CONTRACT - WEEK 1

Question 1

Smith v Hughes [Agreement]

How is agreement judged

Answer 1

FACTS: A racehorse trainer (D) bought oats from a farmer (C). D wanted old instead of new oats, yet he was delivered new one’s instead. D refused to pay and sued C for breach of contract.

RATIO: Applied the objective theory of contract: they did not consider the contract to be invalidated because the farmer thought he was buying old oats.

Question 2

Centrovincial Estates Plc v Merchant Investors [Agreement]

How is agreement judged

Answer 2

FACTS: Cs write to Ds to agree on a rental value of $65,000 which was accepted by the Ds. Cs meant to propose $126,000 but the Ds insisted the initial contract was valid

Ratio = Affirms that intention is judged objectively

• Parties cannot withdraw an “unambiguous offer” after acceptance “merely because he has made a mistake which the offeree neither knew nor could reasonably have known when he accepted it.”

Question 3

Hartog v Colins Shields [Agreement]

snapping up cases

Answer 3

FACTS = D sold 30,000 Argentine hare skins tO the C, by mistake offering them at price per pound instead of at a price per piece. When D refused to deliver the goods, C bought a claim for breach of C

RATIO = It was obvious on the facts of the cases that there has been a mistake in the terms of the contract which the other party ought to have known. The contract was void by mistake. This was judged subjectively to conclude that the offer of the seller did not express the ‘real’ intentions present.

• This was not a case where the court was asked to comment on subjectivty but subjectively was used as it was decided that the experience of the buyer means he must have realized the mistake and was just ‘snapping up’ the offer

exceptions to theory that agreement is ascertained objectivly

Question 4

Denny v Hancock [Agreement]

exceptions to agreement - fault

Answer 4

FACTS: P were selling a property to D. They provided D with a plan for the land, this plan showed a number of features on the property (like trees and fencing) that were not actually a part of the property. Some of these features were material to the value of the land. After bidding the D realized that there were not features of the property.

RATIO:held by the CoA in favor of the D. The D was misled at the fault of the P and so they were not entitled to SP.

Question 5

Tamplin v James [Agreement]

exceptions to agreement - fault

Answer 5

FACTS: P put a property up for sale at auction with a description of the property. While at the auction the lot was not sold, the D (who was present at the auction) offered to buy the property. This was accepted by the P. The D believed however he was buying an additional 2 pieces of land as when he was growing up they had always been part of the property,

RATIO: Ratio = The D had bought the property.
* “but where there has been no misrepresentation, and where there is no ambiguity in the terms of the contract, the D cannot be allowed to evade performance by the simple statement that he made a mistake”

Question 6

Scriven Bros v Henley & Co [Agreement]

exceptions to agreement - fault

Answer 6

FACTS: the auctioneer acting for C’s did not realize Ds misunderstood what was being auctioned and thought they undervalued it. There was no contract as the Ds mistake had been induced by Cs carelessness in preparing the action catalogue

RATIO: A reasonable person in the Ds shoes would have been misled- there was no need to refer to the subjective approach

Question 7

Gibson v Manchester [Offer and Acceptance]*

Answer 7

FACTS: A local authority sent a letter stating they may sell council houses to people. They were negotiating with the respondent but had not agreed on a price. The council did not sell the house.

RATIO:The letter from the authority was not an offer because it contained the phrase “may be prepared to sell” - there was no statement of terms intended to be legally binding.

Although it is of no practical importance, there was no acceptance - there was only “an application to buy at an unstated price, coupled with an application for a loan.”

Lord Denning in the Court of Appeal: The mirror image rule should be replaced with a rule that looks at “whether they have reached agreement on all material points, even though there may be differences between the forms and conditions”.
This approach would not help the claimant here.
This model would be too vague and retrospective and would not give certainty.

Question 8

Partridge v Critten [Offer]*

advertisements - general rule

Answer 8

When a vendor of goods advertises the goods for sale in a local newspaper the advertisement will generally be regarded as an invitation to negotiate not an offer

Question 9

Grainger & Son v Gough [Offer]

advertisements - general rule

Answer 9

Distributing a pricelist for wine was not an offer. If it were “a merchant might find himself involved in any number of contractual obligations of a particular description which he may be unable to carry out as his stock may be of limited number”

Question 10

Carlill v Carbolic Smoke Ball Co*[OFFER]

advertisements - exceptions / intention to create legal relations

Answer 10

FACTS: An advert promised to give people money if their product did not work in preventing influenza. The plaintiff used the product and got influenza.

RATIO: The Court rejected the D’s argument that the advert was an invitation to treat. It was held to be an outright offer (as opposed to “offers to negotiate – offers to receive offers – offers to chaffer”)

• The offer was not made to the world –> it was an offer to anyone who performed the conditions
• The claimant had properly accepted
• It was not a mere puff
• The wording was not to vague to be an offer (in its plain meaning, the public would understand it)
• There was consideration (there was a direct inconvenience to a person undertaking the use of smoke balls)

Also recognised the requirement of the intention to create legal relations.

