Week 3 - Contract Law: Offer And Acceptance

Question 1

Basic principles of contract law (3)

Answer 1

• A contract is also known as a legally binding agreement
• There must be at least two parties but can be more
• Contracts don’t have to be written or in particular pattern form

Question 2

What are the essentials of a binding contract? (6)

Answer 2

• Offer
• Acceptance of offer
• An exchange of something of value (called consideration)
• An intention to create a legal relationship (also known as consideration)
• Compliance with any formalities
• No vitiating factors

Question 3

Which contracts have to be in writing? (3)

Answer 3

• Contracts to sell land under the law of property act 1989
• Contracts to obtain credit under the consumer credit act 1974
• Contracts of marine insurance

Question 4

Role of deeds in sale of land (2)

Answer 4

• Can make transactions legally valid such as sale of land

* If a deed is not used in the sale of land rights associated with the property will not pass from one person to another

Question 5

What is an offer?

Answer 5

it is a clear statement of the terms on which one party (the offeror who makes the offer) is prepared to make an agreement with another party (the offeree who accepts the offer) and the offeree agrees to be bound by the terms of the offer if accepted

Question 6

What is the difference between a unilateral offer and bilateral offer?

Answer 6

• A bilateral offer is the exchange of two promises

* A unilateral offer is the promise to pay a sim in return for a specific act

Question 7

How can an offer be legally binding? (3)

Answer 7

• The terms being clearly stated
• The offer or must attend to be legally bound
• The intention must be communicated to the offeree

Question 8

What resources are used to help create certainty in a contract? (3)

Answer 8

• Previous dealings and the nature of the relevant trade
• Statutory implied term
• Arbitration clauses

Question 9

Previous dealings and the nature of the relevant trade - resources used to help create certainty in a contract (2)

Answer 9

• This is where an offer is deemed valid by looking at previous dealings between the parties
• Hillas v Acros (1932):
  • Contract to supply woof for one year contained an option permitting the buyer to buy more wood next year
  • Was held this was a valid offer as the terms could be clarified by looking at previous dealings as well as the custom and practise of the timber trade

Question 10

Statutory implied term - resources used to help create certainty in a contract (2)

Answer 10

• This is a term contained in a statute/Act of Parliament
• E.g an offer to sell goods that are displayed without price is valid as S8 sale of goods act 1979 infers that a reasonable price will be paid

Question 11

Arbitration clauses - resources used to help create certainty in a contract (2)

Answer 11

• Refers any disputes relating to vagueness which is determined by an arbitrator
• Foley v Classique coaches (1934) - Price if petrol was left to be agreed ‘from time to time’ and this was binding as there was an arbitration to solve any disputes

Question 12

Two statements that look like offers but are not so result in problems

Answer 12

• Invitation to treat

* Negotiations

Question 13

What is an Invitation to treat?

Answer 13

Products in catalogues, menus and items displayed in shops are invitation to treats but not offers for sale

Question 14

Example cases of invitation to treat (3)

Answer 14

• Fisher v Bell (1960) - a flick knife in a shop window was an invitation to treat
• Partridge v Crittenden (1968) - advert in a paper offering for sale wild birds was held to be an invitation to treat
• Pharmaceutical Society (GB) v Boots Cash Chemists (1953) - Medicines on display in boots were held to be invitations to treat

Question 15

Negotiations

Answer 15

Parties will negotiate to iron out all details when finalising a contract and problems occur when negotiation statements are taken as an offer

Question 16

Example cases of negotiations (2)

Answer 16

• Harvey v Facey (1893) - an answer to a request for the price of land was seen as a supply of information
• Gibson v Manchester City council (1979) - council tenant was told that the council ‘may be prepared to sell his council house to him. This statement was not offer

Question 17

What is meant by the phrase ‘the intention to be legally bound must be communicated to the offeree’? (2)

Answer 17

• It is another way of saying that someone cannot accept an offer they are not aware of
• Carlill v Carbolic Smoke Ball Co (1893):
  • Smoke ball company promised to pay £100 to any person who having correctly used the ball caught influenza (which it was meant to prevent)
  • Mrs Carlill used it then caught influenza and claimed the £100 and it was held that the offer was an advert

Question 18

Ways that an offer can be terminated (4)

Answer 18

• Death of the offeror
• Rejection and counter offer
• Lapse of time - an offer open for 2 days will lapse after those 2 days
• Revocation - withdrawing the offer but only effective if the offeree knows of the withdrawal

Question 19

Example case of rejection and counter offer (2)

Answer 19

Stevenson v McLean (1880):

• It was held that an offer to sell iron at a certain price was not destroyed when the offeree enquired if delivery and payment could be made in instalments
• These enquiries don’t change the original offer

Question 20

Example case of revocation (3)

Answer 20

• Dickinson v Dodds (1876):

• Dodds made an offer to sell property to Dickinson, but sold it to a third party before Dickinson had time to respond
• Dickinson heard about the sale from a third party but still tried to accept the offer (knowing house was already sold
• The offer has been revoked so couldn’t be accepted

Question 21

Ways that can offer can be accepted (2)

Answer 21

• Words - either oral or written

* Implied from conduct

Question 22

What is meant by acceptance being a “mirror image” of the offer?

Answer 22

This means that acceptance must fit the offer exactly

Question 23

What is meant by the rule of acceptance being unconditional?

Answer 23

Nothing should be changed or adapted to the offer otherwise it won’t be a mirror image

Question 24

What is meant when acceptance must be communicated to the offeror? (4 sub rules)

Answer 24

• Must be by an authorise person
• Methods of communication
• The offeror cannot waive the communication rule
• The offeror may expressly require method of communication

Question 25

Must be by an authorised person - 4 sub rules for why acceptance must be a communicated to the offeror

Answer 25

Powell v Lee (1908) - claimant was told of a successful job application by an unauthorised person and it was invalid

Question 26

Methods of communication - 4 sub rules for why acceptance must be a communicated to the offeror (4)

Answer 26

• By conduct - Brogden v Metropolitan Railway (acceptance by placing an order)
• Verbal communication - the offeror must hear the acceptance
• Electronic communication - basic rule is that they are seen as received if they arrive within office hours
• The postal rule - acceptance of an offer is valid on posting

Question 27

The offeror cannot waive the communication rule - 4 sub rules for why acceptance must be a communicated to the offeror (2)

Answer 27

• This means that silence is not acceptance
• Felthouse v Bindley (1862):
  • Claimant offered to by horse and said he would assume seller agrees unless he hears differently
  • Seller intended to accept and asked the horse to be withdrawn from an auction but it was sold by mistake and claimant sued auctioneer
  • Claim failed as he was not owner of the horse as seller had never communicated acceptance to the buyer as such, it still belonged to the seller when it was sold

Question 28

The offer may expressly require a particular method of communicating - 4 sub rules for why acceptance must be a communicated to the offeror

Answer 28

Parties are free to contract on the terms that suit them