Contract 1 Agreeement and intention Flashcards
The three elements of a contract
a) agreement (offer and acceptance)
b) intention to create legal relations
c) consideration
Is the assessment of parties intention an objective or subjective test?
(cannot argue…..bound….balance)
Objective test (Smith v Hughes)
The claimant/defendant cannot argue that whether the had an intention to be bound by contract but will be judged on their act on balance of probabilities
Explain the presumption of legal relation in the case of
commercial agreement
Presumption that there was intention to create legal relations
This is rebuttable, however, if there is specific wording to that effect
Explain the presumption of legal relation in the case of
non-commercial/family agreement
Presumption that there was no intention to create legal relation
However, it is a rebuttable presumption (if the couple are seperated/written agreement, that the contract could be said concluded at arm’s length)
Criteria that an offer/acceptance will be viewed as valid in court
There is agreeement if there is a valid offer and acceptance
There must be certainty in offer and acceptance, or court may not uphold contract; for example, timber of fair specification is too vague.
Define and distinguish offer and invitation to treat
(willlingness…. intention)
Offer - 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
Invitation to treat - an offer is different to an invitation to treat, which is made without intention to be bound by specific terms
Examples of situations which will be under most circumstances regarded as invitation to treat
(4)
self-service display in a shop
goods on display
tenders (unless it’s unilateral)
advertisement (unless offering reward/ unilateral contract, in which case acceptance need not be communicated)
Rules for auctions
with reserve price (s.57 Sale of Goods Act 1979) - contract between the seller and the bidder once the auctioneer completes the sale (that’s with the fall of the hammer)
Without reserve price - unilateral contract between auctioneer and bidder that the auctioneer will accept the highest bid; or the highest bidder can sue for damages
Define acceptance
an UNCONDITONAL expression of assent to the terms of an offer
The unqualified assent to the terms of the offer, which is normally required to have been communicated to the offeror.
Rules on whether acceptance must be communicated
Acceptance must be communicated, and should be commmunicated by offeree and authorised agent
Except:
a) there is a unilateral contract
b) if the contract states that silence constitutes acceptance - silence cannot constitute acceptance, unless there is no reason for offeree not to bind themselves
Rules on counter-offer in terms of invalidating acceptance
Rules about enquiries
General rule: a counter-offer is the negotiation of a new provision/ amendment of existing terms so it is an implied rejection
Enquires are not always deemed as rejection, and may still be acceptance if it falls within definition
Explain battle of the forms and last shot
Following an exchange of incompatible terms by the parties, performance of the contract might be taken to be acceptance of the last shot. In such case even a prevail clause can be superseded/impliedly rejected
Explain Butler Machine Tool Co. Ltd v Ex-cell-o corporation
The case law concerns the battle of forms:
counteroffer negates any prevail terms of the original offer and destroys the original agreement.
the last shot prevails if there are conflicting terms and conditions that are irreconcilable
Explain postal rule exemption (Adam v Lindsell)
3
A letter of acceptance will become binding when posted if:
it was reasonable to use post as a method of communication
it was properly posted; and
the offeror did not exclude the postal rule impliedly/expressly
If all the above are satisfied, the letter need not actually arrive for acceptance to be valid
There is no authority on whether an acceptance can be retracted once posted
Explain if a contract can be revoked before it is accepted
General rule: an offer can be revoked at any time even if the offer has agreed to leave it open (Routledge v Grant (six week open offer for house purchase). Revocation must be communicated (Bryne v Van Tienhoven)
Except:
The offeror cannot revoke the offer if the offeree has given consideraion for the offeror keeping the offer open (Mountford v Scott $1)
If it is a unilateral contract, revocation is not possible once the act of acceptance has begun
Discuss the details in relation to the revocation process of a contract
(office hours; public)
General rule: a revocation must be communicated either by the offeror or by a reliable third party
Except
if the revocation was received, but not read, and it could reasonably be assumed that staff would be at work it will be deemed to have been communicated
If the offer was made to the public at large, revocation can be made through the same channel as the offer provided it has the same prominence (Shuey v United States)
Decide if the court will rule in favour of the plantiff or the defendant in the following case:
The revocation of an offer was posted at 12 noon but was only delivered to the offeree until 5 pm. Accpetance was posted at 3:50 pm that day,
is the revocation effective?
No. The example is based on the case of Henthrorn v Fraser
A revocation must be communicated to be effective.
The contract becomes binding from 3:50 and only until 5 pm the revocation was communicated to the offeree
Explain termination of offer due to lapse of time
Offer will lapse if there is an express condition; or in all other cases, the offer will lapse after a reasonable time period - what is reasonable depends on the facts
Edward v Skyways
For commercial agreements, there will be a presumption of intention to enter legal relations
Pilot made redundant, told he could receive ex gratia payment but the payment was denied. Defence on no intention to enter legal relation. Held presumption arose.
Balfour v Balfour
For non-commercial/family agreements, there is a presumption that there is no intention to enter legal relations.
Husband made verbal agreement to pay monthly allowance in return for her to not ask for further maintenance. Husband then did not honour agreement
Rose and Frank Co v Compton Bros
Commercial agreement can be rebutted
Arrangement between English firm and two British companies, specifically mentioned: This arrangement is not entered into as a formal or legal agreement, and shall not be subject to legal jurisdiction in the law courts (referred to as honourable pledge clause)
Merritt v Merritt
Presumption regarding family agreements can be rebutted based on whether any consideration has been give, whether the parties are on good terms, and whether any agreement exists in writing.
