Contract Law
Tutorial Preparation
Tutorial 1:
Introductions, introduction to problems solving
Question 1: (Offer and Acceptance)
Tony, a car dealer in Sydney, advertised that in order to stimulate interest in the new range of Holden
cars, he would sell a car at 50% off the normal price to the first ten customers on the following Monday.
After reading the advertisement Edna travelled from Newcastle on Sunday, spent the night sleeping on
the footpath outside Tony’s showrooms and was the first customer to enter the premises on Monday
morning. Edna told Tony that she wanted to buy a car on the terms of the special offer, but Tony replied
that he had changed his mind and Edna must pay the full price. Advise Edna.
Using template:
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We are acting for Edna.
Edna wants to buy the car at a 50% discount or at least be compensated for her
journey/expenses.
The cause of action is that there was no contract formed (issue in offer/acceptance)
Issue 1: Was there an offer?
 Advertisements are not usually considered offers, merely “invitations to treat”: Partridge v
Crittenden [1968] 1 WLR 1204
o Ad for selling illegal bird, prosecuted for offering bird up for sale
o Held: advertisement was merely an invitation to treat, and not an offer
 However, Carlyl v Carbolic Smoke Ball shows us that an advertisement may be held as more than
an invitation to treat if it is specific enough, and shows an intention to be legally bound.
 To settle this, there is an objective balance:
o On the one hand, by limiting the acceptors “first ten customers on ... Monday”, it seems
that it is closer to being an offer: Lefkowitz v Great Minneapolis Surplus Store [selling
furs]
o On the other, the offer was not that specific (not offering a specific price, or a certain
model of car), and as such could not constitute a valid offer.
 I do not think that this would constitute a valid/binding offer because of its vagueness.
Issue 2: Was the offer accepted?
 It is clear that Edna intended to accept this offer.
 It is clear, also, that in cases of unilateral offers, acceptance need not be expressly
communicated, but, rather, may be implied through action (Carlyl).
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However, was her action in attempting to accept the offer going to Newcastle? That seems
insufficient for a purchase. However, Lefkowitz seems to show that this is acceptance.
Issue 3: Was the offer successfully revoked?
 In the case of a bilateral contract, it is sufficient for the revocation of the offer merely to be
communicated (Dickinson v Dodds (1876)).
 However, this is a unilateral contract, and it would be difficult to revoke the offer personally. As
such, Shuey v US (1875) allows that if the offer was revoked as prominently as it was advertised,
the revocation holds. This did not occur in this case.
 In my opinion, you could get around this: the purpose of Shuey was to allow for the revocation
of unilateral contracts indirectly, not restricting their direct revocation.
 If we accept that Edna’s trip to Newcastle is acceptance, than both revocations are invalid since
the contract is now executed.
 If we say that Edna’s acceptance was to occur on purchase, then it is likely that a court will find
that the offer had been successfully revoked.
Conclusion:
 Estoppels?
 Unlikely that the offer was made, dubious acceptance, probable revocation: it is likely that the
court will not find in favour of Edna.
Question 2: The Nature of Contract and Contract Theory
Excited by the prospect of the World Hang Gliding championships coming to their area they decided to
expand their business. Realising they would need extra finance Charles consulted the Regal Bank. Regal
agreed to advance Charles and Camilla the sum of $200,000.00 to finance renovations and ongoing
business costs however, as security, the bank required a personal guarantee and a mortgage from
Charles visited his parents Liz and Phil and explained the arrangement. He assured them that the
business was fine and the venture would prosper. In fact, just that week, Charles had secured a large
contract with the Hang Gliding 2007 organising committee for a three week conference at Winn’s Ore in
December. The conference and associated accommodation at the mansion would net $400,000.00.
(Well, not quite. He had actually tendered for the conference but did not know if he had won the
tender, but Liz and Phil didn’t need to know that).
Charles explained to his parents the mortgage and guarantee would be for only 6 months and for not
more than $200,000. The next morning, the bank manager (an old friend of the family and their long
time adviser) visited ‘Sandringham’. Phil was busy with his stamp collection and Liz was exercising her
pit corgis. Phil greeted the bank manager and they had a pleasant chat in the gardens, when they got to
the topic of ‘Charles and Camilla’ Phil confidently advised the bank manger that Charles had already
explained everything.
The bank manager realised the hard part was done and duly produced the mortgage and guarantee for
signing. Phil quickly perused the documents and signed them both. Phil called Liz, who was now in the
kitchen preparing a pot of tea and some scones, to come out and sign the documents. Liz duly complied,
she did not bother to read the documents as Phil looked after those sort of things and she would do
anything for Charles.
The mortgage and guarantee were for an unlimited period and an unlimited amount.
Ten months later and unfortunately Charles and Camilla did not win the conference tender and the
renovations were far more expensive than anticipated. Their business is bankrupt and Charles and
Camilla have disappeared. The Regal Bank advises Liz and Phil that Charles and Camilla now owe the
Bank $600,000 and it is going to sell ‘Sandringham’ if Liz and Phil do not repay the debt immediately.
Liz and Phil protest as they thought the contract with the bank was for 6 months and for $200,000 and
in any event the bank should have explained the documents to them. The Bank maintains that they
signed the documents so they should be bound.
Questions:
Note: This case is almost identical to the one we did in the first lecture ... Amadio? ... The difference
being that the bank did not have a personal relationship with the borrower and there was no language
barrier.
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What is the role of contract law in this situation?
o Contract law seeks to (1) make sure there was a meeting of the minds, (2) enforce
the agreement.
How would this case be approached under classical contract theory?
o You signed a document, bound by the 4 corners of the contract, deal with it.
Can one of the ‘feminist’ approaches be taken?
o Yep! As per Amadio: STDebt, emotional connection w child preventing reasonable
contract.
What are the economic consequences of Liz and Phil succeeding?
o Break sanctity of contract, reduce lending want by increasing risk, destabilising the
markets.
In advising the parties what moral and ethical issues arise?
o Is it ethical for the bank to press the contract with the knowledge that the terms
were not known?
o Can the family ask for the contract to be broken when their laziness (not reading the
contract) and trust of their son (fault of a third party, not the contracting party)
contributed to the dilemma?
o Did the banker abuse his position of social intimacy with the client?
Notes on Contract Law Theories
o Classical approach/black-letter tradition
 Lassiaze faire. Based on agrarian history of markets, that everyone was on
equal footing in entering into a contract (less relevant today) and, thus,
should watch out for what they promise (i.e. tough love)
o Economic theory
 Contracts facilitate economic exchange. Based on division of labour
requiring the exchange of goods for aggregate social benefit
 That the court should not interfere so as to not destroy the market
mechanism/balance
o Ideological functions as central (CLS)
 Contract used to prop up the powerful
 Because of unequal bargaining power/informational advantage the court
may be able to step in
o Feminist analysis
 That the contract is a male construct and does not allow for the difference
between men and women
E.g. sexually transmitted debt and the requirement for banks to clearly get permission for
wife/mother guarantees of debt