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Summary SQE 1| CONTRACT LAW
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INTRODUCTION TO THE LAW OF CONTRACTCORE ELEMENTS TO FORM A CONTRACT
1) Agreement
-offer => a promise by a party to do/refriain from doing something
-Acceptance => unconditional agreement by the offeree of all the terms of the offer
Meeting of the minds
Courts usually use the objective interpretation -> what a reasonable person in the other party’s
shoes would have understood the other party to have meant by his words or conduct
2) Intention to create legal relations
The parties must have made the agreement with the intention of creating legally enforceable
relations rather than a domestic or a social agreement.
3) Valuable consideration
The parties must promise to give or do something in exchange for the promise, such as offering
to pay for goods and services received.
OTHER ELEMENTS
-capacity to contract
-Consent
-Legality
-Certainty of terms
-Form
A contract does not need to be in writing unless it falls in one of these categories:
- contracts by deed (conveyance of land)
- Contract in writing , trasnfer of shares, cheques, consumer credit contract
- Contracts evidenced in writing that are only enforceable if there is written evidence,e.g
contracts of guarantee
STYLE OF CONTRACTS
- bilateral contracts -> exchanged promises
- Unilateral contracts -> only one party makes a promise to do something in return for an act by
the other party. Acceptance of an offer need not be communicated. Promise in exchange for
act.
ENFORCEABILITY
a) void contracts -> where the whole transaction is regarded as a nullity. At no time there has a
been a contract between the parties.
b) Voidable contracts -> it operates in every respect as a valid contract unless and until one of
the parties takes steps to void it. Anything obtained must be returned. If goods have been
resold before the contract was voided, the original owner will not be able to reclaim them.Can
claim damages
c) unenforceable contracts -> a valid contract but it cannot be enforced in the courts
, AGREEMENT
An offer is an expression of willingness to contract, made with the intention
that it shall become binding on the offeror, as soon as it is accepted by the
offeree.
OFFER
It if sufficient in the terms of the offer, which may be made in writing, by
words or by conduct, are clear, and that the offer was made with the
intention that it should be binding on anyone who accepts it.
It is an invitation extended by one party to the other, to enter into
negotiations or to make an offer himself.
INVITATION
TO TREAT An offer may be an invitation to treat depending on the intention of the
person making it as revealed by his words or actions and the surrounding
circumstances.
❖ Goods on display in supermarkets and self-service
shops are generally regarded as invitations to treat
and not offers (Boots) (Fisher v Bell).
WINDOW AND SELF
❖ The customer offers to buy the goods when he
SERVICE DISPLAYS OF presents them at the payment point, and
GOODS IN SHOPS acceptance takes place when the shop takes
payment for the goods (Boots).
❖ Generally regarded as invitations to treat
(Partridge v Crittenden) (supplier has control)
❖ An advertisement of a reward has generally been
treated as an offer as there is an intention to be
bound as soon as the information is given:
Unilateral contract: a promise in return for an act
(Williams v Carwardine).
❖ 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 1) a unilateral
offer: 2) a promise in return for an act
ADVERTISEMENTS ❖ (Carbolic Smoke Ball: using the smoke ball for 2
weeks and then getting sick, we will pay you) the
acceptance of the unilateral contract is at the
moment the offeree starts the act.
❖ Provided the advertisement is not mere sales
promotion or puff, not intended to created legal
relations, then even if the offeree has not supplied
any consideration and has not communicated his
acceptance of the offer the advertisement will be
deemed sufficiently clear to constitute an offer.
, ✤ A ticket supplied after hiring a deck chair containing
exclusion clauses on the back was not considered to give
rise to a contract, because the customer wouldn’t expect
them (Chapelton v Barry UDC [1940])
TICKET CASES
✤ A ticket containing exclusion clauses supplied after the
completing of the contract not effective (Thornton v Shoe
Lane Parking Ltd [1971])
An auctioneer’s call for bids is regarded as an invitation to
treat, a mere request for offers - offers which the auctioneer
can accept (with the fall of the hammer) or reject as he
AUCTION SALES chooses.
Auction without reserve -> the auctioneer is obliged to accept
the highest bid
Generally an invitation to tender is an invitation to treat only
and the bid is the offer but tenders can create binding
TENDERS contracts and an invitation to tender can have binding results
for the inviter (Blackpool and Fylde Aero Club Ltd v Blackpool
Borough Council [1990])
Indicates that documents passing from one to the other are
not intended to be offers capable of acceptance so as to form
SUBJECT TO CONTRACT a binding contract. no contract will come into existence until a
formal contract has been drawn up and approved by the
parties.
There will be no contract if two persons make identical cross-offers.
TERMINATION OF OFFER
REVOCATION REJECTION/ LAPSE OF DEATH FAILURE OF
COUNTER TIME
OFFER TERMINATING
The offer may be CONDITION
revoked by the The death of
Where an offer the the
offeror at any time An offer is is stated to be
until it is terminated if the offeree An offer may be
open for a terminates
accepted. offeree has either subject to an
specific length the contract
rejected it express or
of time, it will in all cases.
The revocation of outright or made implied condition
automatically
the offer must be a counter-offer by precedent. If any
terminate once
communicated to attempting to of these
that time limit
the offeree. vary the terms of conditions are not
expires.
In unilateral the offer. satisfied, the offer
contracts, once will not be
the offeree has capable of
commenced acceptance.
performance of
the act that
constitutes
acceptance, the
offer can no
longer be revoked.
, Mirror image rule:
If the offeree:
a) Introduces a new term
b) Amends a term in the offer, => this will be a counteroffer
*not to be confused with request for further information.
Battle of the forms
Acceptance can occur in two forms:
- by explicit agreement
- By conduct (the last shot theory)
Final and unqualified assent to the terms of an offer, whether by express
words or by action.
Must fit the terms of the offer precisely and be clear and unequivocal
ACCEPTANCE -must correspond to the exact terms in the offer (mirror-image rule)
-It must be in response to the offer
-Must follow any method for acceptance (prescribed method)
-Must be actually communicated to the offer (the receipt rule)
Bilateral offers - spoken and written words
ACCEPTANCE Unilateral offers - performance
BY CONDUCT -courts apply the standard of reasonableness
- Acceptance can be implied by conduct
-Silence does not amount to acceptance
SILENCE -however, Previous course of dealing may give rise to acceptance by
silence
No contract comes into existence unless and until the offeree’s
accpetance is communicated to the offeror. therefore, if the offeree
decides to acept an offer and writes a letter of acceptance that he
doesn’t post there will be no effective acceptance of the offer.
*DOES NOT APPLY TO REVOCATIONS!!!
POSTAL exceptions:
RULE -where the offeror waives the requirement
-Where the offeror is estopped from denying that acceptance was
communicated
-Where the acceptance is communicated to the offeror’s agent
-Where the postal rule applies, it will be effective where the offeree
posts the acceptance
-Where quick response is required
VAGUE AND They arise where the parties have not expressed themselves with
INCOMPLETE sufficient clarity on the matter of an essential term. This contract is
AGREEMENTS unforceable and courts may interfere to perfect it.
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