Week 1: Formation of a Contract

Question 1

What is necessary for the formation of a contract?

Answer 1

Consensus in idem.

Question 2

“Commercial contracts cannot be arranged by what people think in their inmost minds. Commercial contracts are arranged by what people say.”

Answer 2

Muirhead and turnbull v Dickson (1905) 7F 686

Question 3

Describe and Explain the importance of Mathieson Gee LTD v Quigley

Answer 3

• Q wished to have a pond on his estate clearer of solt and mould

MG - offered to ‘supply the necessary mechanical plant for the excavation and removal of mould at present deposited in your pond’

Q - I have the pleasure in accpetoing your offer to remove the silt and deposit from my pond

MG provided the mechanical plant to Q, who refused to pay the agreed fee

This highlights that consensus in idem is necessary for the formation of a contract.

Question 4

An invitation to treat is an offer (T or F).

Answer 4

False.
It is not possible to purport to accept an invitation to treat and conclude a contract. Instead, if you respond to an invitation to treat then you are making an offer, which may then be accepted or rejected.

Question 5

Provide two examples of invitations to treat.

Answer 5

1. Shop displays
2. Adverts

Question 6

Which cases highlighted the distinction between an offer and an invitation to treat?

Answer 6

1. Carlill Carbolic Smokeball Co. [1893] 1 QB 256

Background
- Company advertised their ‘smokeballs’ which they claimed would prevent colds and flu.
- They stated that if anyone bought product and used as directed but still caught the cold or flu, then the company would pay them £100.
- Ms Carlill caught the flu and brought action against Carbolic Smokeball Co.

Judgement
- The court held that because the company had deposited £1,000 into a bank account, which therefore showed an intention to be legally bound, and was thereby an offer.

2. Pharmaceutical Society of Great Britain v Boots

Background
- Boots operated a ‘self-service’ system. Products were being sold that contained drugs which by statute should only be sold by a registered pharacist.
- A pharmacist was near the check out and would supervise the sale of any relevant drug.

Judgement
- The display of goods on the shelf cannot be considered as an offer therefore the transaction commenced once the customer had brought the drug in question to the counter. This is supported by the fact that the customer is free to return a product before they reach the counter.

Question 7

What are the three circumstances in which an offer lapses?

Answer 7

1. When rejected or met with qualified acceptance
2. When the offer is revoked.
3. When not accepted in time*

Question 8

What case highlights that an offer is ‘killed’ when met by a counter offer.

Answer 8

Hyde v Wrench.

Question 9

What case highlights that an offer can lapse due to the passage of time?

Answer 9

Wylie & Lochead v McELroy & Sons
- Price of Iron was fluctuating - 5 week delay.
- Offeror not bound by acceptance due to delayed acceptance.

Question 10

What converts an offer into a contract?

Answer 10

Acceptance.

Question 11

What case highlighted that an offer may bot be accepted through silence?

Answer 11

Felthouse v Bindley.

Question 12

What case highlights the conditions for a postal acceptance.

Answer 12

Thomson v James (1855) 18 D 1

Question 13

What is the distinction between the postal acceptance rule and the general acceptance rule.

Answer 13

Postal: Contract concluded upon postage of acceptance.

General: Contract concluded upon reading of fax, email etc.

Question 14

What are the three key features of a promise.

Answer 14

1. In writing
2. Irrevokable
3. Communicated

Question 15

Under what circumstances does a promise not need to be in writing?

Answer 15

When made in the course of business.

Question 16

Philip & Co v Knoblaugh

Answer 16

Facts:
Party attempted to change the price following firm acceptance, claiming no bargain had been made

Judgement:
Court declared that there was a firm offer and there was firm acceptance therefore, terms could not be inserted or altered

Question 17

Partridge v Crittenden

Answer 17

Facts
The defendant advertised for sale a number of Bramblefinch cocks and hens, stating that the price was to be 25 shillings for each. Under the Protection of Birds Act 1954, it was unlawful to offer for sale any wild live bird. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) brought a prosecution against the defendant under the Act. At his trial, the defendant was found guilty of the offence by the magistrates; he appealed this conviction.

Judgement
The court held that the advertisement was not an offer but an invitation to treat, and as such the defendant was not guilty.

In summary: An advertisement cannot be considered an offer

Question 18

Harvey v Facey

Answer 18

Facts
Harvey sent a telegram to Facey asking if he would sell Bumper Hall Pen at his lowest cash price. Facey replied with a telegram stating the lowest price. Harvey then sent another telegram offering to buy at the price stated by Facey, but Facey did not accept.

Judgement
The Privy Council ruled that there was no binding contract between Harvey and Facey. Facey’s telegram was an invitation to treat, not an offer, and Harvey’s reply did not create a contract.

In summary: Proving information does not constitute an offer

Question 19

Fisher v Bell

Answer 19

Facts
A shopkeeper, Bell, displayed a flick knife in his shop window with a price tag. The police charged Bell with offering the knife for sale under the Restriction of Offensive Weapons Act 1959

Judgement
The court ruled that the display was an invitation to treat, not an offer for sale. The court held that the statute must be interpreted in accordance with the general law of the country, and that the display of the knife in the window was inviting customers to make an offer to buy it.

In summary: Shop Displays do not constitute an offer

Question 20

Chwee Kin Keong v Digilandmall.com Pte Ltd

Answer 20

Facts
The defendant, Digilandmall.com Pte Ltd, were an online IT company that sold related software and hardware from Singapore. They were selling a HP laser printer and an employee accidently made a mistake as to the price of the printer on their website. It was listed at the price of $66, when it was advertised on the official HP website for $3,854. This was not noticed by the company until over 4,000 printers were ordered. The complainants had ordered over 100 printers each at this price. When the defendants discovered this mistake on their website, they sent an email to the complainants to say they would not be fulfilling this order.

Decision/Outcome
It was held that the contract between the parties was void. This pricing was a mistake, which was fundamental to the contract and the complainants must have known that this ‘absurdly low’ pricing was an error by the defendants. In this case, there was no consensus ad idem or meeting of the minds between the parties, which meant that there could be no binding contract between them.

In summary: There was no consensus in idem

Question 21

Shaw

Answer 21

Party suggested that if they do not hear back they will assume they bargain concluded. This is not a form of acceptance

Question 22

Holwell Securities v Hughes

Answer 22

The offeror may stipulate the mode of acceptance

Question 23

Dunlop v Higgins

Answer 23

If both acceptance and withdrawal arrive at the same time; the offer is withdrawn

Question 24

Carlyle v RBS

Answer 24

Oral promise made by a bank manager to lend money

Question 25

Littlejohn v Hadwen

Answer 25

Promise to keep an offer open

Question 26

Petrie v Earl of Airlie

Answer 26

Rewards