lecture two Flashcards
What does the term “consensus in idem” refer to in the context of contract formation?
A contract is only formed when the parties reach an agreement on the essential terms, which is known as consensus in idem, meaning a meeting of minds where both parties share the same understanding of the key terms.
How is agreement assessed in the context of contract formation, and what does this imply about the nature of commercial contracts?
Agreement in contract formation is assessed objectively, meaning a reasonable person would determine if the parties reached an agreement on essential terms based on their actions and statements. As illustrated in the cases Muirhead and Turnbull v Dickson and Mathieson Gee Ltd. v Quigley, contracts are not based on private thoughts but on clear communications. In the latter case, the parties had different understandings of the contract, resulting in no agreement being formed.
What are the essential terms required for a contract to be valid, and how do they vary depending on the type of contract?
For a contract to be valid, the parties must agree on all essential or material terms, although they do not need to agree on every term. Essential terms vary depending on the type of contract. For instance, in a sales contract, essential elements include identifying the goods or land being sold and agreeing on the payment price, though the price can sometimes be determined by the court. In lease agreements, essential terms include the property being leased, the rent amount, and the lease duration, among others.
What did the court conclude about the importance of identifying property boundaries in the case of Bogie (t/a Oakbank Services) v The Forestry Commission?
In the case of Bogie (t/a Oakbank Services) v The Forestry Commission, the court emphasized that the precise identification of the property is essential for a binding option to purchase. While there was agreement on the general location and approximate boundaries, the lack of consensus on the exact overall boundaries and a mechanism to determine them meant there was no sufficient meeting of minds to form a binding contract.
How do courts approach the enforcement of contracts that may be incomplete, according to the cases discussed?
Courts generally aim to uphold contracts whenever possible, even if they are incomplete. In the case of Bogie (t/a Oakbank Services) v The Forestry Commission, Lord Macfadyen noted the preference for interpreting the parties’ communications in a way that supports a binding contract when feasible. This principle is echoed in the English case RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH, which suggests that the absence of certain final terms does not necessarily prevent the existence of a legally binding agreement if the parties’ words and conduct indicate intent to be bound.
What is the classic formula used by courts to determine the existence of a contract?
The court uses a straightforward analysis to determine if there is consensus in idem, which consists of an offer plus acceptance leading to a contract. According to Stair’s Institutions, when an offer is accepted, it constitutes a contract because it involves the agreement of both the offeror and the acceptor.
What are the key characteristics and requirements of an offer in contract law?
An offer is a statement of terms proposed by the offeror to the offeree as the foundation of an agreement. It must allow for unqualified acceptance to create legally binding obligations, meaning essential elements like subject matter and price should be identifiable. The offer must be communicated to the offeree; otherwise, it cannot be accepted. Offers can be made to specific individuals or to the public at large, and the method of acceptance may vary based on how the offer is presented.
What are the conditions under which an offer can be revoked or will lapse in contract law?
An offer can be revoked at any time before the offeree communicates acceptance, and this revocation does not require formalities, as demonstrated in McMillan v Caldwell. If a time limit for acceptance is established, the offer lapses upon expiry, as in Flaws v International Oil Pollution Compensation Fund. In the absence of a specific time limit, an offer will lapse after a reasonable time, according to cases like Glasgow Steam Shipping Co. v Watson. Additionally, if a promise is made to keep an offer open for a certain period, the offeror is bound by that promise, as seen in Paterson Ltd. v Highland Railway Co.
What types of communications are not considered offers in contract law?
Certain communications do not constitute an offer, including unilateral promises, replies to requests for information or inquiries about willingness to sell (as established in Harvey v Facey), and parties simply recapping their negotiating positions (as seen in Glasgow City Council v Smith).
What are examples of communications that are not considered offers in contract law?
Certain communications are not classified as offers, such as invitations to treat (ITT), which invite others to make an offer. Examples include the display of goods in a shop window (Fisher v Bell), goods on supermarket shelves (Pharmaceutical Society of Great Britain v Boots), and items put up for auction. Advertisements are typically presumed to be ITTs, even if labeled as offers (Fenwick v Macdonald Fraser & Co Ltd), although this presumption can be rebutted in exceptional cases, such as in Carlill v Carbolic Smoke Ball Co., where the advertisement was deemed an offer to the public.
