Offer and Acceptance, Certainty and Intention Flashcards

Question 1

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

An offer is

Answer

A

(i) a proposal of the terms of exchange and (ii) an expression of willingness to be bound as soon as offeree accepts. It can be distinguished from:
- A request for or supply of information (ex. Upon C’s request asking whether D will sell them Y and price, D replied with a price, and C purported to accept the “offer” – held that it was not an offer because D merely supplied information – Harvey v Facey (PC))
- An invitation to treat, i.e. an expression of willingness to embark on negotiations.

Question 2

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

In negotiations, there will only be an offer where one party confers on the other the power to bind the speaker

Contrast 2 cases:

Answer

A

Storer v Manchester CC (1974)

Facts: D, council, sent a brochure advertising the details of a scheme for tenants to buy their council houses. C ascertained the price and sent an application to buy. The council sent a letter saying “I enclose the agreement for sale. If you sign it and return it to me I will send you the agreement signed in exchange”. C signed and returned the agreement.
Held (CoA): a contract was concluded because the council’s letter evinced an intention to be bound by the terms of the agreement as soon as C accepted it by signing and returning it.

*Gibson v Manchester CC [1979] 1 WLR 294

Facts: C inquired and council responded informing him of the price at which the “council may be prepared to sell the house” and giving details of a mortgage proposal while expressly stating that the letter should not be regarded as a firm offer of a mortgage and that C should complete a further form if C wished to make a formal application. C applied, made some repairs, and the council put the house on the house purchase list.
Held (HL): the letter did not confer power on C to bind the council to sell the house as soon as C assented; the council warned against regarding the letter as a firm offer and invited C to make a formal application (which became an offer). The council’s conduct manifested an intention to accept C’s offer, but had not yet completed the acceptance by communicating it to C.

Question 3

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

Lord Denning vs Diplock on replacing offer and acceptance test

Answer

A

NB here Lord Denning (CoA) suggested that the sole test of offer/acceptance should be whether parties reached an agreement rather than forcing the facts into the template of offer and acceptance (so in this case a binding contract HAS been reached).
Lord Diplock rejected this, holding that while some exceptional types of contract may not fit into offer/acceptance, this is not such a case. CoA was led into error by departing from the conception of a contract made from offer/acceptance. In this case, the letter was an invitation to make an application, not accept an offer. Hard cases offer a strong temptation to let them have their proverbial consequences. It is a temptation that the judicial mind must be vigilant to resist.

Question 4

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

1/ Displays and advertisements
a/ Principle = Invitation to Treat

what is ‘offer’ is used?
authority?

Answer

A

Even if the word “offer” is used the court may still say it’s an invitation to treat because the owrd is not used in its legal sense (Spencer v Harding), so the customer is generally regarded as making the offer when they present goods at the cash desk (and the trader can accept or reject).

Question 5

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

1/ Displays and advertisements
a/ Principle = Invitation to Treat
*PSGB v Boots [1952] 2 QB 795

Answer

A

Facts: legislation required sales of certain pharmaceuticals to be supervised by pharmacists. Boots introduced self-service shopping and supervision only came at the cashier’s desk, so the question was at what point offer and acceptance came together.
Held: Boots did not contravene the legislation because displays and advertisements are not offers, because:
o If displays were offers, then the customer putting it into the basket amounts to acceptance so the customer can no longer change their mind
o If displays were offers, then vendors lose their freedom not to deal with particular customers
o If displays were offers, then vendors would have to trade with everyone who accepts even if they run out of stock
The actual reason was probably that the court didn’t want to deter self-service pharmacies by convicting Boots of an offence.

Question 6

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

1/ Displays and advertisements
a/ Principle = Invitation to Treat

Partridge v Crittenden [1968] 1 WLR 1204

Answer

A

Facts: D advertised birds for sale at a stated price, and was charged with the offence of “offering for sale” wild live birds contrary to legislation.
Held: not guilty because an advertisement was only an invitation to treat and not an offer.

Question 7

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

1/ Displays and advertisements
b/ Exception = offer

Chapelton v Barry UDC (1940)

Answer

A

Facts: the display of deckchairs for hire on a beach with notice of the charges was an offer, which was accepted by a customer taking the chair. This means that the ticket issued to the customer containing an exclusion of liability was not part of the contract (so that the customer could claim compensation when the deckchair injured him.

