Existence/formation of a contract Flashcards
What is required for an enforceable contract?
- Agreement (offer and acceptance)
- Intention to create legal relations
- Consideration
What is the court’s approach to determine whether an agreement exists?
An objective test considering what a reasonable man would say was the intention of the parties, having regards to all the circumstances.
What is a bilateral contract?
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.
What is a unilateral contract?
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
What is an offer?
An undertaking to be contractually bound by the terms of that offer in the event of an unconditional acceptance being made by the offeree.
What is an invitation to treat?
- 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
Are advertisements offers or invitations to treat?
Invitations to treat
statements inviting further negotiations
Partridge v Crittenden [1968]
What is the exception to the general rule that advertisements are invitations to treat?
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
Are goods on display offer or invitations to treat?
Invitations to treat
Fisher v Bell (1961)
When is an offer accepted in an auction?
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.
Is a tender an offer?
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.
Define acceptance
An unqualified expression of assent to the terms of an offer.
Can silence amount to acceptance?
General rule - no.
If coupled with conduct then yes.
What is the battle of the forms?
The idea that when two parties are both contracting on their standard forms, the ‘last shot’ wins.
What is the postal rule?
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
How can an offer be terminated?
Counter offer
Lapse of time
Withdrawal
Express rejection
When can an offer be revoked?
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.
When does acceptance occur in a unilateral contract?
When the act promised is complete.
What is the starting point in deciding whether there is intention to create legal relation between businesses?
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’
What is the starting point in deciding whether there is intention to create legal relation in the context of domestic agreements?
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.
What is the difference between a bilateral and a unilateral contract?
Bilateral contracts involve the exchange of two promises.
Unilateral contract involves a promise in return for an act.
What is the meaning of ‘consideration need not be adequate’?
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
What is the meaning of ‘consideration must be sufficient?
Consideration must be the right ‘sort of thing’. Must have some economic value.
Can a promise to stop doing something be valid consideration?
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.
What is executory consideration?
A promise to do something or refrain from doing something.
What is a tender?
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.
Are requests for tenders offers or invitations to treat?
Invitations to treat
Requestor can accept or reject any tender.
Spencer v Harding (1870)
What is the exception to the rule that invitations to tender are invitations to treat?
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]
Are auction sales offers or invitations to treat?
Invitation to treat
The bidder makes an offer which the auctioneer is free to accept or reject
Payne v Cave (1789)
When is the offer made and accepted at an auction?
Bid = offer
Accepted = by the fall of the auctioneer’s hammer (marks acceptance of last bid)
What are auctions “without reserve”?
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.
What is the exception to the rule that auction sales are invitations to treat?
Auctions “without reserve”
The auctioneer may be sued for breach of contract if they refuse to sell to highest bidder.
What are the ways an offer is terminated? (3 of them)
- Rejection
- Lapse
- Revocation
When does rejection of an offer take effect?
When it is communicated to the offeror
Where a counter-offer is made, can the original offer still be accepted?
NO.
Where an offeree makes counter-offer, the original offer is deemed rejected and cannot be subsequently accepted
What is the difference between a counter offer and request for further information?
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
What are the ways an offer can be terminated through lapse of time?
- Passage of time
- Death of one of the parties
In what 2 circumstances can an offer lapse by passage of time?
- Where acceptance is not made within the period prescribed by the offeror;
- 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.
Requirements for an offer
- Valid
- Communicated
- Not rejected, revoked or lapsed
Requirements for acceptance
- A mirror image of the offer
- Made by the offeree in response to the offer
- Communicated to the offeror
What is the court’s approach to determine whether an agreement exists?
An objective test considering what a reasonable man would say was the intention of the parties, having regards to all the circumstances.
When will a term be implied at common law?
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
What are the relevant sections of the Sale of Goods Act 1979?
· 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
What is an invitation to treat?
- 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
Will death of offeree cause an offer to lapse?
YES
offer can no longer be accepted. The offer cannot be
accepted after the offeree’s death by the offeree’s representatives.
Will the death of the offeror cause the offer to lapse?
Only if the offeree knows of the death.
If not, it probably will not.
What is revocation?
When the offeror withdraws his offer
anytime before acceptance
Payne v Cave (1789)
When is revocation of an offer effective?
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
Can revocation be effective if communicated by third party?
YES
As long as essentials are there
Dickinson v
Dodds (1876)
Can a unilateral offer be revoked?
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)
What exceptions are there to the general rule that unilateral offers can be revoked?
- 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
