a.

Formation of Agreement
In order for a contract to be formed there must first be Agreement. Agreement is determined based on analysis of Offer and
Acceptance.
OFFER:
An expression of willingness to be bound by certain terms.
- [Storer v Manchester City Council (1974)]
Prof. Treitel states in Storer that an Offer is - an expression of willingness to enter into a contract on specific
terms, made with intention that it is to become legally binding as soon as it is accepted by the person to whom
it is addresses
i. HOW IS AN OFFER CONSTRUED?
An Offer is construed through an OBJECTIVE APPROACH, i.e. the manifestation of the parties intention in contrast to the
actual intention. While such intentions ideally can, and at times will coincide, when they differ the objective approach is applied.
- [Moran v University College Salford (1993)]
applicant offered place at university by accident, student acted on this by giving up job and accommodation,
court held that he was entitled to relief for compensation for his detrimental reliance on the offer - a contract
had arisen that sense - there would have been no contract had the applicant known of the mistake.
If x reasonably believes that the other is making a contractual offer to him, X should be entitled to accept that
proposal.
That is to say if a reasonable man would believe he is contracting to be bound, then he is contracting to be bound, otherwise not.
- [Smith v Hughes (1871)]
one party's awareness of the other party's mistake as to unwarranted quality, value, or nature of subject
matter

1) A needs to show that he believed that there was an implied term, objectively , and
2) and that other party B, knew precisely that this was A's belief

buyer refuses to pay seller, seller brings suit

buyer samples oats & thinks they are old, needs old oats for race horse, completes contract - oats are new

Court of Queen's Bench held that would have to show that it was reasonable for the buyer to believe that there
was an implied warrant that the oats should be old & that seller knew or reasonably should have known that
the buyer held this belief



However, while the law generally accepts the Objective Approach, the SUBJECTIVE ELEMENT is not without merit.
- [Leonidas D (1985)]

Goff LJ, in analysing the discussions on the objective test that took place in The Hannah Blumenthal [1983]
preferred the assertion of Lord Brightman in defining the objective test, stating:

In his speech Lord Brightman was, as we understand it, asserting that if one party (O) so acts that his
conduct, objectively considered, constitutes an offer, and the other party (A), believing that the conduct of O
represents his actual intention, accepts Os offer, then a contract will come into existence, and on those facts
it will make no difference if O did not in fact intend to make an offer, or if he misunderstood As acceptance, so
that Os state of mind is, in such circumstances, irrelevant. Webster v Cecil [1861]

The concept of objectivity in this context has, however, to be given some balance, since it is clearly not
desirable for the law to impose an agreement where none existed simply because some hypothetical
reasonable person says that there is such an agreement!

In the case of The Golden Bear [1987] it was stated that the objective test would not apply, for instance, where
X knows that Ys actual state of mind was not in accordance with the objective appearance created by Ys
conduct.

Moreover the objective test will not apply when the result would be to cause hardship to the other party where,
for instance, the apparent acceptance of one party is based on a mistake which has been induced by the
negligent acts of the other. For the most part this apparent conflict between finding for an agreement in
objective or subjective terms will not materialise since in the vast majority of contracts there will be
consensus ad idem between the parties, i.e. subjective agreement and an agreement as seen objectively. In
such circumstances there is unlikely to be a dispute as to the existence of an agreement per se.

THE USE OF THE TERM OFFER DOES NOT NECESSARILY MEAN THERE IS AN OFFER. Spencer v
Harding[1870]

ii. WHAT KIND OF AN OFFER?

There are two basic types of OFFER. One must first identify what kind of Offer it is.

a. Unilateral Offer - An Offer that demands performance rather than acceptance.

[Carlill v Carbolic Smokeball Co.]

- Promise to pay 100 for unsuccessful usage of smoke-ball in an advertisement
was an offer that could be accepted by anyone just by performing.

Cannot accept unilateral in ignorance.

[R v Clarke]

- The Government of Western Australia offered a reward, "for such information as
shall lead to the arrest and conviction of the person or persons who committed the
murders", of two police officers. Clarke, who knew of the offer, gave the required
information in order to clear himself of a false charge of murder and not in order to
claim the reward. Later Clarke claimed the reward.
The issue before the court was whether Clarke had accepted the offer of the
reward; had he in mind the offer when 'did the act' required by the unilateral offer


Cannot revoke unilateral offer once performance has started.

