Advanced Contract Law Revision Notes
Recapping the Basics:
What are the two dominant theoretical perspectives of contract law?
Closed System of Rules: Applied in a formal, mechanistic way, emphasises certainty and
equality before the law. Can be problematic in a changing society causing mis match
between the law and the economy / society.
Dynamic Law and Values: Natural, organic perspective. Common law allows change,
reshaping as society changes. Can be problematic in regards to certainty which is essential
within the commercial world to identify risks you’re entering into and maximising your
security.
What’s the difference between bilateral and lateral contracts?
Bilateral: Biggest volume of contracts. Two parted, something going on each way.
Exchange of contractual obligations, buyer and supplier capable of failing the contract,
both can sue each other if they fail to meet their obligations to supply or pay.
Unilateral: only to be obliged if the other performs. EG. A dog owner promises a reward if
a member of the public finds his lost dog. The finder may sue the dog owner for failing to
meet his obligation to pay if the search has been prompted by the unilateral offer.
However, there is no obligation on the public to perform. The dog owner cannot sue the
member of the public if they fail to find the dog.
What may contract terms be?
Express terms - those agreed between the parties themselves
Implied terms - terms which are put into the contract by the courts or by statute
What are the basic legal requirements for a contract?
Offer & Acceptance, Consideration, Intention to Create Legal Regulations, Certainty,
Capacity, Formalities (in certain circumstances, you might want a contract written down.)
Formation
Offer and Acceptance
What is an offer?
Expression of willingness to contract on specific terms with the intention that the terms
will become binding as soon as they are accepted.
All the details and terms are all present at the time of the offer. More complex contracts
will need more refining and negotiation.
What is lesser than an offer?
If no intention to create legal relations it is an invitation to treat. Examples:
advertisements, websites, auctions & physical display of goods.
What must the individual intend when making an offer?
, In order to amount to an offer, it must be shown that the offeror had the intention to be
bound:
Harvey v Facey 1893 – a series of questions were asked, however the Privy Council held
there was no contract as Facey had not directly answered Harvey’s first question as to
whether they would sell, and the lowest price stated was merely responding to a request
for information not an offer. There was thus no evidence of an intention that the telegram
sent by Facey was to be an offer.
How do you make an offer?
Offer has to be made and communicated. An offer can be made to more than one person
or the public at large
(Carlill v Carbolic Smoke Ball Co) 1893 - A Newspaper advert placed by the defendant state
a £100 reward will be paid by the Carbolic Smoke Ball Company to any person who
contracts the influenza after having used the ball three times daily for two weeks
according to the printed directions supplied with each ball.
Mrs Carlill purchased some smoke balls and used them according to the directions and
caught flu. She sought to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a
mere invitation to treat rather than an offer:
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as
to catching the flu.
5. There was no consideration provided since the 'offer' did not specify that the user of the
balls must have purchased them.
Held: The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert
constituted an offer of a unilateral contract which she had accepted by performing the
conditions stated in the offer.
The court rejected arguments put forward by the defendants:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it
was not a mere sales puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an
intention to accept, since acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved
by applying a reasonable time limit or confining it to only those who caught flu whilst still
using the balls.
5. The defendants would have value in people using the balls even if they had not been
purchased by them directly.
When does an offer end?
Rejected, superseded by counter-offer, lapse of time or is withdrawn or revoked.
Rejection must be communicated.
Lapse of time: offeror can specify duration of the offer. Element of reasonable time also
present. - Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109 - The defendant
, offered to purchase shares in the claimant company at a certain price. Six months later the
claimant accepted this offer by which time the value of the shares had fallen.
The defendant had not withdrawn the offer but refused to go through with the sale. The
claimant brought an action for specific performance of the contract.
Held: The offer was no longer open as due to the nature of the subject matter of the
contract the offer lapsed after a reasonable period of time.
Therefore, there was no contract and the claimant's action for specific performance was
unsuccessful.
Can the offer be withdrawn?
Offer can be withdrawn before it is accepted (Routledge v Grant 1828) – defendant
contacted the claimant in writing, offering to purchase the lease of the claimant’s home.
The offer would remain open for 6 weeks and the defendant changed his mind during this
period before the offer was accepted.
Held: court held the letter did not bind the defendant to keep the offer open for a full six
weeks, as such, it had been validly withdrawn by the defendant and the claimants
purported acceptance was ineffective. (fundamental principle of contract law that one
party cannot be bound whilst the other is not.
Offer cannot be withdrawn after acceptance. - The withdrawal must be communicated –
Dickenson v Dodds (1868) – D wrote to C with an offer to sell his house for £800. This offer
was to remain open until Friday. The defendant accpeted a different offer from a 3rd
party. The issue was whether the defendant’s promise to keep the offer open until Friday
morning was a binding contract between the parties and if he was allowed to revoke this
offer and sell to a third party.
Held: the statement made by Mr Dodd’s was nothing more than a promise, there was no
binding contract formed. He had communicated an offer and this offer can be revoked any
time before acceptance.
What is Acceptance?
Final and unqualified expression of intention and assent made in response to the terms of
an offer, which exactly matches the offer & communicated to the offeror.