Question 8

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

1/ Displays and advertisements
b/ Exception = offer

*Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Answer

A

Facts: the advertisement was held to be an offer to the whole world and that a unilateral contract was created with those who met the condtion on the faith of the advertisement.

Question 9

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

2/ Timetables and automatic vending machines

Answer

A

Subject to express disclaimers of obligations to provide services, railway and bus timetables and automatic machines outside car parks are offers that the customer accepts by buying a ticket.

Question 10

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

2/ Timetables and automatic vending machines

Thornton v Shoe Lane (1971)

Answer

A

Lord Denning: an automatic machine outside a car park stating charge rates makes an offer which the driver accepts by driving in and prompting the machine to issue a ticket (so any exclusion of liability contained in a notice inside the car park was ineffective). This is because there is no expectation or opportunity for negotiation, and no scope for withdrawal once the customer drives in.

Question 11

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

3/ Tenders
a/ General rule = invitation to treat

Harvela

Answer

A

General rule (Harvela Investments)

An invitation to tender is an invitation to treat
Submitting the tender is the offer
When the invitor accepts one of the tenders, there is acceptance

Question 12

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

3/ Tenders
b/ Exception = two-contract analysis

Answer

A

However, when justice requires, courts have invoked two-contract analyses to impose liability for failure to consider (or accept) lowest/highest tender:

Question 13

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

3/ Tenders
b/ Exception = two-contract analysis

Harvela Investments v Royal Trust Co of Canada [1986] AC 207

Answer

A

Facts: D decided to sell their shares by sealed competitive tender between two parties stating that they would accept the highest complying “offer”. C tendered a fixed bid of $2,175,000 while the other tendered a referential bid of $2,100,000 or $x in excess of any other offer, whichever is higher. D accepted the referential bid as a bid for $2,175,000+x.
Held (HL): D was bound to accept C’s bid because D’s invitation to tender was an offer of a unilateral contract to sell the shares to the highest bidder, even though the invitation asked bidders to submit “offers”.

Question 14

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

3/ Tenders
b/ Exception = two-contract analysis

*Blackpool & Fylde Aero Club Ltd v Blackpool BC [1990] 3 All ER 25

Facts/held

Answer

A

Facts: D invited tenders for a concession, but stated that “the council do not bind themselves to accept all or any part of the tender”, and that no tender received after noon on Date X will be considered. At 11AM on Date X, C made a bid in the council letter box that said it was emptied at noon each day. The letterbox was not duly processed and the council did not consider C’s bid, awarding the concession to another party with a lower tender.
Held: using the two-contract analysis: one between the council and party whose tender is accepted, and one comprising the council’s invitation to tender (a unilateral offer to consider any conforming tender), and that the council breached the second contract to consider C’s tender.

Question 15

Q

I - Offer & Acceptance
A - Offer & Invitation to Treat

3/ Tenders
b/ Exception = two-contract analysis

*Blackpool & Fylde Aero Club Ltd v Blackpool BC [1990] 3 All ER 25

Bingham LJ:

Answer

A

tendering procedures are heavily weighted in favour of the invitor (he can invite as many or as few, need not tell anyone who and how many else, no need to accept any of them, and the invitees may have gone to considerable labour and expense in preparing tenders, without recompense if unsuccessful), so that the invitee is protected to at least the extent that if he submits a conforming tender before the deadline, he is entitled (as a matter of contractual right) to be considered (or at least considered if the others are).
1º In Blackpool Aero, CoA said there would be a duty to consider when:
Invitation was made to a small number of parties
Duty to consider was consistent with the parties’ intentions
Tender process was clear, orderly and familiar (enabling the court to state the unilateral offer with reasonable precision)
But in this case there was also the fact that (i) D was a local authority so owes a public law duty to act fairly and reasonably, and (ii) C was the existing concession holder so has something akin to a legitimate expectation in public law that its bid would be considered.
2º The content of the duty to consider would be breached if (i) D accepted the first tender received before expiry or (ii) D considered and accepted a tender received after the deadline (Bingham LJ).

Question 16

Q

I - Offer & Acceptance
B – Acceptance in bilateral contracts

what is acceptance?
what elements must be satisfied?

