Formation of Contracts (1) Flashcards
(23 cards)
What makes a valid contract?
Offer + Acceptance = Agreement → Agreement + Intention + Consideration = VALID CONTRACT
What is an offer?
An offer is a proposal made by the offeror to the offeree to form a contract on stated terms.
What are the two elements for something to be considered an offer?
- Intention
- Certain key terms
What is intention?
Offeror must show CLEAR intention to be bound by the rules and terms stated.
- No need for further negotiation
How do we find out the intention of the offeror?
The objective, also known as the reasonable person test, will be used to find out the intention.
What is certain key terms?
Key terms USUALLY consist of:
1. Subject matter
2. Key terms
To find out the key terms, the objective test is used.
There must be BOTH certain and specific key terms, but not all key terms are needed.
The appearance of only one does not make it an offer.
What are certain key terms in an offer?
Terms that are both certain and specific, usually related to subject matter and price.
What is an invitation to treat (ITT)?
An indication that a party is open to receiving offers and further negotiations from the other party.
What is the main difference between an offer and an ITT?
The intention of the party making the statement.
Offer: Offeror must show clear intention to be bound by the rules and terms stated in the offer.
ITT: Party shows clear intention of being open to offers and further negotiation.
In Harvey v Facey, Harvey asked if Facey will sell the property to them along with a telegraph of the lowest price.
Facey responded with the price only.
Harvey responded agreeing to buy the property. Facey did not reply.
Offer or ITT?
It is an ITT because the silence from Facey does not equal an agreement.
In Partridge v Crittenden, Partridge made an agreement to sell birds for 25s each.
What did the court rule regarding advertisements?
Advertisements are usually considered ITT.
In Partridge v Crittenden, what made it an ITT and not an offer?
The defendant has shown the certain key terms (birds and price), however they do not guarantee the intention to be bound by the rule that they’ll sell it to you.
In Carlill v Carbolic Smoke Ball Co., advertisement stating that the company is positive that their product would prevent people from getting influenza. If a customer did after using the product, they would receive a reward of £1,000 which was put into the bank.
Customer did capture influenza and wanted the reward. Company argued that the advertisement was an ITT, meaning they were not obligated to do so.
Offer or ITT?
It is an offer.
It showed clear intention to be bound by offering a reward, along with the key terms.
What constitutes acceptance in the context of an offer?
Acceptance occurs when the offeree agrees to the terms of the offer.
In Pharmaceutical Society v Boots, Boots offered non-prescription drugs displayed on shelves.
PS argued it was against an Act requiring supervision, and that a display of goods is an offer and putting drugs in the basket is an acceptance.
When does the offer begin?
When the drugs are brought to the cashier for payment.
Display of goods is usually considered an ITT because it does not guarantee that they will sell the product to you.
Such as seeing a MacBook on display but they’re out of stock.
In Thornton v Shoe Land Parking Ltd, Thornton parked his car at an automatic car park. Prices and notice stating “all cars parked at owner’s risk” displayed outside.
Thornton inserted money into an automatic machine, which distributed a ticket with T&C stating “subject to the conditions of issue as displayed on the premises.”
Inside the car park, there was a notice stating that SLP is excluded from any liability from personal injuries or damages.
Thornton had an accident, blamed it on SLP.
- Is it an offer?
- Is SLP excluded from liability?
- It is an offer, because the terms clearly indicate their intentions, so no need for further negotiation. Certain key terms included as well.
- SLP is not excluded from liability.
Court of Appeal stated that in order for the terms to be effective, they must be brought to the attention of the customer before or during the formation of the contract.
So, the offer in this case is the ticket machine, and the acceptance is Thornton putting the money in.
Anything that comes after the acceptance is irrelevant, such as the notice INSIDE the car park, as the contract has concluded outside.
^ This also includes the ticket, as it came after the formation of contract.
What distinguishes a vending machine from a display of goods?
Vending machines are considered an offer with guaranteed acceptance.
- Intention to be bound
- Certain key terms (item and price)
Display of goods is an ITT. The offer starts when you hand the item to a cashier for example.
- Certain key terms included
- No assurance the cashier will sell it to you = further negotiation
What is the role of an auctioneer in an auction?
The auctioneer calls for bids, and each bid is considered an offer.
What happens when there is no reservation price in an auction?
It becomes an offer because there is clear intention to sell to the highest bidder.
What does the ‘Make offer’ button on eBay signify?
It indicates that the seller is open to receiving offers from buyers.
Fill in the blank: An _______ is a proposal made to form a contract.
[offer]
True or False: Silence from the offeree constitutes acceptance.
False
Fill in the blank: An ITT shows a party’s _______ to negotiate.
[willingness]
