Summary
Contract Law Module Summary
- Module
- Contract Law
- Institution
- Canterbury Christ Church University
This summary details all of the relevant information needed on the contract law module. All notes are grade 2:1 and above.
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Contract LawLecture 1 - Contract Formation
Agreement: Offer and Acceptance
Contracts are agreements that are legally enforceable. Verbal social constructs are not
legally enforceable.
How do we determine an agreement?
‘ In contracts you do not look into the actual intent of a man’s mind, you look at
what he said and did. A contract is formed when there is, to all outward
Lord Denning, Storer v Manchester City Council (1974)
This adopts an ‘objective approach’ Objectivity can however be seen from different
perspectives.
Offer and Acceptance
Gibson v Manchester City Council (1979) 1 WLR 294, Lord Diplock.
‘My Lords there may be certain types of contract, through I think they are exceptional,
which do not fit easily into the normal analysis of a contract as being constituted by offer
and acceptance, but a contract alleged to have been made by an exchange of
correspondence between the parties in which the successive communications other than
the first are in reply to one another is not one of these.’
An alternative proposal - Lord Denning M.R. rejected what I have described as the
conventional approach of looking to see whether upon the true construction of documents
relied upon there can be discerned an offer and acceptance. ‘One ought’ he said (1978) 1
WLR 520, 523H, to ‘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.’ Per Lord Diplock referring to Court of Appeal (Lord Denning) proposal in his
judgement.
The Offer
An offer can be accepted by the other party and once that occurs a contract is made and
legally binding obligations are created. ‘An offer is an expression of willingness to contract
on specified terms, made with an intention that it is to become binding as soon as it is
accepted by the person to whom it is addressed.’
Offer always carry intention.
Treitel, GH. (2003)
Intention is key to an offer
Intention is to be bound. Offer or invitation to treat?
Distinguishing an ‘offer’ from an ‘invitation to treat’ can be difficult in practice’. Intention to
be bound vs willingness to enter into negotiations. An example of an invitation to treat is an
item of clothing for sale in a shop window. This is an invitation to treat as it is not intended
to be bound in any way. This allows anyone to go into the shop to look at the product,
without them getting an offer or having to accept it.
Invitation to treat does not always carry intention.
,Certain situations are settled in law as ITT (except evidence of contrary intention is
provided). Examples of invitation to treat include:
Advertisements
Shop Displays
Auction Sales
Gibson v Manchester City Council (1979)
P was a council tenant and received a letter from D inviting an application to buy the house.
D’s letter stated ‘the corporation may be prepared to sell the house to you at the purchase
price of £2’725. ‘If you would like to make formal application to buy your council house,
please complete the enclosed application form.’ P completed the form. D was a newly
elected council and refused to accept Ps application. P sued for a breach of contract. Ds
offer was not contractual which P could accept but the D did not accept. Mr gibson may be
prepared to sell, but this letter is not to be regarded as a firm offer of a mortgage.
Storer v Manchester City Council (1974)
Earlier case involving councils tenants right to buy his property. D send P a document stating
‘if you sign the agreement and return it, I will send you the agreement signed on behalf of
the council in exchange.’ P signed this and returned it. Labor party took control of the
council and did not return a signed copy, refusing to sell the property. P sued for breach of
contract. Binding obligation on D to sell. ‘I understand you wish to purchase your council
house and enclose the agreement for sale. If you sign the agreement and return it to me, I
will send you the agreement signed on behalf of the Corporation in exchange.’
Statements of price
Harvey v Facey (1893) AC 552
Bigg v Boyd Gibbins Ltd (1971) 2 All ER 183
This doesn’t make it an offer if there is a price on something. Such as ‘I’m selling my iPad for
£50’. If you use the word offer, ‘my tablet is on offer for £50’, its still only an invitation to
treat if its to the public. The word offer does not always make it an offer. In public the word
offer isn’t used in the same legal sense.
Use of the word offer
Spencer v Harding (1870) LR 4 CP 561
Advertisements
Partridge v Crittenden (1968) 2 All ER 421
Grainger & Son v Gough (1896) AC 325 Lord Herschell (at p334)
‘the transmission of such a price list does not amount to an offer to supply an unlimited
quality of the wine described at the price names, so that as soon as an order is given there is
a binding contract to supply that quantity. If it were so, the merchant might find himself
involved in any number of contractual obligations to supply wine of a particular description
which he would be quite unable to carry out, his stock of wine of that description being
necessarily limited’.
An advert is by indication an ‘offer’ or ‘an invitation to treat’. This is because they are made
available to the public.