Question 11

Bowerman v Association of British Travel Agents[OFFER]

advertisements - exceptions

Answer 11

Modern application of the Carllil principals

Question 12

(PSGB) v Boots Cash Chemists*[OFFER]

display of goods in a shop - general rule

Answer 12

FACTS: A self-service chemist let customers pick up medicines and pay for them. Was this illegal due to the requirement that a pharmacist must overview the whole transaction

RATIO: It is a “well-established principle that the mere exposure of goods for sale […] indicates to the public that he is willing to treat but does not amount to an offer to sell”, which applies equally to self-service shops. The offer is made by the buyer at the till and accepted under a pharmacist.

• Picking up items from the shelf is not an acceptance, as this would mean customers “would never be able to change [their] mind”.
• “In fact, the offer is an offer to buy, and there is no offer to sell; the customer brings the goods to the shopkeeper to see whether he will sell or n

general rule = display constitutes an invitation to negotiate not offer

Question 13

Fisher v Bell[OFFER]

display of goods in a shop - general rule

Answer 13

FACTS: D displayed an illegal ‘ejector knife’ in his shop window with a price tag

RATIO:Having a knife for display was not an offer to sell merely an exhibition of the object so he had committed no offence

• There are some instances however when the display of goods in a shop will be held to amount to an offer

general rule = display constitutes an invitation to negotiate not offer

Question 14

Chwee Kin Keong v Dingilandmall.Com Pte Ltd [OFFER]

display of goods in a shop - online

Answer 14

Comments on how website advertisements may be treated = “website advertisement is in principle no difference from a billboard outside a shop or an advertisement in newspaper .. however the reach and potential responses are radically different … internet merchants will have to be cautious as to how they present advertisement”

This is NOT an authority

Question 15

Lefkowitz v Great Minneapolis Surplus Store [OFFER] (US case)

display for sale in shop - exceptions

Answer 15

FACTS: The D placed an advertisement in the paper for the sale of fur claiming it would be sold on a first come first serve basis. The C was the first to respond but was refused service on the basis that it was a ‘house rule’ to only sell to female customers.

RATIO: There was a binding contract on the specific language of the advertisement.
* “Whether in an individual instance a newspaper advertisement is an offer rather than an invitation to make an offer depends on the surrounding circumstances”
 in this case the advertisement was for an offer was clear, definite and left nothing for negotiation. The C completed the performance stipulated in the original offer was entitled to performance under the promised obligation to sell.

As the offer had been accepted by the C, the argument that the D could use a ‘house rule’ and modify the terms of the agreement was rejected as you cannot modify terms after acceptance.

AMERICAN CASE = NOT PRECEDENT

Question 16

Spencer v Harding [OFFER]

tenders - general rule

Answer 16

The general rule is that the invitation to tender is not an offer but an invitation to treat

Question 17

**Blackpool & Fylde Aero Club Ltd v Blackpool BC [OFFER] ***

tenders - exceptions

Answer 17

FACTS: Appellants invited a tender for a concession to operate pleasure flights. The date stipulated for tenders to be handed in was 17th march. A mistakenly believed the R had submitted late and discounted their entry when it was an error with the postal system. R claimed for damages for not having their bid considered

RATIO: The court held that there was 1) a contract between the council and the accepting party and 2) a unilateral offer through the initiation to tender to “consider: any conforming tender, which was accepted by the Cs sending an their tender. Tenders can lead to contractual obligations when it is implied that all bids will be considered (not necessarily accepted).

There is no decisive factor for differentiation instead a number of combined factors namely

i) The invitation to tender was addressed to a small number of interested parties (invitees)
ii) The tender procedure was ‘clear, orderly and familiar’
iii) The outcome was, in the opinion of the court, consistent with the ‘assumption of commercial parties’

Question 18

Harvela Investments Ltd v Royal trust Company of Canada [OFFER]*

tenders - exceptions

Answer 18

FACTS: Ds said they would accept the highest offer. The C submitted an offer of $2,175,000 while another bidder submitted $2,100,000 but added that this would ‘include 100,001 in excess of any other offer if it is higher’. The Ds accepted the bet of the second bidder as $2,276,000.

RATIO: the Cs had won the bid. The 2nd offer was only for $2,100,000 making the Cs the highest. The additional $100,000 was a referential bid and the advert was a fixed bidding auction. The highest fixed term bid was the Cs. In accordance with the terms of the tender, the Cs had fulfilled sending in the highest offer.

