contract law Flashcards
elements of a contract
offer
acceptance
consideration
intention to create legal relations
offer definitions
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
invitations to treat
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
advertisements - offer or invitations to treat
- 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
goods in a shop window or shop shelf - offer or invitation to treat
- 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
lots at an auction - offer or invitation to treat
British Car Auctions v Wright – lot is ITT, offer is made by the bidder
request for information and counter offers
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
is an offer open?
starting and ending an offer
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
formation of contract - acceptance
definition
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
communication of acceptance
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
method of communication
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
consideration - general
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”
- consideration need not to be adequate but must be sufficient
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
- past consideration is not consideration
only discuss if relevant
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
- performing a pre - existing duty cannot be consideration for a new contract
only discuss if relevant
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
- a promise to accept part payment of an existing debt in place of the whole debt is not consideration
only discuss if relevant
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
intention to create legal relations rule
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
intention to create legal relations
business agreements
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
intention to create legal relations
domestic or social agreements
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
privity of contract
general rule
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
privity of contact
agency
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
privity of contract
collateral contracts
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
privity of contract
contracts (rights of third parties) act 1999
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
general contract terms
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
