contract law

Question 1

elements of a contract

Answer 1

offer
acceptance
consideration
intention to create legal relations

Question 2

offer definitions

Answer 2

Offeror – Person making the offer
Offeree – Person to whom offer is made
Carlill v Carbolic Smoke Ball Co. – a proposal or promise showing a willingness to enter a contract
Must be definite in its terms

Question 3

invitations to treat

Answer 3

Invitation to Treat – an indication that a person is willing to negotiate a contract but not yet willing to make a legal offer
Words such as “may” or “might” indicate uncertainty – likely to be Invitation to Treat
Gibson v Manchester City Council – use of the word “may” meant it was an Invitation to Treat, not an offer

Invitation to Treat can’t be accepted to make a contract – it is an invitation by one party to another to make an offer
A firm proposal to an invitation to treat amounts to an offer, not acceptance

Question 4

advertisements - offer or invitations to treat

Answer 4

• invitation to treat
  Partridge v Crittenden – advertisement is not an offer only an ITT – it is up to the person responding to the advert to make an offer to buy what is advertised which can then be accepted by the advertiser

Exception – Carlill v Carbolic Smoke Ball Co. - where an advertisement is a unilateral offer (an agreement to pay in exchange for performance), the advertisement may be an offer:
Offeror makes a promise in exchange for an act by another party
Offeree completely performs required act
Offeror is legally obliged to perform his side – pay

Question 5

goods in a shop window or shop shelf - offer or invitation to treat

Answer 5

• invitation to treat
  Pharmaceutical Society of Great Britain v Boots Cash Chemists – goods on a shop shelf are ITT and remain so until the customer presents them to the checkout operator/self-service scanner. Shop accepts offer through operator/scanner
  Fisher v Bell – display of items with a price tag in shop windows are ITT

Question 6

lots at an auction - offer or invitation to treat

Answer 6

British Car Auctions v Wright – lot is ITT, offer is made by the bidder

Question 7

request for information and counter offers

Answer 7

Request for Information:
Harvey v Facey - request for information and reply to the request is ITT
E.g. “How much is X?” “X is Y amount” – not offer on either part
Can respond to a request for information with an offer – “I will sell X to you for Y amount”
Stevenson v McLean - If someone responds to an offer with a request for information this is not a rejection or acceptance of offer

Counter-Offer
When offeree decides they would like to change the terms of an offer(e.g. negotiate price – “I’ll give you x amount for it”)
Hyde v Wrench – counter-offer ends the original offer – a rejection - and becomes an offer in itself which can be accepted or rejected by the person making the original offer

Question 8

is an offer open?

starting and ending an offer

Answer 8

Offer can only be accepted while it is open

Start
Taylor v Laird – offer comes into existence when it is communicated to offeree – offeree must know of existence of offer

End
Revocation
Routledge v Grant - offer can be revoked at any time before acceptance but revocation must be communicated to offeree for revocation to take place
Revocation of offer to the whole world (e.g. Carlill) – offer can be revoked by setting time-limit on offer/by expiry of a reasonable time/by publishing revocation in the same way as the original offer was made
Dickinson v Dodds – revocation doesn’t have to be from offeror if person communicating revocation is reliable

Rejection
Once offer is rejected it ends the offer - can’t be accepted by person rejecting offer
If offered to more than one person, rejection by one person does not end offer to others
Counter-offer is a rejection

Lapse of Time
Ramsgate Victoria Hotel v Montefiore – if there is a fixed period for the duration of the offer, offer ends at expiration of time. If no time set, offer expires after a reasonable time – varies depending on nature of offer

Death
If offeree dies offer ends and those dealing with estate can’t accept on his behalf
If offeror dies acceptance can take place until offeree learns of death

Question 9

formation of contract - acceptance

definition

Answer 9

A final and unconditional agreement to all of the terms of the offer
Must be positive and unqualified – acceptance of the whole offer and all of the terms

Question 10

communication of acceptance

Answer 10

Acceptance occurs once it is communicated to offeror
Can be in any form provided it is unequivocal and communicated to offeror
Does not have to be in same format as offer
Offeror can require a specific method for acceptance – if not complied with there is no acceptance