Question 19

British Car Auctions v Wright [OFFER]

auctions - w/ reserve $

Answer 19

The auctioneer invites people to bid (invitation to negotiate). People respond by making offers (Bids). These are not accepted immediately but instead on the fall of the hammer

Question 20

**Barry v Davies (Heathcote Ball & Co) ***

auctions - w/o a reserve price

Answer 20

FACTS: C submitted 2 items for bid without a reserve price. The market value was $14,521 each. He tried and failed to get $5000 and $3000 but there were no bids. The only bid was for $200. The C refused to sell them at this price and sold the items to a third party for $1500. The C bought an action for breach of contract for breach of contract. C won and was awarded $27,600 in damages (the difference between his bid and the new purchase price)

OUTCOME: C won and was awarded $27,600 in damages (the difference between his bid and the new purchase price). C was entitled to damages as, when an auction takes place without a reserve, the auctioneer makes a unilateral offer which is accepted by submitting the highest bid (as this is the “general and reasonable expectation of persons attending at an auction sale” in this situation. There was therefore a binding collateral contract between the auctioneer and the highest bidder.

Question 21

Hyde v Wrench [acceptance]

Answer 21

The purported acceptance cannot vary the terms proposed by the offer. If it does so it will be treated as a counter offer rather than an acceptance

Question 22

Butler Machine Tool Co Ltd v Ex-Cello-Corp [ACCEPTANCE - BOTF]*

Answer 22

FACTS: The seller offered to sell a machine tool on their standard T&Cs (where the price is variable) but the buyer replied with an order on their own T&Cs, including a return slip acknowledging these terms (where the price would not be variable). The seller returned the slip signed but with a cover letter stating the order was according to their T&Cs.

RATIO: Outcome: The buyer’s order was a counter-offer which the seller accepted. Not decided by the last shot doctrine - even though the sellers’ reply letter was the last shot, it did not prevail.

Despite all reaching the same conclusion the reasoning of the judges was different:

Lawton and Bridge LJ - mirror image rule: Here both judges use the ‘mirror image rule’ to solve the battle of the forms. According to this, the court must ascertain whether an and offer has been made and whether an acceptance has been made that mirrors the terms of the offer’

• Lord Denning - two-stage approach: 1) Has a contract been concluded? 2) What are the terms of the contract? It does not just depend on who fired the last shot.

Question 23

**Tekdata Interconnections Ltd v Amphenol **

Answer 23

FACTS: Tekdata suggested their terms applied to the contract, rather than Amphenol’s (Amphenol’s terms were set out in the last document passing between the parties). Tekdata claimed some connectors were delivered late and Amphenol defended themselves by saying their terms excluded liability for this. Amphenol appealed to ask the court to apply a traditional offer and acceptance analysiS

RATIO: Appeal allowed - a traditional offer and acceptance analysis should be applied, which concludes that Amphenol’s terms should apply. Last shot doctrine applied.

• Rebutting the traditional analysis: The traditional analysis “must be adopted unless the documents passing between the parties and their conduct show that their common intention was that some other terms were intended to prevail.” “Indeed I think it will always be difficult to displace the traditional analysis, in a battle of forms case, unless it can be said there was a clear course of dealing between the parties.”

Question 24

TWR Ltd v Panasonic Industry GmbH *

Answer 24

FACTS: There had been a commercial relationship that TRW would buy resistors from Panasonic for many years. TRW signed Panasonic’s customer file document that subject the contract to German law.. TRW argued their purchase order (saying the contract was governed by English law) was the “last shot” and therefore their terms should apply.

RATIO: As TRW had previously contracted with Panasonic on Panasonic’s general conditions, this displaces the traditional analysis of the last shot document being accepted.

• Different to Butler. In Butler, the first shot did not win because it was killed off by a counter-offer and then the seller accepted the buyer’s terms. Here, the first shot did not fail because it was accepted by being signed, rather than being killed by a counter-offer.
  o No universal rule about what shot wins.

Question 25

Entores Ltd v Miles Far East Corporation *[ACCEPTANCE - COMMUNICATION]

Answer 25

FACTS: The plaintiff made an offer by Telex to D’s agents in Holland (where D’s HQ was in NY) and their offer was accepted by a communication received on the plaintiff’s Telex in London. Was there a contract?

RATIO: The postal rule does not apply to Telex communications so the offer becomes binding when and where “the offeror receives notification of the acceptance”. Although Telex messages are not “completely instantaneous”, they are to be treated as if the conversations were instantaneous.

• When there is no contract: 1) When I shout an offer but cannot hear the acceptance - the acceptance must be repeated for it to be valid. 2) When I phone you with an offer but the line dies - you must repeat your acceptance.
• In these cases, the offeree “knows [the acceptance] has not been received or has reason to know”.
  If the offeror without any fault of his own does not receive the acceptance, even if the sender of the acceptance reasonably believes it has been sent, there is no contract.
• Where there is a contract: When the person sending the acceptance “reasonably believes” it has been sent - “the offeror in such circumstances is clearly bound” as it is “his fault” - applying the objective test.
  “This may happen if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated: or the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an acceptance reasonably believes that his message has been received.”