[Daulia v Four Millbank Nominees]
- The claimant wished to purchase some property from the defendant. The terms
had been agreed but no written contract had been completed. The defendant
promised the claimant that if he arranged for a bankers draft for the deposit to be
delivered to the defendant before 10.00 am on the 22nd December he would
complete the written contract. The claimant duly complied with the request but the
defendant refused to complete. The claimant brought an action stating that
unilateral contract existed and the defendant was thus bound by that contract to
complete the written contract for the sale of the property.

Held: A unilateral contract did exist.

Goff LJ stated obiter on the issue of revocation of a unilateral offer:-

"Whilst I think the true view of a unilateral contract must in general be that the
offeror is entitled to require full performance of the condition which he has
imposed and short of that he is not bound, that must be subject to one important
qualification, which stems from the fact that there must be an implied obligation on
the part of the offeror not to prevent the condition becoming satisfied, which
obligation it seems to me must arise as soon as the offeree starts to perform. Until
then the offeror can revoke the whole thing, but once the offeree has embarked on
performance it is too late for the offeror to revoke his offer."


b. Bilateral Offer An Offer that demands a return promise as acceptance.

[Mattei v Hopper (1958)]

- P brought an action against D for breach of contract because D failed to convey
to P real property in accordance with the terms of a deposit receipt.

An agreement made subject to the satisfaction of leases does not render a
contract illusory or void it for lack of mutuality because of the requirement of good
faith.



iii. WHAT ARE THE ELEMENTS OF AN OFFER?

There are three elements to a valid offer, they are:

1. Intention
2. Certainty
3. Communication of Offer
There are an additional three elements to a valid offer, they are:
4. Consideration
5. Capacity to Contract
6. Finality

1. Intention:

An offer in order to be valid must be substantiated by actual intention to create legal relations. Such is subject to
two presumptions. Both of these presumptions are rebuttable.

(a) Social Agreements:
Social Agreements such as those between husband-wife, mother-child
are generally presumed to be without intention.
[Balfour v Balfour; Jones v Padavatton]
Rebutted in [Meritt v Meritt]
(b) Commercial Agreements:
Commercial Agreements are generally presumed to be with intention.
[Esso Petroleum v CCE (1976)]
Rebutted in [Julian v Furby]

2. Certainty:

The terms of a contract must be reasonably certain, and complete so that the Courts and Parties can determine
the terms of the contract.

(a) Vagueness in Language:
Obscure Language incapable of definite or precise meaning is unenforceable.
[G Scammell and Nephew v HC & JG Ouston]
(b) Lack of Agreement on an Essential term:
Even if the Language is clear but there is a lack of agreement on an essential term contract will be
unenforceable.
[Loftus v Roberts]

(c) Reservation of discretion not to perform:
Where one party reserves discretion not to perform it will be held there is no offer/ acceptance.
[Thorby v Goldberg]

3. Communication of Offer:

The terms of a contract must be communicated.

(a) Must be communicated:
For an Offer to be valid it must be communicated, to the offeree by the offeror or someone authorized by the
offeror.
[Cole v Cottingham ]
(b) When it becomes effective:
An Offer becomes effective once communicated to the offeree.
[Taylor v Laird]
(c) Acceptance:
The acceptance must rely on the said offer.
[Tinn v Hoffman and Co.]
(d) Acceptance of Unilateral Offer:
A Unilateral Offer may be accepted by fulfilling the requirements of the offer.
[Carlil v Carbolic Smokeball Co.]


4. Consideration:

Under English Law ALL contracts must have consideration.

(a) Common Law:
Common Law will only enforce a promise which is paid for.
[Dunlop v Selfridge & Co ]
(b) Amount:
Consideration need only be SUFFICIENT not ADEQUATE.
[Chappell v Nestle]

5. Capacity to Contract:

Under English Law contract will only be valid when undertaken by one capable of consenting.

(a) Only Offeree may Accept:
The Offer may only be accepted by the person to whom it is made.
[Reynolds v Atherton]
(b) Age of Consent:
A minor is not capable of consenting and thereby not capable of contracting, unless for necessities.
[Peters vFleming; Chapple v Anne Cooper]
(c) Insane/ Mentally Challenged may not accept offer :
A minor is not capable of consenting and thereby not capable of contracting, unless for necessities.
[Hart v OConnor] Lord Brightman
(d) Duress/ Undue Influence:
A contract cannot subsist if it was undertaken under duress.
[ Pao on v Lau yiu Long ]
The Privy Council identified 4 factors to consider in assessing whether economic duress
was present:

1. Did the person claiming to be coerced protest?
2. Did that person have any other available course of action?
3. Were they independently advised?
4. After entering into the contract, did they take steps to avoid it?