Lecture notes
Contract formation
Explores contract formation, offer and acceptance, uncertainty, the PAR and much more. Cases and their judgements are also included
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Page |1CONTRACT FORMATION
WHAT A CONTRACT NEEDS:
Agreement
Contractual intention Always
Consideration
Minority of cases Formality
BILATERAL- A type of contract which involves an exchange of promises, reciprocal
obligations.
UNILATERAL- The ‘if’ contract, the obligation is only on one of the parties e.g. if you paint
that wall, I’ll pay you £100.
AGREEMENT
Agreements are vital as that is the point when a contract comes into play, before this
either parties could back out
For an agreement to happen, there NEEDS to be an offer and acceptance e.g.
Gibson v Manchester City Council [1978] 1 WLR 520 (CA); [1979] 1 WLR 294 (HL)
- Council sent out brochures to council house tenants who had previously
expressed an interest in buying their houses.
- Mr. Gibson completed the form with a request of what the price would be.
- Treasurer of council wrote to inform him that the ‘council may be prepared to
sell the house’ and requested him to make a formal application.
- Mr. Gibson completed this but left price blank as he has some queries about
price.
- The council accepted everything and took his house off the list of houses for
which they were responsible for maintenance.
- The Labour party the gained control of all the council houses after the local
election and suddenly refused to sell the house to Mr. Gibson claiming no
contract had been concluded for the sale of the house.
- CoA held that a contract had been concluded with Lord Denning saying an
agreement had been held on all material points, including price.
- It is impossible based on conduct alone to suggest a contract had been made- HL
argument for why the council took him off the list of houses they need to
maintain
- House of Lords however concluded there was no contract and Gibson lost the
case.
CONCEPT OF AN OFFER
, Page |2
‘An offer is an expression of willingness to contract on certain terms 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. An offer may be made to an
individual, to a group of persons, or to the world at large. It may be made expressly or by
conduct.’ (Treitel)
Principle of Objectivity Essentially outlines that we ALWAYS look at what the offeror said
or wrote NOT what they may have thought or intended e.g.
If the offeror intended term X but actually said term Y, the resulting contract will be on the
basis of term Y.
Invitation to Treat
A mere preliminary communication made in order either to commence a set of
negotiations or to elicit an offer which may then be considered.
E.g. an auction sale which comes with or without reserve. With reserve= set lowest
price. See Harris v Nickerson (1873) LR 8 QB 286
Partridge v Crittenden (1968) 1 WLR 1204
- Appellant advertised Bramblefinch cocks and hens for sale at a stated price.
- He was charged with the offence of ‘offering to sell wild live birds’ contrary to the
Protection of Birds Act 1954.
- It was held that the advertisement was an invitation to treat and not an offer so the
appellant was acquitted.
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
- Defendants (manufacturer of Carbolic Smoke Ball) issued an ad in which they offered
to pay £100 to anyone who caught influenza after using the smoke ball in the correct
manner.
- The claimant caught influenza after using the smoke ball and sued for £100.
- It was held that the ad was not an invitation to treat and instead an offer to the
whole world thus meaning the claimant was entitled to recover £100.
Invitation to Tender
An invitation to submit tenders or bids for some reward (eg, the undertaking of certain
construction work, the purchase of goods or shares) in principle constitutes an invitation to
treat, the tender is the offer, which is then available for acceptance. In the absence of an
undertaking to that effect, there is no obligation to accept the winning bid (highest price if
selling; lowest price if buying).
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