Contract Law Flashcards
(12 cards)
Addison v Norway Cement Export Ltd
Mr. Addison assisted Norway Cement Export Ltd. in negotiations with the Ghanaian government regarding Ghana Cement Works Ltd. In return, he was promised £1,000, 10,000 shares, and an option to buy 90,000 additional shares at par. A dispute arose when the company failed to honour the full terms of the agreement, particularly the share option
The court held that a valid contract existed. However, specific performance could not be granted due to the uncertainty of the share option terms. Instead, the court awarded damages to Mr. Addison for breach of contract.
Smith V Hughes
Smith, a farmer, offered to sell oats to Hughes, a racehorse trainer. Hughes believed he was buying old oats suitable for feeding horses, but Smith delivered new oats, which were unsuitable. Hughes refused to pay, arguing he was misled. However, Smith had made no explicit statement about the old oats—Hughes assumed it.
The court held that there was no misrepresentation by Smith, and the contract was valid. What matters in contract law is objective agreement, not internal intent. Since Smith didn’t deceive Hughes, and Hughes didn’t ask for old oats specifically, the misunderstanding was Hughes’ mistake.
Flack v Williams
Falck and Williams were negotiating two separate shipping contracts. Falck sent a coded telegram intending to confirm one shipment (copra from Fiji), but Williams believed it referred to a different one (shale from Sydney). Both parties acted on different understandings of the same communication, leading to a mutual mistake about the subject matter.
The court held that no valid contract existed due to the absence of consensus ad idem (a meeting of the minds). Since both parties were mistaken about what had been agreed upon, the contract was void. Mutual mistake, where each party is thinking of a different deal, prevents contract formation.
Scriven Brothers V Hindley
Scriven Brothers sold bales of hemp and tow at auction. Both products were identically marked and catalogued, which caused confusion. Hindley & Co, intending to buy hemp, mistakenly bid on and purchased tow, thinking it was hemp. Upon discovering the mistake, they refused to pay, and Scriven Brothers sued for breach of contract.
he court held that there was no valid contract due to a mutual mistake and lack of consensus ad idem (no true agreement). The misleading packaging and catalogue contributed to the error, and the buyer’s mistake was not entirely their fault. As such, the contract was void.
Harvey v Farcey
Facts: Harvey (buyer) telegraphed Facey (owner) asking, “Will you sell Bumper Hall Pen? Telegraph lowest cash price,” to which Facey replied only with the price (£900) but did not explicitly agree to sell.
Issue: Whether Facey’s telegraph stating the price constituted a valid offer capable of acceptance, forming a binding contract.
Holding: No contract existed—merely stating a price is not an offer but an invitation to treat (preliminary negotiation), lacking intent to be legally bound.
Rule: A contract requires clear offer + acceptance; price quotations alone are insufficient without explicit willingness to sell (Gibson v Manchester City Council followed).
Significance: Reinforces the distinction between offers and invitations to treat, critical in contract formation (e.g., retail displays, advertisements).
Gibson v. Manchester City Council
Facts: Gibson (tenant) sought to buy his council house after receiving a letter from Manchester City Council stating they “may be prepared to sell” at a fixed price, which he accepted.
Issue: Whether the Council’s letter constituted a binding offer or merely an invitation to treat in the contractual negotiation process.
Holding: The House of Lords ruled no contract existed, as the Council’s letter was only an invitation to treat, not a firm offer capable of acceptance.
Key Rule: Price quotations or statements of willingness to negotiate (without clear intent to be bound) lack contractual force (Harvey v Facey applied).
Significance: Reinforces the objective test for offer/acceptance and distinguishes negotiations from binding agreements in public housing sales.
Fisher v Bell
Facts: A shopkeeper displayed a flick knife in his window with a price tag, leading to prosecution under the Restriction of Offensive Weapons Act 1959 for “offering for sale” a prohibited item.
Issue: Whether displaying an item in a shop window constitutes a legal offer (which could be accepted to form a contract) or merely an invitation to treat.
Holding: The court ruled it was an invitation to treat, not an offer, following the precedent set in Pharmaceutical Society of Great Britain v Boots (1953).
