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Contract LawLecture 2 – Offer
Treitel define a contract as:
- An agreement
- Giving rise to legal obligations
- Which are enforced or recognized by law
The objective Theory of contract formation –
- Parties need to demonstrate that they have made an agreement to the court to prove there
is a contract and therefore that there was an offer and it had been accepted
- Courts prefer objective – Lord Clarke in RTS Flexible v Molkerei
Formation: Offer + Acceptance = Contract
The need for consensus ad idem (meeting of the minds) but:
Smith v Hughes (1871)
- Formation will be linked to the consent manifest by a ‘reasonable man’
- This will be found in what is written in the contract (if it is written), what is said by the
parties (if it is oral), and not what the parties were thinking or how they felt
- This is linked to the availability and credibility of evidence
- E.g. if you said id like to sell you my car and I said ‘sure’ but in my head said ‘nah I’m not
going to buy that’ – in law I have created a contract – contract looks at what the parties
intended from the perspective of the reasonable man – your subjective intention is not
relevant
- Justice Blackburn (important commercial judge) : if, whatever a man’s real intention may be,
he so conducts himself that a reasonable man would believe that 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 – rule of law stated in Freeman v Cooke 2
- The Court of Appeal ordered a re-trial on the ground that the trial judge’s direction had been
unclear
- The value of the case lies in the judges’ discussion of the direction given at trial, and the fine
distinction that in their view it failed to convey
- In commercial trials’ there is no jury but back in the 19 th century they were used for civil
matters
- This case is also important for the doctrine of mistake
- There are two distinctions found in this case 1) the P believed the D thought he was buying
old oats and 2) the P believed that the D thought that he was buying oats which the P had
promised were old
- The former – he must take the oats – this is his own mistake
- The latter – not liable, parties would be at a cross-purpose as to the terms of the contract
- The fact the court ruled that the fact the D believed he was buying old oats was not
sufficient – showing objective stance
- Took Hannen – promisor objectivity
- Took Blackburn – promisee objectivity
- Problems raised here by the terminology of promisor and promisee
, Contract Law
- Was the subject matter the buyers promise to pay or the sellers promise to sell?
- But it is however more likely that they examined the case from the perspective of the
reasonable person in the position of both parties
- Starting point for the court was to look at the position of the reasonable buyer – how would
they understand the sellers offer
- But if this was a snapping up case in which the seller believed that the buyer wanted to buy
old oats and didn’t tell him – objectivity wouldn’t be able to be used
the law starts from the position of the reasonable person in the position of the promisee but it
does not stop there – then goes on to examine the transaction from the perspective of the
reasonable person in the position of the other party to the contract
Objective (a binding agreement exists between two (or more) parties if a reasonable person would
judge that an offer has been made and accepted) over subjective (meeting of minds – concurrence
of intention between the parties)
Rose v Pim (1953)
- Here objective appearance prevailed over a subjective concern. “Moroccan horse beans
described as feveroles”. When defendants asked what ‘feveroles’ were, they were told that
they were simply horse beans. A chain or related supply contracts were then agreed for
‘horse beans’. The eventual buyer found that they were not ‘feveroles’, and sought damages
- The plaintiffs in the present action were applying for rectification of the contract on the basis
that there was a mistake in the reference to horse beans and they should have specified
feveroles – they failed because the court found that the contract was for the supply of horse
beans, taking an objective view
- This is complicated because it involves a supply chain – intention in contract formation
Limits of the Objective Theory –
- What if person accepting an offer knows offeror not intending to make offer..??
- Can you reply on the objective basis of principle?
- Can the person accepting the offer rely on the offeror?
Hartog v Colin Shields (1939)
- Defs offered to sell 30,000 Argentinian hare skins to the claimants at price per pound but
previous negotiations had been discussing price per piece (3 pieces to the pound/more
usual)
- Held for seller-buyer could not snap up skins at absurdly low price
- Sought to take advantage of the mistake in the offer letter
- Called ‘snapping up’ in Taplin v James
- Important to mention that negociations beforehand had been per piece and not per poung
- Judge Singleton: ‘find it hard to believe that anyone could receive an offer for a large
quantity of argentine hares at a price so low without having the gravest of doubts’
- He found that the P actually knew that a mistake had been made – but it would have
sufficed to demonstrate that the P could not have reasonably have supposed that the offer
expressed the D reals intention – combines objective and subjective elements – objective
because the reasonable person ought to have known that it was a mistake
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