1
INTRODUCTION
A
Introduction
Realist view – in practice, courts focus on policy objectives to decide in whose favour
a legal rule should be applied.
B
Freedom of Contract?
*Andrews v Parker [1973] Qd R 93
Principle: Immoral contracts are illegal.
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AGREEMENT
A
Offer and Acceptance
(i)
Offer
! An indication of willingness to enter into a contract on certain terms without
any further negotiation
! Objective test
*Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd [1953] 1 QB 401
Facts: An act prohibited the selling of medicines unless “the sale is effected by or
under the supervision of a registered pharmacist”. Boots’ shop had a self-service
system, with a pharmacist supervising the operations at the cash desk.
Principle:
The mere act of putting something on display does not constitute an offer in a
legally binding sense. It is an invitation to treat.
*Australian Woolen Mills Pty Ltd v Cth (1954) 92 CLR 424
Facts: During WWI the government acquired all wool from growers, sold it to
manufacturers, and controlled the price of manufactured articles. In 1946 it
announced an altered system of regulation under which there was free auction of
wool, with manufacturers being paid a subsidy on wool purchased for domestic
consumption. When this system ended in 1948, Australian Woolen Mills claimed that
it was owed amounts of subsidy which the Cth was bound by contract to pay.
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Held:
It was not possible to construe the documents as containing a standing offer
capable of acceptance by the purchase of wool. The scheme was merely a
statement of Government policy, not an offer subject to acceptance.
‘It was impossible to find anywhere anything in the nature of a request or
invitation to purchase wool, or anything which suggested that the payment of a
subsidy was put forward to induce any manufacturer to purchase wool, or
which suggested that the payment of subsidy and the purchase of wool were
regarded as related in such a way that one was consideration for the other.
The one-sided nature of the statement meant that a contract didn’t exist-no aspect
of quid pro quo, request and reliance.
Principle:
A particular phrase or sentence cannot be regarded as amounting to an offer to
contract if the correspondence as a whole indicates a contrary intention.
The term ‘unilateral’ contracts is open to criticism as it is unscientific and
misleading.
Must be aspect of quid pro quo
Ask whether there has been a request by the alleged promisor that the promisee
shall do the act on which the latter relies (connect to Carlill’s case)
Expending public moneys-if there was an intention on the part of the government
to assume a legal obligation, one would certainly have expected statutory
authority
Offer distinguished from gratuitous promise: look at surrounding circumstances
and whether alleged offeror intends to be legally bound
Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147
Facts: After negotiations, the dept wrote: “the department is prepared to purchase the
subject property” for a price of $385, 000 and set out other conditions. Seppelt
replied: “our board of directors will accept the purchase price of $385, 000 under the
terms specified in our letter” and said that they would later indicate the exact date for
exact possession and that “the matters concerning the transfer of ownership will be
handled by our solicitors”. Seppelt sought a declaration that a contract of sale was
created.
Issue: was the letter made to the company an offer of such a nature that it was
capable, by acceptance, of being converted into a binding contract?
Held: the court held that the parties did not, by the relevant letters in question, have
the intention then to create a binding contract of sale:
the nature of the transaction and the identity of the purchaser→parties are more
likely to enter into a binding contract via a formally drawn up document
elements of the agreement are yet to be finalised
references to future discussions of solicitors
use of the word “offer” is not conclusive
subsequent discussions of the solicitors not conclusive yet supportive of the view
that agreement had not been reached
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Principle:
Court looks objectively at conduct of parties to find relevant intention-reasonable
person’s in the position of the promisee
subsequent discussions of the parties can be referred to in determining whether a
contract has been formed
(ii)
Offers can be made to the whole world or a more limited group
*Carlill v Carbolic Smoke Ball Co [1893] QB 256
Facts: Advertisement for ‘Smoke Ball’ promised immunity from the influenza
epidemic to anyone who used the product. Reward of £100 offered to anyone who
used the product as directed and got sick. Company deposited £1000 with Alliance
Bank to show sincerity. Plaintiff used the smoke ball as directed and got sick and
successfully sued for the reward.
Principle:
" Whether something is an offer is determined objectively from the perspective
of the recipient of the statement
" In unilateral contracts, the performance of the condition is acceptance of the
offer and the need for notification of acceptance is impliedly dispensed with
(Bowen LJ)
" Aspect of request and reliance in terms of consideration-‘does not the person
who acts upon this advertisement and accepts the offer put himself to some
inconvenience at the request of the defendants?’ (Lindley LJ)
" ‘Inconvenience sustained at the request of the other is enough to create a
consideration’ (Bowen LJ)
" £1000 lodged at the bank-therefore ‘it cannot be said that £100 would be paid
was intended to be a mere puff.
