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Law 101 Contract

Offer and Acceptance

Furmston page 36 Agreement is not a mental state but an act and can be inferred from conduct. 2

What constitutes an offer What constitutes an invitation to treat Auctions

3 Agreement may be inferred from conduct Counter-offer is a final rejection of the offer Agreement may be inferred from observance of written terms Agreement may be retrospective Certainty is required Tenders The communication of acceptance Effect of silence Waiver of communication Mode of communication Postal Acceptance rule Termination of offer Lapse of time Failure of a condition subject to which the offer was made Death Constructing a contract Inchoate contract Long-term relationships

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Unilateral offers

Law 101 Contract

What constitutes an offer o A definite promise to be bound o He must be prepared to implement his promise, if it is the wish of the other party What constitutes an invitation to treat o It is a mere attempt to induce offers Most advertisements are invitations to treat e.g. Partridge v Crittenden an advertisement in a circular that said Bramblefinch cocks and hens, 25s each was a mere invitation to treat Prices in shop windows or listed in the shop are invitations to treat e.g. Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd: It is an offer by the customer to buy, and there is no sale effected until the buyers offer to buy is accepted by the acceptance of the price. Court of Appeal o If the wording is not sufficiently definite e.g. Gibson v Manchester City Council where a letter that said may be prepared to sell the house to you at a stated purchase price was held not to constitute an offer but an offer to treat. Auctions: Offers versus Invitations to treat o The auctioneers request for bids is an invitation to treat, the bid is the offer, which the auctioneer may accept to reject Payne v Cave o A promise to hold an auction on a certain day is not a promise that it will be held Harris v Nickerson o An advertisement that the sale is without reserve enters into a collateral contract with the highest bidder Barry v Heathcote Ball & Co (Commercial Auctions) Ltd o Auctions involve two contracts the first is an offer of a unilateral contract to accept the highest bid which would be followed by a bilateral contract with the highest bidder Harvela Investments Ltd v Royal Trust Co of Canada Ltd But a referential bid is inconsistent with an obligation to accept the higher of two sealed bids

Agreement may be inferred from conduct o Brogden v Metropolitan Rly Co where the court inferred the acceptance of a contract which was not signed because both parties afterwards acted thereafter on the strength on its terms with Brogden supplying coal and Metropolitan paying for the coal on its terms o The House of Lords held that the contract came into assistance either when the company ordered its first load of coal from Brogden upon these terms or at least when Brogden supplied it Counter offer is a final rejection of the original offer o You must accept ALL the terms of the offer

Law 101 Contract If you introduce a new term while purporting to accept the offer you have not accepted the offer at all, you have made a counter offer, and in so doing you have destroyed the original offer Hyde v Wrench o A mere request for information does no destroy the offer Stevenson v Mclean where a court held that a request by the plaintiffs to ask if they would accept payment over two months or what the longest limit the defendants would give was a mere inquiry o A conditional assent to an offer does not constitute acceptance Branca v Cobarro The House of Lords held that by using the word provisional the parties had intended the document to be an agreement binding from the outset, though one which would be replaced by a more formal contract It is a matter of construction as to whether The parties intended to undertake immediate though temporary obligations, or The parties were suspending all liability until the conclusion of formalities o The words subject to contract create a strong presumption that the parties do not intend to be immediately bound Agreement may be inferred from observance of written terms o If there is evidence that the parties have acted upon the faith of a written document, the courts will prefer to assume that the document embodies a definite intention to be bound and will strive to implement its terms Hillas & Co Ltd v Arcos Ltd The defendant sellers argued that the written agreement, which only said to provide softwood goods of fair specification, without defining the kind of timber or manner of shipment, showed it was not intended to bind either party. But the House of Lords held that the words, in light of the previous course of dealing by the parties, showed sufficient intention to be bound. o But where there is no particular trade in question and no familiar business practice, the court may find it is to speculative to construct a contract in Scammel v Ouston where the words hire-purchase terms could refer to a wide variety of agreements Two reasons by Lord Wright: The words are so obscure and incapable of any definite meaning The parties never intended or in appearance reached an agreement o Courts will ignore a meaningless addendum if there appears to be agreement on all essential matters either on the face of the contract or through normal business practice or through prior business dealings Nicolene Ltd v Simmonds Lord Denning held the words usual conditions of acceptance the defendant added on were meaningless and so must be ignored Agreement may be retrospective o An offer may have a retrospective effect Trollope and Colls Ltd v Atomic Power Constructions Ltd where the judge imported into the contract a term that it should apply retrospectively to all that had been done in anticipation of it Certainty is required o Letters of Intent No contract: British Steel Corporation v Cleveland Bridge and Engineering Co Ltd 3 o

