#3513 - Offer, Acceptance, Intention, Certainty, Third Parties - Contract Law

Offer, Acceptance, Consideration, Intention to Create Legal Relations, Certainty, Third Party Rights

Offer, ITT & Acceptance

1. Offer or ITT

• Goods displayed on shelves =ITT (Pharmaceutical Society v Boots)

• Advertisement in bilateral contract =ITT (Patridge v Crittenden)

• Advertisement in unilateral contract = offer to whole world(Carlill v Carbolic)

• Invite to make formal application for housing=ITT (Gibson v Manchester CC)

• Invitation to submit tenders= offer when addressed to small number of interested parties, if:

1. tender procedure’s clear, orderly and familiar

2. outcome is consistent w/assumption of commercial parties (Blackpool and Fylde Aero Club v Blackpool BC)

• Display of goods or advertisement to effect that goods will be sold at particular price= offer

• ultimately depends on facts!

2. Acceptance

• Can take any form:

1. by conduct (Brodgen v Metropolitan Railway)

2. silence won’t suffice (Felthouse v Bindley)

• could argue the rule is flawed in principle & shouldn’t apply where offeror is seeking to use it to avoid the contract – shouldn’t be able to rely on the rule intended to protect the innocent party

3. method can be prescribed/requirement waived altogether, if doesn’t adversely affect the offeree (Manchester v Diocesian Council for Education)

4. courts can imply the requirement for acceptance to be communicated to him (Carlill v Carbolic)

• Must be communicated to the offeror (Felthouse v Bindley)

• Instantaneous communication (e.g. telex)

1. contract is complete when acceptance is received by offeror

2. contract is made at the place where acceptance is received (Entores v Milesupheld in The Brinkibon resolve issue by

1. ref. to intention of parties

2. sound business practice

3. possible a judgment where the risks should lie (Thomas v BPE Solicitors)

• Performance of requested act = not acceptance unless performing party is aware of the offer

• Postal Rule:acceptance takes place upon posting (Household Fire Insurance v Grant)

• rule can be displaced by clear offeror’s stipulation (Holwell Securities v Hughes –shouldn’t apply where would lead to manifest inconvenience & absurdity)

• Must coincide w/ offer, otherwise = counter offer (Hyde v Wrench)

• Battle forms: parties exchange their own standard termsis there agreement on material terms (Butler Machines v Ex-Cello Corp BUT

• Tekdata Interconnections Ltd v Amphenol Ltd–can’t have one universal rule but traditional O&A analysis appliesin most cases provides degree of certainty desirable to commercial relations. SO take last counter offer as having been accepted. If there’s long term conduct b/w parties, may dictate a different approach but court is slow to depart from traditional rules.

• GHSP Incorporated v AB Electronic Ltd [2010] – disagreement on whether D’s liability was capped failure to agree. Evidence of judicial reluctance to conclude no contract had been made when parties have behaved as if there was – judge scrapped both parties’ terms & held SGA 1979 implied terms applied.

3. Revocation of Offer

• Can revoke anytime b/facceptancebutonce accepted can’t withdraw

• Withdrawal must be communicated to the offeree (Byrne v Tienhoven)

• Communication can be by reliable TP, e.g. mutual acquaintance (Dickinson v Dodds)

• Unilateral offer can’t be withdrawn once performance has begun but promisor not obliged to honour the promise until performance completed in full (Daullia v Millbank, Errington v Errington)

Intention to Create Legal Relations

• Domestic relationsrebuttable (Merritt v Merritt) presumption against intent (Balfour v Balfour)

• Rebuttal - judged on context in which agreement was concluded

• Links with consideration in Balfour

• Radmacher v Granatino – Baroness Hale: nothing to stop husband & wife making legally binding arrangements by contract/settlement to regulate their property & affairs while they’re still together(e.g. agreement to share ownership/ tenancy of matrimonial home, bank acc, savings, other assets) – any problems posed by consideration or the need to express contractual intent could be solved by making the agreement by deed.

• Commercial & business agreementsrebuttable presumption in favour of intent (Esso Petroleum v Commissioners of Customs and Excise).

• Rebuttal rare but can be done by express & clear stipulation of the parties

• RTS Flexible Systems Ltd - when deciding if parties concluded a binding contract, court has regard not to their subjective understandings, but to what was communicated b/w them by words/conduct + whether it leads objectively to conclusion that they intended to create legal relations & reached agreement on all essential terms (depends upon evaluation of evidence).

