McKendrick Offer Flashcards
What are some areas of uncertainty in determining the existence of contract?
- Outstanding points that have not arrived at mutual agreement
- Point in time when contract was concluded - when negotiating parties became contracting parties
- Precise terms of the contract - ambiguity, inconsistency
What is a contract? Two vital ingredients.
Contract is:
(1) created by an offer made by one party
(2) that has been accepted by the party to whom the offer was made
What is an offer? What issues can arise in determining what is an offer?
A statement of willingness to be bound by the terms of the statement.
May be no more than a representation made by one party to the other to induce the others party to enter the contract, even if it has not been incorporated into the contract itself.
Problems arise when trying to differentiate between an offer (intention to be bound) or an invitation to treat (a reflection of his negotiating position, not a commitment)
What is acceptance?
A final and unqualified expression of assent to the terms of an offer, following which, both parties are bound to the terms of the contract
The 5 general features of the offer & acceptance rules
- Claims to be of general application
- Purports to give effect to the intention of parties, objectively ascertained
- Inter-linked in practice
- Attaches considerable significance to precise moment in time when contract was concluded
- Linked with the will theory of contract
Are the rules of offer and acceptance for general application? What does this even mean? Are there limitations?
The rules purport to be applicable to all contracts, bearing an element of universality.
However, contracts come in all forms (e.g. written/oral; methods of conclusion - letter, fax, email; protracted/swift negotiations; made via representations/explicit promises; bilateral or unilateral) - Rules are modified differently in all these different contexts, example: Construing offer & acceptance in unilateral contracts. Therefore, it is not universal as purported.
What was the conversation between Lord Denning & Lord Diplock in Gibson v Manchester CC?
tldr; Lord Denning tried to depart from the conventional approach. Lord Diplock, in the later appeal to HL, criticised the departure.
Lord Denning, in the Court of Appeal, said that
(1) “it is a mistake to think that all contracts can be analysed into the form of offer and acceptance”
(2) “there is no need to look for a strict offer and acceptance”
(3) “look at the correspondence as a whole and at the conduct of the parties… [if there is] an agreement on all material terms, which was intended… to be binding”… “there is a binding contract in law even though all the formalities have not been gone through”
To which Lord Diplock, in a subsequent appeal to the House of Lords, said:
(1) While there are “certain types of contract… which do not fit easily into the normal analysis of a contract (i.e. offer and acceptance)”
(2) “no reasons… for departing from the conventional approach”
(3) “it was by departing from this conventional approach that the majority of the Court of Appeal was led into error”
What case fits into Lord Diplock’s “do not fit easily into the normal analysis”? In that case, what did Lord Wilberforce say about the conventional approach?
The Eurymedon. Details are not important at this juncture.
Lord Wilberforce said “precise analysis of this complex of relations into the classic offer and acceptance, with identifiable consideration… seems to present difficulty”
“English law [has] committed itself to a rather technical and schematic doctrine of contract… often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration”
What is a possible path for offer & acceptance analysis?
Since not all contracts can be easily analysed in terms of offer and acceptance, we can
(1) Abandon offer and acceptance. Radical, but the classical approach is unnecessarily detailed, technical and mysterious. Claims logical derivation from the idea of agreement, yet as Wilberforce says in Eurymedon, the courts force facts to fit this analysis.
(2) Broaden the approach. Recognise that offer and acceptance is the usual, and sufficient means for the creation of contract, but not necessary and sole means. (E.g. Denning’s approach). Although this creates uncertainty on whether a contract exists, and the lack of clear rules doesn’t help.
Precise time when contract was concluded? What are the limitations
Criticism: Classical analysis of offer and acceptance attaches undue significance to precise moment when contract was concluded.
This does not fit with the practice of many commercial parties - contractual relationships do not spring into existence, usually evolves from the negotiation phase such that it’s difficult to pinpoint the exact moment when obligations arose. Furthermore, what if there are modifications to the contract - are the new terms binding?
Hence, classical analysis does not capture dynamic nature of the relationship between parties. Contracts are not static. The law, however, does regulate the bargaining process to some degree - not important at this point.
What is the Will theory? Limitations?
Essentially, it views a contract as a meeting of minds, mutual assent by parties involved.
Theoretically it makes sense, but in practical terms, a contract will likely have disagreement between parties (implicit/explicit; known/unknown).
This is why the law takes an objective approach to ascertain the intention of the parties, rather than the subjective approach. Oftentimes, even the subjective intention of the parties is not known by the person himself.
Also does not work for unilateral contracts, because there is not so much a meeting of minds that binds parties on both sides. It’s binding on one-side, the promisor. Should the offer and acceptance framework be imposed on unilateral contract - has been the subject of debate.
What is the question to consider is ascertaining the existence of an offer?
Was an offer made, or was it an invitation to treat/willingness to negotiate?
This depends on the intention of the alleged offeror, determined objectively by the court, i.e. the intention of the alleged offeror as it appears to others.
Parties do not always distinguish in their minds whether they’re only negotiating, or if they’re actually making an offer. The courts must therefore ascertain that intention, examine correspondence between parties, or for the sake of certainty, impose a prima facie rule in common occurrences (e.g. supermarkets).
Classic case for a supply of information is NOT an offer
Harvey v Facey [1893].
H sent telegraph to F asking if F would be willing to sell “Bumper Hall Pen. Telegraph lowest price”. F replied that the lowest price is £900. H replied saying they agree to buy it for the price.
Court held no contract concluded as initial telegraph was a request for information, while F’s reply was a supply of information.
Gibson v Manchester City Council (1979) - essential points?
Court held that Manchester CC did not make an offer to G. Hence, the CC was not obliged to sell the house to G.
When CC was under Tory rule, they sent brochure to G with a detachable form for G to return if he was interested in purchasing the home; in so doing, CC would inform G of the price they were willing to ell the home. G returned the form, and CC said they “may be prepared to sell the house” at a price, further saying that a formal application was necessary via an application form.
There was a slight delay for the CC to process G’s application, because G was enquiring whether the price included repairs. In the meantime, Tory rule was replaced by Labour administration, that halted sale of houses. G’s finalisation of his offer was therefore not processed on time.
G succeeded before CA (under Lord Denning), but HL ruled that CC’s initial letter was not a commitment of the council to sell, nor was it an offer. The offer was to be made by G through the application.
Criticisms of Gibson v Manchester CC?
Focused unduly on precise construction of documentation passing through parties. Should look at conduct of parties - G had done much work in repairing and improving his house and premises; CC had took down the house off the list of houses, and placed it under pending sales.
HOWEVER, from the perspective of the courts, there ought not to have been reliance just because CC had made preparations in the midst of the negotiation process. For certainty in the law, the undue reliance of one party should not result in the negotiation process to be interpreted as the existence of a contract.