Question 11

method of communication

Answer 11

Silence
Felthouse v Bindley – can’t be by silence – must be a positive act

Conduct
Carlill v Carbolic Smoke Ball Co – If it is a unilateral offer – can be accepted by conduct - acceptance occurred when Mrs Carlill used the smoke ball correctly and contracted flu

Post
Exception to the rule that acceptance occurs once it is communicated to the offeror
Adams v Lindsell – acceptance takes place at moment letter properly posted (not when received)
Post is usual/expected means of communication
Letter is properly addressed and stamped
Offeree can prove letter was posted

Electronic
Entores v Miles Far East – acceptance occurs when offeror is made aware of it (not when sent like post)
Brinkibon Ltd. V Stahag Stahl – out of hours messages are only effective once the office has reopened
BUT Thomas Gander v BPE Solicitors–each case decided on facts and business practices in use in negotiations regarding timing of email communications (e.g. if 6pm out of hours, whether parties expected to check emails on portable devices)
Article 11 Electronic Commerce (EC Directive) Regulations 2002 – where buyer required to give consent through technological means (e.g. clicking an icon) acceptance occurs when buyer receives acknowledgement of receipt of acceptance

Question 12

consideration - general

Answer 12

Consideration – parties must contribute something in return for the promise from the other party
E.g. price for goods /services
A contract requires a bargain not a gift – both parties give something to the other by way of exchange
Doesn’t have to be a cash transaction

Currie v Misra – Benefit and detriment – “some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”

Question 13

1. consideration need not to be adequate but must be sufficient

Answer 13

Sufficient
Ward v Byham – must be real, tangible and have some inherent value
White v Bluett – an intangible benefit is not consideration

Only discuss if relevant
Adequate
Courts not interested in whether the parties made a poor agreement
Thomas v Thomas – law not concerned with equivalence of consideration - if price for goods/services doesn’t reflect the value of the goods, the court will still enforce the terms unless duress or undue influence has occurred

Question 14

2. past consideration is not consideration

only discuss if relevant

Answer 14

Roscarlo v Thomas - If a voluntary agreement is already struck and there was no mention of payment, a later promise to pay is unenforceable
Re McArdle – consideration has no value if it has already been done at the time the agreement is made

Exception – Lampleigh v Braithwaite – where the matter is so important that some payment could be implied by the parties. Need:
An express/implied request by the promisor to the promisee to perform a task
An implied promise inherent in the request that the promisor will pay the promisee a reasonable sum for performing the task
Performance of the task

Question 15

3. performing a pre - existing duty cannot be consideration for a new contract

only discuss if relevant

Answer 15

Stilk v Myrick – if a party is under an existing obligation to carry out something, can’t use that promise as consideration for a new agreement

BUT Hartley v Ponsonby – if the party does something extra than what was required under the original agreement – may be consideration for a new agreement

Question 16

4. a promise to accept part payment of an existing debt in place of the whole debt is not consideration

only discuss if relevant

Answer 16

Pinnel’s Case – a creditor is able to claim the remainder of a debt even if he has agreed with the debtor that part payment will clear the debt

Foakes v Beer – agreement to pay debt by instalments is not consideration for not clearing the whole debt at once

Question 17

intention to create legal relations rule

Answer 17

Must be an intention to create legal relations to make the contract legally binding
Rebuttable Presumption
Business Agreements – rebuttable presumption that there is Intention to Create Legal Relations
Social/Domestic Agreements – rebuttable presumption that there is not Intention to Create Legal Relations

Question 18

intention to create legal relations

business agreements

Answer 18

Edwards v Skyways Ltd. – business agreements are presumed to be legally binding

Esso Petroleum Co. Ltd. V Commissioner of Customs and Excise – if trying to gain more business through a promotion - there is intention to create legal relations

McGowan v Radio Buxton – prize in a competition - there is intention to create legal relations

Presumption can be rebutted
Jones v Vernon Pools – agreement stated that the transaction was “binding in honour only” – this rebutted the presumption

Question 19

intention to create legal relations

domestic or social agreements

Answer 19

Both Domestic and Social agreements presumed not to be legally binding but presumption can be rebutted

Domestic – between family members
Balfour v Balfour – agreement not binding as it was a domestic arrangement between an amicable married couple

Social – between friends
Wilson v Burnett – agreement between 3 friends - agreement was not binding as it was a social arrangement made through “chat or talk” that had not crossed the line into “meaning business”

