#14997 - Contract Law Problem Question Summary - Contract Law

A Brief Overview

1. CREATION OF A CONTRACT

   • 4 elements

     • Offer and acceptance

     • Intention to create legal relations (ICLR)

     • Consideration

   • Problems with creation of contract

     • Is there a LACK OF CERTAINTY?

     • PRIVITY: Are the players attempting to give RIGHTS TO THIRD PARTIES?

2. TERMS OF THE CONTRACT

   • EXPRESS TERMS

     • IDENTIFYING TERMS OF THE CONTRACT

       • TERMS TO INCLUDE AS PART OF CONTRACT:

         • Are the things said or done TERMS or MERE REPRESENTATIONS?

         • Successfully INCORPORATED into the contract?

       • TERMS TO REMOVE FROM THE CONTRACT:

         • UCTA 1977

         • CRA 2015

         • Common law

     • INTERPRETATION of the term

   • IMPLIED TERMS

     • Implied in fact

     • Implied at law

3. VITIATING FACTORS

   • Mistake

   • Misrepresentation

   • Duress

   • Undue influence

   • Unconscionability

   • Frustration and Force Majeure

• OFFERS

  • Has an offer been made?

    • Advertisements

    • Displays for goods for sale in a shop

    • Tenders

    • Auctions

  • Termination of offer

• ACCEPTANCE – contentious areas

  • Postal rule

  • Electronic communication

  • Acceptance by silence

  • Battle of the forms

• CONSIDERATION

  • Past consideration not good consideration

  • Consideration moves from promisor (privity problem)

  • Legally sufficient consideration

    • Performance of an existing duty

      • Statutory duty

      • Contractual duty to a third party

    • VARIATIONS: Increasing vs decreasing pacts

  • Doctrine of P.E.

    • When does it apply?

      • Existing debts?

    • How does it operate?

      • 3 elements in High Trees

    • What are its EFFECTS?

      • Suspensory or extinctive?

• INTENTION TO CREATE LEGAL RELATIONS

  • Domestic/social context

  • Commercial context

  • ‘in-between’ contexts

Offers

Definition: An offer is an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed (Treitel)

General OBJECTIVE TEST: Does a person in the position of B (having the knowledge of the relevant circumstances which B had), acting reasonably, would understand that A was making a proposal to which he intended to be bound in the event of an unequivocal acceptance: Crest Nicholson v. Akaria [2010]

• Evidence of the objective nature of the test – Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] CA - in this case, the fact that BOTH parties subjectively did not intend the creation of a contract was not material

• Objective principle:

  • Gives effect to REASONABLE interpretation of the language and not fanciful or unrealistic interpretations - eg Thake v Maurice [1986] HC (It was lunacy for claimant to rely on doctor’s assurance that the vasectomy was “irreversible” to be read as “irreversible by God or man”. That it was reasonable to know that “medicine is not an exact science” and that the doctor’s reassurance was “mere therapeutic comfort”)

  • It must be possible to work out what the apparent intent of A was - Raffles v Wichelhaus (1864), the parties agreed a sale of bales of cotton, to be delivered from Bombay on the Peerless, two Peerless, ambiguous, no contract

  • It must not be B’s fault that A appeared to agree to something that he did not actually intend to - Scriven Brothers [1913] HC (auction, misleading display of bale and hay, no contract)

Differentiating between Offers and Invitations to Treat (ITT) (ie has an offer been made)

1. Goods on display and advertisements

GENERAL RULE: The display of goods for sale (Fisher v Bell [1961] – CA, sale of a flick knife policeman contented this contravened some Act, where goods display with a price label, such a display is treated as an ITT. Offer is made by customer when presents item at the till. Acceptance occurs when cashier takes payment) and advertisements (Partridge v Crittenden [1968] HC, where advertisement of bird in newspaper WITH PRICE, therefore doesn’t breach protection of wildlife act) constitute ITT

• EXCEPTION: Rule can be displaced if, applying the objective test above, there is an intention to be bound by the terms:

  • E.g. Advertisements: Carlill v Carbolic Smoke Ball where the intention was evinced by the fact that the advert said that 1000 pounds had been deposited with the bank, indicating the seriousness of their willingness to pay the money

  • Chitty (2012) notes that courts are less willing to hold that it was an offer in bilateral contracts, since this sort of advertisement is intended to lead to further bargaining

2. Tenders

NOTE about definition -> SEALED BIDS vs Auctions – the former is a tender since it generally allows only ONE bid to be made (so sealed bids = tenders)

