Contract Law Revision
A contract is an agreement giving rise to obligations which are enforced or
recognised by law.
Bilateral contracts: mutual promises
Unilateral contracts: only one party makes the promise/ is bound to perform (if
you find my lost dog, I’ll pay you; he doesn’t NEED to find the dog)
OFFER
Harvey v Facey:
Property in Jamaica. Statement of lowest price does not include implied contract
to sell at that price
Carlill v Carbolic Smoke Ball Co 1893
The notification of acceptance of an offer does not always need to be given,
sometimes the performance of the conditions can suffice.
An offer does not have to be made with any one in particular. An offer can be
made to “the whole world”, it will be made to those people who accept it.
Pharmaceutical Society of Great Britan v Boots Cash Chemists 1953
When items are displayed in a shop. Is that an open (not sure if correct term)
contract? Or does the customer make the contract when he goes to the till and
says he wants to buy something. The customer makes the contract when he goes
to the till.
The mere fact that the customer picks up a bottle of medicine from the shelves
does not amount to an acceptance of an offer to sell. It is an offer by the customer
to buy and there is no sale effected until the buyer’s offer to buy is accepted by
the acceptance of the price.
Patridge v Crittenden 1968
The Ds had inserted an ad for the sale of live wild birds, the offering for sale of
which was contrary to the Protection of Birds Act 1954.
Generally, Advertisements and Circulars, unless they came from manufacturers,
should be construed as invitations to treat and not offers for sale.
Gibson v Manchester City Council 1979
The language meant that the correspondence was simply the negotiation process
of a contract and not a contract in itself.
Phrases like “may be prepared to sell the house to you” are fatal to any claim to
the contrary.
Blackpool and Fylde Aeroclub Ltd v Blackpool Borough Council 1990
The defendant council owned and managed an airport and raised some reveneue
by granting a concession to operate pleasure flights form the airport. They
invited the claimant and six other parties to tender for the concession and a
deadline for applications was set. The claimant’s tender was submitted an hour
before the deadline but the letterbox was not cleared by the council in time and
hence they thought that the claimant was late and they didn’t consider his
tender.
The court of Appeal held that the invitation to tender did here contain an offer to
consider tenders received by the deadline.
Tendering procedures are already weighted heavily in favour of the invitor. The
invitee deserves this protection: If he submits a conforming tender before the
deadline he is entitled, as a matter of contractual right, to be sure that his tender
will after the deadline be opened and considered in conjunction with all other
conforming tenders or at least that his tender will be considered if others are.
In this case, such is not explicitly stated, but still implied; and true, that contracts
are not to be lightly implied.
ACCEPTANCE
Adams v Lindsell 1818 (postal rule)
Where an offer was accepted by post, acceptance took effect at the date of
posting.
On September 2, 1817, L (Defendants) had written to P (Plaintiffs) offering to sell
some wool and asking for an answer "in course of post". However, L's letter was
wrongly addressed and did not reach P until the evening of September 5. At that
time P wrote an answer, agreeing to accept the wool on the terms proposed. The
answer, sent in the ordinary course of post, was received by L on September 9.
However, they had sold the wool to another person on September 8.
Judgment for plaintiffs. L had to be considered in law as having made, during
every instant of the time their letter was travelling, the same identical offer to P.
The contract was completed by the acceptance of the offer by P. The delay had
arisen entirely from L's mistake and it had therefore to be held against them.
Household Fire & Carriage Accident Insurance Co Ltd v Grant 1879
Where it was expressly or impliedly authorised by the contractual parties that
acceptance of an offer could be posted, the contract was completed on posting
the acceptance, irrespective of whether delivery was delayed or failed to take
place at all.
The appellant (G) appealed against a decision finding him to be a shareholder in
the respondent company (H). G had applied for shares in H and a letter was
posted to him containing the notice of allotment. G never received the letter. H
went into liquidation and the liquidator brought proceedings seeking payment
from G for the shares. G denied being a shareholder. G argued that for him to be a
shareholder the allotment of shares had to have been communicated to him and
a letter posted but not received did not amount to 'communication'.
Held that G was a shareholder. He had made an application for shares in H in
circumstances which had to imply that he authorised H to send the allotment
notice by post. The contract was made from the time the acceptance was posted
by H and there was no distinction between a delay in delivery by the Post Office
and its failure to deliver at all.