Answer

A

Acceptance is an unequivocal expression of consent to the proposal in the offer. It must:

Correspond with the offer
Be made in response to the offer
Be made by an appropriate method
Be communicated to the offeror

Question 17

Q

I - Offer & Acceptance

B.1 – Correspondence of acceptance with offer

Answer

A

If the purported acceptance deviates in any way from the offer it will not conclude the contract:

Question 18

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

1/ Conditional acceptance

Answer

A

Usually renders the agreement incomplete and not binding (cf certainty, infra)

Question 19

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

2/ Counter-offer

Answer

A

i.e. response that deviates from the terms of the offer terminates the original offer so that the offeree can no longer accept the original offer:

Question 20

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

2/ Counter-offer
Hyde v Wrench (1840) 3 Beav 334

Answer

A

Facts: D offered to sell his farm to C for £1,000, and C said he would only pay £950, which was rejected by D. C then agreed to pay £1,000, which D rejected again.
Held: C’s proposal of £950 was a counter-offer which terminated the original offer (making it incapable of subsequent acceptance).
But sometimes courts will find:
The original offerer’s rejection of the counter-offer includes a renewed offer on the original terms
The offeree’s response was not a counter-offer but a request for additional information about the availability of better terms:

Question 21

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

2/ Counter-offer

Stevenson v McLean (1880) 5 QBD 346

Answer

A

Stevenson v McLean (1880) 5 QBD 346

Facts: D offered to sell C iron for “$x net cash”, and D replied asking whether C would accept “$x for delivery over two months, or if not, longest limit you would give”. C then sold the iron to a third party. Hearing nothing, C accepted the original offer before D’s revocation reached C.
Held: C merely made an inquiry not a counter-offer, and so could bind D with his subsequent acceptance.

Question 22

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

3/ “Battle of the forms”

Answer

A

If parties purport to conclude a contract by exchange of forms with incompatible terms, so the question is on whose terms agreement is reached.

a/ General rule = “last shot”
General rule = whichever party presented its terms last without provoking objection from the recipient.

Question 23

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

3/ “Battle of the forms”
a/ General rule = “last shot”

Brogden v Metropolitan Railway (1877) 2 App Cas 666

Answer

A

Facts: D sent C a draft agreement for ordering coal, C amended the agreement and returned it, and D did nothing more to finalize the agreement. D then ordered coal from C, which C supplied and D paid for.
Held: C’s amendment was a counter-offer, which D accepted by conduct when D placed the order.

Question 24

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

3/ “Battle of the forms”
a/ General rule = “last shot”

*Butler Machines v Ex-Cello Corp [1979] 1 WLR 401

Answer

A

Facts: C quoted the price for D on C’s standard terms with a price variation clause, D placed an order on D’s standard form, which mentioned no price variation but contained a tear-off slip inviting C to sign acknowledging the order to be on D’s terms. C signed it and returned the slip, but attaching a letter stating that C was supplying on C’s original terms. C sought to rely on C’s standard terms to demand more money.
Held (CoA): C’s original offer was met by D’s counter-offer, which C accepted when C signed and returned the acknowledgement slip in D’s standard form. C’s accompanying letter was not a counter-offer, but simply a means of identifying the order.

Question 25

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

3/ “Battle of the forms”
b/ Exception = contrary intention

Tekdata v Amphenol
GHSP v AB Electronic, Burton J

Answer

A

The “last shot” rule applies unless the parties’ common intention is for some other terms (Tekdata v Amphenol, CoA), which can lead to a contract being on neither party’s terms (GHSP v AB Electronic, Burton J)

Question 26

Q

I - Offer & Acceptance
B.1 – Correspondence of acceptance with offer

3/ “Battle of the forms”
c/ Lord Denning’s alternative approach in finding agreement

*Butler Machines v Ex-Cello Corp [1979] 1 WLR 401

Answer

A

Lord Denning: in many cases traditional analyses of offer/counter-offer/rejection/acceptance… is out of date, so the better way is to separate the analysis into two questions:
o Commitment question (whether parties have “reached agreement on all material points”, though there might be differences between the forms and conditions)
o Content question (whether the parties’ terms can be reconciled, and if not, the conflicting terms may have to be scrapped and replaced by a reasonable implication)
This is criticized for uncertainty but is broadly mirrored in the European Draft Common Frame of Reference, Art II-4:208-9 (idea that only “material” inconsistencies will prevent contract formation), and the current approach is quite uncertain as well because courts must decide between the “last shot” rule and a different rule.