(iii)
Acceptance
Until you communicate acceptance, the offeror is free to withdraw
An offer can only be accepted by the person/persons to whom it is addressed.
An offeree is not bound if an unauthorised person conveys to the offeror that the
offeree intends to accept.
The offeror can dispense with the need for communication in the terms of the
offer.
If the acceptance is not sent in the way that corresponds with a prescribed method
of acceptance by offeror, then generally that does not amount to an acceptance.
But there seems to be an exception that if you use a method that is just as efficient
then that would be ok.
(a)
Communication of Acceptance is generally required
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Felthouse v Bindley (1862) 142 ER 1037
Facts: Following conversation, Uncle wrote to nephew regarding proposed sale of a
horse. Letter said “if I hear no more about him, I consider the horse mine at £30 15s.”
No further communication occurred before the horse was auctioned for the nephew.
The nephew had said this sale was a mistake of Bindley (the auctioneer) as he
intended the horse to be kept out of auction and Felthouse to have it. Felthouse sued
Bindley for conversion.
Held: conversion had no occurred as contract had not been formed and therefore title
had not been transferred
Principle:
" Silence does not generally constitute acceptance since communication of
acceptance is generally required
" An offeror cannot compel an offeree to take positive steps to reject an offer by
stating that silence will amount to acceptance.
Empirnall Holdings v Machon Paul Partners Pty Ltd (1988)14 NSWLR 523
Facts: Representative of Machon and Empirnall agreed orally that Machon would
construct a building at Crows Nest for Empirnall. Machon commenced work and
forwarded two copies of a standard contract for signature together with a letter saying
‘we are proceeding on the understanding that the conditions of the contract are
accepted by you and the works are being conducted in accordance with those terms
and conditions’. Empirnall never returned a signed contract, but paid some progress
claims and sued for the balance.
Held:
! There was implied acceptance stemming from the conduct of the parties (Kirby
J)
Principle:
" Acceptance can be implied by conduct
" Acceptance by conduct occurs when the offeree:
! Has a reasonable opportunity to reject
! Takes the benefit of the services provided, and
! The services were clearly meant to be paid for
" In some circumstances there may be a duty on the offeree to communicate
rejection of the offer.
" If, instead of rejecting the offer, the offeree takes the benefit then he is taken to
have accepted.
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
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Principle:
" Acceptance need not be express. It may be inferred from conduct, the
circumstances, or the course of dealings between parties
Airways Corp of NZ v Geyersland Airways Ltd [1996]
Facts: Airways Corp, a newly privatised body was charged (under statute) with the
responsibility of providing air traffic control services in NZ, sent its terms and
conditions to the various airlines operating in the country. Two small airlines rejected
the terms and conditions and yet used the services because they were obliged under
statute.
Held:
! There was no contract because there never was an acceptance of the terms and
conditions. It was argued strenuously that merely using the air traffic control
services amounted to acceptance, however, this failed as it was plain to Airways
Corporation that its terms and conditions had been rejected by the vigorous
correspondence of the two small airlines.
Principle:
" Conduct will not amount to acceptance where rejection is clear.
Trade Practices Act 1974 (Cth) ss 64- 65
s 64: Businesses cannot claim a right to payment for unsolicited goods or services
without reasonable cause. To do so is an offence.
S 65: A person is not liable to pay for unsolicited goods. They become the person’s
property 3 months after receipt or 1 month after notifying the company that they do
not want them.
(b)
Correspondence with offer
*Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (Eng) Ltd [1979]
Facts: Butler’s quotation to supply a machine tool contained printed conditions on the
reverse, which included a price variation clause and stated that the conditions would
prevail over any terms and conditions in the buyer’s order. Ex-Cell-O’s order in
response contained conflicting printing conditions, with no provision for price
variation. Butler sent an acknowledgement, and supplied the machine. It sued for
price increase.
Held:
! ‘last shot approach’ appropriate with the result-seller’s signing of the slip was
final acceptance (of the buyer’s terms)-no price variation clause
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! Denning LJ: Offer/Acceptance tools don’t reflect commercial reality. Look at
the transaction as a whole. In this particular case, the crucial document was slip
signed by seller and sent back, had accepted buyer’s terms and conditions.
