This document serves as a comprehensive study guide for individuals preparing for examinations in contract law. It is meticulously crafted to cover key concepts, cases, arguments, and legal principles essential for understanding and excelling in contract law.
In order for a contract to be formed, four elements must be present:
Offer: an expression of willingness to contract made with the intention (actual or apparent)
that it shall become binding on the person making it as soon as it is accepted by the person
to whom it is addressed.
Acceptance: turns a specific and comprehensive offer into an agreement, made with the
intention to be bound, into an agreement. Acceptance is a final and unqualified expression
of assent to the terms of an offer. It must (apart from a few notable exceptions) be
communicated to the offeror.
The agreement must be certain, the terms of the acceptance must exactly match the terms
of the offer, and the acceptance must be communicated to the offeror.
Consideration: most common definition is found in the case of Currie v. Misa [1875] LR 1
App Cas 554- “some right, interest, profit or benefit accruing to one party or some
forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
(the price paid for the promise)
Intention to Create Legal Relations: the parties must have intent to enter into a legally
binding and enforceable agreement, under which all rights and liabilities can be legally
enforced.
Objectivity in Contract Law
Contract law principles have evolved to govern how the court deciphers the intentions of the
parties. This is typically through the analysis of some outward indication(s) of agreement, for
example the words or actions used, rather than what the party argues was in their minds at
the time (consensus ad idem).
Crest Nicholson Ltd v. Akaria Investments Ltd [2010] EWCA Civ 1331, 25 per Sir John
Chadwick
“[W]hen seeking to ascertain the parties' intention under the terms of a contract which both
accept has been made…the question is ‘what did the parties intend by the words used in the
agreement which they made.”
Michael Furmston, Cheshire, Fifoot and Furmston's Law of Contract (15th edn OUP 2007) 38
“[A]greement…is not a mental state but an act, and, as an act, is a matter of inference from
conduct. The parties are to be judged not by what is in their minds, but by what they have
said, written or done....In the common law, therefore, to speak of “the outcome of
,consenting minds” or, even more mystically, of consensus ad idem is to mislead….The
function of an English judge is not to seek and satisfy some elusive mental element but to
ensure, as far as practical experience permits, that the reasonable expectations of honest
men are not disappointed.”
The objective test is here the courts adopt an objective position to look at all external factors
from the position of a reasonable person. The court does not want to look into what a
person thinks (subjective) but what they said or did.
Storer v Manchester City Council [1974] 1 WLR 1403, 1408 per Lord Denning
“In contracts you do not look into the actual intent in a man’s mind. You look at what he said
and did. A contract is formed when there is, to all outward appearances, a contract. A man
cannot get out of a contract by saying: ‘I did not intend to contract’, if by his words he has
done so.”
The benefit of an objective test is that it provides certainty, and with certainty comes
business efficacy.
It could also be argued that it is more “just to only hold individuals bound by a contract
where it has been objectively assessed, and this links back to the idea of “freedom to
contract”.
Examples of the objective test in cases:
Fle (1871) LR 6 QB 597
Mr Smith presented Mr Hughes with a sample of green oats (new oats) and based off
this sample Mr Hughes ordered forty quarters of oats at 34 shillings per quarter.
When the first shipment arrived, Hughes said they were not the oats he thought they
were and need old oats so that his horses could eat them, but he received green oats
just as he had sampled.
Hughes refused to pay as they were worthless to him and so Smith sued for breach of
contract.
The court found that a contract had been made for the oats in question.
Blackburn J: “If, whatever a man’s real intention may be, he so conducts himself that a
reasonable man would believe he was assenting to the terms proposed by the other party,
and that other party upon that belief enters into the contract with him, the man thus
conducting himself would be equally bound as if he had intended to agree to the other
party’s terms.”
, An alternative approach?
It has been argued by judges, however, that the objective approach is not the most desirable
approach.
Lord Denning for example has made such an assertion in Butler Machine Tool Co Ltd v Ex-
Cell-o Corporation (England) Ltd [1979] 1 WLR 401:
“In many cases our traditional analysis of offer, counter offer, rejection, acceptance and so
forth is out of date ... the better way to look at all the documents passing between the
parties - and glean from them or from the conduct of the parties whether they have reached
an agreement on all material points...”
The same argument was made by Lord Denning again in Gibson v Manchester City
Council [1979] 1 All ER 972:
“You should look at the correspondence as a whole and at the conduct of the parties and see
therefrom whether the parties have come to an agreement on everything that was
material.”
“no need to look for a strict offer and acceptance”
In this case the House of Lords reversed the Court of Appeal’s decision that, looking at the
evidence as a whole, there was a concluded agreement; instead, it was held that there had
been no matching offer and acceptance.
It could be said that this is a more subjective approach.
Chapter 2.1 in Taylor and Taylor, Contract Law Directions, 9th edn, OUP 2023 pp 17-21:
The court stands in the seller’s shoes and asks what the reasonable person would have
concluded from the events; this is established in The Hannah Blumenthal (1983).
A term in a contract for the sale of a ship provided that all disputes should be settled
by an arbitrator.
The seller claimed that the buyer had agreed to abandon this contract and the House
of Lords considered what was necessary to create such an agreement to abandon the
original contract, including the method of dispute resolution.
None of the Lords condoned a purely subjective approach and Lord Brightman
thought it was necessary for “the Buyers to so conduct themselves as to entitle the
Sellers to assume…that the contract was to be abandoned”.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller aw1128. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.23. You're not tied to anything after your purchase.