Question 27

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

1/ Cross offers

Answer

A

Conduct is ineffective as acceptance if done in ignorance of the offer (even if it matches the offer).

Question 28

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

1/ Cross offers
Tinn v Hoffmann (1873)

Answer

A

C wrote an offer to sell something to D for $x; on the same day, D wrote an offer to buy the same thing from C for the same price no binding contract because they were simultaneous offers made in ignorance of each other (Tinn v Hoffmann (1873), obiter).

Question 29

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

2/ Rewards cases

Answer

A

The offeree must have known of the offer and be induced by it, though the cases show that these requirements are easily satisfied…

Question 30

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

2/ Rewards cases
R v Clarke (1927)

Answer

A

Facts: reward offered for information leading to the arrest of certain murderers. D was charged and gave the relevant information in order to absolve himself. Because D admitted that when giving the information, he had forgotten about the reward, his claim to the reward failed.

Question 31

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

2/ Rewards cases
Gibbons v Proctor (1891) 4 LT 594

Answer

A

Facts: a police officer was allowed to claim a reward because the court found that though he was ignorant of the offer when he gave information to a fellow officer, he knew of it by the time the information reached the superintendent.

Question 32

Q

I - Offer & Acceptance
B.2 – Nexus between offer and acceptance (ignorance of offer)

2/ Rewards cases
Williams v Carwardine (1833)

Answer

A

Facts: D gave the relevant information because she wanted to ease her conscience, but was allowed to claim the reward because she “must have known” of it and the reward was interpreted as being payable even if the informant did not act from the desire to receive it.

Question 33

Q

I - Offer & Acceptance
B.3 - Method of acceptance

1/ Acceptance by Conduct or acquiescence

Answer

A

Conduct in reliance on and consistent with the terms of the contract (Bogden)
Acquiescence (failing to object) to the last shot fired in battle of the forms cases

Question 34

Q

I - Offer & Acceptance
B.3 - Method of acceptance

2/ Acceptance in a prescribed way

Manchester Diocesan Council for Education v Comm. & Gen. Investments [1970] 1 WLR 242

Answer

A

If offeror requires a particular method of acceptance, deviating from this would not bind the offeror unless the latter waives his right to insist on compliance (but courts are slow to find an intention that the form was mandatory).

Facts: C invited tenders stating that the person whose bid was accepted would be informed by a letter sent to the address contained in the tender. However, C sent an acceptance of D’s tender to D’s surveyor rather than the address D provided, and D sought a declaration that no contract had been concluded.
Held: mode of acceptance specified in the invitation to tender was not the soel permitted means of acceptance, and since D was not disadvantaged by the means actually used, the acceptance was effective. Also, since C was the one who made the stipulation, C could waive strict compliance.

Question 35

Q

I - Offer & Acceptance
B.3 - Method of acceptance

3/ Acceptance by silence

Felthouse v Bindley (1862) 11 CBNS 869
Hannah Blumenthal?
why was this different?

Answer

A

General rule = no acceptance.

Facts: C offered to buy his nephew’s horse, adding that if C doesn’t hear anything more, C will consider the horse his at £x. The nephew didn’t answer but told his auctioneer, D, that the horse had already been sold.
Held: C’s offer culd not be accepted by his nephew’s silence.

However, silence can mean different things in different contexts: ex. in The Hannah Blumenthal (HL, 1983), held that silence over six years could constitute a contract to abandon their contract to arbitrate their disputes, because of the negative nature of the promise (not arbitrate), the presence of a pre-existing contract, and C’s clear reliance on the belief that the contract had been abandoned.

Question 36

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

2 exceptions

Answer

A

Contract forms when the offeree communicates his acceptance to the offeror:

Postal = when the letter is sent
Instantaneous = when it comes to the offeror’s attention

Question 37

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

1/ Postal acceptance

Answer

A

If it is reasonable for offeree to accept by post, acceptance is when offeree posts the acceptance (Adams v Lindsell):

Thus, the offeror is bound before they know of the acceptance, even if it is delayed, or never received (Household Fire v Grant)
Offeror cannot then revoke the offer