GENERAL rule: constitutes only ITT: Spencer v Harding [1870]

• EXCEPTION: Displaced if appears objectively that maker of the statement intended to make an offer

  • E.g. Sealed bid context: a legal obligation to award the contract to the bidder with the highest bid

• COMPLICATION #1: In LIMITED CIRCUMSTANCES, a collateral offer to consider bids properly submitted might be created: Blackpool Aero Club v Blackpool B. C (tenderer successfully sued auctioner for not considering bid as tender submitted tender by hand 1 hour before the deadline and the council’s janitor failed to clear the letter box the next day. That tender was struck out)

  • Obligations upon the invitor that were minimum standards of fair dealing:

1. The invitor must ‘consider’ each valid tender

2. The invitor must ignore invalid tenders eg Fairclough Building v Port Talbot BC (1992) CA held that invitor had not acted wrongly when refusing to consider a tender because a member of the tender committee was married to a director of the relevant tendering company

3. The invitor must not award the contract ahead of the deadline for submission of tenders

   • NOTE reasons given for creation of the collateral offer:

     • Tender addressed to a small number of interested parties

     • Procedure was “clear, orderly and familiar”

     • Outcome consistent with the “assumptions of commercial parties”

• COMPLICATION #2: A referential bid will generally be invalid (because of practice problem – of what if more than one party makes a referential bid): Harvela Investments v Royal Trust Co of Canada [1986]

  • Lord Templeman, in rejecting the attempt to make a referential bid, gave two main reasons:

    • First, the reason the other bidder had not made a referential bid was that the invitation to bid, on an objective view, did not indicate that such a bid was permissible. The terms of the invitation expressly or impliedly prohibit a referential bid.

    • Second, an impasse would emerge if more than one respondent made a referential bid (unless where there are only two bidders, the referential bid is capped).

  • BUT Lord Templeman added that an auction through referential bids could only be conducted by (i) making express provision in the invitation for the purpose and (ii) require each bidder to specify a maximum sum he was prepared to bid

3. Auctions

• Auctions with a reserve price: inviting bids to be made constitutes an invitation to treat.

  • The bidders are the ones making offers, and the offer is accepted by the auctioneer bringing down his hammer (British Car Auctions v Wright [1972] (therefore auctioneers not guilty of offering to sell the car since only ITT) and Sale of Goods Act 1979, s57(2)). The auctioneer acts as agent for a vendor, so when the hammer is brought down, a contract is made between the highest bidder and the vendor.

• Auctions without a reserve price: Barry v Davies [2001] (held valid offer and auctioneer must accept)

  • A COLLATERAL CONTRACT:

    • the auctioneer makes an offer to sell the goods to the highest bidder

    • this offer is accepted as soon as the highest bid is made

    • contractual obligation is thus created

  • BUT case gives no guidance given as to when exactly the offer was made by the auctioneer: TWO POSSIBILITIES

    • made when the auction is advertised; or

    • made when the auctioneer actually puts up the goods for sale at the auction.

4. Other transactions

GENERALLY, refer back to the objective intent of both parties

• Timetables/Transportation: TWO (or more?) possibilities

  • Timetable constitutes an offer

  • Passenger makes the offer by booking the journey

• Unilateral offer for reward (e.g. pls find my dear pet Rover) – generally an offer

• Automated machines: offer made by sign/notice near or at the machine: Thornton v Shoe Lane Parking [1971]

  • Lord Denning MR suggested that that ‘the offer was contained in the notice at the entrance giving the charges for garaging’. It is only when the customer is ‘committed beyond recall’ by putting the money into the slot that he demonstrates an unequivocal intent to accept.

Termination of Offers

1. Express termination by offeror

• General rule: a withdrawal must generally be communicated to the offeree before the latter accepts it in order to validly withdraw the offer

  • NOTE that communication of withdrawal must ACTUALLY (IN FACT) be communicated (i.e. there is no corresponding postal rule for withdrawal of offer) to the offere: Byrne & Co v. Van Tienhoven Co [1880] (held withdrawal of offer by postal rule invalid)

    • Lindley J’s judgment seems to suggest that withdrawal need not actually be communicated by the offeror himself

  • BUT communication of withdrawal could be done through a 3^rd party: Dickinson v Dodds (1876) (3^rd party informed offeree that offer is revoked as it was already sold to someone else. Held to be a sufficient termination of offer, even though a period of acceptance had been stipulated)

    • Note that the court was silent on whether the reliability of the 3^rd party is a crucial element

      • On the facts of this case, the 3^rd party was a reliable source of information (P’s own...