Bramwell L.J (Dissenting) posting a letter did not differ from other forms of
communication in that for a person to be affected by a communication, it must
have reached him.
Holwell Securities v Hughes 1974
An option, exercisable by notice in writing, is not validly exercised by the posting
of a letter which is not received.
D granted P an option to purchase land, exercisable by notice in writing within
six months. Shortly before the expiration of the period, P posted a notice of the
exercise of the option, which never arrived. P contended that the option was
validly exercised by the posting of the notice.
The court summarized that the postal rule means that if the parties
contemplated that the postal service might be used for acceptance of an offer, the
contract is formed when acceptance is posted rather than when it is received.
However, the terms of the contract can require actual communication, and this
was so in the present case.
Entores Ltd v Miles Far East Corporation 1955
An English company (the claimants) and the agents in Amsterdam (the
defendants) of a New York based company concluded a contract by means of the
telex system of communication whereby a message can be typed on a teleprinter
in one country and be instantly recorded in another. An offer was sent by telex
from England accepted by telex from Holland. The acceptance was received in
London. The claimants wished to take a legal action that was only available if the
contract was made in England (they sought leave to serve notice of a writ on the
defendant in New York claiming damages for breach of contract). So the question
at issue was whether the contract was made where the acceptance was sent (ie
Amsterdam) or where the acceptance was received (ie London). The court held
that it was the latter.
The rule about instantaneous communications between the parties is different
from the rule about the post. The contract is only complete when the acceptance
is received by the offeror; and the contract is made at the place where the
acceptance is received. Thus, in the case of telex communications, the place
where the contract is made is the place where the offeror receives the
notification of the acceptance by the offeree.
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellchaft mbH 1983
After negotiations between the parties for the sale of a quantity of steel bars the
buyers, an English company, accepted by a telex sent from London to Vienna, the
terms of sale offered by the sellers, an Austrian company. The contract was not
performed, and the buyers issued a writ claiming damages for breach of contract.
Held, dismissing the buyers' appeal, that where there was instantaneous
communication between the offeror and the offeree the formation of a contract
was governed by the general rule that it was concluded where and when
acceptance of the offer was received.
Butler Machine Tool Co v Ex-cell-o Corp (England) 1979
The claimant sellers offered to sell a machine to the defendant buyers. The offer
was stated to be subject to certain terms and conditions, one of which was a
price variation clause. The buyers replied ordering the machine, and the order
was stated to be subject to the buyers own terms and conditions, which did not
include a price variation clause. At the foot of the buyers order was a tear-off
slip stating “We accept your order on the terms and conditions stated therein”,
which the sellers signed. Issue as to whether price variation clause part of
contract or not.
Held, here parties to a contract have made offer and counter-offer, the
documents passing between the parties must be construed as a whole, but the
rules set out in Hyde v Wrench (49 E.R. 132) still apply. The plaintiff sellers
offered to deliver a machine tool on condition that orders were only to be
accepted on the terms set out in the quotation. The sellers' terms included a
price variation clause. The defendant buyers replied with an order containing
different terms and no price variation clause. The order had a tear-off slip of
acknowledgment on those terms, which acknowledgment was duly signed by the
sellers. Due to the buyers' delay in accepting delivery the sellers invoked the
price variation clause. The sellers were successful at first instance but on appeal,
held, allowing the appeal, that the buyers' reply was a counter offer which the
sellers had accepted by their acknowledgment.
The courts looked for an acceptance which corresponded exactly to an offer, and
the signing of the tear off slip was just that. In such a case, the ‘last shot fired’
commonly wins.
Byrne & Co v Leon Van Tien Hoven & Co
This was an action for the recovery of damages for the non-delivery by the
defendants to the plaintiffs of 1000 boxes of tinplates, pursuant to an alleged
contract. The defendants claimed that the contract was not valid as they had
revoked the offer (8th Oct) before the claimants had accepted it (11th Oct).
Revocation of an offer could not be effective until received by the offeree (done
on the 20th of Oct) and that was after the claimants’ acceptance on October 11.
Carlill v Carbolic Smoke Ball Co 1893
The notification of acceptance of an offer does not always need to be given,
sometimes the performance of the conditions can suffice.
