Chapter 2 Flashcards
Stages of contract
Offer
Agreement
Consideration : transfer of value
Intention: intention to create a legally binding agreement
Capacity and form:
Void
There is no contract and goods should be returned
Voidable
The contract can be set aside by the injured party
Factors for voidable and void contracts
Lack of capacity- an individual should be of sound mind and aged 18 or over
Absence of free will- there should be no duress or undue influence
Illegality- contract must not be illegal
Misrepresentation- an incorrect statement of fact made pre contract which is intended to make the party enter the contract
Contracts must be in writing when
Transfer of land
Consumer credit agreement
Contracts just he evidenced in writing when
Guarantees
Email exchanges and standard terms
Court of appeal changed rules so that contracts can arise form emails
If not clear what parties standard terms will apply then neither will take effect
Offer
Definite promise that is made by an offeror to be bound on specific terms
Must be certain/specific
An invitation to treat is not an offer but a statement of willingness to enter negotiations
Examples of invitations to treat (not offer)
Can’t be accepted
Advertisements
Goods displayed for sale in a shop
Circulation of a price list
Auction
Fisher v Bell
Flick knife displayed in shop window - charged for offering offensive weapons for sale - argued they weren’t offering - invitation to treat
Carill v Carbolic Smoke ball co 1893
Manufactures of a carbolic smoke ball was supposed to prevent influenza.
The company offered a reward of £100 to anyone who contracted influenza after using the product
Carill caught flu and took her to caught as they made an offer to the world at large
How can an offer be terminated
Rejection
A counter offer
Hyde v Wrench 1840
Facts: D offered to sell property for £1000. Two days later, C made a counter offer of £950 which D rejected. C informed D he accepted the original offer of £1000
Decision: original offer of £1000 had been terminated by the counter offer
Stevenson vs McLean 1880
Facts: D offered to sell iron at ‘40s net cash per ton, open til Monday’. C enquired whether he would agree to delivery spread over 2 months. D didn’t reply and C accepted the original offer. Meanwhile D sold iron to a third party
Decision: Merely an enquiry as to variation of terms not a counter offer or a rejection
Lapse of time
Can be expressed in the offer or after a reasonable period of time
Ramsgate Victoria Hotel v Montefiore 1866
Offer to subscribe to shares elapsed after 5 months
Revocation/withdrawing offer
Offeror may revoke their offer at anytime before acceptance. When it is communicated to the offeree
Communication can be made by any reliable person
Failure of precondition
Offer will automatically lapse if a pre condition is not satisfied
Acceptance
An unqualified agreement to all the terms of the offer
Express words or by conduct
Some act is required to show that an offer is being accepted
Brogden v Met railway company 1877
Brogden supplied coal to Met
D agent sent a draft agreement to C for consideration and the parties applied the terms of the draft agreement to their dealings, but never signed a final version
C later denied there was ever any agreement
Decision : the conduct of the parties was only explicable in the assumption they both agreed to the terms of the draft
Felt house v Blindley 1862
Facts : c write to his nephew offering to buy the nephews horse. Adding If I hear no more about him I consider the horse mine. Nephew died intending to accept the offer
Decision: C had no right to the horse as the nephews silence couldn’t constitute acceptance
Communication being waived
Offeror has impliedly or expressively waived the need for communication
Eg rewards (Carlill)
Postal rule of acceptance
Acceptance is valid from the moment letter is posted regardless of whether it had been received
Exceptions to postal rule
Only applied when use of post is within reasonable contemplation between parties
Letter must be addressed correctly
Rule only applies to acceptance not revocation
Acceptance ‘by notice in writing’ overrides rule
Doenst apply to instananious ie email
2 rebuttable presumptions
Social and domestic : no intention to create legal obligations
Commercial : intention to create a legally binding contract
Ex gratia
Consideration
The value that each party gives in the agreement
3 types of consideration
Executed
Executory
Past considerations
Executed consideration
An act performed or expected In Return for a promise
Takes place at point of agreement
Executory consideration
A promise that is given for a promise: to do something in the future - after agreement
Past consideration
An act which has already been done when the promise is made
Before date of agreement
Not valid consideration
Re McArdle 1951
Under a will the testators children were entitled to mums house after her death. The wife of one of the kids made improvements to house before she died
The children agreed to pay her ‘in consideration of her work’ but refused to do so when she died
D: as the work had already been completed when the postings was made it falls under past consideration and there is no binding contact
Implied promise to pay
Should be distinguished from past consideration -
Where the promise is made before consideration is provided and both parties expect a payment to be made. Actual terms of payment may be provided after the event
Eg barbers and taxi
Exceptions where consideration isn’t required