Requirement of notification of acceptance: It is made for the “benefit of the offeror”, who can waive it either expressly (in advertisements, where the offeror is “content with the performance of a condition - Carbolic Smoke Ball) or impliedly (“by indicating a contemplated method of acceptance, for example, by post or telegram”).

Question 26

**Brinkibon Ltd v Stahag-Stahl ** [ACCEPTANCE - COMMUNICATION]

Answer 26

Approved the Entores : the postal rule does not apply to instantaneous communication like Telexes so acceptance takes place the moment the acceptance is received by the offeror

• Tempting to apply the postal rule: The postal rule also applies to telegrams sent through the post office and there are similarities between this and sending Telexes (especially when it is received by a secretary).
   However, it is the principal’s “responsibility to arrange for prompt handling of messages”.
   The acceptor can tell if his acceptance has not been received, unlike the failed recipient, so it is “convenient that the acceptor, being in the better position, should have the responsibility of ensuring that his message is received”.
• This case does not lay down a universal rule: The message could be received by secretaries or sent out of office hours (and not received immediately). In these cases, there is no “universal rule”, as each case would have to be resolved by looking at the intentions of the parties, and sound business practice.

Question 27

Manchester Diocesan Council for Education v Commercial and General Investments [ACCEPTANCE - PRESECRIBED METHODS]

Answer 27

Buckley J “Where an offeror has prescribed a particular mode of acceptance, but not in terms of insisting that it only acceptance in that mode shall be binding, I am of the opinion that acceptance communicated by any other mode that is not less advantageous to him will conclude the contract”
* “if the offeror intends that he shall be bound only if his offer is accepted in some particular manner, it must be for him to make this clear”

Question 28

**Felthouse v Bindley **[ACCEPTANCE - SILENCE]

Answer 28

FACTS: : D was an auctioneer selling a horse on behalf of a third party (X). P claimed that he had a preexisting contract with X which meant that the horse was his and so had a claim in conversion.

RATIO: The horse was still X’s. The contract had not been concluded as X had never accepted. Ds statement that “If he heard no more back from you, I will consider the horse mine” was not an acceptance when X did not reply.

It must be noted that while silence cannot amount to acceptance, it is clear law that conduct can amount to acceptance

Question 29

Brogden v Metropolitan Railway [ACCEPTANCE - SILENCE]

conduct

Answer 29

FACTS: D has supplied the railway company (C) with coal for 2 years without a formal contract. C send a draft contract to D but no formal contract was made. C’s manager then ordered coal in accordance to the terms of the draft for 2 years. D sought to stop and C sued D for breach of contract.

RATIO: A contract can be accepted by the conduct of the parties.

Question 30

Rust v Abbey Life insurance [communication of accepatnce]

Answer 30

Held that the D had accepted the Ps offer, probably when she issued her with the life insurance policy.

• While it may be well that in many cases silence of inactivity is not evidence of acceptance, having regard to the facts of the and the history of the transaction between the parties … it seems to me to be an inevitable inference that she accepted the policy as a valid contract.
• This was later cited in Vitol v SA to say that the law does in exceptional cases recognize acceptance of an offer by silence

Question 31

Adams V Lindsell
AND Dunlop v Higgins
[ACCEPTANCE - POST]

Answer 31

ADAMS: Cited as the authority for establishing the postal rule.

–> the ‘postal rule’ stipulates that acceptances via post
are deeded to have been effective at the point of postage not at the point of reception

DUNLOP: Affirmed the postal rule

Question 32

Henthorn v Fraser [ACCEPTANCE - POSTAL RULE]

Answer 32

The postal rule only applies where it is reasonable to use the post (when parties live at a distance)

Question 33

**Household Fire and Carriage Accident Insurance Co Ltd v Grant * ** [acceptance - postal rule]

Answer 33

FACTS: D allotted shares in a company but he never received a letter telling him the shares had been assigned to him.

RATIO: the contract had still been concluded even though he had never received the latter and the postal rule still applied. This was affirmed by Russel LJ in Holwell; the postal rule is still in place “even if the letter goes astray and gets lost”

Question 34

**Byrne & Co v Van Tienhouse & Co **[acceptance - postal rule]

exceptions

Answer 34

FACTS: V posted a letter to B offering 1,000 boxes for sale. B telegraphed their acceptance when they received it on 11 October but V sent a withdrawal on 8 October because prices rose. V refused to go through with the sale.

RATIO: Although an offer can be withdrawn before it is accepted, this needs to be communicated. The revocation of the offer was not active on 8 October but on 11 October, when it was received. Therefore, there was a contract.

The postal rule does not apply to the revocation of an existing offer - the postal rule only applies when it is received as an acceptance by post is expected, but a revocation is not.