Question 38

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

1/ Postal acceptance
Henthorn v Fraser [1892] 2 Ch 27

Answer

A

Facts: C, who lived atBirkenhead, called at the office of a land society inLiverpool, to negotiate a contract. The secretary signed and handed to him an offer. On the next day the secretary posted to C a withdrawal of the offer. This withdrawal was posted between 12 and 1 o’clock, and did not reachBirkenheadtill after 5 P.M. In the meantime H. had, at 3.50 P.M., posted to the secretary an unconditional acceptance of the offer, which was delivered inLiverpoolafter the society’s office had closed, and was opened by the secretary on the following morning.
Held:
o Where the circumstances under which an offer is made are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of it, the acceptance is complete as soon as it is posted.
o In the present case, as the parties lived in different towns, an acceptance by post must have been within their contemplation, although the offer was not made by post.
o A revocation of an offer is of no effect until brought to the mind of the person to whom the offer was made, and that therefore a revocation sent by post does not operate from the time of posting it.
o Therefore, a binding contract was made on the posting ofH.’sacceptance, and the revocation was too late.

Question 39

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

1/ Postal acceptance
*Byrne v Van Tienhoven (1880) 5 CPD 344

Answer

A

Facts: D sent an offer on 1 October, arriving on 11 October, at which time C immediately sent an acceptance. On 8 October, D sent a letter revoking the offer, which reaches C on 20 October.
Held: a contract had been concluded on 11 Ocober, because the postal acceptance rule does not apply to revocations (so that it only took effect on 20 October).
However (Holwell Securities v Hughes, obiter), the postal acceptance rule does not apply when:
It is expressly or impliedly excluded in the offer
It would produce manifest inconvenience and absurdity

Question 40

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

1/ Postal acceptance
*Holwell Securities v Hughes (1974)

Answer

A

Facts: a contract stipulated that C could accept “by notice in writing” to D within six months. Sent an acceptance by mail but was never received.
Held: “notice in writing” requires actual notice so that the postal acceptance rule was impliedly excluded, so no valid contract had been concluded.

Question 41

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

2/ Instantaneous acceptance
a/ Two-way instantaneous (face-to-face, telephone)

Answer

A

In cases of instantaneous communication acceptance takes effect when actually brought to the attention of the offeror, unless one of the parties should reasonably have detected and rectified the communication failure (Brinkibon [1983] 2 AC 34).

Question 42

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

2/ Instantaneous acceptance
a/ Two-way instantaneous (face-to-face, telephone)

*Entores v Miles Far East Corp [1955] 2 QB 327 (Lord Denning)

Answer

A

If face-to-face oral acceptance is drowned out by a noisy aircraft flying overhead, the offeree must repeat acceptance once aircraft has passed.
If telephone goes “dead” before acceptance completed, the offeree must telephone back to complete acceptance
If the offeror does not catch the clear and audible words of an acceptance, or the printer receiving a fax runs out of ink, but the offeror does not bother to ask for the message to be repeated, the offeror will be bound.

Question 43

Q

I - Offer & Acceptance
B.4 - Communication of Acceptance

2/ Instantaneous acceptance
a/ Two-way instantaneous (face-to-face, telephone)

b/ One-way instantaneous (email, text messaging, answerphone messagine, fax)

Answer

A

Here receipt is instantaneous, but the recipient doesn’t necessarily access the message simultaneously. Here, no universal rule can cover all cases, they must be resolved by reference to parties’ intentions, sound business practice and sometimes judgment as to where the risk should lie (Lord Wilberforce, Brinkibon).
Thus acceptance takes effect when a reasonable offeror would access the message, taking into account of all the circumstnaces.

Question 44

Q

I - Offer & Acceptance

C - Acceptance in unilateral contracts

Answer

A

The offer is accepted on performance of the stipulated act (no need to communicate intention):

Question 45

Q

I - Offer & Acceptance
C - Acceptance in unilateral contracts

*Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Answer

A

Acceptance is complete when C buys and uses the smoke ball as instructed (though is only entitled to the £100 when she satisfies the further condition of catching the illness). C need not communicate to D.
The offer can no longer be revoked when the offeree has “unequivocally begun performance of the stipulated act” (Chitty):

Question 46

Q

I - Offer & Acceptance
C - Acceptance in unilateral contracts

Errington v Errington [1952] 1 KB 290

Answer

A

Facts: a father promised his son and daughter-in-law that if they paid off the mortgage it would be theirs. Nine years later, the father died after a substantial part of the mortgage was paid.
Held (CoA): the couple had commenced payment, so the father’s representatives could no longer revoke the offer, provided that performance was not left “incomplete and underperformed”.