Key Rule: Displaying goods with a price in retail settings is generally an invitation to negotiate, not a binding offer – the customer’s request to purchase is the offer, which the seller can accept or reject.
Significance: Reinforces the distinction between offers and invitations to treat in contract law, particularly in retail contexts, protecting sellers from unintended contractual obligations.
Perby v Attorney General
Facts: The plaintiff (Perbi) submitted a tender bid in response to the government’s public invitation for proposals, but the government later withdrew the tender process without awarding any contract.
Issue: Whether the government’s “invitation to tender” constituted a binding offer or merely an invitation to negotiate, and whether withdrawing it breached any legal obligation.
Holding: The court ruled that an invitation to tender is generally not an offer, but a request for bids (invitation to treat), meaning the government had no contractual obligation to accept any proposal.
Key Rule: Unless the tender documents explicitly state otherwise, a bidder’s submission is the offer, which the inviter may accept or reject—withdrawal of the tender process does not breach contract law.
Significance: Confirms that standard tender processes do not create binding obligations until formal acceptance, protecting public authorities’ discretion in procurement.
Payne v Cave
Facts: The defendant (Cave) made the highest bid at an auction for the plaintiff’s (Payne) goods but withdrew his bid before the auctioneer’s hammer fell.
Issue: Whether a bid at an auction constitutes a binding offer that cannot be revoked before acceptance (hammer fall).
Holding: The court ruled that bids are revocable offers until the auctioneer’s hammer falls, which constitutes acceptance.
Key Rule: In auctions, the bidder’s offer only becomes binding upon the auctioneer’s acceptance (traditionally signaled by the hammer strike).
Significance: Established the default rule for auctions—sellers can withdraw items before acceptance, and bidders can retract bids before the hammer falls (Sale of Goods Act later codified this principle).
British Car Auctions v Wright
Facts: A car was auctioned without reserve (i.e., no minimum price), but the auctioneer refused to sell to the highest bidder (Wright), claiming the bid was too low.
Issue: Whether an auctioneer conducting a true “without reserve” auction is contractually bound to accept the highest bona fide bid.
Holding: The court ruled that in a genuine “without reserve” auction, the auctioneer implicitly promises to sell to the highest bidder, creating a collateral contract with bidders.
Key Rule: An auction advertised as “without reserve” imposes a unilateral obligation on the auctioneer to accept the highest bid (distinguishing Payne v Cave, which applies only to reserve auctions).
Significance: Protects bidders’ legitimate expectations in no-reserve auctions and establishes potential liability for auctioneers who reject valid bids.
Carlill v. Carbolic Snow Ball Co
Facts: The company advertised its “Smoke Ball” product with a £100 reward for anyone who used it as directed and still contracted influenza; Mrs. Carlill did so but was refused payment.
Issue: Whether the advertisement constituted a binding unilateral offer (acceptance by performance) or mere “puff” lacking contractual intent.
Holding: The Court of Appeal ruled it was a valid unilateral offer, enforceable once Mrs. Carlill performed the requested act (using the product as instructed).
Key Rule: An offer can be made to the world, and acceptance occurs through full performance of stipulated conditions (objective test applied to ascertain intent).
Significance: Established unilateral contracts in common law and demonstrated that advertisements can be offers if they show clear, definite terms and intent to be bound.
Gibbon V Proctor
Facts: A police officer (Gibbon) provided information leading to a criminal’s conviction after seeing a public reward notice, but the defendant (Proctor) refused payment, arguing the officer was merely doing his duty.
Issue: Whether a public reward notice created a binding unilateral contract when performed by someone who didn’t know about the offer at the time of performance.
Holding: The court ruled no contract existed because Gibbon was unaware of the reward when he performed the act (providing information), meaning there was no acceptance of the offer.
Key Rule: Acceptance of a unilateral offer requires knowledge of the offer at the time of performance (contrast with Carlill where the plaintiff knew of the offer).
Significance: Reinforces that unilateral contracts require (a) knowledge of the offer and (b) performance in reliance on it—not incidental compliance.
