formation of a contract Flashcards
offer
an offer is a proposal agreement or promise showing willingness to contract on firm and definite terms. a binding legal commitment , a contract is formed once accepted
invitation to treat
an indication that one person is willing to negotiate a contract with another, but that they are not yet willing to make a legal offer.
Gibson v Manchester city council 1979
the case arose at a time when the council permitted tenants to purchase their council homes. Mr Gibson requested details on purchasing his home and received a letter from the council stating that it may be prepared to sell the house to you . Mr Gibson was invited to complete an application if he wished to pursue the sale. the form was completed, but in the period between making the initial inquiry and submission of the completed form, the council changed its policy on house sales. The issue before the court was whether or not a contract for sale had been concluded when Mr Gibson submitted his form.
held: The agreement was not upheld. the house of lords found no clear indication in the letter from the council that it intended to make a binding promise. The letter was no more than an invitation to treat and Mr Gibson’s completed form had never been accepted.
storer v Manchester city council 1974
The tenant storer received communication from the council which stated ‘ if you will sign the agreement and return it to me, I will send you the agreement signed on behalf of the council in exchange.
held the words of the communication were deemed to fulfil the formalities required to constitute a valid offer.at the point intime that the tenant accepted this offer, a binding agreement was concluded.
what are advertisements classed as?
In most instances advertisement will be classified as invitations to treat with the exception of unilateral contracts. The case sets the precedent for this partridge v Crittenden 1968.
good on display shop/window shelves etc
Partridge v Crittenden 1968
The defendant was charged with the offence of offering a live wild bird which is contrary to another law on protected birds. Crittenden had placed an advertisement stating Bramblefinch cocks 25s each.
held :he was found not guilty of offering these wild birds for sale because the advertisement was seen as an invitation to treat and not an offer. The person responding to the advertisement would be the offeror.
goods in shop window are an invitation to treat which case establishes this:
Fisher v bell 1961
A flick knife was displayed with a price in a shop window. To offer this would be an offence under the offensive weapons act 1961, but it was
held: the shopkeeper was not guilty because it was an invitation to treat and not an offer.
Pharmaceutical society of great britian v Boots cash chemists 1953
Boots were charged with selling controlled pharmaceutical products other than under the supervision of a pharmacist. The shop was a self- service shop where the items had to be sold by a Pharmacist were on a shelf for customers to select.
Held: they were found not guilty as the offer was made by the customer at the till where there was a pharmacist present to approve the acceptance of the offer. The approval by a pharmacist was required by the act controlling of sales.
British car auctions v Wright
lots at an auction are an invitation to treat
in this case, the auctioneers were prosecuted for offering to sell an unfit vehicle at an auction. However, the prosecution failed because there was no offer, only invitation to treat.
request for information is not an offer which case authorises this;
Harvey v Facey 1893
Harvey wanted to buy Facey’s farm and sent a message: will you sell me bumper hall pen the farm state lower price ‘
Facey replied lowest price acceptable £900
Harvey tried to buy the farm for £900 but could not as the reply was merely a reply to the request for information, not an offer.
advertisements
- although usually invitations to treat one key case set the precedent that unilateral contract in advertisement will seen as offers whereas bilateral contract in an advertisement will be an invitation to treat
CARLLIL V Carbolic smoke ball co 1893
the company making the ball advertised it in the pall mall gazette offering £100 reward to anyone using it correctly who then contracted influenza. They deposited 1,000 in the alliance bank in regent street to show the money was there. The manufacturers ignored two letters from her husband. They finally replied saying that if used properly they had total confidence in their product. in order to protect them sales against a fraudulent claim they stated mrs carllil.
what is a unilateral contract?
an agreement to pay in exchange for performance if the potential performance chooses to act. there is no obligation to perform the act.
offer
what is a bilateral contract ?
This requires both offerer and offeree to do something. both parties have obligations.
invitation to treat
Thornton v shoe lane parking 1971
Mr Thornton put money into a machine and was given a ticket at the entrance to a car park. the offer was made by the machine on behalf of the company owning the car park.
the acceptance was made by putting the money into the machine. This was where the contract was made which dictated what terms were in the contract - the terms displayed by the machine
when does an offer start and end?
it starts when the offer is communicated to the offeree
= when t enters the offeree brain
it is essential to establish when the offer ends
Taylor v Laird 1856
Taylor gave up the captaincy of a ship overseas. He needed to get back in England. He worked as an ordinary crew member on the ship in order to get back to England, but received no wages. the ship owner had not received any communication of his offer to work as an ordinary crew member. Therefore no contract could exist for the payment of wages on this voyage.