Uncertainty/Incompleteness

• Courts won’t make the contract forparties – must make & express it in sufficiently clear manner to enable courts toenforce it

• Omission of essential term/means for determining it= no contract (May and Butcher v King)

• in absence of description of goods, agreement is still valid (Hillas v Arcos)

• Contract which may come into existence following a letter of intent may take one of 2 forms:

1. ordinary executory contract

2. “if”contract (A requests B to carry out a certain performance & promises B that, if he does, he’ll receive a certain performance in return – if parties still at the state of negotiation, no contract exists

• Work being done pursuing to agreement = evidence that contract exists (but not inevitable conclusion(British Steel v Cleveland Bridge (1981)

• McKendrick: disagreement (parties actively didn’t agree on something) v failure to agree (contract is silent on the point) – easier for court to fill the gap in the latter.

• Parties must agree on all terms they think law requires but there are certain terms regarded by law as essential

• RTS Flexible Systems - parties must have agreed on all terms which theythink law requires as essential to the agreement –can provide that they’ll only be bound if certain matters are agreed won’t be bound if they aren’t, unless there’s been a waiver (e.g. you keep up the work & no one raises the point of written contract as requirement, court may conclude it’s been waived).NB: there are certain points which law requires as essential and w/out agreement on those, contract is too uncertain to be enforced.

• B agrees for specified period of time not to negotiate w/anyone but A re sale of property + A gives good consideration = enforceable lock out agreementNOT a lock in agreement, in that it doesn’t lock B into contracting w/ A (Walford v Miles)

• Techniques used to resolve uncertainty

1. resolution by either party orTP

2. statutory intervention

3. severance by courts

4. implied terms

Consideration

• Definition: some right, interest, profit or benefit accruing from one party or some forbearance, detriment or loss or responsibility given, suffered or undertaken by another

• Needn’t be adequate but must be sufficient (Chappel v Nestle)

• Act not wholly illusory (Lord Wedderburn)

• Pre-existing duty rule

1. Performance of contractual duty owed to TP = sufficient consideration (Shadwell v Shadwell)

2. Performance of duty imposed by law or a promise to a perform it = no consideration

• unless C did more than the pre-existing duty (Ward v Byham; Glassbrook v Glamorgan)

3. Performance of contractual duty owed to promisor = no consideration (Stilk v Myrick) unless promisor obtains a ‘practical benefit’ (Williams v Roffey)

• Attrill v Dresdner Kleinwort Ltd – employee’s decision not to exercise his right to terminate the contract could equate to consideration for the employer’s promise to pay him more (employer sought to retain!)

• Promise to accept part payment does not constitute consideration for promise to discharge whole debt (Foakes v Beer)

• Exceptions

1. earlier payment

2. accepting something other instead

3. accepting part payment + something else

4. promissory estoppel (Collier v Wright Holdings– debtor offers to creditor to pay amount he owes + he voluntarily accepts + in reliance, debtor pays as agreed = debtor bound to accept it by virtue of promissory estoppel) goes against “suspensory effect” of estoppel)

• Foakes v Beer remains good law, despite Williams v Roffey (ReSelectmove Ltd)

• Past consideration isn’t good consideration (Eastwood v Kenyon) UNLESS

1. the act was done at request of the promisor

2. it was understood that payment was to be made for service when it was requested

3. the contract must have been a legally enforceable one (Pao On Lau Yiu)

• Consideration must move from the promisee (Tweddle v Atkinson) also relates to privity

Promissory Estoppel

• In absence of consideration, a promise can still be binding under promissory estoppel

• Originated in Hughes v Metropolitan Railway revived by Denning in High Trees = 5 elements:

1. Clear, unequivocal/unambiguous promise or representation as to future conduct, intended to affect legal relations b/w parties & indicating promisor won’t insist on his strict legal rights (Woodhouse AC Israel v Nigerian Produce Marketing)

2. Promisee relied on it to his detriment sufficient he took a course of action he wouldn’t have otherwise taken

3. It’s inequitable for D to go back on his promise (D&C Builders v Rees) usually satisfied by showing reliance

4. Promiseedidn’t induce the promise byinequitable conduct – he who comes to equity, must do so w/clean hands (Collier v Wright Holdings)

• Suspensory effect (Hughes v Metropolitan Railway)

• unless post breach representations/ not possible/practicable to return parties to original position (High Trees, Collier v Wright Holdings)

• Normally, not used as a cause of action – acts as...