Certainty concerns: Otherwise, “no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it”

Question 35

Holwell Securities Ltd V Hughes [ACCEPTANCE - POST]

exceptions

Answer 35

FACTS: C’s rights under the contract to purchase land had to be exercised “by notice in writing”. However, the letter sent to purchase the land was never received by D. C argued that the postal rule applied, so the letter’s failure to arrive was irrelevant.

RATIO:The terms of the offer (which said “by notice in writing”) can expressly or impliedly require the acceptance to actually be received. This is such a situation, so the postal rule does not apply - acceptance cannot be constituted “by the act of posting”.

Exceptions to the postal rule:
* “When the express terms of the offer specify that the acceptance must reach the offeror”.

• Lawton LJ identified a larger exception to the rule, whereby the postal rule would not operate when “its application would produce manifest inconvenience and absurdity”. (This was not commented on by Russel LJ)
  o Should a stockbroker who is holding shares under clients’ orders liable be because he did not sell according to instructions sent in the post that was never received?
  o This is a difficult point as while it sounds good it is adopting it meant departing from binding precent it must be rejected, as its Lawton’s LJs use of the term draws support from the (overruled) judgement of Bramwell B in British American Telegraph v Colson the breadth should be treated with suspicion.

If the “negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising an option had in fact communicated the acceptance or exercise to the other”.

Question 36

Thomas v BPE Solicitors [ACCEPTANCE - ONLINE]

Answer 36

The postal rule is not applicable ‘at least where the parties are conducting the matter by email’

Question 37

Eurasia Sports Ltd v Tsai [ACCEPTANCE - ONLINE]

Answer 37

The postal rule does not apply to communications on WhatsApp

Question 38

Percy v Trentham Ltd v Archital Luxfer Ltd [CERTAINTY]

general rule

Answer 38

The courts are generally reluctant to find no contract has been concluded when parties have acted on the assumption a contract has been entered into

Question 39

Astor Management AG [CERTAINTY]

general rule

Answer 39

The role of the court is to “give legal effect to what the parties have agreed, not to throw its hands in the air and refuse to do so because the parties have not made It ea

Question 40

May and Butcher Ltd v The King [CERTAINTY]

Difficulty in mitigating needs

Answer 40

FACTS: The government agreed to sell tents to May & Butcher, who left £1,000 as a deposit. The written agreement said the price and dates would be agreed later. When new management took over, they refused to sell the tents and said they were not bound by the contract.

RATIO: There was no contract. A contract which is not certain about all essential elements and provides that the parties will agree to them in the future is not enforceable - the standard of reasonableness cannot be used to fill gaps where the parties expressly agree to agree later.

• Today: Probably would be decided differently. A reasonable price would now be implied under the Sale of Goods Act. An agreement to agree something in the future can also be valid if there is an arbitration clause or other mechanism for it to be decided
   May and Butcher criticised in Fletcher Challenge Energy v Electricity corporation of New Zealand where Blanchard J said “We take the view that this case is no longer to be regarded as authority for any wider proposition that an ‘agreement’ which omits an essential term, or means of determining such a term does not amount to a contract” … “on its own facts we respectfully doubt that May and Butcher would be decided the same way today”

This case is seen as too narrow - if the parties clearly intended to be bound the courts will try to make the contract work.

Question 41

Hillas v Arcos [CERTAINTY]

difficulty mitigating needs

Answer 41

FACTS: Was an agreement between the buyer and seller of wood with an option for the buyer to purchase more wood later at an unspecified price enforceable? The seller sought to escape the option by alleging that no enforceable meaning could be deduced from the words.

RATIO: The agreement was enforceable - it was not an agreement to agree but a contract in itself. Courts can imply a price into a contract which does not specify the price based on the parties’ previous dealings, the custom of the timber trade and the standard of reasonableness.

• It is “necessary to exclude as impossible all reasonable meanings which would give certainty to the words” before enforcement would be denied.
• While he dissented in the judgement, Scruton LJ (also a judge in May and Butcher) noted that “the English law and the practice of commercial courts is getting wider apart, with the result that the commercial business is leaving the courts and is being decided by commercial arbitrators with infrequent reference to the courts”

Commentary (Chen-Wishart): This case shows the courts’ willingness to cure uncertainty. A reason for this is because of the imprecision in business practice - businessmen often refrain from insisting upon precise terms for fear of losing the deal or annoying the other party

Question 42

Wells v Devani *

Answer 42

Where parties did (objectively) intend to be bound and too perform, the courts are much more likely to conclude that the parties did enter into a legally binding contract.

Facts: A builder was struggling to find purchasers for flats and was put into contact with an estate agent. The parties agreed over the phone that the estate agent would find a buyer, which he did. The issue was whether the estate agent was entitled to a commission for the sale of the property, even though the parties agreed the rate of commission but failed to agree the date.

Outcome: The parties had entered into a valid contract as the date of payment was not an essential term - payment would be due on completion (as found through interpretation - a reasonable person would understand this to be the case).