When a contract is made by deed
Deed
Formal promise made between parties that states promise must be in writing and signed
Promises that must be made by deed
- Conveyency: transfer of property
- Leases which are over 3 years
- Promises unsupported by consideration (donation to charity (no return value))
Consideration must be sufficient
Must have some identifiable value to be capable of being realised as valid consideration
Consideration Need not to be adequate
Doenst have to be of market value - doenst have to be of equals value as a bad bargain is still a contract
Thomas v Thomas 1842
By his will C’s husband expressed the wish that his widow should have the use of his house drying her life
After death the executors allowed her to do so. In return pay £1 per annum
Later said the promise to let her stay wasn’t supported by consideration
Decision: payment of nominal amount of £1 was sufficient
Consideration which has been determined insufficient
Performance of existing statutory duty - unless it can be shown that some extra service over the scope of the statutory duty
Performance of an existing contracted duty owed to promissory is not consideration unless can be shown the promised is actually giving or doing something above the contractual obligation
Williams v Raffrey bros and Nichols 1990
Facts: D subcontracted C to do world for £20000. During work C ran into financial difficulties. D promised to play an extra £10300 to ensure work was completed. Later refused amount
Decision: D’s arguments was that there was no consideration for the promise to pay £103000. Was decided that D didn’t have to engage someone else to complete the work or pay a penalty therefore was deemed consideration
Scotson Vs Pegg
Claimant to X to deliver cargo as X directed. Claimant to deliver it to Defendant. Defendant then made a contract with Claimant to unload it he cargo if Claimant Delivered it to Defendant (which he was already obliged to)
Was held that Claimants obligation to X to deliver the cargo to Defendant was sufficient consideration for the Defendants promise
Waiver of debt/ Foakes V beer
Part payment of Debt is insufficient
Dobtained judgement against C, Jusgement debt bears interest from date of judgement.
By a written agreement D agreed to receive payments in installments. No mention of interest. Once C had paid the amount D claimed interest. Which he was entitled too since there was no consideration given by c for the waiver of any part of her rights against him
Exceptions to Foakes v Beer rule
Waiver binding if:
Alternative consideration eg payments in goods or services in Lieu of cash
Bargain between creditors
3rd party payments
Early payment
Oral contract
All terms are incorporated but there may be evidentiary issues
Written contacts
All terms incorporated even if the parties have not read them
Statement of fact made before the contract was entered into
Such a term may be incorporated into the contract if it induces the party to enter the contract. If it is not part of the contract the claimant may have a claim for misrepresentation not for breach of contract
Factors that Courts will consider when deciding whether a term is incorporated into a contact
-special Knowledge of the subject by party making statement
- how much time has passed between statement and making it contract
- why statement wasn’t included
- importance attached to statement
Oral evidence
Not usually be admitted to add, vary it contradict written terms, unless it can be shown the document was not intended to comprise of all written terms
SS Arden’s cargo v SS Arden’s owners
D contracted to take C’s cargo of oranges to LDN ‘by any route, directly or indirectly’
Ds agent gave verbal undertaking that the vessel would sail directly to LDN from Spain - but ship went via Antwerp so oranges arrived late
Held that the verbal undertaking amounted to a warranty and was admissible as oral evidence to override written terms in the bill if lading
Implied terms
Additional terms may be implied by law
Deed to form part of the contact even though not mentioned
Terms can be implied in a contract by
By reference to custom proboder the custom is not inconsistent with the expressed terms of the contract
By statute eg the sale of goods act which can override express terms of the contract (for for purpose, of reasonable quality)
By courts - if courts concluded the parties must have intended the term to apply to make the contract effective
Moorcock 1889
Owners of a wharf agreed that a ship should be moored alongside to unload its cargo. It was well known that the ship would ground on the mud when the tide went down - suffering damage
Decision - implied term that the ground alongside was safe at low tide as both parties new the ship would rest on it
Liverpool city council v Irwin
Tenant in a tower block with no formal tenancy agreement withheld his rent. Alleging the owner off the block had breached contract as the lifts were broke and stairs were dark
Implied term that the owners would maintain these common parts of the building as this is necessary for the tenants to access the building
Privity rule
Only a person who is a party to a contract has enforceable rights and can be bound by a contract
Exceptions to privity rule
Road traffic act (3rd party insurance)
Agency arrangements
Executives of a will (stand in for a dead person)
Contracts (right of third parties) act 1999 provides a third party may enforce a term of the vibrancy provided - must be clearly identified in contract
