1
Q
Contract
A
- In order to have a legally binding contract (i.e. a contract that can be enforced by the courts), it is necessary for all of the following to be present –
- An Agreement,
- An Intention to Create a Legal Relationship,
- Consideration,
- Capacity.
2
Q
Capacity
A
- Capacity is a legal mechanism that protects the vulnerable. For example -
- those who are vulnerable by virtue of their age and inexperience. Known as ‘minors’ they are under 18 years old.
- those who are vulnerable by virtue of some mental incapacity.
- Special rules apply. They are not part of this course.
3
Q
Agreement
A
- -Agreement is usually taught under two separate sub-headings – Offer and Acceptance.
- In most cases it is possible to see a clear offer and a clear acceptance of that offer. However, particularly if there have been negotiations between the parties, offer and acceptance may not be clearly, and separately, visible.
4
Q
Offer
A
- The first step in any analysis of a contract, is to decide whether or not an offer has been made.
- Offers have to be distinguished from what the law calls ‘invitations to treat’
- ‘Treat’ here is used in the old fashioned meaning of ‘to bargain’.
- An invitation to treat is, therefore, an invitation to bargain.
5
Q
Invitation v Offer
A
- The distinction is crucial, because an invitation to treat cannot be the foundation of an agreement.
- Only an offer can be accepted. An invitation to treat cannot be an offer and is incapable of being accepted.
6
Q
Invitation to Treat
A
- An Invitation to Treat invites people to come forward and make an offer.
- There are situations where the law commonly rules that there is an Invitation to Treat, not an offer.
- However, there are also exceptions to these rules.
7
Q
Displays of Goods
A
- Goods on display are not being ‘offered’, but are there to invite customers to make an offer.
- It does not matter if the display is in the shop window, or on a shelf inside the shop.
- Fisher v Bell (1961)
- Pharmaceutical Society v Boots (1953)
8
Q
Advertisements
A
- Usually an advert is an Invitation to Treat
- The reason is that if they amounted to offers then an acceptance would create a legally binding contract, even where the advertiser had run out of stock!
- Partridge v Crittenden (1968)
9
Q
Tenders
A
- A tender is a document that provides details of a company’s bid to perform a service or to buy or sell goods.
- The tender is the offer.
- An advertisement inviting people to tender is usually an Invitation to Treat.
- The university invited builders to tender to build the new building for the BaL faculty
10
Q
So what is an offer?
A
- ‘An expression of willingness to contract on certain terms, made with the intention (actual or apparent) that it shall become binding as soon as it is accepted by the person to whom it is addressed.’
- Note that this definition makes no provision for any negotiation between the parties regarding the contents of the terms.
- An offer can be made to one specified person, a group of people, or to the whole world. There will only be a binding contract with the people who accept the offer.
11
Q
offers and requests for information
A
- During the course of negotiations, one party may ask the other for information. Such a request is not an offer. Nor, as we will see later, can a request amount to the rejection of an offer, or a counter-offer.
- Harvey v Facey 1893
- Clifton v Palumbo 1944
12
Q
Communication
A
- This is vital in any contract
- It applies not just to offers, but also to acceptances and rejections.
- The basic rule is that offers, acceptances and rejections all have to be communicated in order to be effective.
13
Q
Except (Communication)
A
-Unilateral offers, where it is clear from the term of the offer that acceptance does not have to be communicated.
14
Q
Bringing an offer to an end.
A
- There are a number of ways in which an offer may cease to exist –
- By being accepted, or
- Rejected,
- By a counter-offer,
- By being revoked, or
- By lapse of time.
15
Q
By being accepted
A
- Once an offer has been accepted, it ceases to exist as an offer and becomes part of an agreement.
- Once accepted, an offer cannot be brought to an end by rejection, revocation or lapse of time. This is because the offer has ceased to exist as a stand-alone item. It has become part of the agreement, along with the acceptance.
16
Q
Lapse of Time
A
- The offeror may make it a condition of the offer that acceptance be communicated to him/her by a certain time/date.
- If that time/date passes without the offeror receiving any communication, the offer is said to have lapsed.
- Even if no time/date is -specified, an offer will lapse if it is reasonable for it to have done so.
- Reasonableness looks at the nature of the goods/services being offered.
- Ramsgate Victoria Hotel v Montefiore 1866
17
Q
Death
A
- If no contract has actually been entered into, the death of one of the parties will mean that the agreement does not proceed.