Presumption can be rebutted for domestic and social agreements
Simpkins v Pays – if money has changed hands, even if arrangement made socially, more likely to be business agreement and legally binding
Merritt v Merritt – presumption rebutted as agreement was between a separated married couple

Question 20

privity of contract

general rule

Answer 20

Dunlop v Selfridge – only those who are parties to a contract are bound by it and can benefit from it

Based on the rule of consideration - Tweddle v Atkinson – only the person who has provided the consideration can sue
Exceptions:
Agency
Collateral Contracts
Contracts (Rights of Third Parties) Act 1999

Question 21

privity of contact

agency

Answer 21

Where one person (the agent) is authorised to make a contract on behalf of another person (the principal) – the principal is bound by the contract even though he did not make it himself
E.g. employee makes a contract on behalf of the company

Question 22

privity of contract

collateral contracts

Answer 22

Courts can avoid the rule of privity by finding a second contract running alongside the main agreement

Shanklin Pier Ltd. V Detel Products Ltd – Shanklin Pier employed contractors to paint the pier and instructed them to use paint from Detel. Detel made a representation to Shanklin Pier that the paint would last 7 years but it only lasted 3 months – although main agreement was between contractors and Detel, there was a collateral contract between Shanklin Pier and Detel that paint would last 7 years – consideration was the instruction given by Shanklin Pier to the contractors to order paint from Detel

Question 23

privity of contract

contracts (rights of third parties) act 1999

Answer 23

S.1(1) – possible for person not party to the contract (3rd Party) to enforce contract against either of the actual parties if:
S.1(1)(a) – the contract expressly provides they may sue; OR
S.1(1)(b) – the contract intends to confer (give) a benefit to the 3rd party
AND
S.1(3) - The 3rd Party is expressly identified by name, or as a member of a class or as answering a particular description

S.3 – if the contract is being enforced by a 3rd Party, the person who made the contract can rely on any defence or exclusion cause that would have been available
The original parties to a contract can exclude the Act from benefitting a 3rd Party – many commercial contracts include a term excluding the Act

Question 24

general contract terms

Answer 24

Term – what the parties to the contract have agreed – obligations of each party
Can be:
Express – specifically agreed between parties
Implied – not specifically agreed but part of the contract
E.g. you buy a cup of coffee for £1
Express terms – providing coffee, paying £1
Implied terms – e.g. the coffee is hot

Question 25

terms implied by common law

Answer 25

Business Efficacy and the Officious Bystander Test - 2 part test
Business Efficacy Test – *The Moorcock – is the term necessary to make the contract effective?
Officious Bystander Test – *Shirkaw v Southern Foundries Ltd – if the parties to the contract had thought about it would they have agreed to the term going into the contract?
Marks and Spencer plc v BNP Paribas Securities Services – judged objectively – not what they hypothetically would say but what the reasonable person in the position of the parties would say

Terms Implied by Custom
Hutton v Warren – terms can be implied by custom

Terms Implied by Prior Dealings Between the Parties
Hillas v Arcos – the courts may imply a term that reflects previous dealings between the parties

Question 26

terms implied by statute - consumer rights act 2015

definition

Answer 26

Consumer Rights Act 2015 – makes rights and remedies available to consumers when making contracts with traders by implying terms into a contract for supply of goods or services
The terms implied into the contract give rights to consumers and duties to traders

Question 27

consumers and traders

Answer 27

Need a consumer-trader relationship
Consumer = an individual acting for purposes that are wholly or mainly outside their trade, business, craft or profession (not a company)
Trader = a person acting for purposes relating to their trade, business, craft or profession. Can be acting personally or through an agent. Can be sole trader, Company etc.

Question 28

types of contracts

Answer 28

Supply of Goods
Supply of Services
Mixed Contracts
Often a contract to supply services also includes the supply of goods
Need to deal with the separate elements under supply of goods and supply of services

Question 29

contracts to supply goods

Answer 29

Supply of goods includes sale, hire, hire-purchase

terms implied into contracts to supply goods :

• s.9 satisfactory
• s.10 fitness for a particular purpose
• s.11 description

Remedies for Breach of a Term Implied Into a Contract to Supply Goods

• S.20 – Short-term Right to Reject
• S.23 – Right to Repair or Replacement
• S.24 – Right to Price Reduction or Final Right to Reject