Formation II Flashcards
How can you distinguish between a counter offer and an acceptance?
Acceptance is an unqualified agreement to the terms of an offer, forming a contract.
Counter Offer is when the offeree responds with new or different terms, effectively rejecting the original offer.
Is a request for further information a counter offer? How are such requests treated by the courts?
No, a request for further information is not a counter offer. It’s an inquiry to clarify the offer’s terms without rejecting it.
Courts treat such requests as preserving the original offer, which remains open for acceptance.
Can a unilateral offer be revoked? When/how? What about other offers? – is this justifiable?
A unilateral offer can generally be revoked before the offeree begins performance, but not after substantial performance has started.
Other Offers: Revocation must be communicated before acceptance. This is justifiable to allow parties to change their minds.
(In a bilateral contract one cannot revoke after acceptance without there being consequences despite nothing being exchanged yet)
What is the postal rule and when does it apply? Can it be waived? Is it justifiable? REMEMBER - only applies to acceptance, not offers, and only if agreed that acceptance can be made by post
Acceptance is effective once posted, not when received, unless the offeror specifies otherwise.
It can be waived if the offeror requires receipt for acceptance. The rule is debated, but aims to address issues with non-instantaneous communication.
How do the rules on acceptance differ on acceptance between instantaneous and non-instantaneous communications?
Instantaneous (e.g., phone, email):
Acceptance is effective upon receipt.
Non-Instantaneous (e.g., post): Acceptance is effective once sent, unless otherwise specified.
What is the ‘battle of the forms’? What do you think of the different judgments in the Butler Machine Tools case?
Occurs when two parties exchange contracts with conflicting terms.
Butler Machine Tools v Ex-Cell-O: Courts applied the “last shot” rule, where the final set of terms sent before acceptance was upheld. There’s ongoing debate on which terms should govern in such disputes.
Why/when does the battle of forms occur, and what is the approach of the court in these circumstances?
The ‘battle of the forms’ occurs when two parties negotiate a contract but each uses their own standard terms and conditions, which often conflict. Instead of negotiating a single set of terms, each party sends their own version, leading to confusion about which terms govern the contract.
Approaches by Courts:
‘Last Shot’ Rule: The terms last sent and accepted (explicitly or implicitly through performance) govern the contract.
Butler Machine Tool Co v Ex-Cell-O [1979]
Butler Machine Tool Co offered to sell a machine to Ex-Cell-O for £75,535, including a price variation clause in their standard terms. This clause allowed the price to increase if costs rose before delivery.
Ex-Cell-O responded with an order form containing their own standard terms, which excluded the price variation clause. They also included a tear-off acknowledgment slip for Butler to sign.
Butler signed and returned the slip, but later sought to enforce the price variation clause, claiming it was part of the contract.
KEY PRINCIPLES:
The “last shot” principle applied: The contract was concluded on Ex-Cell-O’s terms because Butler’s return of the signed acknowledgment slip was an acceptance of those terms, not a counter-offer.
Battle of the Forms: This case illustrates how courts resolve disputes when both parties attempt to impose their own standard terms during contract negotiations.
Thornton v Shoe Lane Parking [1971]
Mr. Thornton parked his car at a multi-storey car park operated by Shoe Lane Parking.
A ticket was dispensed from a machine upon entering the car park. The ticket stated that parking was subject to the car park’s terms and conditions, which were displayed on a notice inside the premises.
One of the terms limited the car park’s liability for injuries to patrons.
Mr. Thornton suffered personal injuries while using the car park and sued Shoe Lane Parking for damages.
The car park argued that the terms on the notice excluded their liability for such injuries.
KEY PRINCIPLES:
Incorporation of Terms: Terms must be communicated to the other party before or at the time of contract formation to be binding.
Notice of exclusion clauses: The exclusion clause was not sufficiently communicated to Mr. Thornton before the contract was formed. A clause that significantly limits liability requires clear, prominent notice, which was not provided here. (Reasonable Notice: Particularly onerous terms, such as exclusion clauses, require a higher standard of notice to be enforceable.)
Walford v Miles [1992]
Mr. and Mrs. Walford were interested in purchasing a business owned by Mr. and Mrs. Miles.
The Mileses orally agreed that they would negotiate exclusively with the Walfords to finalize the sale.
In exchange, the Walfords provided a comfort letter, confirming their intention to complete the purchase and indicating their financial capability.
Despite the exclusivity agreement, the Mileses sold the business to a third party.
The Walfords sued, claiming breach of the exclusivity agreement.
KEY PRINCIPLES:
Certainty in Contracts: For an agreement to be enforceable, it must be sufficiently certain and definite in its terms.
Freedom to Contract: The case reaffirms the principle that parties are free to withdraw from negotiations unless a formal, binding agreement has been reached.
Exclusivity Agreements: These must be carefully drafted to ensure they are supported by consideration and clear obligations to be enforceable.
(Agreements to negotiate are unenforceable: Such agreements lack the necessary certainty and are inherently inconsistent with the principle of freedom to contract.
The exclusivity agreement was too vague to constitute a binding obligation.
There was no express consideration supporting the exclusivity agreement, further undermining its enforceability.)
Brinkibon Ltd v Stahag Stahl [1983]
Brinkibon Ltd, based in London, wished to purchase steel from Stahag Stahl, a company based in Vienna, Austria.
The acceptance of Brinkibon’s offer was communicated by telex from Vienna to London.
A dispute arose, and Brinkibon sought to sue Stahag Stahl in the English courts.
The question was whether a contract was formed in London (where the offer was received) or in Vienna (where the acceptance was sent).
KEY PRINCIPLES:
Instantaneous Communications Rule: Acceptance via instantaneous communication (e.g., telex, modern emails) is effective when received by the offeror.
