Contract formation Flashcards
*Fisher v Bell [1961] 1 QB 394
theme : invitations to treat
An item in a shop window with a price tag is an invitation to treat NOT an offer.
The Court ruled in favour of the defendant (not guilty)
The defendant shopkeeper displayed in his shop window a flick knife accompanied by a price ticket displayed just behind it. He was charged with offering for sale a flick knife, contrary to s. 1 (1) of the Restriction of Offensive Weapons Act 1959. The issue was whether the display of the knife constituted an offer for sale or an invitation to treat in which case the defendant was guilty of breaching the Act) or an invitation to treat.
*Pharmaceutical Society v Boots Cash Chemists [1953] 1 QB 401
theme : invitations to treat
Items displayed are invitations to treat hence the offer is made by the client upon reaching the till and accepted by the cashier.
The Court ruled in favour of the defendant (not guilty);
The defendant ran a self-service shop in which non-prescription drugs and medicines, many of which were listed in the Poisons List provided in the Pharmacy and Poisons Act 1933, were sold. These items were displayed in open shelves and the till was operated by a registered pharmacist. The claimant brought proceedings against the defendant for breach of section 18(1) of the Pharmacy and Poisons Act 1933, which requires the supervision of a registered pharmacist for the sale of any item in the Poisons List.
The question was whether the contract of sale was concluded when the customer selected the product from the shelves or when the items were paid for.
Spencer v Harding (1870) LR 5 CP 561
theme : invitations to treat
an offer inviting tenders to be submitted did not amount to an offer capable of acceptance, but rather amounted to an invitation to treat.
The Court ruled in favour of the defendant
Harding distributed advertisements that said he was putting the stock-in trade of a company for sale by tender. It also said that he was willing to accept tenders. The defendants decided not to sell the stock to the highest bidder, which was Spencer. Spencer sued, saying that Harding was compelled to accept the highest offer. The court in Spencer v Harding held that the bids served as offers, which the defendants were at liberty to either accept or decline.
Harvey v Facey [1893] AC 552
theme : invitations to treat
The acceptance of an offer to buy should be expressed, not implied.
Court ruled in favour of the defendant
Harvey wants to buy BHP. Facey had not directly answered the first question as to whether they would sell, and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer, indeed Facey’s language didn’t show readiness to be legally bound. Hence, Facey’s reply could not be treated as an acceptance of an offer to sell to them, for no offer had been made.
*Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
theme : general offers
an advertisement containing particular terms to get a reward is considered a binding unilateral offer that is accepted by anyone who completes its terms + The offeror may waive the need for communication (sometimes it’s implied: language used + nature of the transaction)
Court ruled in favour of the defendant.
CSB sold smoke balls to prevent ppl from getting influenza. In their ad campaign, they promised £100 to anyone catching influenza while taking it 3 times per day for 2 weeks.
They deposited 1000 pounds in the bank to show their sincerity. Mrs. Carlill (claimant) contracted influenza and sued CSB for her £100. The defendants (CSB) contended that they could not be bound by the advert as it was an invitation to treat rather than an offer on the grounds that the advert was lacking true intent and not aimed at a specific person.
However, the court held that this was an offer and in completing the conditions stipulated by the advert, Mrs Carlill provided acceptance. Main reasons:
Specific wording: language of commitment
The tone of the advertisements required an act to be done by a member of the public without reference to the person placing the ad. That act involves that member of the public in some inconvenience or expense. A contract is formed when the person completes the performance;
Their 1000 pounds deposit in the bank was not a crucial reason
Barry v Davies [2001] 1 All ER 944
theme : auction sales
if an auctioneer advertises an auction with “no reserved price” that ad is an offer not an ITT. The Acceptance takes place when the highest bid is made
Court rules in favour of the claimant who recieved £27, 600
Auctioneer selling car parts worth 28k): Mr. Barry bid 400 pounds (no other bids) and the auctioneer didn’t accept his bid. But as it was an auction without reserve it was an acceptance to the offer in the advertisement. Mr Barry after suing the auctioneer is entitled to receive 27, 600 £ (put in the same position as if the contract had been completed) .
