Existence/formation of a contract

Question 1

What is required for an enforceable contract?

Answer 1

1. Agreement (offer and acceptance)
2. Intention to create legal relations
3. Consideration

Question 2

What is the court’s approach to determine whether an agreement exists?

Answer 2

An objective test considering what a reasonable man would say was the intention of the parties, having regards to all the circumstances.

Question 3

What is a bilateral contract?

Answer 3

Each party assumes an obligation to the other party by making a promise.

2 people having to do something e.g. sell an item in exchange for payment. Promise for promise.

Question 4

What is a unilateral contract?

Answer 4

One party makes an offer/ proposal which calls for an act to be performed by one or more parties.

Offer is accepted by performance of an act

Question 5

What is an offer?

Answer 5

An undertaking to be contractually bound by the terms of that offer in the event of an unconditional acceptance being made by the offeree.

Question 6

What is an invitation to treat?

Answer 6

• Not an offer
• First step in negotiations which may or may not lead to a firm offer by one of the parties.
• Cannot be accepted to form a binding contract

Question 7

Are advertisements offers or invitations to treat?

Answer 7

Invitations to treat

statements inviting further negotiations

Partridge v Crittenden [1968]

Question 8

What is the exception to the general rule that advertisements are invitations to treat?

Answer 8

Where advertisements amount to a unilateral offer

e.g. advertising a reward or a clear prescribed act w/ clear intent to be bound

Carlill v Carbolic Smoke Ball Co (189

Question 9

Are goods on display offer or invitations to treat?

Answer 9

Invitations to treat

Fisher v Bell (1961)

Question 10

When is an offer accepted in an auction?

Answer 10

At the fall of the auctioneer’s hammer. The auctioneer is an agent of the seller so the contract is formed between the owner and the buyer.

Calls for bid are an invitation to treat.

When the auction is without reserved the auctioneer is under an obligation to sell to the highest bidder. The auctioneer would be in breach of this contract so the potential buyer could sue the auctioneer.

Question 11

Is a tender an offer?

Answer 11

The general rule is that a tender is an invitation to treat. However the exception is if the party calling for bids makes a promise. If this is the case the person making the tender can sue in relation to this promise for loss of opportunity.

Question 12

Define acceptance

Answer 12

An unqualified expression of assent to the terms of an offer.

Question 13

Can silence amount to acceptance?

Answer 13

General rule - no.

If coupled with conduct then yes.

Question 14

What is the battle of the forms?

Answer 14

The idea that when two parties are both contracting on their standard forms, the ‘last shot’ wins.

Question 15

What is the postal rule?

Answer 15

When a letter of acceptance is sent by post acceptance is communicated as soon as the letter is posted if:

It was reasonable to use the post
the letter was properly addressed, stamped and posted
the postal rule had not been excluded by the offeror

Question 16

How can an offer be terminated?

Answer 16

Counter offer

Lapse of time

Withdrawal
Express rejection

Question 17

When can an offer be revoked?

Answer 17

At any time before acceptance by the offeree or their authorised agent. Only exception is when the offeror gave some consideration for the offer to be kept open.

Revocation must be communicated.

If notice of revocation is sent during business hours it should be read.

The postal rule does not apply to notices of revocation.

Question 18

When does acceptance occur in a unilateral contract?

Answer 18

When the act promised is complete.

Question 19

What is the starting point in deciding whether there is intention to create legal relation between businesses?

Answer 19

There is a presumption of intention to create legal relationship but this can be rebutted for example by stating the offer is binding ‘in honour only’

Question 20

What is the starting point in deciding whether there is intention to create legal relation in the context of domestic agreements?

Answer 20

There is a presumption there is no intention to create legal relationships but this can be rebutted.

For example when:

solicitors are negotiating the terms of a divorce.

one party is selling their house to another.

Question 21

What is the difference between a bilateral and a unilateral contract?

Answer 21

Bilateral contracts involve the exchange of two promises.

Unilateral contract involves a promise in return for an act.

Question 22

What is the meaning of ‘consideration need not be adequate’?

Answer 22

The consideration given does not need to reflect the value of what is given in return.

For example £1 would be sufficient consideration for an Aston Martin

Question 23

What is the meaning of ‘consideration must be sufficient?

Answer 23

Consideration must be the right ‘sort of thing’. Must have some economic value.

Question 24

Can a promise to stop doing something be valid consideration?

Answer 24

In some circumstances but not when the matter would be detrimental to public policy.

When people have a right to do something under law then stop this could be sufficient consideration.

Question 25

What is executory consideration?

Answer 25

A promise to do something or refrain from doing something.

Question 26

What is a tender?

Answer 26

Where a party invites tenders (i.e. offers) from those interested in supplying goods and services to submit bids so that they can be chosen to carry out the work for them.

Question 27

Are requests for tenders offers or invitations to treat?

Answer 27

Invitations to treat

Requestor can accept or reject any tender.