,Auctions
The general rule is that the Auctioneer Inviting bid is ITT
Sale of Goods Act 1979
‘sale by auction is complete when the auctioneer announces its completion by the fall of the
hammer, or in other customary manner; and until the announcement is made any bidder
may retract his bid.’
However it is different when the auction is advertised without reserve: offer made by
auctioneer, offer accepted by highest bidder. Therefore bound to see at that price -no
matter the amount.
Unilateral Contracts
This is when only one party has obligations.
Carlill v Carbolic Smoke Ball Co (1893) 1QB 256
In this case the defendants, the proprietors of a medical preparation called ‘the carbonic
smoke ball’, issued an advertisement in which they offered to pay £100 to any person who
contracted the influence after having used one of their smoke balls, in a specified manner
and for a specific period. The plaintiff on the faith of the advertisement bought one of the
balls, and used it in the manner and for the period specified, but nevertheless contracted
the influenza.
Bowman v Association of British Travel Agents (1996) CLC 451
Shop displays
Pharmaceutical Society of GB v Boots Cash Chemists (1953) 1 QB 401
Fisher and Bell (1961) 1 QB 394
Automated Machines
Thornton v Shoe Lane Parking (1971)
’ The customer pays his money and gets a ticket. He cannot refuse it. He may protest to the
machine, even swear at at; but it will remain unmoved. He is committed beyond recall. He
was committed at the very moment that he put his money in the machine. The contract was
concluded at that time. It can be translated into offer and acceptance in this way. The offer
is made when the proprietor of the machine holds it out as being ready to receive the
money. The acceptance takes place when the customer puts his money into the slot’.
Lord Denning MR at 169
Acceptance
What is acceptance?
Final and unequivocal assent to the terms of the offer without any changes or variations.
‘An acceptance is a final and unqualified expression of assent to the terms of an offer. The
objective test of agreement applies to an acceptance no less than the offer’.
Treital, G.H. (2003)
Jones v Daniel (1894) Ch 332
The general rule is the it must be communicated.
Entores Ltd v Miles Far East Corporation (1955) ‘ Let me first consider a case where two
people make a contract by word of mouth in the presence of one another. Suppose, for
instance, that I shout a offer to a mana cross a river or a courtyard but I do not hear his reply
, because it is doomed by an aircraft flying overhead. There is no contract at that moment. If
he wishes to make a contract, he must wait till the aircraft is gone and then shout back his
acceptance so that I can hear what he says. Not until I have his answer am I bound.’
Lord Denning
This is usually done by words. As a general principle acceptance must be communicated to
the offeror before it is effective.
Holwell Securities v Hughes (1974)
But can be done by conduct:
Carill v Carbolic Smoke Ball Co (1893)
Brodgen v Metropolitan Railway (1877)
It is however, doubtful that acceptance can be made by silence.
Felt house v Bindley (1862)
As a general rule, acceptance cannot be silence. Exceptions - Rust v Abbey Life Assurance
Co. Ltd (1979) Something changed within the insurance policy, and by not saying anything
was this acceptance?
An example of this is in your car insurance renewal contract. This may state that if you do
not change the insurance after the contract is up, then this may automatically renew.
Counter Offers
Hyde v Wrench (1840) 3 Beav 334
The defendant offered to sell a farm to the claimant for £1,000. The claimant then sought to
accept the original offer of £950, which the defendant refused. The claimant then sought to
accept the original offer or £1,000. D refused to sell to the claimant and the clamant bought
an action for specific performance. Held that there was no contract. Where the counter
offer is made this destroys the original offer, and it is offer the table, so that it is no longer
open to the offer to accept.
If the other party does not accept the offer then a counter offer may be considered.
Prescribed methods of acceptance
‘Where, however the offeror has prescribed a particular method of acceptance, but not in
terms insisting that only acceptance in that mode shall be binding, I am of the opinion that
acceptance communicated to the offeror by any other mode which is no less advantageous
to him will conclude the contract…’
Buckley J
Vital SA v Norelf Ltd (1996)
The Postal Rule
Yet there is an anomaly… ‘the postal rule of acceptance holds that, when it is reasonable to
use the post as a means of communicated acceptance of a contractual offer, the acceptance
is complete when a properly addressed and correctly stamped letter of acceptance is
deposited in the post box’.
Halson, R (2003)
Postal acceptance is binding on posting.
Adams v Linsell (1818)
Even where correctly addressed but never arrived.
Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216
Limitations include that it must be reasonable to use post as a means of acceptance.
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