Hyde v Wrench (1840) 3 Bea 334
theme : counter-offers
A counter-offer extinguishes the original offer. An offer must be accepted in the exact terms of the offeror
The Court ruled in favour of the defendant
Mr Wrench, offered to sell the farm he owned to Mr Hyde. He offered to sell the property for £1,200, but this was declined by Mr Hyde. The defendant decided to write to the complainant with another offer; this time to sell the farm to him for £1,000. He made it clear that this would be his final offer regarding the property. In response, Mr Hyde offered £950 for the farm in his letter. This was refused by Mr Wrench and he confirmed this with the complainant. Mr Hyde then agreed to buy the farm for £1,000, which was the sum that had previously been offered. However, Mr Wrench refused to sell his farm.
Stevenson v McLean (1880) 5 QBD 346
theme : counter-offers
if the language or conduct shows an intention to keep the negotiations to continue = not a counter offer but a request for information.
The Court ruled in favour of the claimant
MacLean offers to sell iron at 40 shillings a ton for immediate delivery, Stevenson responds: “Please let me know if you would accept 40 shillings a ton for a delivery over a period of two months” (he wants to pay by installments). McLean did not respond to this telegram. The defendant sold the iron to another party, but did not inform the complainant of this action. On Monday morning, the complaint sent a telegram to accept the offer, unware it had been sold.
The complainant sued the defendant for non-delivery of the iron and that this was a breach of contract. The issue in the case was whether there was binding contract between the parties and if the telegram sent by the complainant was an inquiry for information or a counter offer.
Brogden v Metropolitan Ry Co (1877) 2 App Cas 666
theme : acceptance by conduct
Performing the contract in the terms laid out by the offeror amounts to an acceptance (by conduct).
The Court held in favour of the claimant
Brogden is a coal merchant supplying the Metro Railway. Decided to regularize with a contract. Brogden got the written contract and changed the name of the arbitrator then sent it back (Counteroffer). Metro Ry didn’t tell Brogden put the contract in a drawer but carried out the contract in the terms specified on the contract. The Court ruled that it was acceptance by conduct: unequivocal conduct showing acceptance
*Manchester Diocesan Council for Education v Commercial Investments Ltd [1969] 3 All ER 1593
theme :prescribed method of acceptance
The offeree must accept in the manner set out by the offeror in the terms of the offer:
- If the offeror sets out a method of acceptance but doesn’t insist that it should be the only method = the offeree can accept using another method provided it doesn’t prejudice the offeror’s position / is equally advantageous.
- If the offeror insists on a specific method ( and rules out the other), then that method must be followed
+ if the offer is only open for a period and it expires = No longer valid. Offers with no time limit expire within a reasonable period
Court rules in favor of C
The complainants, Manchester Diocesan Council of Education, called for tenders relating to a school. The defendant, Commercial and General Investments Ltd, submitted a tender offer to buy the property from the complainants. It was stated that the acceptance of tender would be notified to the person by a posted document and to the address that was to be given in the tender. The complainants decided to accept the tender given by the defendants. They sent their acceptance of the tender. However, they sent the document to the defendant’s solicitor and not the address given on the offer. Later on, the complainant sent another acceptance to the defendant’s address detailed on the tender.
.
*Butler Machine Tool Co Ltd v Ex-cello Cpn (England) Ltd [1979] 1 WLR 401
theme : battle of the forms
Last shot approach : the buyer’s (offeree) confirmation can be amounted to a counter-offer which the seller (offeror) can accept.
The Court ruled in favour of the defendant
Butler sends an offer to sell machinery to EC Corp on May 23rd : Butler sends a document- to EX-cello offering to sell ( price variation clause : the seller can adjust the price)
May 27th: Ex-Cello replies: document without price variation clause and tear-off acknowledgment clause request Butler to accept the order on Ex-Cello’s terms and conditions.