Question 47

Q

I - Offer & Acceptance
C - Acceptance in unilateral contracts

Daulia v Four Millbank Nominees Ltd [1978] Ch 231, 239

Answer

A

In unilateral contracts, the offeror is entitled to require full performance of the condition and short of that he is not bound, but there is one important qualification: there must be an implied obligation on the part of the offeror not to prevent the condition becoming satisfied, which arises as soon as the offeree starts to perform. Until then the offeror can revoke the whole thing, but once the offeree has embarked on performance it is too late for the offeror to revoke his offer.

Question 48

Q

I - Offer & Acceptance
D - Termination of an Offer

1/ Revocation by offeror

Answer

A

Offeror can revoke their offer at any time before offeree communicates their acceptance, except unilateral offers.
Even firm offers or options (offers with a promise to keep it open for a specified time) are revocable before the stipulated time, even if the other party relied on it, except if given in a deed or the promisee provided consideration.
Revocation must be communicated to the offeree: a postal revocation is not subject to the postal acceptance rule (Byrne v Van Tienhoven) and is only effective when:
- Brought to the mind of the offeree (Henthorn v Fraser) or
- When it would be reasonable to expect the offeror to acquire notice of it (ex. If delivered at business premises after hours, only effective the next day)

Question 49

Q

I - Offer & Acceptance
D - Termination of an Offer

1/ Revocation by offeror
*Dickinson v Dodds (1876) 2 Ch D 463

Answer

A

An offer can be revoked by a reliable third party acting without the offeror’s authority (ex. if the third party tells the offeree that the house the latter wanted to buy had already been sold to someone else)
However, the onus is on the offeror to show that it would be unreasonsble for the offeree to doubt the accuracy of the information.

Question 50

Q

I - Offer & Acceptance
D - Termination of an Offer

2/ Rejection by offeree

Answer

A

By rejecting the offer
By making a counter-offer
Only takes effect on communication to the offeror:
In case of acceptance by post, and then before the offeror receives it telephone the offeror to reject the offer, the rejection is too late and the parties are bound
On the other hand, if the offeree posts his rejection, then posts acceptance before rejection letter is received, the acceptance binds the offeror even though the acceptance arrives after the rejection letter.

Question 51

Q

I - Offer & Acceptance
D - Termination of an Offer

3/ Lapse of the offer

Answer

A

Expiry of a stipulated period
Expiry of express or implied condition (ex. while stocks last)
Expiry of a reasonable period where no time or other condition is imposed

Question 52

Q

I - Offer & Acceptance
D - Termination of an Offer

4/ Death of offeror or offeree

Answer

A

Terminates the offer unless the offeror could not have terminated the offer during their lifetime, and the performance of the contract can be satisfied out of the offeror’s estate (Errington v Errington).

Question 53

Q

I - Offer & Acceptance
D - Termination of an Offer

5/ Change in circumstances (subject matter deteriorates before acceptance)

Answer

A

Court can imply a condition into the offer that it would lapse if the subject matter of the contarct is not, at the time of acceptance, in substantially the same condition as when the offer was made

Question 54

Q

II – Certainty

A – Conditional Agreements

Answer

A

A agreement made “subject to contract” or “subject to solicitor’s advice”… usually do not make a binding contract, but the presumption of unenforceability is rebuttable by clear evidence to the contrary if:

The expression can be severed because there is nothing left to be negotiated and no need for any further formal contract, and that both parties proceeded on this basis (ex. Storer v Manchester CC – a contract was made when C returned the signed agreement though the council never signed and returned it)
There is a clear intention to be bound and the non-signing party’s subsequent conduct amounts to a waiver of the stipulated step.