• “Lawyers frequently speak of the interpretation of contracts (as a preliminary to the implication of terms) as if it is concerned with the words used expressly”, but the “context in which the words are used, and the conduct of the parties at the time” can be more important, as essential terms can be agreed by conduct.
• Interpretation vs. implication: Although this was considered a case of interpretation, had it been necessary to do so, they would have implied a term into the contract that commission was payable on completion. The same conclusion would be reached through both interpretation and implication.
  o “The obligation to make payment of the commission on completion would be what was required to give the agreement business efficacy, and would not go beyond what was necessary for that purpose” - implied terms should only be used based upon necessity.
  o Judges may also imply a term “where it is necessary to do so to give the agreement business efficacy or the term would be so obvious that ‘it goes without saying’, and where, without that term, the agreement would be regarded as incomplete or too uncertain to be enforceable.”
• “There will be cases where an agreement is so vague and uncertain that it cannot be enforced. So too, there will be cases where the parties have not addressed certain matters which are so fundamental that their agreement is incomplete.”
  o But, “the courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement.”

Question 43

May and Butcher v The King [CERTAINTY]

exceptions

Answer 43

One of the leading cases where uncertainty was found (see above)
* Has been criticized for being outdated and commercially unreasonable

Question 44

Scammel and Nephew Ltd v Ouston [CERTAINTY]

Answer 44

FACTS: D entered into an agreement to purchase a new van from the P. It was stipulated that the purchase price should be set up on a hire purchase agreement on the basis of 2 years, with some of the purchase price being paid by/with an alternative van owned by the D.

Before the term of the contract had been agreed negotiations deteriorated and D refused to take part in the exchange. P bought a claim for breach of contract which D contended on the basis that the agreement was void by uncertainty as the terms ‘on hire-purchase terms’ lacked definite meaning.

OUTCOME: The agreement was too uncertain to be enforced.
* “it is inaccurate and misleading to apply an order for goods, as given by a purchaser, a clause that hire purchase terms are too apply without something to explain the apparent contradiction”  without clarification or any reference to any ‘usual terms’ by which the parties might ordinarily use hire/purchase it too uncertain

Question 45

Shamrock SS Co v. Storey and Co [CERTAINTY]

Answer 45

Court concluded that the agreement was nothing but an agreement to agree

Question 46

British Steel Corp v Cleveland Bridge Engineering Co Ltd [CERTAINTY]

Answer 46

Facts: B entered into negotiations to manufacture steel nodes for C. C sent a letter stating their intention to place an order for the nodes on their standard terms and requested B to commence work “pending the preparation and issuing of the official form of subcontract”. No formal contract was agreed

Outcome: There was no contract between the parties. However, if a party has already started work during contract negotiations and the contract is never made, they can use a restitutionary remedy to recover a reasonable sum for their work (through the claim quantum meruit).

• Why was a contract not made here?: Performance often indicates that a contract has been made, but this is not the case if the essential terms are not agreed. As the negotiations were ongoing, it was impossible to say with certainty what the terms of the contract were, especially as essential terms like price and quantity were undecided.
• Whether letters of intent are binding depends on the circumstances.
• “In the vast majority of business transactions, particularly those of substantial size, the price will indeed be an essential term”.
  Contrast to RTS Flexible Systems [2010]: A letter of intent was binding as there was

Question 47

Esso Petroleum v Customs & Excise * [INTENTION 2 CREATE LR]

commerical relationships - general presumption

Answer 47

Held there was an intention to create a legal obligation (as the agreement took place in a business setting and was a legal offer beyond a “mere puff” that gave Esso commercial advantages, that was accepted by the customers). Despite this intention, there was no consideration for the coins as the coins were transferred under a contract separate to the contract of petrol sale. The coins were not for sale and tax did not have to be paid.

• Lord Simon: There was an intention to create a legal obligation. “It seems in general undesirable to allow a commercial promoter to claim that what he has done his a mere puff, not intended to create legal relations”.
• Lord Russell: There is no need to have a contractual relation here because Esso would be unlikely to renege on the offer of a free gift “without the additional compulsion” of a contract

Question 48

Blue v Ashley [INTENTION 2 CREATE LR]

commerical relationships - exceptions

Answer 48

Facts: A statement made during an informal pub meeting by the majority owner of a company that he would pay a consultant £15 million if he raised the company’s share price to £8 - was this intended to create legal relations? The share price did later reach £8

Outcome Although there is a strong presumption that parties intended to create legal relations in a commercial context and being in a pub with alcohol does not negate the making of ontracts, this was not a truly commercial context and it was an “unlikely” place to negotiate. No reasonable person would have seen the discussions as showing such an intention.

• To be a contract, the agreement “must be intended to create legal rights and obligations which are enforceable in the courts, and not merely moral obligations.”
  o The agreement here was merely “banter”, and the consultant himself understood this to be the case until, with hindsight, the share price started increasing.