According to Stair, what are the three steps in exercising one’s will, and why do only some of them constitute an offer?
Stair identifies three steps in exercising one’s will: desire (the inclination to act), resolution (deciding to act), and engagement (committing to act). Only engagement, which involves communicating a commitment to another party, creates binding obligations. Thus, things like mere desires or resolutions do not constitute offers since they lack the necessary commitment to engage with another party. This framework highlights that obligations arise only at the engagement stage.
What formula does the court use to determine if a contract exists, according to Stair?
The court uses a straightforward analysis to determine if there is consensus in idem, defined as the combination of an offer and acceptance, which together form a contract. According to Stair, when an offer is accepted, it results in a binding contract between the offeror and the acceptor.
What constitutes acceptance of an offer, and what conditions must be met for it to be valid?
Acceptance is defined as the final, unqualified agreement by the offeree to the terms of the offer. An offer remains open for acceptance until revoked, but the offeree’s acceptance must be clear and unqualified. If the offeror specifies a method of acceptance, the offeree must adhere to that method.
What is required for an offeree to communicate acceptance of an offer, and how do silence and surrounding circumstances play a role in this?
The offeree must actively communicate acceptance of the offer through words or actions that would be recognized by a reasonable observer, as established in Sabre Leasing Ltd v Copeland. Silence or inaction typically does not constitute acceptance, and an offeror cannot claim that a lack of response implies acceptance, as seen in Higgins v Wilson & Co. However, in certain contexts, such as Shaw v James Scott Builders and Co., silence may indicate acceptance if the surrounding circumstances suggest an intention to be bound.
What is the postal rule in contract law, and how has the Scottish legal system approached its application?
The “postal rule” is an exception to the general principle that acceptance is effective only when communicated to the offeror. According to this rule, posting an unqualified acceptance creates a contract, preventing the offeror from withdrawing their offer once the acceptance is mailed, as established in Jacobsen Sons and Co v Underwood and Son Ltd. However, this rule applies only to postal acceptances and not to offers, counter-offers, or withdrawals, as noted in Carmarthen Developments Ltd. v Pennington. Scottish courts are hesitant to apply the postal rule to other forms of communication, including faxes and instantaneous communications. The Scottish Law Commission has suggested abolishing the postal rule in favor of a new rule where acceptance is effective upon communication, though the offer cannot be retracted between the dispatch and arrival of the acceptance.
What constitutes a qualified acceptance in contract law, and how does it differ from a valid acceptance?
An acceptance is not considered valid if it is qualified. There are three possible responses to an offer: a straightforward “yes” (acceptance), a “no” (rejection), and a “yes, but” (qualified acceptance). A qualified acceptance proposes changes to the original terms, which effectively transforms it into a counter-offer. For example, if the offer is “I will buy your book for £10,” a qualified acceptance might be “Yes, I will sell you the book, but for £11.” The key point is that a qualified acceptance is not an acceptance at all; it is treated as a counter-offer.
What occurs when an offer is responded to with a qualified acceptance or counter-offer?
When an offer is met with a qualified acceptance or counter-offer, the original offer is effectively rejected and is no longer available for acceptance. The counter-offer then becomes a new offer that the original offeree can accept, effectively switching roles between the parties. Case law such as Wolf & Wolf v Forfar Potato Co illustrates this principle. However, in Findlater v Maan, it was noted that two simultaneous offers can coexist without one superseding the other, meaning both offers remain valid and actionable.
What is the significance of the de minimis rule in determining whether a change in acceptance constitutes a qualified acceptance, according to case law?
A trivial change in the terms of an acceptance may not constitute a qualified acceptance due to the de minimis rule, although case law on this issue is inconsistent. In Erskine v Glendinning, Lord President Inglis argued that a minor addition did not require the offeror’s consent, affirming the landlord’s right to demand a formal lease. Conversely, in Stobo Ltd v Morrison’s (Gowns) Ltd, Lord President Cooper indicated that stating a formal contract is needed does not imply ongoing negotiations; rather, it depends on the correspondence’s construction and the surrounding facts to determine if an acceptance includes suspensive conditions.