Law 101 Contract Robert Goff J held that there was no contract since it was clear that the parties had never agreed on the critical issues of progress payments and liability for late delivery But the plaintiffs were entitled to payment on a quantum meruit basis Yes contract: AC Controls Ltd v British Broadcasting Corporation o What if major questions, like price, are left for future decision? Not necessarily fatal to contract Sudbrook Trading Estate Ltd v Eggleton involved an agreement where both parties would supply a valuer for a landlease but one party refused and the contract had no mechanism for dealing with this. House of Lords held that the provision by fixing the price by valuers meant that the price was to be a reasonable one therefore it was sufficiently certain to be a contract. Acceptance in the case of tenders o A tender is an offer but is the acceptance by the other party an acceptance in the legal sense? o It depends: Yes: If the tender involves a definite requirement of a specified quantity of goods Yes: If the corporation states it would take all its needs for a particular year from a particular supplier or to take all the suppliers output for the year Maybe: When a corporation says it may take a certain amount up to a maximum amount , then it may be a standing offer Each requisition by the offeree is an individual act of acceptance which creates a separate contract But an order prevents pro tanto the possibility of a revocation and the supplier, though he may regain his liberty of action for the future, was meanwhile bound to supply the goods actually ordered Great Northern Rly Co v Witham

Law 101 Contract

The communication of acceptance

There must be a physical manifestation of assent Effect of silence: o Silence is equivocal to consent and an offeror may not arbitrarily impose contractual liability upon an offeree by proclaiming that all silence shall be deemed consent Felthouse v Bindley Waiver of communication o If the nephew sues the uncle in Felthouse v Bindley it may be held that the latter would be unable to rely on the non-communication of acceptance Mode of communication prescribed by offeror o A reply by any method equally expeditious would constitute a valid acceptance o The offeror must use very clear words before a means of communication will be treated as mandatory e.g. And by that method only. o The place where the contract is concluded is where the offeror receives the acceptance of the offer This is true for face to face and for instantaneous telecommunications like telex, see: Brinkibon Ltd v Stahag Stahl und Stahlwarenhandel GmbH, where an offer was made by telex in Vienna and accepted by a telex message from London to Vienna. House of Lords held the contract was made in Vienna. As for electronic communications the time and place of receipt is governed by the ELECTRONIC TRANSACTIONS ACT 2010 o Postal Acceptance Rule Acceptance occurs the moment the letter containing the acceptance is put into the mail Adams v Lindsell This only applies where no particular mode of communication is prescribed by the offeror It must yield to manifest inconvenience or absurdity. The rule should apply only to a letter which is properly stamped and addressed.

Termination of offer
Revocation is possible and effective at any time before acceptance Payne v Cave This is even when there is a time limit for acceptance Routledge v Grant Revocation of offer must be communicated o The offeror must prove not only he has done some act which manifests his revocation but that it has been communicated to the offeree But it may be communicated by a third party Dickinson v Dodds

Lapse of time
No acceptance after a time limit is valid Even if there is no express time limit, it is normally open only for a reasonable time Ramsgate Victoria Hotel Co v Montefiore

Law 101 Contract

Failure of a condition subject to which the offer was made

If the condition fails the offer will not be capable of acceptance The condition may be implied as well as express Financings Ltd v Stimson Where the Court of Appeal held that there is an implied condition in a hire-purchase agreement that the car remained, until the moment of acceptance, in substantially the same state as at the moment of offer

A promise which is independent of the offerors personality which can be satisfied out of his estate may still be accepted, before the offeree has been notified of the death Bradbury v Morgan Terminates negotiations in the case of agency or if the offer relates to some personal element of the offeror such as writing a book But if the offeree dies there is no English authority

Constructing a contract
A court may infer contract from conduct between persons who seem, at first sight, not to be in a contract at all o Shanklin Pier Ltd v Detel that there was a collateral contract between the plaintiffs and the defendants where A specify to B that X paint should be used in return for the promise by X that the paint would be of good quality o In all cases the defendant gave an undertaking to the plaintiff which induced the plaintfiff to make an independent contract

Inchoate Contracts
There are times when even inchoate contracts may be seen as being effective Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council where the Court of Appeal held that the defendant impliedly undertook to operate the tender according to its own terms and held that the plaintiffs were entitled to damages when it failed to do so. Even when there is no contract, a party may be entitled to restitutionary relief on the grounds that the other party has derived benefit from the transaction for which the other party deserves compensation o E.g. British Steel Corporation v Cleveland Bridge and Engineering Co Ltd This does not apply where the defendant had not encouraged the plaintiffs to think they would be paid for the work Regalian Properties plc v London Dockland Development Corpn But in certain cases this may give rise to a case in tort

Long-term relationships
Just because there have been a long-term and consistent relationship doesnt mean the court will necessarily infer that there is an agreement for a long-term contract Baird Textile Holdings Ltd v Marks and Spencer plc

Law 101 Contract

Unilateral offers
Only one promise, made in exchange for an act the other person accepts by performing the act An offer may be made to the world at large Carlill v Carbolic Smoke Ball Most advertisements are invitations to treat The act will be deemed an adequate indication of assent; there is no need for communication of acceptance There is no acceptance of the offer if the person did not know of the knowledge, if even if he performs the act required, and even if he knew but the knowledge had passed out of his mind, he will be treated as if he did not know R v Clarke (Australian case) But if the reward had been present in the plaintiffs mind, it is an acceptance, even if he or she was predominantly influenced by some other motive Williams v Carwardine Revocation o Whether or not a unilateral offer may be revoked depends on the nature of the offer o In Luxor (Eastbourne) Ltd v Cooper the offeror could o But not in Errington v Errington and Woods where the plaintiff son and daughter-in-law were promised they could have the house they lived in if they paid the weekly instalments and the court held as long as they were paying the instalments the offer could not be revoked