An offer does not have to be made with any one in particular. An offer can be
made to “the whole world”, it will be made to those people who accept it.
Felthouse v Bindley 1862
The claimant was the uncle of the owner of a horse. He wrote his nephew a letter
offering to buy the horse for 30I 15s and adding that he would consider the deal
done if he hears no more about it. The nephew intended the deal to be done and
didn’t communicate anything to his uncle, and at a later auction (6 weeks later)
asked the auctioneer not to sell the horse as it has already been sold. The
auctioneer accidently did. The uncle bought an action against the auctioneer,
which failed because it was held that the nephews silence did not constitute
acceptance and hence there was no contract and the horse did belong to the
uncle at the time the auctioneer sold it.
TERMINATION OF AN OFFER
Dickinson v Dodds 1876
On Wednesday, June 10, 1874 Dodds (D) sent Dickinson (P) a memorandum in
which he agreed to sell a specified piece of land for 800 pounds with the offer
held open until 9AM the following Friday. Dickinson alleged that he had decided
to accept Dodds’ offer on Thursday morning but did not contact him immediately
because he thought he had until Friday morning to accept. On Thursday
afternoon Dickinson learned that Dodds had offered or agreed to sell the land to
a third party. Dickinson wrote a note accepting the offer and delivered it to his
home, leaving it with his mother-in-law who neglected to give the note to Dodds.
On Friday morning before the original deadline to accept the offer, both
Dickinson and his agent gave Dodds a written acceptance of the offer. Dodds
stated that he had already sold the land to another party the previous day.
Dickinson sued for specific performance. The trial court found in Dickinson’s
favor and ordered that Dodds convey the property to him and Dodds appealed
Issue: Whether a promise to hold an offer open is binding where the other party
does not accept until after he learns that the offeror has already conveyed the
property.
Holding and Rule: No. An open offer to sell terminates when the offeree learns
that the offeror has already agreed to sell to someone else.
The court stated that since Dickinson knew that Dodds’ offer had been implicitly
withdrawn when he learned that he had sold the property to someone else, there
was no meeting of the minds at the time acceptance was made and therefore a
binding contract was not formed.
Byrne & Co v Leon Van Tien Hoven & Co
This was an action for the recovery of damages for the non-delivery by the
defendants to the plaintiffs of 1000 boxes of tinplates, pursuant to an alleged
contract. The defendants claimed that the contract was not valid as the had
revoked the offer (8th Oct) before the claimants had accepted it (11th Oct).
Revocation of an offer could not be effective until received by the offeree (done
on the 20th of Oct) and that was after the claimants’ acceptance on October 11.
CERTAINTY
British Steel Corp v Cleveland Bridge & Engineering Co Ltd 1984
Where one party does work at the request of another in anticipation of a
contract, but where on the facts no contract is created, then that party is entitled
to payment on a quantum meruit basis.
D successfully tendered for the fabrication of steel work in the construction of a
building. The parties entered into complicated negotiations and D eventually
sent a letter of intent requiring P to commence work on the construction of
various items pending contract. P began construction of the items. Further
negotiations took place for some time during which P continued to manufacture
steel nodes. Eventually negotiations broke down and D refused to make any
payment for the nodes. P sued on a quantum meruit basis, D counterclaimed for
breach of contract.
Held, that no contract had in fact been made by the letter of intent, nor had an
executory contract been created by P acceeding to the request to begin work on
the nodes; in the circumstances D were liable to pay a reasonable sum for work
done at their request.
Hillas & Co Ltd v Arcos Ltd 1932
Hillas & Co Ltd v Arcos Ltd is a landmark House of Lords case on English contract
law where the court first began to move away from a strict, literal interpretation
of the terms of a contract, and instead interpreted it with a view to preserve the
bargain. The Court ruled that judges may imply terms into a contract based on
the past dealings of the parties rather than void the agreement.
Lord Wright stated in this case that people who give good consideration can bind
themselves to a duty to negotiate in good faith, though this was controversially
rejected in the later House of Lords case, Walford v Miles.
Arcos agreed to supply Hillas with lumber in a contract stating the sale of
"22,000 standards of softwood of fair specification". In the contract there was an
option to purchase additional "100,000 standards" of lumber. The only terms of
the option stated,
"Whatever the conditions are, buyers shall obtain the goods on conditions and at
prices which show to them a reduction of 5 per cent on the f.o.b. value of the
official price list at any time ruling during 1931."
