Topic 6 Formation of a contract (Agreement and Intention)

    Cards (52)

    • What is a Contract and what is the purpose of the formation of a contract?
      A legally binding agreement between two or more parties. The rules of the formation is to seek to identify what contractual parties have agreed to
    • Key elements of a contract (4)
      • Offer
      • Acceptance
      • Intention to create legal relations
      • Consideration
    • What is an Offer?
      When one party must intend to make an offer capable of acceptance by another party
    • What is Acceptance?
      Must be communicated on the subject matter and where it was taken place (postal rule)
    • Intention to create legal relations
      An agreement that is legally binding (mental state)
    • What is Consideration?
      Consideration would involve something of valuable benefit or detriment to one party or the in a bilateral contract
    • What is the Objective test to identify an offer?
      To see if a reasonable person would believe an offer has been validly made which enhances the certainty and reliance
    • Facts and principle Butler Machine Tool Co. v. Ex-Cell-O Corp
      • Sale of machine tools, T&C of the offer had a price valuation which had a specific price can be increased depending on costs. Ex Cell sent T&C which removed the clause can had a signature and rip off area to the agreement. Butler machine assumed it followed their T&C by sending a letter. with the outbreak of war led to prices increases so they reinforced the price valuation. The conclusion was that Butlers letter was irrelevant as he signed the last T&C.
      • LP last set of terms presented usually prevails unless explictly rejected
    • What are Invitations to treat? Give 4 examples
      These are to incentivise an offer but are not offers and the test to determine this is if a reasonable person would believe it is a treat or an offer. A judge will go through details and language to determine it.

      Gibson v Manchester City Council
      Fisher v Bell
      Pharmaceutical Society of GB v Boots Cash Chemists Ltd
      Patridge v Crittenden
    • facts and LP of Gibson v. Manchester City Council
      • LP: Invitation to treat is not an offer. C wanted to purchase the house he was renting under the Tory scheme. C applied for the details stating interest. The council were prepared to sell the house at a purchase price and asked for claimant to make a formal application which he did. However, shift in gov restricted the deal unless it was legally binding. D refused and C claimed action. It failed since, the letter by the council was an invitation of sale because there was no price but an offer so was not legally binding.
    • Facts and LP of Fisher v Bell (window displays)
      • Advertisments are invitations to treat and not an offer
      • prohibits the sale, advertisement and display of anything of a flick knife. Fisher had a convenience store at the time with a display with flick knives for 4 shillings. Police prosecuted him for offensive reference act for selling illegal goods. He would have had to have a advertisement for sale, question if an display was a sale, no it wasn't. It was an invitation of sale
    • Facts and LP of Pharmaceutical Society of GB v. Boots Cash Chemists (Southern) Ltd (shelf displays)
      • LP- Displays are not offers, they are invitations to treat.
      • Sale of certain goods in the form drugs and poisons without a licensed pharmacists under the poisons act. Shelf in boots had these drugs on a shelf so a case was brought against them for violating the poisons act. Question if a display is an offer to sell goods. It was false because it was essentially an invitation to treat. As a consumer you would still go to the till where a registered pharmacist would process the sale.
    • Partridge v. Crittenden (advertisements)
      • LP: Advertisements are invitations to treat
      • Advert on newspaper on the sale of a number of exotic animals for a specific price. There are laws and regulates on the types of animals for sale. If certain breeds are sale for social work. Issue if the animal was up for sale. Answer was that it was advertisements are not offers but invitations to treat.
    • What are Unilateral contract and provide an example
      An offer may lapse after a certain period of a specific event. Where there is no specific expiry date, courts may determine if a reasonable time hs elasped.

      Carlill v Carbolic Smoke Ball
    • Carlill v Carbolic Smoke Ball Co. Ltd
      • A product was advertised smoke which smell would prevent you from getting influenza. Carlill was used of the smoke ball but still got the flu. Argument that the advert in the newspaper that if they did the procedure but still get the flu, they would get £100. The defence was that advertisements are indications to treat and there is no need to treat to establish a contract based upon an advertisement. It was determined to be an offer
    • Are Online transactions an invitation to treat or an offer?
      They are invitations to treat, an offer is made when you go through the check-out process which states confirmation. The money is temporarily reserved so the seller can cancel the payment.
    • Methods to Terminate an offer (5)
      • Refusal
      • Revocation
      • Death/Insanity
      • Counter offer
      • Lapse of time
    • Byrne & Co v Leon Van Tienhoven &Co
      • 2 companies (1 new London and 1 in New York). The contract concerned the production and sale of any number of quantities of tin plates. The contract was made by post by 10 working days. Letter was sent with an offer for tin plates, 10 days after it was immediately accept by post. The letter had another 10 days to go back. However, the tin plate manufacturer changed their mind so another offer was sent that revoked and sent 5 days after the initial sentence was sent. C sued for consideration. When you send communications by post, acceptance happens when you sent the letter since acceptance occurred when it was sent and the revocation came afterwards so there was a case.
    • Hyde v. Wrench
      • Hyde's attempt to accept Wrench's original offer after making a counter-offer raised questions.Court ruled that Hyde's counter-offer also constituted a rejection of Wrench's original offer, preventing Hyde from later accepting it. Some counter-offers may be interpreted as both counter-offers and rejections.
    • Ramsgate Hotel Co & Montefiore

      • Offer to sell shares of the hotel until 6 months later. Ramsgate hotel went into difficulties so the shares decreased during those time. Monteflore initially wanted to buy the shares at that price 6 months ago so Ramsgate took him to court. Court said no because too much time had lapsed so the offer was rescinded and the conditions were the financial issues at the time.
    • Why is acceptance IMPORTANT?
      Conduct may lead to acceptance but is very rare whilst the most common form is a signature whilst being silent with the intention to accept an offer would not be valid.