Stevenson v Mclean 1880
on Saturday, the offeror offered to sell iron to the offeree. the offer was stated to be open until Monday. On Monday at 10am, the offeree sent a telegram asking if he could have credit terms, but got no reply . at 1:34pm the offeree sent a telgram accepting the ofefer but at 1:25p, the offeror had sent a telegram. sold iron to third party arriving at 1.46pm. the offeree sued for breach of contract but the offeror argued that the query about credit wasa counter offer so there could be no acceptance.
held: the query about credit was only an enquiry, so a binding contract was made at 1.34pm.
which are the multiple ways an offer can end?
1 revocation
2 rejection
3 lapse of time
4 death
5 acceptance
6 counter offer
what is revocation?
An offer can be revoked at any time before acceptance. The offeror must communicate the revocation to the offeree before the revocation can take affect as in Routledge v grant 1828. this can have implications where there is an offer to the hole world the Carlill v carbolic smoke ball type offer.
what is rejection?
once an offer is rejected it cannot be accepted by the person rejecting the offer as the rejection ends the offer.
what is lapse of time ?
an offer can come to an end by lapse of time if a fixed period for the duration of the offer is stated then as soon as that expires there is no offer to accept.
what is death?
The effect of the death of either the offeror or the offeree depends on which party died and the type of contract involved.
what is acceptance?
once an offer has been accepted there is an agreement and assuming that the other essentials features of a contract have been fulfilled there is a legally binding contract.
What is a counter offer?
a response to an offer which makes a firm proposal that materially alter the terms of the offer.
a counter offer is not just a price negotiation but anything else that makes a significant different
acceptance key points
1 acceptance can be in any form and does not have o be in the same format the offer was in
2 acceptance must be communicated and full acceptance no ifs or buts
3 acceptance can not be by silence felthouse v Bindley
4 but acceptance can be by conduct particularly in unilateral contract e.g. Carlill
the postal rule
if you are accepting an offer via post, there are certain rules that must be followed
these rules only apply to acceptance letter not offer letters revocation or counter offer letters
the rules only apply if post is the usual or expected means of communication
the letter must be properly addressed and stamped
the offferee must be able to prove their letter was posted
if all above applies then acceptance takes place at the moment the letter is properly posted not when the offeror has received the letter
Adams v lindsell
Lindsell wrote to Adams offering to sell them some wool and asking for a reply in the course of post the letter was delayed in the post on receiving the letter, Adams posted a letter of acceptance on the same day. however, because of the delay Lindsell assumed Adams did not want the wool and sold it to someone’s else
Byrne v van tienhoven
even if the letter is lost in the post never received by the offeror then acceptance has still taken place. this is different to the usual rule of acceptance which only occurs when it has been communicated to the offeror
8 oct revoke letter
11 acceptance ofer
15 revocation arrived
electronic methods of acceptance
this is the opposite to the postal rule
acceptance only occurs via email/ fax electronic methods when the offeror is aware of the acceptance. if this is verbal both parties must have heard of it
e.g when they have read the email. if it is sent within working hours it is assumed to they will read it then and is therefore valid . it is really important to note when the fax/ email was sent.
this is because this aligns with the usual rules of acceptance which is that it takes place when it is communicated to the offeror.
however the court will reach a decision based on particular facts of a case
entores v miles lord denning
if a man shouts an offer to a man across a river but the reply is not heard because of a plane flying overhead, there is no contract. the offeree must wait and the shout back his acceptance so that the offeror can hear it.
Thomas and Gander v Bpe solicitors 2010
an email of acceptance was received at 6pm, a Friday before the bank holiday, the email was not read until Tuesday morning. Bpe argued that acceptance was not effective from the moment it was received because it was after working hours.
the court held that the context in which 6pm email was sent meant that is was a transaction that could be completed that evening and didn’t consider 6pm to be outside of working hours. the emails was available on a mobile to be read even though the defendant had gone home, it was reasonable that he could have seen that email.
Mondial shpping v Astarte shipping
a telex message withdrawing a ship from charter was sent just before midnight on a Friday. the time of revocation was crucial as they would have been in breach if they made the revocation after midnight.
it was held by the court that the notice was only effective at the commencement of business on the next working day the Monday.
Gatehouse j summarised by saying ‘ what matters is not when the notice is given but when it reaches the mind of the the charters’.