Question 55

Q

II – Certainty

B – Vagueness and incompleteness

Answer

A

Vagueness and incompleteness may leave gaps in the contract which calls into question the parties’ intention to be bound:

Question 56

Q

II – Certainty
B – Vagueness and incompleteness

*British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504

facts
held
Goff J
C’s unjust enrichment claim

Lord Tomlin Hillas v Arcos

curing uncertainty?
business’ crude agreements

Answer

A

Facts: C entered into negotiations to manufacture goods for D. D sent C a letter of intent stating intention to place an order on D’s standard terms, and requested C to commence work “pending the preparation and issuing of official form of contract”. No formal contract was agreed, and D refused to pay upon (late and out of sequence) delivery. C made a quantum meruit claim arguing that there was no contract, and D argued that there was a contract which had been breached by C because of late and out of sequence delivery (suing for damages that exceeded the contract price).
Goff J:
o There was no contract because no agreement was reached on price and other essential matters (in most business transactions price will indeed be an essential matter)
o But C’s claim in unjust enrichment succeeded because both parties expected a formal contract to eventuate, and one requested the other to commence work, and the other complied. If a contract were later entered into, the work would have been done under contract, but if not, then it is not referable to any contract but the law imposes an obligation on the requesting party to pay a reasonable sum for work done pursuant to the request, such obligation sounding in restitution.
However, courts are very willing to cure uncertainty and uphold contracts: it is necessary to exclude as impossible all reasonable meanings which would give certainty to the words before enforcement would be denied (Lord Tomlin, Hillas v Arcos):
Example - often businesses refrain from insisting on precise terms for fear of losing the deal, so that “businessmen often record the most important agreements in crude and summary fashion, so that it is the duty of the Court to construe such documents fairly and broadly, without being too astute or subtle in finding defects” (Hillas v Arcos)

Question 57

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

1/ Previous dealing, custom and reasonableness

Hillas v Arcos (1932) 147 LT 503

Answer

A

Facts: parties agreed to sell goods “of fair specification”, with a further option to buy a further number a year later. The seller sought to escape the option by alleging that no enforceable meaning could be deduced from the agreed words.
Held: upheld the option by reference to the parties’ previous dealings, the custom of the timber trade, and standard of reasonableness. Thus, “of fair specification” meant reasonable assortment of the kinds, qualities and sizes, taking into account the season’s output.

Question 58

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

2/ Severance

If essential aspects of the transaction are agreed, vague words can be severed and the remaining agreement enforced.

Answer

A

If essential aspects of the transaction are agreed, vague words can be severed and the remaining agreement enforced.

Question 59

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

3/ Agreements to negotiate or not to negotiate

Answer

A

Agreements to negotiate are unenforceable for uncertainty (‘lock-in’)
Agreements not to negotiate with third parties are enforceable if there is a time limit on duration (‘lock-out)

Question 60

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

3/ Agreements to negotiate or not to negotiate

*Walford v Miles [1992] 2 AC 128

Answer

A

Facts: parties agreed that if C did something, then D would (i) break off negotiations with any third parties and would not consider any other alternative or accept a better offer, and (ii) deal exclusively with C with a view to concluding a deal as soon as possible. D continued to negotiate with third parties, and eventually sold the business to one such third party.
Held: (i) was unenforceable for lack of a time limit on their duration, for otherwise it might indirectly impose a duty to negotiate in good faith, and (ii) as an agreement to negotiate in good faith was unenforceable because a party would be in breach if they walked away from negotiations without good reason. This is because (a) contracts are about self-interest, (b) difficulty in determining whether breach has occurred, and (c) impossibility of quantifying damages. [However, remedies were awarded for misrepresentation]

Question 61

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

3/ Agreements to negotiate or not to negotiate

Petromec v Petroleo (2005)

Answer

A

Longmore LJ distinguished Walford and said that in this case the agreement to negotiate in good faith was enforceable because:

Contained in an otherwise legally enforceable agreement (≠ Walford, where there was no agreement)
The agreement was an express term (≠ Walford, where it was implied) drafted by solicitors
The agreement related only to a particular cost, which was comparatively easy to ascertain
In this case it was breached by fraud

Question 62

Q

II – Certainty
B – Vagueness and incompleteness

Techniques to overcome uncertainty:

4/ Agreed mechanisms for ascertainment

May & Butcher Ltd v R [1934] 2 KB 17

Answer

A

Where parties expressly agree to agree later:

Facts: D agreed to sell C some surplus goods, explicitly leaving (in a written agreement) the price and date of payment “to be agreed upon from time to time”
Held: there was no contract because “an agreement to enter into an agreement in which some critical part of the contract matter is left undetermined” is no contract (Lord Buckmaster).
But if the parties agree to a mechanism or formula of ascertainment, the court will enforce the agreement.