Hillas tried to exercise the option but Arcos claimed the contract was cancelled.
At trial the jury found that the contract had not been cancelled but Arcos put
forward the claim that the option "was an agreement to make an agreement, the
terms of which were not defined, and so was unenforceable."
In application to the facts, the court ruled that "fair specification" was not vague
enough to void the contract. Both parties had experience in the trade and had
completed similar bargains in the past thus each would have known each others'
intentions at the time. Therefore, the option in the contract was valid.
Sudbrook Trading Estate Ltd v Eggleton 1983
Where a lessee exercises an option to purchase but the lessor refuses to appoint
a valuer, the court may intervene to ascertain a fair and reasonable price and
order specific performance of the contract. Various industrial premises were
demised by four separate leases all due to expire in 1997, and all with clauses
granting the lessees an option to purchase the reversion in fee simple at a price
to be agreed by valuers appointed by both parties. The lessees exercised their
options to purchase, but the lessors refused to appoint a valuer.
Held, allowing the lessee's appeal, that since the price was capable of being
ascertained, a complete contract was constituted; the court could and would, if
the machinery of ascertaining a price broke down, substitute its own to ascertain
a fair and reasonable price.
Walford v Miles 1992
An agreement whereby one party for consideration agrees for a specified period
of time not to negotiate with anyone else in relation to a sale of property can be
enforceable but an agreement that is open-ended in terms of time is not
enforceable.
M owned a company and premises which he decided to sell. He received an offer
of GBP 1.9 million from a third party and GBP 2 million from W. It was agreed in
principle to sell to W and M warranted that the profits in the first year would be
GBP 300,000. It was also agreed that if W provided a letter of comfort from their
bank confirming the loan facilities to raise the GBP 2 million, then M would
"terminate negotiations with any third party". W provided the letter but M,
concerned that staff would not co-operate with W and hence not make GBP
300,000 profit, withdrew from negotiations. W brought an action for breach of
the "lock-out" agreement which gave W exclusive opportunity to come to terms
with M. The agreement was collateral to the main agreement and the
consideration was the letter of comfort and W's continuation with true
negotiations. M argued that the agreement was unenforceable. The judge upheld
W's claim but the Court of Appeal found in favour of M.
Held, dismissing W's appeal, that a "lock-out" agreement could be enforceable
but this agreement was not as it amounted to an agreement to negotiate for an
unspecified period and so a vendor was not obliged to conclude the contract and
would not know when he was entitled to withdraw from negotiations. The courts
could not be expected to decide subjectively whether a proper reason for ending
negotiations existed
INTENTION TO CREATE LEGAL RELATIONS
Balfour v Balfour 1919
It held that there is a rebuttable presumption against an intention to create a
legally enforceable agreement when the agreement is domestic in nature.
Mr Balfour was a civil engineer, and worked for the Government as the Director
of Irrigation in Ceylon (now Sri Lanka). Mrs Balfour was living with him. In 1915,
they both came back to England during Mr Balfour's leave. But Mrs Balfour got
rheumatic arthritis. Her doctor advised her to stay, because a jungle climate was
not conducive to her health. As Mr Balfour's boat was about to set sail, he
promised her £30 a month until she came back to Ceylon. They drifted apart, and
Mr Balfour wrote saying it was better that they remain apart. In March 1918, Mrs
Balfour sued him to keep up with the monthly £30 payments. In July she got a
decree nisi and in December she obtained an order for alimony.
At first instance, Sargant J held that Mr Balfour was under an obligation to
support his wife.
The Court of appeal unanimously held that there was no enforceable agreement,
although the depth of their reasoning differed.
Jones v Padavatton 1969
There is possibly a presumption that members of a family do not intend
agreements between themselves to have the force of contracts. A mother agreed
with her daughter, a secretary in the United States, that if she would give up her
job and read for the Bar in England the mother would provide 200 (West Indian)
dollars per month maintenance for her; the daughter came to England and began
to read for the Bar. Later the agreement was varied, the mother agreeing to
provide a house for the daughter. On the mother's claim for possession of the
house, held (Salmon, L J dissenting)(1) that the arrangement was not intended to
be legally binding; and (2) that, consequently, the mother was entitled to
possession.