Question 49

Balfour v Balfour

domestic agreements - general rule

Answer 49

FACTS: The husband agreed to send maintenance payments to his wife. His wife sought to enforce the agreement when he stopped sending them after the relationship soured.

RATIO: The court would not enforce an agreement that was purely social and domestic - it is presumed that they did not intend to create legal relations.

“In order to establish a contract there ought to be something more than mere mutual promises having regard to the domestic relations of the parties”.

o There was no intention to create legal relations due to the agreement being made in a “friendly way” and with “natural love and affection”.

• Consideration: There was no consideration in this case. Even if there were, it would not be enforced.
• Practical reasons:
  1) It would lead to lots of arguments and there is no “benefit” from this “unlimited litigation” for the couple - “in respect of these promises each house is a domain into which the King’s writ does not seek to run”.

2) It would enforce agreements such as where “two parties agree to take a walk together, or where there is an offer and an acceptance of hospitality” - nobody thinks these are contracts.

3) The courts would be overburdened.

Question 50

Jones v Padavatton [INTENTION 2 CREATE LR]

domestic relationships - general rule

Answer 50

No intention to create legal relations in a mother/daughter relationship

Question 51

Merrit v Merrit [INTENTION 2 CREATE LR]

domestic agreements - exceptions

Answer 51

The presumption of no legal relations does not apply for couples who do not live in amity as these parties “then bargain keenly. They do not rely on honorable understandings. They want everything cut and dried. It may be safely presumed that they intend to create legal relations”

Question 52

Parker v Clark [INTENTION 2 CREATE LR]

domestic agreements

Answer 52

Held that as one of the parties had acted in detrimental reliance on her boyfriend’s agreement to share the defendants home and the Ds promise to give her the house in the will. A promise to which she acted on by selling her old home and lending some of the sale money to her daughter
* McKendrick notes that this case may have been decided differently if the evidence suggested that the parties had been falling out before she moved in  this may highlight the difference between executed and executory agreements

Question 53

Lens v Devonshire Health Club [INTENTION 2 CREATE LR]

social relationships

Answer 53

The winner of a golf competition was not entitled to sue in order to recover the prize

(note however in some competitions this may not be the case – See O’Brien

Question 54

**Raffles v Wichelhaus **[O&A MISTAKES]

Answer 54

FACTS: Latent ambiguity mistake. The parties agreed to sell cotton due to arrive on the ship Peerless, but the buyer meant the October Peerless and the seller meant the December Peerless, so the buyer refused to accept the cotton in December

RATIO: There was no agreement and therefore no enforceable contract due to ambiguity about what Peerless was referred to - there had been no consensus ad idem or “meeting of the minds”. The objective test made it clear that a reasonable person would not have been able to identify which ship had been agreed upon

Question 55

Smith v hughes [O&A MISTAKES]

Answer 55

See above for facts –> a mistake as to the quality of the oats did not negate consent as both the parties knew the contract was for the trade of oats

Question 56

Cundy v Lindsay [O&A MISTAKES]

Answer 56

FACTS: A rogue signed his name as Blenkiron & Co, a respectable firm, as a buyer of handkerchiefs. The rogue sold the goods to Ds. Cs discovered their mistake and sought to recover the goods.

RATIO: Cs did not intend to sell the handkerchiefs to Blenkarn but to Blenkiron & Co. There was no consent to selling to Blenkarn and therefore there was no contract. As there was no contract between C and Blenkarn, Blenkarn could not transfer a title to D under nemo dat. Ds were held liable for conversion as the ownership remained with C.

Question 57

**Scriven Bros v Hindley [O&A MISTAKES] **

Answer 57

Facts: The auctioneer acting for Cs selling hemp and tow (where the auction catalogue did not indicate there was any difference in their contents) did not realise Ds misunderstood what was being auctioned. D gave a bid which was a reasonable price for hemp but excessive for tow.

No contract had been formed, so D did not have to pay. If one party is mistaken about the goods they are buying, they are not bound to buy the goods unless there is an estoppel - and there can be no estoppel when the party seeking to enforce the contract “has by his own negligence or by that of those for whom he is responsible caused, or contributed to cause, the mistake.”

• Offer and acceptance mistake: The offer to sell tow was met with an acceptance intended to buy hemp.
  o D had not conducted himself in a way that a reasonable man would believe he actually accepted - he paid an excessive amount for tow, so it was clear that he wanted hemp.
• Duties of the seller: It is not the case that the “purchaser has a duty towards the seller to examine goods that he does not wish to buy, and to correct any latent defect there may be in the sellers’ catalogue”.

Question 58

**Phillips v Brooks [O&A MISTAKES] **

Answer 58

FACTS: A rogue purchased a ring from the jeweller with a cheque and signed his name “Sir George Bullough”, providing “his” address. Phillips knew Boullough lived at the address so allowed the rogue to take the ring before the cheque cleared, but it bounced. The rogue then pledged the ring to a third party.

