Contract Formation Flashcards
Definition of a Contract (legal agreement two or more parties, offer+acceptance, precise definite and capable)
A contract is a legally enforceable agreement between two or more distinct parties. The formation of a contract requires an offer to be made by one party which is then accepted by another (offer + acceptance=contract). The offer must be a proposal that is both precise, definite, and capable of acceptance.
(An invitation to treat/adverts/placement of products in a shop window is not an offer meaning that is it not capable of acceptance)
Non enforceable contracts
1) Breach of Social agreements
2) Domestic Agreements
3) Agreements binding in honour only (agreement to do something)
Spellman v. Spellman (1961)
Domestic Agreement
CASE: Husband buys a car for wife in effort to save the marriage. Couple split and husband takes the car as he paid for it.
HELD: Wife takes ex-husband to court over the dispute. Court decided no contract was formed as it was a domestic agreement
Jones v Vernons Pools (1938)
Agreements binding in honour alone
CASE: Mrs Jones filled two winning entries on coupons for a sales promotion. However, the coupons express “binding in honour only” and entry of coupon “shall not give any legal relations”.
HELD: Due to the existence of the terms on the coupon the prize claim was not an enforceable legal contract, and the claim was dismissed.
Unilateral Promise/ Gratuitous Obligation
2 Cases
Petrie v. Earl of Airlie (1834)
Morton’s Trustee v. Aged Christian Friend Society of Scotland (1899)
Petrie v. Earl of Airlie (1834)
Unilateral Promise
CASE: Someone in a village had posted defamatory notices of the Earl and he promised a reward to the person who snitches resulting in the individual being convicted. Petrie tells on his brother and the Earl attempts to prosecute.
HELD: Court throws out the case and Earl refuses to pay the reward to Petrie. However, it was found that since the Earl made a promise and Petrie complied the rewards should be paid
Morton’s Trustee v. Aged Christian Friend Society of Scotland (1899)
Unilateral Promise
CASE: Morton makes a written promise to pay pension of 50 members of society but then dies. His executors then refuse
HELD: Morton had made a unilateral promise that was enforceable.
Contract Offers (5 Conditions)
- Must be precise and definite- Carlill v Carbolic Smokeball Co (1893)
- Invitation to treat- Harvey v Facey (1893)
- Adverts- Partridge v Crittenden (1968)
- Special Cases (vending machines)- Thornton v Shoe Lane Parking (1971)
- Counter-Offer- Wolf & Wolf v Forfar Potato Company Ltd (1984)
Carlill v Carbolic Smokeball Co (1893)
Must be precise & definite
Case: The Carbolic smokeball was developed to prevent flu and the company was so confident that it worked it offered £100 to anyone who bought the smokeball and used it accordingly but still ended up catching the flu.
Mrs Carliil purchases the smoke ball, and it didn’t work. She ended up passing away and her husband claimed against the company.
HELD: The wording of the advert constituted an offer that was made to the world at large. A contract existed even though there was no written contract or express acceptance of the offer. Complying with the terms was enough to form a contract.
Principal Established
A contract existed even though there was no written contract AND even though there was no express acceptance of the offer – merely complying with its terms was enough to form a contract.
Harvey V Facey (1893)
Invitation to treat “lets do trade” or “make me an offer”
CASE: Facey received a telegram asking “Will you sell us Bumper Hall Pen? Telegraph lowest cash price” Bumper Hall Pen was an estate in Jamaica. Facey replied by telegraph
“Lowest price for Bumper Hall Pen is £900” and received a reply: “We agree to buy Bumper Hall Pen for £900 asked by you. Please send us your title deeds in order that we get early possession”
Harvey tried to enforce the sale which Facey then disputed claiming the 2nd telegraph was not an offer but a mere invitation to treat
HELD: There was no binding contract because an offer was never made…it was an invitation to treat
Partridge v Crittenden (1968)
Adverts
CASE: A person was charged with offering a wild bird for sale contrary to Protection of Birds Act 1954, after he had placed an advert relating to the sale of such birds in a magazine.
HELD: It was held that he could not be guilty of offering the bird for sale as the advert amounted to no more than an invitation to treat.
Adverts don’t constitute an offer
Wolf & Wolf v. Forfar Potato Company Ltd (1984)
Counter Offer
CASE: Offer made to sell potatoes as long as accepted by 5pm the next day. Next day a telex arrives to accept the offer but contains new conditions. Customer told that conditions are unacceptable and another telex arrives accepting the first offer.
HELD: First telex is a counter offer which has the effect of cancelling the first offer and replacing it with a new one. Therefore there is no longer an original offer that is capable of acceptance.
When does an offer lapse (7 ways)
- Express or implied revocation (offer is taken away)
- The offer is rejected (no longer exists)
- There is a counter offer (kills off original offer)
- Either party loses capacity (through mental wellbeing ie insanity or under influence of drugs/alcohol or death)
- A set time limit expires (context specific eg perishable goods)
- The offer has not been accepted within a reasonable time limit
- The offer is terminated if some condition is not satisfied
Offer Lapse
2 Cases to Know
Wylie and Lochhead v. McElroy and Sons (1873)
Glasgow Steam Shipping Co v. Watson (1873)
Wylie and Lochhead v. McElroy and Sons (1873)
Decorative iron work not accepted for 5 weeks and price increased
CASE: Offer to carry out decorative iron work not accepted for 5 weeks but during that time the price of iron increased. However, offeror could no longer do the work for the same price…therefore a dispute.
HELD: Original offer had expired