Question 63

Q

III - Intention to Create Legal Relations

Rebuttable presumptions that:

Answer

A

People in social and domestic agreements do not intend legal relations
People in commercial agreements do intend legal relations

Question 64

Q

III - Intention to Create Legal Relations

A – Family and social agreements

A.1 - Presumption

1/ Between couples
Balfour v Balfour [1919] 2 KB 571

Answer

A

Facts: Husband agreed to pay wife an allowance of £30. When they separated the wife sued for payment.
Held: payment denied for (i) lack of consideration and (ii) lack of intention to create legal relations because the agreement was made while they were living in amity.
But the presumption does not apply when the couple is no longer living in amity but are separated or about to separate, where intention to create legal relations can be “safely presumed” (Merritt v Merritt).

Answer 65

A

The court will give effect to nuptial agreements freely entered into by each party with full appreciation of its implications, unless in the circumstances it would not be fair to hold the parties to their agreement (ex. because of the parties’ emotional state at time of agreement, age, maturity, relationship history… thus a far wider range of circumstances than would vitiate a contract)

Answer 66

A

Facts: mother bought a house for daughter to live in and maintain herself from the proceeds from letting out the other rooms, and the daughter agreed to give up work in Washington. Six years later, the parties fell out and the daughter claimed she had a contractual right to remain in the house.
Held (CoA): no enforceable contract because (i) no intention to create legal relations because the parties were on good terms at time of agreement and (ii) too vague especially as to duration.

Answer 67

A

Reliance (Parker v Clark)

- Agreement is incidental to relationship or symbolic of its ending (ex. agreement to separate between husband and wife)

Answer 68

A

Presumption in favour of intention to create legal relations:

Facts: Esso offered to give away a World Cup coin for every minimum purchase of petrol.
Held (HL): there was an intention to create legal relations because the transaction took place in a business setting and contemplated commercial advantage to Esso from the scheme.

Answer 69

A

The question whether there was a binding contract between parties, and if so upon what terms, required consideration of what was communicated between the parties by words or conduct and whether it led objectively, in accordance with the reasonable expectations of honest sensible businessmen, to a conclusion that the parties had intended to create legal relationsand had agreed all the terms which they regarded, or the law required, as essential for the formation of legally binding relations
Even if certain terms of economic or other significance to the parties had not been finalised, an objective appraisal of their words and conduct could lead to the conclusion that they had not intended agreement of such terms to be be a precondition to a concluded and legally binding agreement
Where a contract was being negotiated “subject to contract” and work began before the formal contract was executed, it would depend on the circumstances whether the parties had waived the subject-to-contract term and, if so, whether the contract included the particular terms agreed subject to contract
The fact that a transaction was performed on both sides would militate against any argument that there had been no intention to create legal relations or that the contract was void for uncertainty
However:
Collective agreements between employers and trade unions are conclusively presumed not to be intended to create legal relations unless in writing and expressly provides contrary (Trade Union and Labour Relations (Consolidation) Act 1992, s 179).
Agreements expressed to be without intention to create legal relations (subject to contract, letters of intent, letters of comfort, honour clauses) are generally unenforceable

Answer 70

A

What was said?The evidence indicated that the substance of the “agreement” made at the pub was that, if the claimant could get the share price to £8 per share within an unspecified time, the defendant would pay him £15 million
Binding contract?The defendant’s statement that he would pay the claimant the £15 million would not reasonably have been understood as a serious offer capable of creating a legally binding contract.
o The statement had been made in a pub when a fair amount of alcohol had been consumed.
o Serious discussion of the claimant’s remuneration would have been extraneous to the meeting’s purpose.
o The jocular nature of the conversation was inconsistent with an intention to make a serious contractual offer.
o The defendant had had no commercial reason to offer the £15 million.
o The offer was far too vague to have been seriously meant. There had also been no agreed timescale or discussion of a period of time for which the price would need to stay above £8.
o None of the witnesses to the conversation thought it was serious.
o The claimant had not understood there to be an intention to make a contract at the time of the conversation.
o It was improbable, if he had understood that, that he would have made no written record of the agreement or that he would have waited almost a year before mentioning it again to the defendant.
Certainty -No period had been agreed within which the price had to reach £8. The court could not fill that gap by implying a term that the obligation would be performed within a reasonable time: there was no objective standard it could invoke to identify a reasonable period. That could only be decided by express agreement between the parties. The offer could not create a contract because it lacked an essential term.

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