Paper 3: formation of a contract

Question 1

Definition of a contract

Answer 1

An enforceable agreement between two parties

Question 2

Definition of an offer

Answer 2

A definite promise to be legally bound

Question 3

Definition of acceptance

Answer 3

Unconditional assent to all the terms of the offer

Question 4

Definition of consideration

Answer 4

The price one party pays for the other parties promise

Question 5

Definition of intention to create legal relations

Answer 5

The courts must have satisfied that the parties intended to be bound

Question 6

Definition of unilateral contracts

Answer 6

One party known as the offeror, makes a promise in exchange for an act by another party known as the offeree

Question 7

Definition of bilateral contracts

Answer 7

A reciprocal arrangement between two parties by which each promises to perform an act in exchange for the other parties act

Question 8

Harvey v Facey (1893)

Answer 8

Held: Facey’s telegram was not a definite promise to sell but a mere statement of price and value. Harvey tried to accept this but could not as the statement was not an offer

Question 9

Carlil v Carbolic Smoke Ball Co (1893)

Answer 9

Held: the advert was an offer as it was so detailed and it could be accepted by anyone who used the smoke ball correctly and still got flu. If the advert indicates a course of action in return for which the advertiser makes a promise to pay, then she is bound by this promise

Question 10

Partridge v Crittenden (1968)

Answer 10

Held: not guilty as he was an offer but an invitation to treat. The contract s not formed until the person seeing the advertisement has made an offer to buy, which has then been accepted

Question 11

Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953)

Answer 11

Held: boots were not guilty as goods on a supermarket shelf are only an invitation to treat, an offer is made when a customer picks the item off the shelf to bu, they are invited to make an offer to buy, the contract is formed when sale is agreed at the cash desk

Question 12

Fisher v Bell (1961)

Answer 12

Held: flick knives were not an offer to buy, they were invitations to treat, goods on display windows are not offers, but an invitation

Question 13

Shopping principles

Answer 13

• Display or advert is an invitation to treat
• Customer offers to buy the goods at particular price
• he offer can then be accepted by the seller by some action
• The offer and acceptance may then be a binding contract

Question 14

Gibson v Manchester City Council (1979)

Answer 14

Held: no contract, it was held that the councils proposal was an invitation to treat, Gibson made an offer on the form which the council rejected, therefore not forming a binding contract

Question 15

Auction principles

Answer 15

• When the auctioneer holds up the ‘lots’ it is an invitation to treat
• Each bid is an offer
• Acceptance takes place when the auctioneer’s hammer falls
• Any bidder may therefore withdraw a bid before the hammer falls and the auctioneer may withdraw goods on behalf of the seller before that point

Question 16

Harris v Nickerson (1873)

Answer 16

Held: no such right of action and could not recover the expenses. The advert for the auction was only an invitation to treat and did not amount to a promise that all the articles advertised would be put up for sale

Question 17

Thornton v Shoe Lane Parking (1971)

Answer 17

Held: the offer is made when the machine holds it ready to receive the money. The acceptance takes place when the customer pays his money into the slot, so the machine is an offer as you cannot negotiate with a machine

Question 18

Ramsgate Victoria Hotel v Montefiore (1866)

Answer 18

Held: 5 months is not a ‘reasonable’ length of time for acceptance of an offer to buy shares as they are a commodity with a rapidly fluctuating price. Therefore, the offer had lapsed before the company tried to accept therefore no contract between them

Question 19

Byrne v Van Tienhoven (1880)

Answer 19

Held: there is a binding contract as revocation could only take effect on communication but the acceptance by telegram and post took effect as soon as it was sent. By the time Byrne received the letter of revocation on the 20th, the contract had been made and so the revocation had no legal effect

Question 20

Dickenson v Dodds (1876)

Answer 20

Held: there was no contract as the offer had already been revoked by communication from the 3rd party and the 3rd party was shown to be a mutual acquaintance on whom both parties could rely

Question 21

Hyde v Wrench (1840)

Answer 21

Held: the counter offer of £950 destroyed the original offer of £1,000

Question 22

Stevenson v McClean

Answer 22

Held: it is difficult to draw a line between a counter-offer and a request for further information

Question 23

Felthouse v Bindley (1862)

Answer 23

Held: the court held that there was no contract as there was no communication of acceptance by the nephew to the uncle

Question 24

Entores v Miles Far East Corp (1955)

Answer 24

Held: the acceptance was only valid when received in London, as telex was a form of instantaneous communication

Question 25

When does acceptance take place?

Answer 25

When it is clearly heard and understood

Question 26

The Kodak case

Answer 26

• Offers on the internet are an invitation to treat
• Placing an order amounts to an offer
• An automatic reply from the service provider is not an acceptance
• Acceptance is only done when the company makes a formal acceptance

Question 27

Yates v Pulleyn (1975)

Answer 27

Held: a specific method was not mandatory, it made no practical difference to the offeror since the letter was delivered on time, so this was not binding. Any acceptance which was communicated to the offeror by any other no less advantageous method would conclude the contract

Question 28

Thomas v Thomas (1842)

Answer 28

Held: “consideration means something which is of value in the eye of the law, moving from the plaintiff: it may be of some benefit to the plaintiff or some different to the defendant”

Question 29

Currie v Misa (1875)

Answer 29

Held: “a valuable consideration, in the sense of law, may consist either in some right, interest, profit, or benefit accusing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by another”

Question 30

Dunlop v Selfridge (1915)

Answer 30

Held: “an act of forbearance or the promise thereof is price which the promise of the other is bought and the promise thus given value is enforceable”

Question 31

Williams v Roffey Bros (1991)

Answer 31

Held: courts need to find the existence to reflect the intentions of the parties

Question 32

Tweddle v Atkinson (1861)

Answer 32

Held: he was unsuccessful in his claim, he failed as he had given no consideration for the agreement himself. No consideration moved from him, he had given nothing in return for Atkinson’s promise

Question 33

Re: McArdle (1951)

Answer 33

Held: daughter-in-law was unsuccessful in her claim and the money did not need to be paid as the promise was given in return for something already done. This was a past consideration and the promise made by the children was NOT binding which allows them to break their promise

Question 34

Lampleigh v Braitwaite

Answer 34

Held: