Unit 1/2 Notes - Agreement, Offer, Acceptance & Unilateral contracts Flashcards
State the 4 main elements required for a legally binding/enforceable contract
For a contract to exist the court states that there needs to be;
Offer & Acceptance
Consideration
Certainty
Intention
State the different ways a contract can be deemed unenforceable or non binding
Void; the contract had no legal effect
Voidable; the contract is legal until such time it is made void by one of the parties
Unenforceable; cannot be enforced by the courts due to the lack of legal evidence a contract was agreed.
Briefly explain the notion of an ‘offer’
It is generally accepted that an offer starts the process of a contract coming into existence. An offer is a expression of willingness to do business on certain terms / conditions.
Offers must be communicated person(s) need to know the existence of an offer in order to provide an acceptance.
Offers can be specific or general. Specific denoting the offer is made to a specific person or persons, which can only be accepted by the person(s) it was addressed to
Briefly explain the notion of ‘acceptance’
If an offer has been accepted, the offeree unconditionally agrees to the terms of the offer , and the basics of a contract can start being drawn up. The acceptance has to be communicated to the offeror. There are many forms of communicating acceptances, in today’s business environment instantaneous communication methods would be phone, fax or email, alternatively post or telegram could be used. The offeror can stiplulate in the terms of the offer the method the acceptance should be communicated and can also indicate a time limit for acceptances to be received.
The acceptance can be deemed invalid if communicated in a different way than stipulated
There is one rule when this does not apply, the exception, where post or telegram is used as the form of communication. Known as ‘the postal rule’. If the acceptance is communicated through post or telegram, it is deemed the offer has been accepted once the letter of acceptance has been posted
Explain the notion of ‘Consideration’
It can be ascertained as the price or value parties agree on for a promise on offer. If it is proved there is no consideration, then it is deemed that no contract exists. Consideration must exist for a contract to be valid. Consideration must be either executed or executory. Executed relates to the carrying out of a promise or payment for that promise in the present time. Executory relates to the carrying out of the promise or making payment for the promise in the future.
Consideration must move from the promisee for the law to assume consideration had taken place. It must also be taken that the consideration is deemed sufficient that it is good and has a value. Under consideration the courts do not consider the value.
If a party negotiates a bad deal, consideration does not have to be adequate.
Explain the notion of ‘Intention’ to create legal relations
It is assumed most commercial contracts are intended to be legally binding. If a party is not happy in an agreement and tries to get the contract annulled, the onus is on them to prove the contract has no legal standing. Some enter clauses to the effect that the agreement would not be binding in a court of law, instance where you find this today would be competitions in newspapers, with the inclusion of the clause “ editors decision is final”.
Key case relating to the issue of creating legal intentions is Rose & Frank Co v JR Crompton & Bros(1925) where a honour clause was written into an agreement. When a dispute arose the courts stated the defendants Rose had to honour the outstanding orders placed on them by the plaintiffs JR Crompton, as they had been accepted but did not have to continue with the agreement or accept any new orders.
Explain the importance of ‘Certainty’ in a contract
Every area of the law experiences tension between the need for clarity and certainty, so that conduct can be regulated by reference to predictable rules, versus the desirability of flexibility, giving the courts enough discretion to respond to the merits of a dispute.
In contract, this tension is particularly evident, but in most cases there is everything to be said for clarity and certainty, even if this means some harsh decisions on the merits. Commercial parties need to know where they stand and, on balance, would prefer to be the loser today if that means that, next time, they know precisely what to do to avoid being the loser again.
The law of contract is very definitely not just concerned with litigation and resolving disputes after the event, although (perhaps inevitably) the focus of commentators is on case law, which is, by definition, the product of litigation. It is also facilitative, a set of ground rules to enable parties to make and perform their desired bargains, and needs to be clear and accessible as such to practitioners drafting contracts and advising clients in negotiations
State the key things to remember about Contract law
It does not matter whether the contract is made orally or in writing—with very limited exceptions (such as contracts for the sale of land or guarantee contracts), English law does not require writing, signature, or other formalities for a valid contract.
Even if Y made a mistake in its final calculations and offered a lower price per ton than it intended, this will not affect the validity of the contract. Y will generally be held to the terms to which, objectively, it appeared to be agreeing, regardless of its innermost intentions.
Many of the terms of the contract (such as obligations about the quality of the tomatoes) will be included automatically, by virtue of the Sale of Goods Act, not because of the express intentions of the parties.
For example, if theres a gap between the date the contract is made and the date it is to be performed the contract is still valid and binding immediately in June (if thats when the contract was made), even before any part of the contract has been performed or any sums spent in preparation to perform the contract.
Commerce is built on the understanding that contracts create enforceable obligations and corresponding expectations immediately, not at some unidentifiable later date when the other party first acts or incurs expenditure in reliance.
Contractual obligations are generally strict—so it is irrelevant that Y is not ‘at fault’ in the tort sense of the word.
English law takes an extremely restrictive view of when unexpected external circumstances provide an excuse for escape from a contract. So it is crucial that the law holds the parties to their contract in these unexpected conditions—otherwise, why bother to make a contract at all?
Explain the differences between tort and contract
The differences between tort and contract, which in classical theory represent a very sharply delineated boundary. Traditionally, the law of contract is concerned with voluntarily assumed obligations, while the law of tort involves obligations imposed by law, regardless of the intention of the parties (it is pointless to drive around with a sign on the bonnet of your car, stating that you do not agree to owe a duty of care to your fellow road-users!).
Tort is primarily concerned with fault, whereas contracting parties can, and frequently do, commit themselves to strict contractual obligations; damages for breach of contract protect financial expectations, whereas tort remedies are geared to compensating harm, usually to persons or property.
While the core contractual situation and the core tort situation are fundamentally different, the edges of the two concepts are not quite as sharp as this might suggest.
Developments in the law of negligence relating to financial harm have muddied the distinction; many contractual obligations exactly reproduce tortious duties, as where professionals contract to take reasonable care, and the law now recognises concurrent liability in such cases (especially significant for procedural reasons, because the rules of limitation, or time limits for bringing a claim, are more favourable to claimants suing in tort rather than for breach of contract).
More fundamentally, it has been pointed out that certain implied contractual terms, imposed by operation of law without reference to the parties’ intentions, are closer to tort duties than consensual contractual obligations—for example, a bus company’s relationship with its passengers is contractual, with terms and conditions ‘incorporated’ into the contract via wording on a notice or the ticket, but is it really very different in kind from the tort duties.
Explain ‘classical contract theory’
Classical contract theory has 3 related threads.
- a contract is a bargain, which means a reciprocal agreement between the parties, almost invariably an exchange of promises.
- not always entirely consistent with the first thread, contracts are the product of the will of the parties, so that it is the parties’ intention to ‘bind’ themselves that justifies legal recognition of enforceable contractual rights and obligations.
- freedom of contract is paramount. Everyone is free to decide whether or not to contract at all, with whom they are willing to contract, and on what terms. Once again, the law must interfere as little as possible, ensuring only that improper tactics by one party, such as fraud or coercion, did not compromise the other party’s negotiating freedom
plain what the terms ‘offeror’ and ‘‘offeree’ mean
Offeror - person making the offer
Offeree - person to whom the offers being made to
Explain the principle of objectivity in contractual formation
In order to ascertain whether a contract has been formed, and if it has, what its terms are, we often do not focus on the parties’ actual intentions. Instead we focus on what each party’s intention reasonably appeared to be to the other party.
In order to work out whether there was a valid offer in our car example, we ask whether it should have appeared to you that I was offering to sell my car, not whether it was my actual intention to do this. This is known as the principle of ‘objective intention’. So a party might be bound by a contract even though this is the last thing she intends.
As the Supreme Court emphasised in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG(2010)
‘Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct.’
Explain the conditions that are necessary for objectivity
The following conditions are necessary for objectivity:
- B must be seeking to hold A to A’s apparent intent. B must be saying ‘A appeared to mean this, so A should be held to this meaning.’
- B must have actually believed that A’s apparent intent represented A’s actual intent. Indeed, this emerges from the quotation from Smith v Hughes. The purpose of the principle is to protect B by allowing him to assume that A means what A says. Therefore, there is no need to protect B in this way where B does not believe or assume that
- It must be possible to work out what the apparent intent of A was.
- It must not be B’s fault that A appeared to agree to something that A did not actually intend to (Scriven v Hindley (1913), on which see Spencer (1973)). If B’s offer was confusing in some way, A should not be bound by their apparent intent. If B has relied on A’s apparent intent, A is effectively to blame and should have framed the offer more clearly.
- If the purpose of the principle is to allow B to rely on A’s apparent intent, it has been suggested that it should be necessary to show that B has relied in some way
English law has generally not explicitly required this (although see The Hannah Blumenthal (1983)) and it is submitted that its stance is correct. In the commercial world particularly, it is extremely important that A knows if, at what moment and on what terms they become legally bound. Accordingly, it is undesirable for A to have to keep B’s actions under review in order to be able to spot if and when B has relied, and so tell if, when and on what terms a contract has been formed with.
Explain how to determined whether a valid offer and acceptance has taken place:
In working out whether there is a valid offer and acceptance, factors other than the apparent intention of the parties may also be relevant I.e. the distinction between an offer and an invitation to treat when examining the doctrine of intention to create legal relation
In some contexts we are happy to impose duties and bestow rights upon the parties that they have not agreed to. For example, we imply terms into a contract, despite the fact that the parties have not agreed to such terms. Similarly, in some circumstances, statute permits us to strike down terms of the contract that seem unfair, despite the fact that the parties have agreed to such terms.
Moreover, contract law is happy to give one party various remedies against the other party when the latter breaches a term of the contract, despite the fact that the parties have not agreed to any such remedies
Finally, if we take such a strict approach, by always requiring an offer and acceptance, the result will often be that no contract will be found between the parties. This is problematic, because the law is very unclear as regards when one party will have to pay for work done by the other, if there is no contract between them. Moreover, if there is no contract, one party cannot recover for loss caused to him by the other party because there is no contract between them to be breached.
Explain the difference between a Bilateral and Unilateral Contract
The key difference is that only the latter type of contract places obligations upon and grants rights to both parties.
Bilateral Contracts: A promise (offer) in return for an act (acceptance). Acceptance of the offer is performing the act. Effectively this contract places obligations upon and grants rights to both parties.
Unilateral Contracts: In a unilateral contract, the offeree makes no promise and so is under no obligation to do anything.Essentially an exchange between two parties is immediately binding. With unilateral contracts the promiser is bound to perform, if and only if, the person (or persons) with whom the promise is made performs the specified act. (i.e. carlill v carbolic smoke rewards)
