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ACCA F4
Corporate and Business Law (CL)
公司法与商法
ACCA Lecturer: Eli Qiu
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Chapter 3: Formation of contract
Part B: The law of obligation
Chapter 3: Formation of contract
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CHAPTER GUIDE
Nature of a simple contract
Offer and invitation to treat
The termination of an offer
acceptance
The need for consideration
The doctrine of privity
The presumptions relating to intention to create legal relations
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CHAPTER 3 Formation of contract
Formation of a contract
offer
Acceptance
Consideration
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Capacity
intention
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CHAPTER 3 Formation of contract
3.1 definition
A contract can be described as ‘a legally binding
agreement-enforceable in law
A standard form contract is set out in pre-printed form
by one party, usually a large organisation which has
sufficient economic muscle to be able to impose its own
terms on the other party. There will be no scope for
negotiation of the terms and therefore at least that part of
contract will automatically be in writing.
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CHAPTER 3 Formation of contract
3.1 Formation of contract
1 Analyse the nature of a simple contract
Simple contracts require no formality such as the need to
be written or formally completed. In order to form a
contract the five essential features must be present.
a) Offer
b) Acceptance
c) Consideration
d) Intention to create legal relation
e) Capacity
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CHAPTER 3 Formation of contract
3.2 The meaning of an offer and distinguish it from an
invitation to treat
Define “an offer”
-A definite promises to be bound by specific terms
-Cannot be vague
-Can be in any form
-Can be made to a particular person, a class of persons or
the whole world at large
-Carlill v Carbolic Smoke Ball Co
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CHAPTER 3 Formation of contract
3.2 Define Invitation to treat
This is merely something that acts as an inducement to
encourage another person to make an offer
1) Most public advertisements(Patridge v Crittenden 1968)
2) Shop windows displays (Fisher v Bell 1960)
3) Goods on shop shelves (Phar society of GB v Boots
Cash Chemists 1953)
4) Catalogues , prospectus and tender, auction
advertisement
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CHAPTER 3 Formation of contract
3.2 Distinguish the meaning of an offer and an invitation to treat
In this case the pleas of the defence, amongst which were that
their newspaper advert was merely an ITT, were undermined
by the following facts:
a) The wording was too precise to be deemed an ITT
b) The advert was addressed to the world at large, not Mrs
Carlill, hence worldwide offers are possible.
c) ‘Money on the table’ signaled intention
d) Unilateral acceptance was possible by Mrs Carlill. Waiving
the need for her to communicate her acceptance of the
offer
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CHAPTER 3 Formation of contract

Tan writes to Yun stating that he will sell his car to him
for £10,000.At the same time, Yun writes to Tan stating
that he will buy his car for £10,000
Which of the following statements applies this situation?
A There is a binding agreement due to the postal rule
B There is a collateral contract
C There is neither an agreement nor a contract
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CHAPTER 3 Formation of contract
3.2 Termination of an offer
Termination
Rejection
Counter
offer
Lapse of
time
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Revocation
Death
Condition
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CHAPTER 3 Formation of contract
3.2 Termination of an offer
a)Express rejection-saying no
b)Counter offer-Hyde v Wrench
Through this should not be confused with a mere request for
information per Stevenson v Mclean
c)Lapse of time either:
express
Implied-Ramsgate Hotel v Montefiore
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CHAPTER 3 Formation of contract
d) Revocation subject to the following:
It is open to the offer or to revoke his offer at any time before
acceptance. He may do this, even if he has already stated a
period for which the offer will remain remain open.-Routledge v
Grant
It must be actually received by the offeree- Byrne v Van
Tienhoven
It communication may be via a reliable third party- Dickinson v
Dodds
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CHAPTER 3 Formation of contract
e)Death
The death of the offeror will bring an end to the offer. However,
if the offer is accepted in ignorance of the offeror’s death, there
will be a binding contract, provided the obligations are not
personal to the offeror Bradbury v Morgan 1862.Death of the
offeree terminates the offer.
f) Conditions
An offer may be conditional. If the condition is not satisfied, the
offer is not capable of acceptance.
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