Introductory notes to contract law 1. Covers formation and agreements. Includes main cases such as Carbolic Smoke Ball Co. Explains the difference of agreements. What constitutes an offer etc. Covers acceptance in various mediums.
- Contracts are legally enforceable agreements that represent a vehicle for planned exchanges
(Merkin and Saintier, 14th edition)
- Legally considerations is the thing that you promise in exchange for a promise, so if nothing is given
in exchange for your promise it will be construed as a gratuitous promise and therefore
unenforceable
- In order for a contract to be valid and enforceable something has to be given in exchange
for the promise (consideration)
- Equity is a body of law that has been developed by the courts, over time, alongside the common
law to mitigate against the harsh effects of certain common law principles. Over time the courts
gave recognised that certain legal rules can be unfair or leads to unfair results.
- This led to a series of equitable notions to mitigate against those harsh effects to safeguard and
protect those harsh effects to safeguard and protect parties from the otherwise harsh effects of the
common law.
- Legal principle is that the promise won’t be enforceable unless you provide consideration
- In order for a court to uphold an agreement they have to identify with certainty what the core
terms of the contract are. If we have consideration the contract may be invalid because certain
terms in the contract are uncertain/unclear or incomplete in some way.
Distinction between agreements:
Social and domestic type context and those agreements are made in a commercial type context.
- Commercial setting the courts are more likely to determine that there is an intention to create legal
relations
- Social or domestic type context, the courts find that there is no intention for legal consequences to
flow from agreements (starting point in court is that there is no intention create legal relations)
Unilateral and bilateral contracts:
Bilateral:
- Two-sided contract, we have one promise being given in exchange for another promise.
Unilateral:
- One party promises something in a unilateral contract, but the other party doesn’t give a promise.
Instead they perform some requested act.
Formation:
Agreement:
- Offer and acceptance ‘broadly speaking an agreement is made when one party accepts an offer
made by another party.’- Professor Treitel
- Consensus ad idem
- Parties minds must have met, they should agree on certain things
- ‘if the parties reach accord by means of offer and acceptance then they should be contractually
bound’ Martin Smith Vs Williams (1998)
- “English law, having committed itself to a rather technical and schematic doctrine of contract in
application, takes a practical approach, often at the cost of forcing the facts to fit uneasily into the
marked slots offer and acceptance” New Zealand shipping Co Vs Satterthwaite (1975)
Example of objective test:
Smith V Hughes (1871):
“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 had
, intended to the other party’s terms” Per Blackburn J. This case looks objectively, subjectively it would seem
that there was no agreement.
Exception of objective approach:
This test will not prevail where the offeree, which is the person to whom the offer is made, knew the truth
of what the offer rule was. That is the person who was making the offer as intended. If the offer was
mistaken in some way and the offeree is aware of that mistake, this objective test will not prevail.
Limited circumstances the objective test won’t prevail.
Hartog V Shields (1993)
Court held that objectively there had been an offer and a corresponding acceptance, in spite of that no
contract had been formed. This because Hartog knew that the offer from Shields didn’t represent the truth
Offer:
Professor Treitel:
“An offer is an expression of willingness to contract on specified terms made with the intention that it shall
become binding as soon as it is accepted by the person to whom it is addressed.”
Carlill Vs Carbolic Smoke Ball Company
Unilateral contract
Main issue: to who the offer can be made
- No intention to create legal relations
- Bound to contract to whole world
- ‘it is not a contract made with the whole world. There is a fallacy in the argument. It is an
offer made to the whole world and why should not an offer made to the whole world which
is to ripen the contract with anybody who comes forward and performs the condition” Per
Bowen LJ
- Offering to make a contract essentially to anyone who came forward that accepted the offer by
performing a requested act
When is an offer not an offer?
- When it is an invitation to treat, invitation to negotiate, to make an offer
“…statements which indicate the makers willingness to receive offers, they are not offers
themselves…”
- If there is room for further negotiation (if all the terms have been agreed) then it is more likely the
statement that will be construed as an invitation to treat rather than as an offer
Gibson V Manchester City Council 1979
“the council may be prepared to sell the house to you for the purchase price of £2275”
Before the contract was complete the council changed politically thus ending the era of selling council
houses to tenants. (Is the council contractually bound to sell the house to Gibson?)
- An action to make the council go through the sale of the house to him
- House of Lords have to consider this correspondence between the two parties, if at any point an
offer and acceptance had occurred such that an agreement had taken place and the House of Lords
held that when objectively looking at what was and done by the parties
Initial words of the council that they may be prepared to sell the house to Mr Gibson were not capable of
immediate acceptance without further discussion and negotiation
- An invitation to treat
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