Later terms cannot be imposed after acceptance, offeror cannot purport to thereafter
withdraw their offer.
What must acceptance be?
Acceptance must be on terms of the offer & there must be certainty.
(Scammel v Ouston) 1941 – parties entered an agreement whereby Scammell were to
supply a van and there was disagreement over terms and Scammell refused to supply the
van.
Held: there was no certainty as to the terms of the agreement. Whilst there was
agreement on the price there was nothing in relation to the HP terms stating whether it
would be weekly or monthly instalments or how much the instalments would be.
How does the postal rule operate?
Where acceptance is communicated by post, the contract is formed as soon as the letter of
acceptance is sent without the need for it to reach the offeror (even if the post never
arrives) –
, Adams v Lindsell (1818) – due to a delay in post, the defendant assumed the claimant was
not interested in the offer. Held in this case: there was a valid contract which came into
existence the moment the letter of acceptance was placed in the post box.
Does the postal rule apply?
The postal rule applies only if it is reasonable to use post.
Henthorn v Fraser [1892] – in this case an offer was made not by post, and the defendant
decided to later try to withdraw the offer by post. The issue in this case concerned the
revocation of the offer and whether the subsequent acceptance of the offer was valid.
Held: offer was valid. The postal rule in Adam v Lindsell would apply, which stated that it
would be reasonable for acceptance of an offer to take place by post.
However, this rule would not apply to the revocation of an offer. Post was a way of
communicating offer acceptance, but the acceptance itself is completed as soon as it is
posted. This was reasonable to expect since both parties lived in different towns.
Consideration:
In contract law, what is consideration?
In contract law consideration is concerned with the bargain of the contract. A contract is
based on an exchange of promises.
Each party to a contract must be both a promisor and a promisee. They must each receive
a benefit and each suffer a detriment. This benefit or detriment is referred to as
consideration.
What are the general rules of consideration?
There are various rules governing the law of consideration:
1. The consideration must not be past.
2. The consideration must be sufficient but need not be adequate.
3. The consideration must move from the promise.
4. An existing public duty will not amount to valid consideration.
5. An existing contractual duty will not amount to valid consideration.
6. Part payment of a debt is not valid consideration for a promise to forego the balance.
What is Promissory Estoppel?
Promissory Estoppel is an equitable doctrine which in some instances can stop a person
going back on a promise which is not supported by consideration.
What are the requirements of Promissory Estoppel?
A pre-existing contract or legal obligation which is then modified
There must be a clear and unambiguous promise
Change of position
It must be inequitable to allow the promisor to go back on their promise.
Implied Terms and Frustration
Recapping the Basics:
What are the two dominant theoretical perspectives of contract law?
Closed System of Rules: Applied in a formal, mechanistic way, emphasises certainty and
equality before the law. Can be problematic in a changing society causing mis match
between the law and the economy / society.
Dynamic Law and Values: Natural, organic perspective. Common law allows change,
reshaping as society changes. Can be problematic in regards to certainty which is essential
within the commercial world to identify risks you’re entering into and maximising your
security.
What’s the difference between bilateral and lateral contracts?
Bilateral: Biggest volume of contracts. Two parted, something going on each way.
Exchange of contractual obligations, buyer and supplier capable of failing the contract,
both can sue each other if they fail to meet their obligations to supply or pay.
Unilateral: only to be obliged if the other performs. EG. A dog owner promises a reward if
a member of the public finds his lost dog. The finder may sue the dog owner for failing to
meet his obligation to pay if the search has been prompted by the unilateral offer.
However, there is no obligation on the public to perform. The dog owner cannot sue the
member of the public if they fail to find the dog.
What may contract terms be?
Express terms - those agreed between the parties themselves
Implied terms - terms which are put into the contract by the courts or by statute
What are the basic legal requirements for a contract?
Offer & Acceptance, Consideration, Intention to Create Legal Regulations, Certainty,
Capacity, Formalities (in certain circumstances, you might want a contract written down.)
Formation
Offer and Acceptance
What is an offer?
Expression of willingness to contract on specific terms with the intention that the terms
will become binding as soon as they are accepted.
All the details and terms are all present at the time of the offer. More complex contracts
will need more refining and negotiation.
What is lesser than an offer?
If no intention to create legal relations it is an invitation to treat. Examples:
advertisements, websites, auctions & physical display of goods.
What must the individual intend when making an offer?
, In order to amount to an offer, it must be shown that the offeror had the intention to be
bound:
Harvey v Facey 1893 – a series of questions were asked, however the Privy Council held
there was no contract as Facey had not directly answered Harvey’s first question as to
whether they would sell, and the lowest price stated was merely responding to a request
for information not an offer. There was thus no evidence of an intention that the telegram
sent by Facey was to be an offer.
How do you make an offer?
Offer has to be made and communicated. An offer can be made to more than one person
or the public at large
(Carlill v Carbolic Smoke Ball Co) 1893 - A Newspaper advert placed by the defendant state
a £100 reward will be paid by the Carbolic Smoke Ball Company to any person who
contracts the influenza after having used the ball three times daily for two weeks
according to the printed directions supplied with each ball.