Principle:
" counter-offer extinguishes the original offer
" offer and acceptance must correspond exactly
" in battle of the forms-‘last shot fired’ approach
Hyde v Wrench (1840) 49 ER 132
Principle:
" A purported Acceptance which is not in the same terms is a Counter-Offer, and
amounts to a rejection of the Offer
" An offer, once rejected, is no longer open to Acceptance
Stevenson Jacques and Co v Maclean (1880) 5 QBD 346
Principle:
" A mere request for information by the offeree does not amount to a rejection
(c)
Postal Acceptance Rule
Bressan v Squires (1974) 2 NSWLR 460
Principle:
" Where it is contemplated that acceptance may be made by post, Acceptance is
complete as soon as a properly pre-paid and addressed letter is posted
! This rule only applies where the offer itself is made by post (Adams v Lindsell
(1818))
! Does not apply to instantaneous communications (Brinkibon v Stahag Stahl)
! This may be expressly displaced by the offeror, or by inference from the
circumstances of negotiation, or where the application of the rule would lead to
manifest absurdity (sale of land)
(d)
Knowledge of offer generally required for acceptance?
*R v Clarke (1927)
Facts: A reward was offered for information leading to the arrest and conviction of
certain murderers. Clarke had been arrested, and although he had heard of the reward,
he gave the necessary information not for the purposes of obtaining the reward but
rather to save himself from the murder charge.
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Held:
! Not entitled to reward as he did not act in reliance on the offer
Principle:
" A person must have knowledge of an offer in order to accept it → “there cannot
be assent without knowledge of the offer, and ignorance of the offer is the same
thing whether it is due to never hearing of it or forgetting it after the hearing”
" Unless a person performs the conditions of the offer, acting upon its faith or in
reliance on it, he does not accept the offer and the offeror is not bound to him
NB. This concept of reliance or pursuit seems to cross line into subjective state of
mind
(iv)
Duration of Offers
(a)
Revocation
! In the communication of the revocation of the offer in reward situations, the
only authority is the American authority Shuey v United States (1876), which
held that an offer will be effectively revoked if the same method that was used
for advertising the offer was used for its revocation. Eg. an offer made in a
newspaper must be revoked in the same method.
Dickinson v Dodds (1876) 2 Ch D 463
Facts: Dickinson offered to sell property to Dodds and that the offer will be kept open
until Friday 9am. Then sells to a third party and this is communicated to Dodds.
Dodds tries to accept but cannot as already cancelled
Principle:
" An offer can be revoked any time before acceptance
" Notice to the Offeree is required, but may come from a source other than the
Offeror
Options
! A promise to hold an offer open is binding at common law if consideration has
been given in return for that promise.
! An option is an agreement between an option holder and a grantor on specific
terms, either at a specified time or within a specified period.
Goldsborough, Mort & Co Ltd v Quinn (1910) 10 CLR 674
Facts: Goldsborough gave an option to purchase to the plaintiff in respect of lands
conditionally purchased under the Crown Land Act, the price being expressed as “£1
10s per acre calculated on a freehold basis”. Quinn sought to revoke its offer.
Question whether Quinn could be forced to perform or just get damages.
Held:
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! Griffith CJ and O’Connor saw the option as a contract for the sale of that
property, conditional upon being exercised within the specified period.
Therefore, you get specific performance of the contract rather than damages.
! Isaacs J: Clearly preferred irrevocable offer theory. Despite adopting
irrevocable offer theory you can still get specific performance.
! Therefore, distinction is of little value as both provide for specific
performance.
If the contract is a ‘unilateral contract’ and the act has been part performed, can the
offer be revoked?
Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1910) 10 CLR 674.
Facts: Mobil Oil issued performance targets with corresponding rewards for a six
year period to its syndicates. Mobil Oil revoked this offer before six years were
complete.
Principle:
" No special rule that an offer of a unilateral contract cannot be revoked because
an attempt to do the act requested has commenced.
" Part performance does not mean that the offer is irrevocable because there is no
contract until complete performance of the act required for acceptance.
! There could be circumstances where you could get an injunction to stop an
offeror from revoking an offer once the act of acceptance has commenced.
(b)
!
!
!
!
!
!
!
!
Rejection, Lapse, Non-occurrence of condition and Death
Death:
The effect of death upon the continuity of an offer is not altogether clear
Effect of death of offeror?
