Contract law 1 Flashcards
Tell about obligations by choice (3)
- Voluntary obligations (i.e. by one party)
- Conventional obligations/contracts (i.e. by two or more parties
- Essentially a relationship between party A&B, mutual understanding of the obligations and duties
Tell about the nature of a contract (5)
- Must be an agreement
- Must be in legal capacity to enter into a contract
- Consent to enter -intention to be bounded
- Formal requirements (e.g. in writing, not necessary in Scotland)
- Agreement must no be prohibited
What are must the both parties be in order to have legal capacity for a contract?
- Proper age
- Mental capacity (not elder, not insane
- Able to consent and not be forced
Contracts are….
Agreements between parties who have the capacity to make it, in the form demanded by law and they need to be able to perform and not illegal or impossible. Otherwise, grounds for compensation
What are the formalities related to contracts?(4)
- Writing
- Verbally if evidence
- Inferred (reasoned conclusion) from the acting’s of the parties
- Has to be mutual understanding of what the contract is about (details create certainty)
What are required in writing under Requirements of Writing (Scotland) Act 1995? (4)
EACH NEED TO SIGN A DOCUMENT TO MAKE THIS VALID
1) A contract or unilateral obligations for the creation variation, extinction of an interest in land(except for a lease for less than a year)
2) A gratuitous unilateral obligation EXCEPT an obligation undertaken in the course of a business (Unique to Scotland, if you make a personal promise needs to be in writing except business purpose)
3) A trust by which a person declared himself sole trustee of his own property
4) Making of a will or codicil (codicil= an addition or supplement which explains, modifies or revokes a will or part of one)
What defects effects contracts validity? (3)
- Parties not having full capacity (too young, drunk or bankrupt)
- Error in mind of one or both parties, not mutual understanding or agreement (may be induced by fraudulent statement)
What is a void contract?
- Contract has no legal effect,
- Neither party can enforce it
- Even a third party cannot acquire any rights under it
- NO RIGHTS NO DUTIES
- “contract” is nullity
E.g. A sells to B and the contract is void, if B resold to C, C acquires no rights
Void contract case:
Morrison v Roberson 1908
Case that established the common law principles that govern
unilateral error in Scots Law. Man claiming to be son of
Wilson of Bonnyrigg approached Morrison and offered to
buy two cows from him. Due to the name, Wilson and their
good reputation he made the deal and agreed on credit.
Judgement: The action was successful as there were no
contract between Morrison and this fraud ‘Telford’, and
purported transaction was a complete nullity. Telford had no
rights to pass the cows on, so morrison recovered the cows.
Only entered to the contract because of the mistaken belief
of the identity.
What is a Voidable contract?
- May be reduced or set aside, until done, it is valid and has full legal effect
- Third party has rights up till voided
e.g. A sells to B and the contract is voidable, B has resold the goods to C before the validity of the contract is challenged, C acquires the title for the good
What is unenforceable contract?
Cannot be enforced by a court decision, may be unenforceable under common law or statute.
If an unenforceable contract is performed, the court will not interfere to cancel the contract or order repayment of the money.
Tell about formation of a contract
- Agreement between parties “Meeting of the minds” = Consensus in idem
- Law concerns only what is agreed, not what the parties thought they agreed (Objectively examine, objective test)
Tell about case Muirhead and Turnbull v Dickson 1905 (Contract law case)
Hire purchase – hybrid contract created in 19th century to allow consumers to buy good on credit.
‘Hire charges’ paid as instalments to purchase. Followed by one optional instalment after the hire
charges to transfer ownership. Dickson claimed it was a contract of sale. The court, looking at the
contract objectively, held that it was a contract of sale and that despite the mental differences
between the two parties, there was a contract of sale. Thus Muirhead and Turnbull could not retain
the piano.
Objective test
No express agreement re terms; nevertheless bound, for even “where parties honestly differed, the
commercial contracts cannot be arranged by what people think in their inmost minds. Commercial
contracts are arranged according to what people say.”
Tell about contract case Mathieson Gee (Ayrshire) Ltd v Quigley 1952
They thought they were hiring staff and equipment, when Mathieson Gee only provided hire for
equipment, the equipment was delivered as said and they sat on the site (pond for a fortnight), they
eventually collected them away, presented the bill to which Quigley argued that you didn’t do your
end of the contract of cleaning the pond. NO CONTRACT as no same thinking. House of Lords said
there was no contract, but parties believed there were, and had argued accordingly. Objective
approach – court looks at the change of letters, House of Lords ruled that it didn’t actually show an
agreement. The two sides failed to match on their agreement of what each other thought were the
terms. Mathieson Gee were insolvent, and therefore could not afford to pay Quigley’s damage. The
conduct of the parties was never examined. Themselves believed to have a contract, courts
objective approach said they didn’t.
What must exist in an contract? (3)
- Offer with fine terms and details
- Acceptance which meets the offer
- Intention to be legally bound by the agreement
Tell about an offer
A proposal from one party in such definite terms that if it accepted, a legally binding contract will be formed. (You can accept what is put as the terms). Offer needs a valid acceptance to in order to create a contract. Present something for someone to accept or reject as desired
Tell about invitation to treat
An invitation to another person as being willing to negotiate a contract. This is not an offer but an indication of the party’s bargaining position - he does not intent to be bound by a simple acceptance.
