Principles Flashcards
What are the necessary parts of a legally enforceable contract?
Offer, Acceptance, Consideration by both parties, intent to creat legal relations
What must an offer express?
1) Willingness to contract
2) Specific terms
3) Intent to be legally binding upon acceptance (i.e. clear, certain, and final upon acceptance)
Leading case: Gibson v Manchester City Council
What is an invitation to treat?
An invitation to negotiate/make an offer.
Leading case: Fisher v Bell, flick knives in window.
What is a unilateral offer?
An offer made to all the world which can be accepted by performance of a prescribed action. Leading case: Carlill v Carbolic Smoke Ball
In a self-service shop, when is an offer made and accepted?
When items are brought to the cashier for checkout.
Leading case: Pharma Society vs Boots Chemist
Is an offer objective or subjective?
Objective. Can’t read in terms that aren’t present.
Leading case: Smith v Hughes
What are the three steps of the offer objectivity test?
1) Detached objectivity - fly on a wall
2) Promisee objectivity - what’s reasonably understood by the offeree
3) Promisor objectivity - was the offer reasonable?
Can an offer be accepted if the accepting party knows the offering party made a mistake?
No, can’t snatch a bargain - Hartog v Collins & Shields.
However, mistake must relate to the terms of the contract - Statoil ASA v Louis Dreyfus.
List the 7 requirements of acceptance
1) Unqualified
2) Communicated by an authorized person (unless offer is unilateral)
3) Made while the offer is valid
4) Mirror image of the offer
5) Accepted by the offeree
6) Accepted in response to the offer
7) Based on actions, not intentions
How does one communicate acceptance?
Verbal, written, by action, but cannot be silent acceptance. Case: Paul Felthouse v Bindley
Specific communication method can be stipulated as a term of the offer, but must be clear that it’s a condition not a preference.
What is the Postal Rule?
Acceptance occurs at the moment of proper posting of communication. Case: Adams and Others against Lindsell and Another.
What happens if acceptance was intended to be communicated but never received?
If not received due to fault of offeree or third party, then no contract. Exception: Postal Rule.
If not received due to fault of offeror, then they can’t deny acceptance. Case: Entores v Miles Far East Corporation.
What happens if an accepting action was performed for reasons unrelated to an offer?
Offer was not accepted. Acceptance must be in response to the offer. Case: Williams v Cowardine, deathbed confession
How does an offer end?
1) Acceptance - becomes a contract
2) Rejection - including counteroffers
3) Lapse - if a time limit was specified
4) Revocation
What is a counteroffer?
A rejection of the initial offer and proposal of a new offer. Case: Hyde v Wrench
Request for further information is not a counteroffer: Stevenson Jaques v McLean
When can an offer be revoked?
Any time before acceptance - Payne v Cave
When can a unilateral offer be revoked?
Prior to acceptance if not all conditions have yet been met: Great Northern Railway v Witham
However, if performance of accepting actions has begun and it would be inequitable to revoke, then the offeree must be given the opportunity to complete acceptance: Errington v Errington & Woods.
What is a “Battle of Forms”?
Phrase used to describe each party insisting on using their own paper, or trading redlines. Each turn is a rejection of the previous offer and forms a counteroffer (if it would be final upon acceptance). Case: Butler Machines v Ex-Cell-O Corp
When trading redlines, which form prevails?
The most recent (Butler v Ex-Cell-O); unless a form is introduced after an offer was already accepted, in which case it’s unenforceable: TRW Ltd v Panasonic Industry
What is consideration?
Something a party gets or gives up, i.e. price of a promise.
Is consideration an act or a promise to act?
Consideration treats actions and promises to act equally. Case: Pao On v Lau Yiu Long.
What are the rules of good consideration?
1) Consideration must not be past, i.e. the act can’t have come before consideration (Eastwood v Kenyon)
2) Consideration can’t move from the promisee (Dunlop v Selfridge)
3) Consideration must be sufficient, but not necessarily adequate (Chapelle v Nestle; Pao On v Lau Yiu Long)
4) Not covered by an exception or promissory estoppel
What is the past consideration test?
1) Was the act done on the request of the promissor?
2) Was there are understanding of payment, implicit or explicit?
3) Otherwise, would the contract be enforceable?
What can count as consideration?
1) Anything the promissor asked for, regardless of intrinsic value (Chapelle v Nestle)
2) May not relate to a specific value (Pao On)
3) Can include avoidance of penalty or other undesirable outcome (Williams v Roffey Bros)
What are the exceptions to good consideration?
1) Can’t have been doing the act anyways of your own volition (essentially past consideration - Eastwood v Kenyon)
2) No consideration if it was in performance of a public duty, however there could be consideration if you went above and beyond (Collins v Godefray)
3) No consideration if it was a pre-existing duty to a third party (i.e. redundant contracts) - Scotson v Pegg
4) The duty already existed in the current form of the contract (Stilk v Myrick). Doesn’t apply if there’s new additional effort required not contemplated by original contract (Hartley v Ponsonby).
Is there consideration when agreeing to accept a partial payment of a debt?
Normally, no. Part payment doesn’t settle a debt - Foakes v Beer.
When can part payment settle a debt?
1) Part payment plus something else can settle a debt - Pinnel’s Case.
2) If there was consideration regarding the part payment, and the additional “something else” was the avoidance of a penalty or some other undesirable situation, such as with Williams v Roffey Bros. Money has a time-based value.
Can a third party payment clear a debt?
Yes - Welby v Drake.
What is promissory estoppel?
The principle that you can’t go back on a promise made and relied upon if it would be inequitable to do so. Leading case: Central London Property Trust v Higher Trees House.
What are the four rules of promissory estoppel?
1) There must be an express or implied promise to suspend an otherwise enforceable contract
2) The promisee must have relied on the promise, directly leading to a change in position (positive or negative)
3) Shield not a sword - only defends against enforcement of a contract, can’t be used to force action
4) Must be fair/equitable to reneg on the promise, i.e. legal right is only suspended while it would be inequitable to enforce the promise. (MWB v Rock, Central London Property v Higher Trees House)
