Contract 1 Agreeement and intention

Question 1

The three elements of a contract

Answer 1

a) agreement (offer and acceptance)
b) intention to create legal relations
c) consideration

Question 2

Is the assessment of parties intention an objective or subjective test?
(cannot argue…..bound….balance)

Answer 2

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

Question 3

Explain the presumption of legal relation in the case of

commercial agreement

Answer 3

Presumption that there was intention to create legal relations

This is rebuttable, however, if there is specific wording to that effect

Question 4

Explain the presumption of legal relation in the case of

non-commercial/family agreement

Answer 4

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)

Question 5

Criteria that an offer/acceptance will be viewed as valid in court

Answer 5

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.

Question 6

Define and distinguish offer and invitation to treat

(willlingness…. intention)

Answer 6

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

Question 7

Examples of situations which will be under most circumstances regarded as invitation to treat

(4)

Answer 7

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)

Question 8

Rules for auctions

Answer 8

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

Question 9

Define acceptance

Answer 9

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.

Question 10

Rules on whether acceptance must be communicated

Answer 10

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

Question 11

Rules on counter-offer in terms of invalidating acceptance

Rules about enquiries

Answer 11

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

Question 12

Explain battle of the forms and last shot

Answer 12

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

Question 13

Explain Butler Machine Tool Co. Ltd v Ex-cell-o corporation

Answer 13

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

Question 14

Explain postal rule exemption (Adam v Lindsell)

3

Answer 14

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

Question 15

Explain if a contract can be revoked before it is accepted

Answer 15

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

Question 16

Discuss the details in relation to the revocation process of a contract

(office hours; public)

Answer 16

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)

Question 17

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?

Answer 17

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

Question 18

Explain termination of offer due to lapse of time

Answer 18

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

Question 19

Edward v Skyways

Answer 19

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.

Question 20

Balfour v Balfour

Answer 20

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

Question 21

Rose and Frank Co v Compton Bros

Answer 21

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)

Question 22

Merritt v Merritt

Answer 22

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.

Question 23

Scammell v Ouston

Answer 23

For an agreement, there must be certainty

Question 24

Fisher v Bell

Answer 24

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

Question 25

Carill v Carbolic Smoke Ball

Answer 25

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.

Question 26

Spencer v Hardling

Answer 26

Tenders requests are invitations to treat and there is usuallyt no obligation on the party requesting the tender

Question 27

Barry v Davies

Answer 27

Auction - if there is no reserve price, object must be sold to the highest bidder

Question 28

Blackpool & Fylde Aero Club v Blackpool Borough Council

Answer 28

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

Question 29

Entores v Miles East Corp

Answer 29

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

Question 30

Felthouse v Bindley
Re Selectmove

(silence)

Answer 30

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)

Question 31

Adams v Lindsell

Answer 31

Postal rule: it was reasonable to use the post, the acceptance was propertly posted and the postal rule was not expressly or impliedly excluded

Question 32

Holwell Securities v Hughes

Answer 32

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.

Question 33

Hyde v Wrench

Answer 33

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

Question 34

Stevenson, Jacques and Co v Mclean

Answer 34

Requesting for more infromation does not amount to a counter-offer and there is not a rejection of the offer

Question 35

Mountford v Scott

Answer 35

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

Question 36

Dickinson v Dodds

Answer 36

Communication of revocation can be made through a reliable third party

Question 37

Errington v Errington and Woods

Answer 37

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

Question 38

Two requirement of an offer

Answer 38

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

Question 39

Three ways to cancel an offer

Answer 39

Take the offer off the table: revocation
Sweep the offer off the table: Rejection
Disappearance of the contract: Lapse

Question 40

Situation where an advertisement would be amount to an offer

Answer 40

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

Question 41

Rule for revocation if the original offer was made to the public

Answer 41

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.

Question 42

The Leonidas

Answer 42

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.

Question 43

Does postal rule apply to communcation of revocation?

Answer 43

revocation of an offer must be communicated, and the postal rule does not apply to the revocation of an offer – Byrne v van Tienhoven.

Question 44

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?

Answer 44

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.

Question 45

Define offer

Answer 45

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.

Question 46

For an auctioneer failing to honour a unilateral contract to sell without a reserve price, is he liable to still sell the lot?

Answer 46

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

Question 47

Rule on acceptance by electronic communication

Answer 47

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