Chapter 1 - Agreement and Contractual Intention Flashcards
What are the elements of a binding valid contract?
- Agreement (offer & acceptance)
- Consideration (something given in exchange for the other party’s promise)
- Intention (that the agreement should have legal consequences)
How do parties reach an agreement?
One party must make an offer (definite promise to be bound by specific terms) which is accepted by the other
What is meant by an offer?
Professor Treitel defines 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, p.8).
Who is the Offeror?
The person who makes the offer
Who is the Offeree?
The person to whom the offer is made
Explain ‘expression’ that is used in Treitel’s definition
this word used in the definition takes many forms, e.g. a letter, newspaper advertisement, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract
Explain ‘intention’ in Treitel’s definition
doesn’t necessarily mean the offeror’s actual intention. The courts adopt an ‘objective’ approach in deciding whether there was agreement between the parties (Smith v Hughes [1871]). They can’t discover what was going in in the minds of the parties nor accept what they say their intention was (subjective approach).
Explain the ‘objective approach in deciding whether there was ‘intention’ and agreement between the parties
courts look at what was said and done between the parties from the point of view of a ‘reasonable person’, and try to decide what a reasonable person would have thought was going on.
Identify the subjective and objective intention in the example: Faheem was advised by motorcycle dealer to ask for £6,000 for his motorcycle. Faheem texted john offering to sell for £5,000. John immediately rang Faheem and agreed to pay £5,000. Faheem said he wouldn’t accept less than £6,000 and said sorry if the price stated in the text wasn’t £6,000 as it must have been an error which he hadn’t noticed.
Even though Faheem intended (subjectively) to sell for £6,000, the price in the text was £5,000. Assuming this communication was the only one between the parties regarding the price, a reasonable person would assume that £5,000 was the intended asking price, and so that was the objective intention. Also, John believed Faheem was making an offer to sell the bike for £5,000. Faheem would be bound to sell the motorcycle to John for £5,000.
What is the case and authority for this objective/subjective distinction of intent?
Allied Marine Transport v Vale do Rio Doce Navegacao SA (1985)
What was the distinction that Goff LJ’s statement made in relation to objective/subjective intention?
“If the offeror so acts that his conduct, objectively considered, constitutes an offer, and the offeree, believing that the conduct of the offeror represents his actual intention, accepts the offer, then a contract will come into existence”.
Although the test is objective, the offeree must believe subjectively that the offeror actually intended to make an offer, introducing a subjective element to what is otherwise an objective test of intention.
In Treitel’s definition of an offer, who does he mean by ‘the person to whom it is addressed’?
This may be one person, class of persons or the whole world. Crucial point: you can only accept an offer that was addressed to you.
Explain why the following statement is NOT and offer, but an invitation to treat: “I am thinking of selling my car. I have been told that £7,000 would be a realistic asking price. Would you be interested in buying it?”
This would NOT amount to an offer as he said he’s “thinking” of selling his car, and price is a potential price. He hasn’t committed himself to selling the car at that price.
What is the general legal principle regarding goods on display in supermarkets and self-service shops? Give an authority too
Goods on display in shop windows or supermarket shelves are not actual offers but ‘invitations to treat’. Authority for this principle is case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953).
Why are goods on display in shops considered invitations to treat rather than offers?
If goods on display were considered offers, a customer might be regarded as accepting that offer as soon as they selected the goods and put it in their basket, unable to change their mind without breaching contract.
At what point does a customer make an offer to buy goods in a self-service shop and when does acceptance take place?
- The customer offers to buy the goods when they present them at the payment point.
- Acceptance takes place when the shop takes payment for the goods.