Mrs Carlill purchased some smoke balls and used them according to the directions and
caught flu. She sought to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a
mere invitation to treat rather than an offer:
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as
to catching the flu.
5. There was no consideration provided since the 'offer' did not specify that the user of the
balls must have purchased them.
Held: The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert
constituted an offer of a unilateral contract which she had accepted by performing the
conditions stated in the offer.
The court rejected arguments put forward by the defendants:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it
was not a mere sales puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an
intention to accept, since acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved
by applying a reasonable time limit or confining it to only those who caught flu whilst still
using the balls.
5. The defendants would have value in people using the balls even if they had not been
purchased by them directly.
When does an offer end?
Rejected, superseded by counter-offer, lapse of time or is withdrawn or revoked.
Rejection must be communicated.
Lapse of time: offeror can specify duration of the offer. Element of reasonable time also
present. - Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109 - The defendant
, offered to purchase shares in the claimant company at a certain price. Six months later the
claimant accepted this offer by which time the value of the shares had fallen.
The defendant had not withdrawn the offer but refused to go through with the sale. The
claimant brought an action for specific performance of the contract.
Held: The offer was no longer open as due to the nature of the subject matter of the
contract the offer lapsed after a reasonable period of time.
Therefore, there was no contract and the claimant's action for specific performance was
unsuccessful.
Can the offer be withdrawn?
Offer can be withdrawn before it is accepted (Routledge v Grant 1828) – defendant
contacted the claimant in writing, offering to purchase the lease of the claimant’s home.
The offer would remain open for 6 weeks and the defendant changed his mind during this
period before the offer was accepted.
Held: court held the letter did not bind the defendant to keep the offer open for a full six
weeks, as such, it had been validly withdrawn by the defendant and the claimants
purported acceptance was ineffective. (fundamental principle of contract law that one
party cannot be bound whilst the other is not.
Offer cannot be withdrawn after acceptance. - The withdrawal must be communicated –
Dickenson v Dodds (1868) – D wrote to C with an offer to sell his house for £800. This offer
was to remain open until Friday. The defendant accpeted a different offer from a 3rd
party. The issue was whether the defendant’s promise to keep the offer open until Friday
morning was a binding contract between the parties and if he was allowed to revoke this
offer and sell to a third party.
Held: the statement made by Mr Dodd’s was nothing more than a promise, there was no
binding contract formed. He had communicated an offer and this offer can be revoked any
time before acceptance.
What is Acceptance?
Final and unqualified expression of intention and assent made in response to the terms of
an offer, which exactly matches the offer & communicated to the offeror.
Later terms cannot be imposed after acceptance, offeror cannot purport to thereafter
withdraw their offer.
What must acceptance be?
Acceptance must be on terms of the offer & there must be certainty.
(Scammel v Ouston) 1941 – parties entered an agreement whereby Scammell were to
supply a van and there was disagreement over terms and Scammell refused to supply the
van.
Held: there was no certainty as to the terms of the agreement. Whilst there was
agreement on the price there was nothing in relation to the HP terms stating whether it
would be weekly or monthly instalments or how much the instalments would be.
How does the postal rule operate?
Where acceptance is communicated by post, the contract is formed as soon as the letter of
acceptance is sent without the need for it to reach the offeror (even if the post never
arrives) –
, Adams v Lindsell (1818) – due to a delay in post, the defendant assumed the claimant was
not interested in the offer. Held in this case: there was a valid contract which came into
existence the moment the letter of acceptance was placed in the post box.
Does the postal rule apply?
The postal rule applies only if it is reasonable to use post.
Henthorn v Fraser [1892] – in this case an offer was made not by post, and the defendant
decided to later try to withdraw the offer by post. The issue in this case concerned the
revocation of the offer and whether the subsequent acceptance of the offer was valid.
Held: offer was valid. The postal rule in Adam v Lindsell would apply, which stated that it
would be reasonable for acceptance of an offer to take place by post.
However, this rule would not apply to the revocation of an offer. Post was a way of
communicating offer acceptance, but the acceptance itself is completed as soon as it is
posted. This was reasonable to expect since both parties lived in different towns.
Consideration:
In contract law, what is consideration?
In contract law consideration is concerned with the bargain of the contract. A contract is
based on an exchange of promises.
Each party to a contract must be both a promisor and a promisee. They must each receive
a benefit and each suffer a detriment. This benefit or detriment is referred to as
consideration.
What are the general rules of consideration?
There are various rules governing the law of consideration:
1. The consideration must not be past.
2. The consideration must be sufficient but need not be adequate.
3. The consideration must move from the promise.
4. An existing public duty will not amount to valid consideration.
5. An existing contractual duty will not amount to valid consideration.
6. Part payment of a debt is not valid consideration for a promise to forego the balance.
What is Promissory Estoppel?
Promissory Estoppel is an equitable doctrine which in some instances can stop a person
going back on a promise which is not supported by consideration.
What are the requirements of Promissory Estoppel?
A pre-existing contract or legal obligation which is then modified
There must be a clear and unambiguous promise
Change of position
It must be inequitable to allow the promisor to go back on their promise.
Implied Terms and Frustration
