Contract Law - this is a section of private, civil law. Private law affects individuals, small groups,
businesses and families.
Module 1
A contract is an agreement giving rise to obligations which are enforced by the law (GT Treitel, The
Law of Contract, 11th edition, Sweet & Maxwell 2003)
Contracts are agreements which are implied (even unspoken), explicit (perhaps written), between a
business and consume or between two businesses. However, a contract does not
arise between family or friends as courts do not believe that this is enforceable by law. Contracts
range from very informal (buying a chocolate bar) to formal (purchasing a car). They can be
immediate (buying food) or ongoing (an agreement between a university and its catering service.)
The claimant must show that a valid contract exists as not all agreements are enforceable by law. An
obligation may not always be enforceable as a contract. Contractual obligation aarises where a party
has agreed to provide something in return for something of value (consideration) given by the other
party and this must be voluntary (there must not be any duress or undue violence.)
There are three basic elements to a contract: parties must have reached an agreement (offer and
acceptance), parties must intend to be bund legally and the parties must’ve provided valuable
consideration (this is payment under a contract.)
Process
1. Sometimes but not always there may be an invitation to treat, this is a preliminary stage
which does not always occur. This is where the price being asked for is open to offer/negotiable.
It is an indication that someone is prepared to receive offers with the view of forming a binding
contract (Kiley, 2018). An example of an ITT is an advertisement, as only when the customer
decides they will pay the price that is being advertised, is an offer made.
2. An offer (normally the first step if an ITT doesn’t occur.) This is an expression of willingness
to contract on certain terms, made with the intention that it shall become binding as soon as it is
accepted by the person to whom it is addressed (Professor Treitel.)
3. Then there is acceptance which is communicated by the offeree to the offeror and is where
the offeree accepts the offer made by the offeror (Anon, 2018.)
In addition, the parties must have capacity to contract and in some cases, there must
be compliances with certain formalities.
A contract consists of various terms, both expressed and implied. A term may be inserted into
the contract to exclude or restrict one person’s liability.
A contract may be invalidated by a mistake, or by illegality and where the contract has been
induced by misrepresentation, duress or undue influence, the innocent party may have the right
to set it aside.
Classification of contracts
Deed A deed derives its validity from the form in which it is made. It must be in writing and it must be
signed, witnessed and delivered. Promises made by deed do not need to be supported by
consideration to be enforceable.
Simple All other contracts are classed as simple contracts, whether they are made by writing, orally or
Contract by conduct.
Unilateral One party promises to do something in return for an act of the other party as opposed to a
Contract promise e.g. A promises a rewards to whoever finds his lost wallet. Only one party, A, is bound
to do anything. No one is bound to search for the lost wallet, however if B finds the lost wallet,
B is entitled to the reward.
Bilateral A promise by one party is exchanged for a promise by the other. The exchange of promises is
Contract enough to render them both enforceable
Origins of Contract Law
,19th Century (known as the golden age of contract)
There was an increase in the amount of contracts due to the industrial revolution therefore
the classical theory aimed to make it easy for agreements to be made with few barriers.
Classical contract principles:
Freedom of contract, there was a laissez faire approach which meant the parties were left to
agree for themselves
Liberal economic theory
Individual voluntary choice
Classical contract relies on the expression of will as it is up to the parties to strike the best deal.
Here, the substance of the bargain is not relevant. The classical contact
promotes entrepreneurship and those capable of maximising their position in a contract are the
ones who will prosper (benefit to the economy.)
There are several criticisms to the laissez faire approach. For example, it doesn’t consider the
matters outside the contract e.g. the rights/duties of the third parties that may be affected by the
contract (does not consult or aid everybody involved.) Also, it ignores any inequality of bargaining
power between parties (it seems to favour large companies rather than the consumer.) Also, it fails
to address problems of monopolies. Under the classic approach, the contract is enforced
according t is terms no matter how unfair.
Another theory which prevailed during the 19th century was the will theory which relies on the court
respecting the will of the parties and only interfering where a dispute arises in a contract.
Area of debate
1. Does the concept of freedom really exist?
A level of freedom must exist to ensure entrepreneurship however it must be balanced between
the parties. The concept of freedom does still exist as parties are free to pursue interests with
little interference e.g. the law will not protect you from a bad bargain (sell a £60,000 car for
£2,000 the law will not protect) however it has slightly eroded due to the paternalistic approach
by Parliament.
