Contract Law Notes
Agreement and Contractual Intention
Agreement:
In order for parties to reach an agreement, one party must make an offer which is accepted
by the other.
‘Offer’: Professor Treitel: ‘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.’
‘Offeror’: Person who makes the offer.
‘Offeree’: Person to whom the offer is made.
‘Expression’: May take different forms, e.g. a letter, newspaper advertisement, fax and
conduct, as long as it communicates the basis on which the offeror is prepared to contract.
‘Intention’: Does not necessarily mean the offeror’s actual intention. Smith v Hughes:
Objective test. Courts look at what was said and done between the parties, from the point
of view of a ‘reasonable person’, and try to decide what a reasonable person would have
thought was going on.
Allied Marine Transport: If the offeror so acts that his conduct, objectively considered,
constitutes an offer, and the offeree, believing the conduct of the offeror represents his
actual intention, accepts the offer, then a contract will come into existence. Subjective
element of the offeree must believe the offeror intended to make an offer.
Offer or Invitation to Treat:
Offers are distinct from inviting negotiation E.g. ‘I am thinking of selling my car, £7,000
would be a realistic asking price, would you be interested in buying it?’ – An ‘invitation to
treat’ is where there is no such intention to be bound.
Goods on display are invitations to treat, as otherwise as soon as the customer put selected
the goods and put them in the trolley they might be regarded as accepting the offer. The
customer offers to buy the goods when presenting them at the payment point, and
acceptance takes place when the shop takes payment. (Pharmaceutical Society of Great
Britain v Boots Cash Chemists).
,Advertisements: Generally regarded as invitations to treat. Partridge v Crittenden:
Defendant not guilty with ‘offering for sale’ a live wild bird contrary to law, by placing an
advertisement in a periodical. Seen as an invitation to treat, as if it was an offer anyone
asking for the advertised goods would be accepting an offer which would be problematic if
they had run out of stock.
Advertisements of rewards traditionally treated as an offer, as there is intention to be
bound as soon as the information is given (Williams v Carwadine). Payment has to be made
once information supplied, no negotiation is involved – Encouraging people to come
forward.
In exceptional circumstances, advertisements may be an offer if there is a clear intention to
be bound. Carlill v Carbolic Smoke Co: Company manufactured a product designed to
prevent flu. Their advertisement in the newspaper stated a reward of £100 would be paid to
anyone who contracted flu or a cold after using the smoke ball 3 times per day for 2 weeks
according to supplied directions. Advertisement also stated company had deposited £1,000
with a named bank to show the sincerity of its offer. Claimant contracted flue whilst using it.
Company raised 3 defences: (a) Advertisement was mere puff sales (dismissed, as £1,000
had been deposited as evidence of sincerity – meaning a reasonable person would treat
£100 promise seriously); (b) No offer to any particular person (dismissed, as offer was to
anyone who fulfilled conditions stated); (c) Claimant gave no notice of acceptance
(dismissed, as held that company could not have been expected every user of product to
contact them). Case is the authority for the proposition that an advertisement can
constitute an offer to ‘the world’, and that it may, by the way in which it is stated, waive the
need for communication of acceptance prior to a claim under it.
Unilateral and Bilateral Contracts:
Bilateral Contract: Arises where one party makes a promise in return for a promise from the
other party. Both parties are immediately bound.
Unilateral Contract: A promise in return for an act – Commitment is one-sided. The
promisor is bound to perform if, and only if, the person(s) to whom the promise is made
performs the specified act. E.g. An offer of reward.
Auctions: s.57(2) Sale of Goods Act 1979: A sale by auction is complete on the fall of the
auctioneer’s hammer. Bids are offers which can be withdrawn at any time before
acceptance. Auctioneers calling for bids is an invitation to treat.
Sale in auction ‘without reserve’: Barry v Davies: Refusal of auctioneer to sell due to bid
price being exceptionally low. Claimant could sue as there was a contract between
auctioneer and bidder if good advertised ‘without reserve’ – Auctioneer is promising to sell
to the highest bidder (unilateral contract). Bidder had accepted auctioneer’s unilateral offer
by making the highest bid. Claimant could not sue owner of goods as there was no contract
between them.
, Tenders: Businesses outsourcing work will invite contractors to submit tenders for the job
(invitations to treat). The tenders will be offers which may or may not be accepted by the
businesses.
In certain situations, tenders can constitute offers. Blackpool & Fylde Aero Club: Council
invited tenders to operate pleasure flights from Blackpool airport (invitations sent to 7
interested parties). Invitation stated that tenders had to be received not later than 12 noon
17th March. The Aero Club posted their tender at 11am 17th March, however due to an
oversight the letterbox was not emptied at noon on 17th March and therefore tender was
recorded as late and not considered. Held, that invitation had laid down a ‘clear, orderly and
familiar procedure’ so that the tenderers obviously would assume that if they submitted a
conforming tender they would have the right to have it considered along with the rest. The
council should have specified the terms on which tenders would be considered, but they
had not done so, and accordingly were bound by the reasonable expectation of the
tenderers. Council had a contract with the accepted tender, but also a unilateral contract
with the Aero Club (to consider all tenders submitted on time). The Club had accepted this
offer by submitting such a tender, and therefore the Council was liable for damages for loss
of opportunity.
Termination of Offer:
An offer may be terminated in 3 ways:
- Revocation;
- Rejection by the offeree;
- Lapse of time.
Revocation:
General Rule: Offer can be withdrawn at any time before acceptance. Once an offer has
been accepted it is irrevocable (Routledge v Grant).
Routledge v Grant: Promises to Keep offers open for a certain period of time are not binding
if they are gratuitous promises (in the sense that the offeree has not given, or promised
anything in return for the promise to keep the offer open).
Offeror can revoke the offer within the specified time as long as it has not been accepted.
Exception to the rule in Mountford v Scott: Claimant paid £1 for the option to buy Vs house
for £10,000. Option was exercisable within 6 months. V purported to revoke the offer.
Claimant subsequently sought to exercise the option. Held, that the offer was irrevocable as
the Claimant had paid for the option. In paying, the Claimant had given consideration for the
Offeror’s promise to leave the offer open for 6 months. Offeree has given (or promised)
something to the Offeror in return for keeping the offer open.