Scammell v Ouston
For an agreement, there must be certainty
Fisher v Bell
Goods on display will be an offer to treat
Defendant accused of offering for sale a knife contrary to Restriction of Offence Weapons Act; held that the display of knife in window did not amount to an offer of sale
Carill v Carbolic Smoke Ball
When there is an advertisement of a reward, this will amount to a unilateral contract. Where there is a unilateral contract, there is no need to communicate acceptance beyond taking the steps stipulated in the contract.
Carbolic Smokeball offered 100 to anyone who contracted influenza despite using their smoke ball as indicated; Claimant contracted influenza and requested money.
Spencer v Hardling
Tenders requests are invitations to treat and there is usuallyt no obligation on the party requesting the tender
Barry v Davies
Auction - if there is no reserve price, object must be sold to the highest bidder
Blackpool & Fylde Aero Club v Blackpool Borough Council
A request for tenders may amount to a unilateral contract where there has been a commitment to consider all validly received tenders; in these instances failure to consider a valid tender will amount to a breach
Club sent in a valid tender on time but postbox not cleared on time by Council staff; tender deemed to be late and not considered; club successfully claimed damages
Entores v Miles East Corp
Contract is concluded where offer had been accepted and that acceptance occurs when communicated to the other party
Acceptance must be communicated by the offeree or by a duly authorized agent
Felthouse v Bindley
Re Selectmove
(silence)
Offeror cannot impose that the offeree’s silence means acceptancee
except (Re Selectmove)
there is no reason to an offeree should not bind themselves (if you don’t hear from me, assume i accept)
Adams v Lindsell
Postal rule: it was reasonable to use the post, the acceptance was propertly posted and the postal rule was not expressly or impliedly excluded
Holwell Securities v Hughes
Notice in writing impliedly exclude the postal rule
Defendant gave claimant possibility to buy house; specified that option was exercisable by notice in writing to the defendant; letter never arrived; held that notice in writing implied excluded postal rule.
Hyde v Wrench
Acceptance must match terms of offer; any counter offer is an implicit rejection and offeror is no longer bound by initial offer
Claimant made counter-offer on a farm and then watned to accept original offer; defendant refused; held he was not in breach
Stevenson, Jacques and Co v Mclean
Requesting for more infromation does not amount to a counter-offer and there is not a rejection of the offer
Mountford v Scott
An offer cannot be revoked if consideration is given for that offer to remain open
Claimant had paid 1 for option to buy defendant’s house within six-month period; held that option irrevocable even if considertation given was nominal
Dickinson v Dodds
Communication of revocation can be made through a reliable third party
Errington v Errington and Woods
An offer cannot be revoked once acceptance of a unilateral contract has begun
Father offered son and daughter-in-law his house if they paid mortgage payments; father died and it will left house to his widow; son later left his wife and left house; held that agreement could not be revoked halfway and daughter-in-law entitled to possession as long as she contunued making payments
Two requirement of an offer
Willingness to be bound: Putting yourself in a position to be bound by a contract must be voluntary
sufficient certainty in the terms of proposal
Three ways to cancel an offer
Take the offer off the table: revocation
Sweep the offer off the table: Rejection
Disappearance of the contract: Lapse
Situation where an advertisement would be amount to an offer
If the wording of an advert shows a clear intention to be bound by an acceptance then it may constitute an offer
- the more detailed the advert is the more likely it is regarded as an offer
- if there is an exact price and description it may be an offer (certainty as to being legally bound)
- if it includes a specific channel to place order it is more likely to be an offer
Rule for revocation if the original offer was made to the public
Shuey v US - the revocation is effective if the offer was withdrawn through the same channel in which it was made, and the same notoriety given to the revocation as to the offer.
The Leonidas
If the order on the terms expressly set out, and if the offeror so acts that the offerer’s conduct, objectively considered, constitute an offer, and the offeree, believing that the conduct of the offeror represents his actual intention, accepts the offer, then there is a contract.
Does postal rule apply to communcation of revocation?
revocation of an offer must be communicated, and the postal rule does not apply to the revocation of an offer – Byrne v van Tienhoven.
Where an auctioneer has accepted an offer (on the fall of the hammer), who are the parties to the contract?
Is it the same if there is a commitment of selling without reserve price made by the auction house, then the auction house refuses later to sell it?
On the fall of the hammer, a contract is formed between the product owner and the offeror; the auctioneer drops out since he is merely an agent.
Where a commitment to sell without reserve price has been made, the auctioneer is in essence, making a promise to the bidder that I will sell you the goods at whatever price is the highest. If the auctioneer then does not honour this pledge, he is in breach of contract. The owner is not a party since there has never been acceptance thus, there is no contract.
Define offer
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.
For an auctioneer failing to honour a unilateral contract to sell without a reserve price, is he liable to still sell the lot?
By refusing the bid, there was no contract to sell the goods so the bidder cannot claim for the goods in question,
However, the bidder can sue for breach for damages equivalent to the difference in value between the highest bids and the cost of procuring it elsewhere
Rule on acceptance by electronic communication
The Brimms: a telexed acceptance will be effective when it would be reasonable to expect
the recipient to have read it, even if it is not read until a later time.
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelgesellschaft GmbH [1983]:
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 judgment where the risks should lie