Tell about invitation to treat case Harvey v Facey 1893
Telegram was sent about selling of Bumper Hall Pen(plantation in Caribbean). The Privy
Council held that there was no contract concluded between the parties. Facey had not
directly answered the first question as to whether they would sell and the lowest price
stated was merely responding to a request for information not an offer. There was thus
no evidence of an intention that the telegram sent by Facey was to be an offer, no
detail, merely of invitation to treat
Tell about invitation to treat case (not too important) Philip v Knoblauch 1907
Offer, not invitation to treat because the information was so specific that must have had intention
to conclude contract. a detailed letter quoting terms and asking if the addressee were buyers was
considered to be an offer
Invitation to treat case Fisher v Bell 1961
The defendant had a flick knife displayed in his shop window with a price tag on it.
Statute made it a criminal offence to ‘offer’ such flick knives for sale. His conviction
was quashed as goods on display in shops are not ‘offers’ in the technical sense but an
invitation to treat. The court applied the literal rule of statutory interpretation.
There is no obligation on a retailed to sell the goods on display in a shop window. There is no obligation to the customer under the law of contract to sell them at the displayed price
Invitation of treat case about goods displayed
Pharmaceutical Society of GB v Boots Cash Chemist 1952
Boots introduced the then new self service system into their shops whereby customers would pick
up goods from the shelf put them in their basket and then take them to the cash till to pay. The
Pharmaceutical Society of Great Britain brought an action to determine the legality of the system
with regard to the sale of pharmaceutical products which were required by law to be sold in the
presence of a pharmacist. The court thus needed to determine where the contract came into
existence.
Held:
Goods on the shelf constitute an invitation to treat not an offer. A customer takes the goods to the
till and makes an offer to purchase. The shop assistant then chooses whether to accept the offer.
The contract is therefore concluded at the till in the presence of a pharmacist.
The customer is entitled to put back the goods if they change their mind, and the store is entitled to withdraw the goods from sale at any time until the contract has been conducted at the cash desk
Tell about offer to the public
An offer to the public may be classed as an offer that can be accepted to form a contract - don’t need to perform individual acceptance
Offer to the public at large case - Carlill v The Carbolic Smokeball Co. Ltd 1893
The company argued:
o The advert was not an offer
o Even if it was an offer, it had not been addressed specifically to Mrs Carlill
o Even if there had been a valid offer she had not notified the company of any acceptance and
so there was no contract
Can be only accepted by the individuals it addressed. Also accepted by performance (e.g. taking the
item to the counter), otherwise contract needs to be accepted before it being binding.
- The court held:
o The advert was expressed in such definite terms that it was an offer.
o An offer can be made to the general public and it will be deemed to be an offer to whoever
accepts it.
o Mrs Carlill had accepted the offer in exactly the manner proscribed by the offer, i.e. by
buying and using the smokeball.
Carlill v The carbolic smokeball Co. Ltd 1893 more details
A Newspaper advert placed by the defendant stated:-
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after
having used the ball three times daily for two weeks according to the printed directions supplied with each
ball…
£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter.”
Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought
to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a mere invitation to
treat rather than an offer:
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu.
5. There was no consideration provided since the ‘offer’ did not specify that the user of the balls must have
purchased them.
Held:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a
unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected
all the arguments put forward by the defendants for the following reasons:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales
puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since
acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a
reasonable time limit or confining it to only those who caught flu whilst still using the balls.
5. The defendants would have value in people using the balls even if they had not been purchased by them
directly.
Tell about lapsing of offer
Offer can lapse in certain circumstances, and when this happens, it will be unavailable for acceptance; cannot be performed. DEPENDS WHAT IS REASONABLE UNDER CIRCUMSTANCES
Tell about express revocation
Where withdrawn (revoked) before acceptance, unless offeror promises to hold open for a certain period
Tell about implied revocation (3)
1) Time limit for acceptance in offer passes or reasonable time passes without reply or acceptance
2) Where counter offer (or qualified acceptance) received
3) Where either party dies or goes insane prior to the acceptance
Tell about counter offer
Where a qualified acceptance is received, this determines/diminishes the original offer. Counter offer includes additional terms or some contradictory terms or even partial terms
Counter offer case Wolf and Wolf v Forfar Potato Co. Ltd 1990 KNOW THIS
Forfar sent a telex to Wolf & Wolf offering to sell potatoes. The offer was open until 5pm the
next day. Wolf & Wolf telexed back what purported to be an acceptance but contained extra
conditions. Forfar advised Wolf & Wolf by phone to say the extra conditions are not acceptable.
Wolf & Wolf sent another telex in which they attempted to accept the original offer. There was
no contract and the court found the counter offer killed off the original offer. The pursuers appealed to the Court of Session where it was held that on the making of a qualified
acceptance and counter-offer, the original offer falls and that on the failure to obtain the terms requested
in the counter-offer, the party cannot fall back on and accept the original offer.
Tell about time related to contracts
Time is essence, if promised a time frame, offer must stand open till that time frame, and if accepted within that time frame, contract is binding. Where acceptance is not tendered within a reasonable time of the receipt of offer, the offer is implied revoked. Again what is reasonable time frame