Spencer v Harding (1870)

Question 28

What is the exception to the rule that invitations to tender are invitations to treat?

Answer 28

Where the invitation to tender expressly contains an undertaking to accept the highest or lowest bid - forming a unilateral contract.

Harvela Investments
Ltd v Royal Trust Co. of Canada (CI) Ltd [1985]

Question 29

Are auction sales offers or invitations to treat?

Answer 29

Invitation to treat

The bidder makes an offer which the auctioneer is free to accept or reject

Payne v Cave (1789)

Question 30

When is the offer made and accepted at an auction?

Answer 30

Bid = offer
Accepted = by the fall of the auctioneer’s hammer (marks acceptance of last bid)

Question 31

What are auctions “without reserve”?

Answer 31

Seller promises to sell to the highest bidder whatever it may be

e.g. as opposed to reserved price where if no bid above then seller can keep item.

Question 32

What is the exception to the rule that auction sales are invitations to treat?

Answer 32

Auctions “without reserve”

The auctioneer may be sued for breach of contract if they refuse to sell to highest bidder.

Question 33

What are the ways an offer is terminated? (3 of them)

Answer 33

1. Rejection
2. Lapse
3. Revocation

Question 34

When does rejection of an offer take effect?

Answer 34

When it is communicated to the offeror

Question 35

Where a counter-offer is made, can the original offer still be accepted?

Answer 35

NO.

Where an offeree makes counter-offer, the original offer is deemed rejected and cannot be subsequently accepted

Question 36

What is the difference between a counter offer and request for further information?

Answer 36

Counter offer = new terms and amounts to rejection of original offer

Request for further information = enquiry about offer. Seeks clarification of the extent and terms of offer. Original offer remains open

Question 37

What are the ways an offer can be terminated through lapse of time?

Answer 37

1. Passage of time
2. Death of one of the parties

Question 38

In what 2 circumstances can an offer lapse by passage of time?

Answer 38

1. Where acceptance is not made within the period prescribed by the offeror;
2. Where no period is prescribed and acceptance is not made within a reasonable time. What is reasonable will depend on the circumstances of the case.

Question 39

Requirements for an offer

Answer 39

1. Valid
2. Communicated
3. Not rejected, revoked or lapsed

Question 40

Requirements for acceptance

Answer 40

1. A mirror image of the offer
2. Made by the offeree in response to the offer
3. Communicated to the offeror

Question 41

What is the court’s approach to determine whether an agreement exists?

Answer 41

An objective test considering what a reasonable man would say was the intention of the parties, having regards to all the circumstances.

Question 42

When will a term be implied at common law?

Answer 42

to give effect to legal duties which arise, as a matter of policy, out of certain common types of contractual relationships

e.g. landlord and tenant relationship

Question 43

What are the relevant sections of the Sale of Goods Act 1979?

Answer 43

· S12 - title
· S13(1) - description
· S14(2) - satisfactory quality
· S14(3) - fit for particular purpose the purchaser has expressly or impliedly made known
· S15 - the bulk of the goods must correspond with the sample

Question 44

What is an invitation to treat?

Answer 44

• Not an offer
• First step in negotiations which may or may not lead to a firm offer by one of the parties.
• Cannot be accepted to form a binding contract

Question 45

Will death of offeree cause an offer to lapse?

Answer 45

YES

offer can no longer be accepted. The offer cannot be
accepted after the offeree’s death by the offeree’s representatives.

Question 46

Will the death of the offeror cause the offer to lapse?

Answer 46

Only if the offeree knows of the death.

If not, it probably will not.

Question 47

What is revocation?

Answer 47

When the offeror withdraws his offer
anytime before acceptance

Payne v Cave (1789)

Question 48

When is revocation of an offer effective?

Answer 48

Revocation of an offer is effective only upon actual notice of it reaching the offeree.

Offeror must have shown, by words or conduct, a clear intention to revoke their offer + notice it has reached offeree

When communicated by post = when reaches offeree - Postal rules does NOT apply

Question 49

Can revocation be effective if communicated by third party?

Answer 49

YES

As long as essentials are there

Dickinson v
Dodds (1876)

Question 50

Can a unilateral offer be revoked?

Answer 50

YES

It remains possible to revoke the offer at any time prior to the completion of the required act

However, exception where offeree has partly performed obligation.

Great Northern Railway Company v Witham (1873)

Question 51

What exceptions are there to the general rule that unilateral offers can be revoked?

Answer 51

• Where offeree has partly performed the obligation and is willing and able to complete, the offeror may be under an implied obligation not to revoke the offer once performance has commenced
• The offeree’s acceptance and consideration for this implied promise is starting to perform the required act.
• Where a unilateral offer is made ‘to the whole world’ and there is no requirement ppl communicate their intention to accept to the offeror, revocation will only be effective if the offeror takes reasonable steps to bring it to the attention of all those who may have read the offer