RATIO: The contract between the rogue and Phillips was valid, so the rogue could transfer ownership to the third party. As the contract was made face-to face, there is a presumption that Phillips intended to deal with the person he was physically talking to, even if they were using a false identity.

• There had been no mistake, only fraud. A fraudulent contract is voidable, not void.

Question 59

Hartog v Colin and Sheilds [O&A MISTAKES]

Answer 59

See above  D offered C to sell 3,000 hare skins but by mistake valued them at so much per pound instead of per piece, significantly undervaluing them by ⅓. C accepted the offer but D refused to fulfil the contract. C argued he suffered a loss of profit and claimed damages for breach of contract.

There was no contract between C and D - the agreement was void. C cannot take advantage of D’s mistake by “snapping up” an offer D knew they did not mean to make

Question 60

Ingram v Little [O&A MISTAKES]

Answer 60

A rogue attempted to purchase a car from C by cheque, which C initially refused. The rogue pretended to be a reputable businessmen (who C looked up in the telephone directory) and then the cheque was accepted, but bounced. The rogue sold the car to D and C tried to recover the car or its value from D.

Outcome: As C intended to deal only with the genuine businessman, the rogue was incapable of accepting C’s offer to sell the car, so there was a void contract and ownership remained with C, meaning the car could be recovered from D.

• The Phillips v Brooks presumption for face-to-face transactions that you intend to deal with the person you are physically talking to is not irrebuttable.
  o If particular importance is attached to the buyer’s identity, then a false identity can make the contract void even in a face-to-face transaction.
• Is irreconcilable with Lewis, where C did also check the rogue’s identity.

Question 61

Lewis v Averay [O&A MISTAKES]

Answer 61

FACTS: Mistake as to identity. C advertised his car for sale for £450 in a newspaper. A rogue claiming to be a well-known actor (he provided proof of this when asked) bought the car through a cheque. C wanted the car back when he found the cheque was useless but found the rogue had sold it to someone else.

RATIO: The innocent buyer did not have to return the car. The contract between C and the rogue was voidable. The innocent buyer acquired a good title to the car because he purchased it in good faith and for value before C acted to set aside the contract with the rogue.

• “I do not, therefore, accept the theory that a mistake as to identity renders a contract void”, especially as the buyer is in good faith and has paid money.
• There is a presumption that “when the plaintiff accepted the cheque and handed over the car and logbook, he concluded a contract with the person physically present with whom he had been dealing.” A contract was formed, even if it was made under a mistake.
  o “The fact that one party is mistaken as to the identity of another does not mean that there is no contract, or that the contract is a nullity and void”.
• There was nothing to displace this presumption. Therefore, the contract was merely voidable and meant the rogue could pass property to the innocent buyer, so long as the contract was not set aside before then (it was not here).

Objective approach: “I say that he ‘made a contract’ because in this regard we do not look into his intentions, or into his mind to know what he was thinking or into the mind of the rogue. We look to the outward appearances”.

What mistakes count?: “A mistake as to identity, it is said, avoids a contract: whereas a mistake as to attributes does not. But this is a distinction without a difference. A man’s very name is one of his attributes. It is also a key to his identity. If then, he gives a false name, is it a mistake as to his identity? or a mistake as to his attributes? These fine distinctions do no good to the law.”

On Ingram v Little:
* Phillips v Brooks cannot be reconciled with Ingram v Little.
Ingram v Little should be confined to its “special and unusual” facts. Even if you think the other party’s identity is important and try to confirm it, this may not displace the Phillips v Brooks presumption.

Question 62

Shogun finance Ltd v Hudson [O&A MISTAKES]

Answer 62

FACTS:
A dealer agreed a price for the sale of a motor vehicle on hire-purchase to a fraudster who produced a stolen driving licence as proof of his identity. The claimant approved the loan facts after a credit check. The fraudster paid the deposit to the car (to be bought fully via hire purchase). Using a false identity, the fraudster sold the car to D

RATIO:There was no “consensus ad idem” between the finance company and the rogue, so there was no hire-purchase agreement. This means the contract was void. The dealer still owned the car, rather than D owning it. Appeal dismissed.

• If a contract is made by writing, you have to resolve the question of who the parties are by construction of the documents. If the documents name one person but they did not consent as it was someone else using their name, there is no agreement, so no contract.
  o This is where the identity of the party was a term of the contract.
• Reconciles Cundy and Lewis.

On the dissenting judges:

• “Where there is some form of personal conduct between individuals who are conducting negotiations, this approach gives rise to problems. In such a situation I would favour the application of a strong presumption that each intends to contract with the other, with whom he is dealing.”

Both: Would allow the appeal. There had been a contract of hiring formed, but a voidable one. There is no reason why the presumption that parties intend to contract with the person whom they are dealing with should apply only to face-to-face transactions and not to written transactions, so Cundy, which establishes this principle, should be overruled.