June 5th: Butler signs it and send back another document to Ex-cello: saying they accept “in accordance with our revised quotation of May 23rd (containing price variation) for delivery in March April 1970”
The Court ruled that the dominant document was the tear-off acknowledgment and Butler accepted its terms.
Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA 1209
theme : battle of the forms
Exception to the GR :
First shot approach when court finds that both parties intended: first shot approach : when accepting the offeror’s (seller) conditions, the offeree (buyer) waives his conditions of trade, so the contract is looked upon as concluded under the seller’s terms.
Court ruled in favour of the defendant
Tekdata purchased harness connectors from Amphenol. They had been doing so for several years. On one occasion, Tekdata claimed that Amphenol were in breach of contract. They alleged that Amphenol’s latest delivery was late and of inadequate quality.
Amphenol argued that the contract was on their standard terms, which excluded liability in these circumstances. These terms had been provided in Amphenol’s acknowledgement of Tekdata’s purchase order. Tekdata responded that the contract was on their terms, which were provided in the purchase order. Tekdata’s terms did not include an exclusion clause.
The Court of Appeal held in favour of Amphenol. The judge should have applied the traditional offer/acceptance analysis of contract formation : the parties contracted on Amphenol’s terms. Tekdata’s purchase order was an offer. Amphenol’s acknowledgement was a counter-offer. Tekdata’s decision to accept delivery was acceptance of the counter-offer. This case is authority for the correct manner to approach offer/acceptance analysis.
Williams v Carwardine (1833) 5 C & P 566; 172 ER 1101
theme : knowledge and reliance on offer
The offeree’s reason(s) for accepting the offer do not have an impact on its validity.
The Court held in favour of the claimant
The defendant put up an advert offering a reward for anyone who gave information leading to the identification of the person who murdered the defendant’s brother.
The claimant knew who did it, but when she saw the advert she did not come forwards. She was later badly beaten by the murderer. Believing that she was going to die and seeking to ease her conscience, the claimant provided the information to the defendant. This information helped the police convict the man of murder.
The claimant later claimed the reward. However, the defendant refused to pay. He argued that the claimant was not motivated by the offer when she gave the information, but rather had other motives. This, he claimed, meant that there was no contract.
Felthouse v Bindley (1862) 11 CBNS 869
theme : silence as a condition of acceptance of an offer
The offeror cannot impose that the offeree’s silence shall constitute acceptance / force the offeree to take positive steps to reject the offer
The Court ruled in favour of the defendant
The complainant, Paul Felthouse, wants to buy his nephew’s horse. After their discussion, the uncle stated in a letter that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show that the horse was his property, in order to prove there was a valid contract.
=> It was held that there was no contract for the horse between the complainant and his nephew.
Henthorn v Fraser [1892] 2 Ch 27
theme : postal rule
When the post is contemplated by both parties as a resonable mean of communication => constitutes acceptance
Court ruled in favour of the claimant.
A building the society offers to sell H, given 14 days to accept. Can Henthorn accept by post? The Court ruled that he could accept by post bc it is in contemplation of the parties as a means of communication
Adams v Lindsell (1818) 1 B & Ald 681
theme : postal rule
The acceptance is valid when the letter is posted
the court ruled in favour of the plaintiff
The facts of Adams v Lindsell are that: the defendants wrote to the plaintiffs on 2 September, offering to sell them some wool and requested that the plaintiffs reply ‘in course of post’. The letter which contained the offer was wrongly addressed and therefore the plaintiffs did not receive it until 5 September. As a result of this delay, the letter of acceptance was not received until 9 September by the defendants, and this was two days later than the defendants would have expected to receive it. Because of this, on 8 September the defendants had sold the wool to a third person.
