WS1 Agreement & Intention
STEP 1: Is there a contract?
1. Which party is alleging a contract?
2. State the three elements of a contract
(a) Agreement (offer and acceptance)
(b) Intention to create legal relations; and
(c) Consideration
3. Show briefly that consideration is satisfied
STEP 2: Show whether there is intention to create legal relations
1. Assessment of parties’ intention in making an offer is objective (Smith v Hughes)
2. Commercial agreements:
(a) Presumption that there was intention to create legal relations (Edwards v Skyways)
(b) This is rebuttable, if there is specific wording to that effect (Rose & Frank v Crompton)
3. Non-commercial/family agreements:
(a) Presumption that there was no intention to create legal relations (Balfour v Balfour)
(b) This is rebuttable (Merritt v Merritt)
STEP 3: If there is intention to create legal relations, state that the issue concerns
agreement
1. State: There is agreement if there is a valid offer and acceptance
There must be CERTAINTY in offer and acceptance, or court may not uphold contract (Scammell
v Ouston); for example, “timber of fair specification” was too vague (Hillas v Arcos)
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2. Is there an offer?
(d) Battle of the forms
(a) Define ‘offer’ – ‘an expression of willingness to contract on certain terms, made with the
intention that it shall become binding as soon as it is accepted by the person to whom it is
addressed’ (Treitel, The Law of Contract - confirmed in Allied Marine Transport v Vale do
Rio Doce Navegacao SA (Leonidas))
(b) Distinguish from an INVITATION TO TREAT - an offer is different to an INVITATION TO
TREAT, which is made without intention to be bound by specific terms, for example:
• Self-service display in a shop (Pharmaceutical Society of GB v Boots Cash Chemists)
• Goods on display (Fisher v Bell)
• Tenders (Spencer v Harding; Blackpool & Fylde Aero Club Ltd v Blackpool BC), unless it is
a unilateral contract, in which case it will be an offer (Harvela Investments)
• Advertisements (Partridge v Crittenden), unless:
○○ Offering reward (Williams v Carwardine); or
○○ Unilateral contract, in which case acceptance need not be communicated (Carlill v
Carbolic Smoke Ball Co.)
(c) Rules for auctions
GENERAL RULE: last shot wins (Brogden v Metropolitan Railway)
Butler Machine Tool v Ex-Cell-O – not true battle of forms, but an
exchange of incompatible terms:
• Offer:
○○ Claimant makes an offer to the Defendant;
○○ offer contains clause that the Claimant’s terms prevail over the
Defendant’s.
• Counter offer:
○○ Defendant sent ‘acceptance’ to the Claimant;
○○ ‘acceptance’ amended one of the Claimant’s terms.
• Acceptance:
• With reserve price (s.57 Sale of Goods Act 1979) - Contract between the seller and
the bidder once the auctioneer (as agent) completes the sale i.e. with the fall of the
hammer.
• Without reserve price (Barry v Davies) - Unilateral contract between auctioneer and
bidder that the auctioneer will accept the highest bid; if he doesn’t, the highest bidder
can sue for damages.
3. Is there acceptance?
○○ Claimant signed and returned the Defendant’s ‘acceptance’ to the
Defendant;
○○ ‘acceptance’ provided that D’s terms prevail.
The Claimant argued that the Defendant accepted the original offer, and tried to
rely on original terms. However, the court found that the Defendant’s acceptance
amounted to a counter offer that was accepted by the Claimant. Therefore, the
Defendant’s terms prevailed.
(a) Define ‘acceptance’: ‘an unconditional expression of assent to the terms of an offer’
(b) Acceptance must be communicated
• GENERAL RULE: Acceptance must be communicated, and should be communicated by:
• A letter of acceptance will become binding when posted if:
○○ offeree (Entores v Miles Far East); or
○○ it was reasonable to use post as a method of communication;
○○ authorised agent (Powell v Lee)
○○ it was properly posted; and
• EXCEPTIONS:
○○ there is a unilateral contract (Carlill v Carbolic Smoke Ball); or
○○ if the contract states that silence constitutes acceptance - silence cannot constitute
acceptance (Felthouse v Bindley), unless there is no reason for offeree not to bind
themselves (Re Selectmove)
(c)Acceptance or counter offer?
• GENERAL RULE: A counter offer i.e. a new provision entered, is implied rejection (Hyde
v Wrench)
• QUALIFICATION: Questions about an offer are not deemed as rejecting it, and may still
be acceptance if it falls within definition (Stevenson Jacques & Co. v McLean)
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(e) Postal rule exemption (Adams v Lindsell)
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○○ the offeror did not exclude the postal rule impliedly/expressly (e.g. Holwell v
Hughes)
• If all the above are satisfied, the letter need not actually arrive for acceptance to be
valid (Household Fire Insurance v Grant)
N.B. There is no authority on whether an acceptance can be retracted once posted
(Countess of Dunmore v Alexander)
(f) Has the offer been revoked before it was accepted?
STEP 1: When can the offer be revoked?
GENERAL RULE: An offer can be revoked at any time even if the offeror has agreed to leave
it open (Routledge v Grant)
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EXCEPTIONS:
• the offeror cannot revoke the offer if the offeree has given consideration for the offeror
keeping the offer open (Mountford v Scott)
• if it is a unilateral contract, revocation is not possible once the act of acceptance has
begun (Errington v Errington & Woods)
WS2 Consideration
STEP 1: Is there a contract?
STEP 2: How must the offer be revoked?
GENERAL RULE: Revocation must be communicated:
• by offeror (Byrne v Van Tienhoven); or
• by reliable third party (Dickinson v Dodds)
1. Which party is alleging a contract?
2. State the three elements of a contract
(a) Agreement (offer and acceptance)
EXCEPTIONS:
• if the revocation was received, but not read, and it could be reasonably be assumed that
staff would be at work it will be deemed to have been communicated (The Brimnes); or
• if the offer was made to the public at large, revocation can be made through the same
channel as the offer provided it has the same prominence (Shuey v US N.B. US law)
Henthorn v Fraser: An example of the postal rule of acceptance vs the revocation rule in action
Where the revocation of an offer posted at 12 noon did not reach the offeree until 5pm. However,
since the offeree posted the acceptance at 3.50pm there was a binding contract from that time.
The revocation must be communication in order for it to be effective.
(g) Has the offer lapsed?
Offer will lapse if there is an express condition; or in all other cases, the offer will lapse after
a reasonable time period - what is reasonable depends on the facts
Step 4: Conclude
(b) Intention to create legal relations; and
(c) Consideration
3. Show briefly that agreement and intention to create legal relations are satisfied; the issue
concerns consideration.
STEP 2: Define consideration
“The Price one Pays for another’s Promise” (‘The 3 Ps’) (Pollock)
Consideration is, in short, reciprocity. For example, the Defendant promises something to the Claimant.
This promise is not reciprocal unless the Claimant has given or promised something in exchange for the
Defendant’s promise. That ‘something’ is consideration, and without it a contract is unenforceable.
STEP 3: Identify the consideration and problems (if any). Explain rules, exceptions and
cases. Apply to facts
1. Consideration need not be adequate, but must be sufficient (Chappell v Nestle)
Is there a valid contract? Who can recover what from whom?
2. Consideration must have some economic value (Thomas v Thomas)
3. Is forbearance i.e. not doing something, good consideration?
• GENERAL RULE: no, due to public policy issues (floodgates argument) (White v Bluett)
• POSSIBLE EXCEPTION: if it involves giving up one’s legal rights (Hamer v Sidway – N.B. US
case)
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