893) held to be an offer rather than an Invitation to Treat?

This is an example of a Unilateral Contract

Answer 13

Advert placed stating that its use would positively cure/prevent ailments including flu.

A £100 reward was offered if anyone contracted flu after using the product.

£1,000 was placed in a trust account to prove the company would pay the reward.

The offer was addressed to the whole world.

Acceptance took place by a person buying the product.

Court said the offer was not mere sales hype; the ordinary person would interpret the advert as going beyond this due to the words used and actions:

a) stating it would “positively cure”
b) there would be a reward; and
c) placing money in a bank in sincerity of the promise.

Question 14

Is the display of goods in a shop window/shelf an offer or an invitation to treat?

Answer 14

Goods for sale in a shop window are Invitations to Treat.

Fisher v Bell (1961) - flick knife

Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1952) - poisons on a shelf.

Question 15

Which case where goods were on display was treated as an offer, and not an Invitation to Treat?

Deckchairs

Answer 15

Chapelton v Barry District Council (1940)

Display of deckchairs for hire.

Held to be an offer, which could be accepted by the payment by the customer and the sitting on the chair.

Question 16

Is a mechanised sale (vending machine/parking etc.) an offer or an invitation to treat?

Thornton v Shoe Lane Parking (1971)

Answer 16

Mechanised sales could be treated as offers.

Thornton v Shoe Lane Parking (1971)

Lord Denning held that when a ticket is issued by an automated machine

“the offer is made when the proprietor of the machine holds it out as being ready to receive the money”.

Acceptance takes place when the customer puts the money in the slot.

Question 17

Are goods on a website offers or invitations to treat?

Answer 17

Generally, websites are treated as Invitations to Treat.

The offer is made by the customer when they complete an order form and they provide payment details.

Question 18

Is an auction an offer or invitation to treat?

Answer 18

Depends on whether a reserve has been set or not.

Payne v Cave (1789)

Held that an auction bid constitutes the offer, and the auctioneer is free to accept the bid.

s57(2) Sale of Goods Act 1979 recognises that the fall of the hammer at an auction completes the sale.

However:

Barry v Davies (2000) - no reserve

Where there is no reserve set by the seller, the auctioneer is obliged under a collateral warranty to accept the highest bid, a failure to do so would be a breach of contract.

The contract is created between the seller and the buyer, with the auctioneer acting as the seller’s agent.

Question 19

Is a Tender an offer or an Invitation to Treat?

Answer 19

Spencer v Harding (1870)

The court held that a tender is usually an invitation to treat.