Holwell Securities Ltd v Hughes [1974] 1 WLR 155
theme : postal rule
The postal rule does not apply if it would be absurd in the given situation or be unreasonable
the court rules in favour of the defendant
The defendant, Dr Hughes, gave the complainants, Holwell Securities, the option to purchase his house for £45,000. It was stated that this option was exercisable ‘by notice in writing’ within six months. The complainants posted a letter agreeing to this option by Dr Hughes and this was done five days before the six-month expiry. However, this agreement letter was lost in the post and it never reached Dr Hughes.
Entores Ltd v Miles Far East Cpn [1955] 2 QB 327
themes : electronic communication
In the case of instantaneous communications, the contract is only complete when the acceptance is received by the offeror, and the contract is made at the place where the acceptance is received
Court ruled in favour of the plaintif
The plaintiffs (firm in London) made an offer by telex to the defendants (company in Amsterdam) who communicated their acceptance of the offer by telex. When the contract was not fulfilled, the complainants/ plaintiffs tried to sue the defendants for damages. It was held that the contract had taken place in London. The suit for damages would hence be treated under english law.
The Brimnes [1975] QB 929
theme : electronic communications
The offeror must act in a reasonable business manner when receiving communications. + The withdrawal was effective when Telex message was received, not when the message was read.
Court ruled in favour of the defendant
The charterers hired a vessel (Brimnes) “hire to be paid on the first day of each month.” Payments were always late and the charterers were asked by the owners (defendant) to ensure that payments were punctual. In April 1970 the charterers made payments on April 2. The shipowners withdrew the vessel from service as soon as they heard that payment had not been made on April 1. The owners sent a message by Telex, which gave notice of withdrawal of the ship from service. This Telex message was sent during normal office hours. However, the claimant did not read it until the next day and had already made payment.
The charterers claimed for damages against the shipowners for the wrongful withdrawal of the vessel from the charterers’ service.
Byrne v Van Tienhoven (1880) 5 CPD 344
theme : termination of offer
The offeror can revoke his offer at any point before the acceptance + the offeree must hear about the revocation before it’s effective
The court ruled in favour of the defendants
The defendants wrote a letter, on October 1, to the plaintiffs offering the sale of 1000 boxes of tin plates. The defendant was based in Cardiff and the plaintiff was based in New York, and letters took around 10-11 days to be delivered. The plaintiffs received this letter on October 11 and accepted it on the same day by telegram, as well as by letter on October 15. However, on October 8, the defendant sent a letter to the plaintiffs which withdrew their offer and this arrived with the plaintiff on October 20. The plaintiffs claimed for damages for the non-delivery of the tin plates.
Dickinson v Dodds [1876] 2 Ch D 463
theme : termination of offer
Usually, the offeror must notify the offeree of their revocation but if the offeree hears about the revocation from a reliable third party it is still effective
The Court ruled in favour of the defendant
The defendant, Mr Dodds, wrote to the complainant, Mr Dickinson, with an offer to sell his house to him for £800. He promised that he would keep this offer open to him until Friday. However, on the Thursday Mr Dodds accepted an offer from a third party and sold his house to them. It was claimed that Mr Dickinson was going to accept this offer, but had not said anything to Mr Dodds because he understood that he had until Friday. Mr Dodds communicated that the offer had been withdrawn through a friend to the complainant. After hearing this, Mr Dickinson went to find the defendant, explaining his acceptance of the offer. The complainant brought an action for specific performance and breach of contract against the defendant.
Routledge v Grant
theme : termination of offer
Even if the offeror has promised to keep his offer open for a period he can revoke it before the other party provides consideration ( in contract law : one party cannot be bounfd while the other one is not)
The Court ruled in favour of the defendant
The defendant contacted the claimant in writing, offering to purchase the lease of the claimant’s home. The offer stated that it would remain open to the claimant for a period of six weeks. However, during this period, before the claimant had accepted, the defendant changed his mind about the purchase and wrote to the claimant once again purporting to withdraw the offer. After receiving this second letter, still within six weeks from the first, the claimant accepted the defendant’s offer.