Is the offeror’s estate bound if the offeree performs an act of acceptance in
ignorance of death? In Dickinson v Dodds (1876) it has been suggested that
Mellish LJ said, by way of obiter dicta, that an offer cannot be accepted once
the offeree knows of the offeror’s death. The case of Bradbury v Morgan
(1862) suggests that, in principle at least, this opinion does not represent the
law when the offeree is ignorant of the offeror’s death.
Effect of death of the offeree?
In obiter dicta in Reynolds v Atherton (1921), Warrington LJ was of the
opinion that an offer ceases on the death of the offeree.
If the offer takes the form of an option then a contractual right is vested in the
offeree, and, in the event of this death before the expiration of the agreed
period, whether or not the offeree’s personal representatives can exercise the
option by accepting the offer will depend on the nature of the contract (Carter
v Hyde (1923))
Lapse:
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! An offer terminates at the expiration of the stated period or if no such period is
stated then it will be terminate at the expiration of a reasonable time.
*Stevenson Jacques and Co v Maclean (1880) 5 QBD 346
Facts: McLean telegraphed to Stevenson an offer to sell iron at 40s per ton.
Stevenson telegraphed ‘Please wire whether you will accept 40 for delivery over two
months, or if not, longest limit you would give’, but this was not answered. McLean
telegraphed later revoking his offer, but before it was received Stevenson had sent a
telegram of acceptance. McLean refused to deliver and sued for damages.
Held: Stevenson’s first telegram was only an inquiry and not a counter-offer.
Stevenson had a right to accept the offer until revocation.
Principle:
" A mere request for information does not amount to a counter-offer.
(v)
Uncertainty and Incompleteness
(a)
Generally
! If the agreement that the so called parties have reached is uncertain or
incomplete, then there is no contract.
! However, courts do strive to give certainty to agreements, especially
commercial agreements. They use various techniques to do this.
i)
ii)
iii)
By recourse to external standards, but usually only if the contract itself
adopts that agreement. But the agreement must exist (Whitlock v Brew A
sells to B, B leases back to A for the purposes of running a petrol station.
But lease terms only said “on such terms as normally or usually govern
such a lease”)
Recourse to standard of “reasonableness” to try to give effect to the
bargain.
Courts can also imply a term to uphold a bargain. Such as price. But not
for a contract for sale of land.
Hillas v Arcos Ltd (1932) 147 LT 503
Facts: Sale of “22,000 standards of Russian soft wood goods of fair specification over
the season 1930” Also an option to purchase another 100,000 standards for 1931. The
option didn’t say anything about the kind, sizes, quality, dates etc.
Issue: Was the option void for uncertainty?
Held: H of L said that it wasn’t.
Principle:
" Standard has to be of “fair specification” quality can infer reasonable in the
circumstances.
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! What the court was heavily influenced by was that they had entered into the
previous contract of sale and had gone ahead.
Sale of Goods Act, s 13
(b)
Severance of Unenforceable Clause
! An agreement that contains an uncertain term or a combination of terms may
be saved by the court severing the offending part or parts from the contract.
! Severance can be used in contracts where uncertainty stems from
incompleteness as well as ambiguity
! There has in recent years been a tendency for the courts to be more astute than
previously in finding ways in which to uphold agreements, especially
commercial agreements.
! A contract may be void for uncertainty if its language is vague or ambiguous,
or if it is incomplete
*Whitlock v Brew (1968) 118 CLR 445
Facts: Brew agreed to buy land from Whitlock and paid a deposit. Contract for sale of
land included a term regarding the lease of a portion of the land to a petrol station
‘upon such reasonable terms as commonly govern for such a lease’. Brew later sued
for return of deposit.
Held: Deposit was recoverable as there was no concluded contract. Clause 5 was
uncertain in that it neither specified, nor provided, a means for the determination as
between the parties of the period for which the contemplated lease was to be granted
or the rent payable. The clause was material and an inseverable part of the
consideration.
Principle:
" Test for severability: The test is whether the parties intended that, if the clause
in question could not for any reason take effect, the whole contract must fail
" That intention is to be ascertained from the construction of the contract as a
whole
" The independence or interdependence of the uncertain part with the contract as
a whole, the relative importance of that part and the role it plays in
consideration are factors in determining severability
(c)
Agreements to negotiate
*Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1
Principle:
" Majority accepted the possibility of a legally enforceable agreement to
negotiate
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