- In any event, if a contract provides for the personal services of a party who subsequently dies, the contract will be frustrated.
18
Q
Rejection
A
- If the person to whom the offer is made (the offeree) says ‘no thanks’, then the offer ceases to exist as far as that offeree is concerned.
- The offeree cannot then change her/his mind and accept the offer.
- The offeror can repeat the offer, in which case the offeree can then accept it.
- Hyde v Wrench 1840
19
Q
Counter-offers
A
- A counter-offer is made by the offeree to the offeror. It is an alternative proposal to that made by the offeror and operates to terminate the original offer.
- It is the same as a rejection of an offer.
- ‘A’ offers to sell for £10, ‘B’ makes a counter-offer to buy for £5.
- A request for information is not a counter-offer.
- Stevenson, Jacques v McLean 1880
20
Q
Revocation
A
- An offer may be revoked at any time before acceptance.
- To be effective, the revocation must be brought to the attention of the offeree.
- Byrne v Van Tienhoven 1880.
- If the notice of revocation is not read –
- The Brimnes 1974
21
Q
Revocation 2
A
- How is an offer made in an advert revoked?
- No UK case, but Shuey v US (1875), is a persuasive case from the USA.
- Revocation does not have to be communicated by the offeror, as long as the person communicating the revocation has the ostensible authority of the offeror to do so.
- Dickinson v Dodds 1876
22
Q
Revocation 3
A
- What if a unilateral offer requires the performance of a task that takes some time to complete? Can the offeror change his/her mind before the task is complete?
- Errington v Errington 1952
- Daulia v Four Millbank Nominees 1978.
23
Q
Acceptance
A
- ‘Acceptance is the unqualified assent to the terms of the offer.’
- It must be the ‘mirror image’ of the offer
- It must not introduce any new terms.
24
Q
Communication of acceptance
A
- As with offers and revocations, acceptance has to be communicated to the offeror to be effective.
- Brinkibon v Stahag Stahl 1983
- Entores Ltd v Miles Far East Corporation 1955
- Although communication of acceptance may be waived in a unilateral contract (Carlill), this is not the case with bilateral contracts. See –
- Felthouse v Brindley 1862
25
Where a particular method of communicating is specified
- Generally if the method is legal then acceptance has to be by the method specified.
- However, if the courts find that the method was specified for the benefit of the buyer, not the seller, or that the method was directory rather than mandatory, then failure to follow the prescribed method will not be fatal to the formation of a contract. See –
- Yates Building Co v Pulleyn 1975
26
The Postal Rule
-Acceptance to be effective, has to be actually communicated to the offeror.
-The Postal Rule is an exception to the general rule.
Under this rule, acceptance is deemed to be effective when the letter, correctly addressed and with the correct stamps upon the envelope, is placed in a post box.
-Henthorn v Fraser 1892
27
The exception to the postal rule
- Although the postal rule is an exception to the general rule, it is itself subject to an exception that effectively restores the general rule.
- The postal rule will not apply if the offeror indicates (explicitly or implicitly) that s/he wants actual notice of acceptance, rather than the deemed notice provided by the postal rule.
- Holwell Securities v Hughes 1974
- It must also be reasonable to use the post to communicate acceptance.
28
The effects of the postal rule
- -Any attempt to revoke the offer is ineffective after posting has taken place.
- Acceptance is deemed to be effective even if the letter is delayed in the post.
- Acceptance is deemed to be effective even if the letter never arrives.
- Household Fire Insurance v Grant 1879
29
Rationale for the postal rule
- There is no completely satisfactory method of ensuring that both parties know that they have entered into a legally binding contract, when acceptance is sent by post – or some other method that does not involve instantaneous communication.
- If acceptance is only effective on actual communication, the buyer will not know if his/her letter has been received.
- The postal rule means that the seller can never be sure that the goods have been sold, even if no letter is received
30
Battle of the Forms
- Businesses like to buy and sell on their own terms. They often have standard forms for such transactions.
- If the seller sends out a standard form, but the buyer responds using her/his own standard form, which one prevails?
- Butler Machine Tool v Ex-cell-o Corp 1979
- The Battle of the forms only applies to pre-printed forms, not letters or e-mails.
31
e-mails
- Contracts concluded by e-mail are treated the same as those negotiated by post.
- No consensus as to whether or not the postal rule applies to e-mail acceptances.
- e-mails can get lost in the system.