Errington v Errington [1952] 1 KB 290
theme: termination of offer
In unilateral contracts, the offeror cannot revoke when the offeree has commenced the action
Australian case
A father bought a house for son and daughter-in-law (Ds) and was liable for the mortgage. The father told them that the house would be theirs if they paid off the mortgage. However, before the mortgage could be paid off, the father passed away. The father’s widow (C) claimed possession of the house and wanted to eject the daughter-in-law who has since divorced the son.
Bradbury v Morgan (1862) 1 H & C 249; 158 ER 877
theme : termination of offer
The offeree can no longer accept the offer once they hear about the offeror’s death
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523:
theme : termination of offer
“Where an offeree, with a reasonable opportunity to reject the offer of goods or services, takes the benefit of them under circumstances which indicate they were to be paid for, the tribunal of fact may hold that the offer was accepted according to its terms.”
Court ruled in favour of the defendants
Machon Paull (MPP) has designed buildings for the claimant and supervise the construction work (informally). They want a formal contract with Empirnall Holdings (EH).
Late August: EH: “send the contracts”
September 14: EH: “Our Managing director doesn’t sign contracts”
Late September: progress claim (MPP’s bill) paid by EH to MPP.
October 3rd: MPP sends contracts to EH (some details are missing) = OFFER
October 18th: progress claim paid by EH
October 19th: MPP says to EH: “We are proceeding on the assumption that the terms are accepted” = Waiving communication of acceptance
October 30th :progress claim paid by EH = Acceptance by conduct
EH: relies on Felthouse v Bindley to argue that the offeror can impose that the offeree’s silence shall amount to an acceptance” + the Progress payment was not an unequivocal gesture of acceptance (bc they already made the same payments before)
The court held in favour of MPP: MPP made the offer on 3 October and EH accepted it partly with their progress payment but also with their silence (= combination). The Court considered the whole conduct of EH.
Currie v Misa (1875) LR 10 Ex 153, 162
theme : definition of consideration
The Court held that consideration must “consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”
Lizardi & Co. sold a number of bills of exchange to Mr. Misa, drawn from a banking firm owned by Mr. Currie, and were to be paid on the next day. However, Lizardi was in substantial debt to Mr. Currie’s bank and was being pressed for payment. A few days later, upon paying in the cheque, Mr. Mirsa learned of Lizardi’s stopped payments and outstanding debts, instructing his bankers not to honour the cheque. The question arose as to whether the cheque was payable, particularly as to whether the sale of an existing debt formed sufficient consideration for a negotiable security, so as to render the creditor to whom it was paid, Mr. Currie, a holder for the value of the cheque.
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
theme : consideration adequacy
the adequacy of consideration is irrelevant
defendants won
The defendants, Nestlé, contracted with a company manufacturing gramophone records to buy several recordings of music. The plaintiffs, Chappell & Co, held the copyright in these recordings. Nestlé offered to sell these records at a discount price to anyone presenting three wrappers from their chocolate bars. The wrappers themselves were worthless and were thrown away by Nestle. The plaintiffs sought an injunction restraining the manufacture and sale of the records because they breached copyright.
Lampleigh v Brathwait (1615) Hobart 105; 80 ER 255
past consideration
There will be past consideration if the relevant consideration occurs before the other party’s specific promise of payment.
but The consideration will not be passed if there has been a previous general request to undertake the consideration before it takes place. Provided at the time, the parties assume that there is an expectation of payment.
The defendant had been convicted of murder. He requested the claimant’s help in obtaining a pardon from the King. The claimant expended considerable effort and expense in doing so. A pardon was granted. Afterwards, the defendant promised to pay the claimant a sum of money as a reward. The defendant never paid, and the claimant sued.
The claimant argued that the defendant was bound by contract to pay for his services. The defendant responded that consideration had not been given for his promise to pay – the claimant’s services did not count as they were past acts.