      Rust v Abbey Life Assurance Co Ltd
      Felthouse v Bindley
      Robophone Facilities Ltd V Bank
    • Instantaneous means of communication
      Typically very wide such as text, fax, phone and typically occurs when the other party receives the letter and take notice during reasonable working hours
    • What is the Poster rule, provide a case example
      Applies only when offers and acceptances occur in the post. Acceptance occurs when you sent the letter even if the offeror has not received it. the 3rd party to deliver is considered to be an 'agent'

      Adams v. Lindsell
      Provision for the sale of wool, respond via post by a deadline. C sending the letter did everything right but the poster got it wrong until it was very late and by that time, they had sold the wool. Acceptance happened when he sent the letter so was eligible for consideration of damages
    • Request for more information
      Offerees seek clarification or additional information about the offer without intending to change its terms. An inquiry does not reject the original offer to allow the offeree to still accept it. It is not a counteroffer.
      Stevenson Jacques v. Maclean supply of iron made at 4s per IB. C asked if he could pay in instalments or one off purchase. D recieved the message and sold the iron whule C agreed. This was not a counter offer because there was no price change
    • Special rule for tenders, provide a case
      Blackpool & Flyde district aero club v Blackpool UDC- Local council (D) owned an airport and allowed the operation of leisure flights which had a dealine of 12pm to submit tenders. C submitted at 11am but was not considered because the letter box was not cleared so sued for damages and suceeded. LP: invitation to submit a tender was an offer to recieve bids and thus intention to create legal relations
    • Terms cannot be incorporated after the acceptance of a contract, provide a case
      Thornton v. Shoe Lane Parking- Recieved a ticket which read subject to conditions displayed in car park. However, the sign was present inside the car park so could not be incorporated after a contract was made
    • Intention to create legal relations, provide 2 case examples

      In the eyes of the law, this can be either a social agreement (between family members) may not be legal contracts whilst business agreements is intentional unless proved otherwise.

      Jones v Padavatton, law student sued mother who agreed that until she became a barrister should give n allowance and a house. after a disagreement, the mother wanted to repossess the house so the daughter sued. It was a social arrangement so there was no legal relationship.
      Rose and Frank Co. v. J.R. Crompton & Bros Ltd
    • Agreements may not be the same as a contract since it may lack essential elements such as the intention to create legal relations or consideration making it void and non-binding.
    • Agreements may be enforceable if there is certainty where the terms are not vague or incomplete, if the language is too ambiguous and uncertainty to price then it may not be enforceable.
    • Incomplete or vague contract, where terms are agreed upon later or an incomplete agreement, then there will be challenges to enforcement
    • Enforceability of Agreements to Negotiate: the enforceability of agreements to negotiate, highlights the challenges of enforcing good faith negotiation terms. The case of Walford v Miles illustrates the difficulties in enforcing agreements based on good faith negotiation.
    • Duration of Agreements: The duration of agreements, particularly "lock out" agreements preventing negotiation with third parties, is crucial for enforceability. Indefinite agreements may be deemed uncertain, while fixed-term agreements are more likely to be enforceable.
    • Dispute Resolution Clauses: Dispute resolution clauses, such as those requiring parties to engage in friendly discussion before arbitration, are examined. The enforceability of such clauses depends on their clarity, duration, and adherence to good faith principle
    • Legal Precedents: Legal cases such as Scammell v Ouston and Hillas & Co. Ltd v Arcos Ltd are referenced to illustrate how courts interpret and decide cases involving uncertain agreements. These cases demonstrate the importance of implied terms and the interpretation of vague language.
    • Interpretation of Sale of Goods Act (SoGA) 1979: Section 8 of SoGA 1979 addresses the determination of price in contracts of sale. The text examines Viscount Dunedin's interpretation of this statute in May & Butcher and its implications for incomplete agreements.
    • Enforceability with Mechanism for Completion
      The courts may enforce agreements to agree if the parties provide a mechanism for completing the agreement in case of disagreement. The case of Foley v Classique Coaches Ltd (1934) illustrates this point, where an arbitration clause provided a means for settling disputes over price.
    • Failure of Completion Mechanism
      SoGA 1979 also addresses situations where the mechanism for determining price fails, providing guidance on the consequences for the agreement. If a third-party valuation fails or is prevented, the agreement may be avoided, but the buyer may still be liable to pay a reasonable price if goods have been delivered and appropriated.
    • What is Refusal when you terminate an offer?
      When an offeree declines the origninal offer which would render it void by just saying no.
    • What is the Revocation of an offer? provide 2 cases. 

      When an offer was made but later recinded. This can occur any point until the offer is accept but never afterwards. The revocation must be communicated to the offeree either directly by the offeror or indirectly.
      Byrne & Co v Leon Van Tienhoven &Co
      Dickinson v Dodds
    • What was the principle of Bradbury v Morgan? 

      LP: Death can terminate an offer in a unilateral contract. However, existing contracts cannot be automatically revoked on death. Notice must be given to the offeree