2. Is the classical or will theory still a valid foundation upon which the rules of contract are
based?
There are clear examples where the judiciary and state shift away from the classical approach.
Intervention mainly occurs in areas where inequality in bargaining power exists between
parties.
Post IR/20th century
Legislative intentions and change in the judicial attitude led to a shift from the previous laissez faire
approach (Hough, T. and Kirk, E. (n.d.). Contract law. Routledge, p.5.)
Most significant change could be seen in non-commercial contracts (freedom of contract seemed
to favour large companies rather than the consumer.)
Consumer contracts became ‘contracts of adhesion’ where there was no real negotiation. The Court
of Appeal introduced this to save time and prevent duplication in areas where a lot of contracts
were formed and would not be appropriate to negotiate each agreement separately.
Reasons for decline of classical model in 20th century
1. Contracts of adhesion were introduced by the Court of Appeal
2. State intervention - the judiciary and state intervened mainly where inequality of bargaining
powers existed between parties. They were also particularly prominent in areas of duress,
contract, misrepresentation and undue influence
3. Regulation of commercial agreement – Commercial agreements became much more
regulated and controlled e.g. contact of employment or a leasehold contract governed by
various statutory protection. ‘Cavaet emptor’ still exists but is much more watered down (means
let the buyer beware.)
4. Welfare policies
, Acts passed with the aim of balancing power between large companies and consumers
Sales of Goods Act 1979
Unfair Contract Terms act 1977
Misrepresentation Act 1967
Consumer Rights Act 2015
Impact of European law
There will be no short-term change post brexit as we are required to follow EU law until we leave.
Medium term however, the European Communities Act 1972 will be repealed and Parliament will
enact legislation incorporating current EU law into domestic law. The long-term affect depends on
our relationship with the EU. The EU is a substantial trading party therefore it is
in everyone’s interests to pursue a relationship of mutual benefit.
Consumer law within the UK is mainly governed by the Consumer Rights Act 2015 therefore there
we shouldn’t be massively affected by our departure from the EU. Furthermore, a lot of EU law will
still survive.
A ‘soft brexit’ means we are likely to have an agreement where the UK have some or full access to
the European single market and European economic area membership. A ‘hard brexit’ could result in
possibly no agreement resulting in the UK having t conduct trade with EU under the world
trade organisation rules.
Unfairness in contract
Procedural unfairness is regarding how a contract was made. Both parties must freely agree to be
bound by those terms. The process must be fairly conducted (no duress or undue influence.)
Substantive unfairness is regarding the content of terms
Offer and Acceptance
An offer may be defined as a statement of willingness to contract on specific terms made with
the intention that, if accepted, there will arise a binding contract. An offer may be express or implied
from conduct. It may be addressed to one particular person, a group of persons or the world at
large, as in an offer of a reward.
Carlill v Carbolic Smoke Ball Co., CA, (1893) - D’s advertised they’d pay £100 o anyone who
contracted influenza after using their product. C contracted influenza after using it as directed and
claimed the reward. However, the D’s argued, inter alia (among other things) that it was impossible
to contract with the whole world. This argument was rejected by the court which found that the
advertisement constituted an offer to the world at large, accepted by the claimant who was entitled
to the £100.
Advertisements of goods for sale are normally construed as invitations to treat. In Partridge v
Crittenden (1968) the appellant, who placed an advertisement in a periodical which said ‘bramble
finches, 25 shillings each’ was charged with the statutory offence of ‘offering for sale a wild bird. He
was convicted, and he appealed. His conviction would be quashed because the advertisement was
not an offer but an invitation to treat.
In an auction, the auctioneer’s request for bids is an invitation to treat and each bid is an
offer: Payne v Cave (1789). This is given statutory force by s.57(2) of the Sales of Goods Act
1979 which states ‘a sale by auction is complete when the auctioneer announces its completion by
the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder
may retract his bid’
Acceptance may be defined as an unconditional assent (offeree must accept the exact terms
proposed by the offerror without adding any new terms which the offeror hasn’t had the
opportunity to consider, the introduction of new terms is referred to as a counter-offer),
communicated by the offerree to the offeror (acceptance will not be effective unless communicated,
an uncommunicated mental assent will not suffice), to all terms of the offer, made with
