Contract Law


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Introduction Offer and Acceptance The Fact of Acceptance Termination of Offer Consideration Intention to Contract Contract Express Terms Implied Terms Exemption Clauses

Introduction A Contract is an agreement which binds the parties to it. Some agreements are not contracts; for example, an agreement to meet under the clock at Selfridges: what distinguishes contractual agreements from other agreements is the feature of binding legal obligation. Some

Offer and Acceptance A Contract is founded on agreement. another person accepts that offer. When that has happened (provided that other necessary factors. Although agreement is a basic element of every contract. namely . Agreement arises from offer and acceptance. One person makes an offer. consideration and intention to contract . it should be noted that the agreement is not always of such a kind that it would be so called in popular speech. Offer .are present ) there is a contact. Consideration will be dealt with in chapter 2 . in the law of torts) arise without agreement: what distinguishes contractual obligations from other obligations is the feature of agreement. intention to contract in Chapter obligations ( for example .

it may be. The offeror (that is.offer is a proposition put by one person (or persons) to another person ( or persons) coupled with an intimation that he is willing to be bound to that proposition. The intimation that the offeror is willing to be bound need not to be stated in words ( written or spoken). An True Offer distinguished from Invitation to Treat . such as a bus driver pulling up at a bus stop. inferred from the nature of the offeror's proposition or from the circumstances in which the proposition is made. or spoken words or by conduct. or to a group of persons or to " the whole world ". Thus the offer may take any form between an elaborate document with numerous clauses and sub-clauses and an ordinary everyday act of conduct. and frequently is. the person who makes the offer ) may make his offer to a particular person . He may make this offer in writing.

he cannot . that is .) a case involving council house sales. Tenders In Connection with tenders the distinction between an offer and an invitation to treat is reasonably clearly seen.L. The importance of the distinction is that if a true offer is made and is then accepted the offeror is bound . whereas if what the offeror said or did is not a true offer the other person cannot by saying " I accept " create a contract . it is not always easy to make it. For an example of this. H. If A asks a number of tradesmen to put in tenders for supplying him .It is necessary to distinguish a true offer from an "offer to chaffer" (as it is put in some of the old cases ) or from an "invitation to treat" ( to use a more modern phrase ).by saying " I accept " bind the offeror. see Gibson v Manchester city council (1979 . Important though the distinction is.

in so doing . he is not bound to accept the lowest. there may be cases where the person inviting tenders may bind himself to accept the highest bid. ( see Spencer v Harding (1870) ) on the other hand. Consequently. The position is similar Where A asks one tradesman to put in an estimate for supplying particular goods or services. But common sense is not so clearly satisfied with the parallel rule that the displaying of goods for sale is not the making of an offer. .with some particular goods or services he is not. making an offer . or any other tender. This is what happened in Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd. It is not A who makes the offer . ( 1985 HL) Display of Goods for Sale The rule of law that calling for tenders is not the making of an offer accords with common sense. the offer comes from the tradesman in the form of the tender or estimate.

The general proposition is that the bidder is the offer. C. The auctioneer accepts the offer by striking the table with is hammer. his bid (which may be by words or by conduct . merely an offer to chaffer.A. It follows that the auctioneer can withdraw an item at any time provided he has not accepted a bid. such as waving a catalogue ) is the offer.see Pharmaceutical Society of Great Britain v. it seems. This point is well illustrated by the case of Partridge v Crittenden (1968) Auction Sales The analysis of auction sales in terms of offer and acceptances is not entirely easy. laps . a trader stating that he is willing to sell some goods. Boots Cash chemists (southern) Ltd . The advertisement is not an offer. for example.( 1953 . previous bids.) Advertisements The same rule applies to an advertisement by.

In Harris offers as soon as a higher bid is made. P. if the sale once starts. Nickerson (1873) it was decided that the advertising of an auction sale to be held at a particular time and place is not an offer. But it seems that an advertisement that a sale will be held " without reverse" is definite offer. A good example of this tendency is offered by Harvey v Facey ( 1893. that the auctioneer will accept the highest bid. Negations for sale of land In sales of land there are so many points to be settled between the parties that the courts are inclined to treat as a mere step in the negotiations a communication which in other circumstances might be held to be a definite offer. According to Warlow v Harrision (1859) the auctioneer in such circumstances makes a contract with each bidder that he will sell to the highest bidder.C) .

Acceptance This topic is best discussed under two heads: first. Palumbo). It is harder still sometimes to say wether an acceptance has been made. Secondly . Acceptance by conduct . (e.g in a situation such as arose in Clifton v. the communication of acceptance. We have seen that it is sometimes hard to determine whether an acceptance has been made. The facts of Acceptance How does one recognize that acceptance has occurred as a fact ? What amount to acceptance ? Negotiations When parties carry on complicated negotiations it is sometimes difficult to say when ( if at all ) an offer has been accepted. the fact of acceptance .

Fido. Metropolitan Railway Co. did not continue an acceptance because he had introduced a new term.Just as an offer can be made by conduct so can an acceptance . Thus in Brogden's case Brogden. marked "approved" . It is more important to note that a bilateral contract can be made by means of an acceptance by conduct. A "battle of forms" . H. by taking Fido to A.s returning the draft. then B. In Brogden v. Thus if A offers a reward for the return of his lost dog. ( 1877. This is clearly so in the case of a unilateral contract.L ) Acceptance must exactly fit the offer A reply to an offer is only effective as an acceptance if it accepts all the terms of the offer without qualification or addition. both accepts the offer of the reward and performs the act necessary to gain it.

Ex-Cell-O Corporation (England) Ltd.A. It is necessary that he should communicate his acceptance to the offeror. (1979. but that decision in itself does not amount in law to acceptance .In some cases there occurs what has come to be called a "battle of forms".C. and B accepts on his printed form which contains conflicting terms. that he accepts the offer. the fact that the agent of the railway company stuffed the amended draft contract in . Ltd v. A contract may well come into existence by conduct. A makes an offer on his own printed form containing certain terms. Thus in Brogden's case. but this is too simple a proposition to meet all the varied facts of real commercial life.) The Communication of Acceptance The offeree may have decided. The whole matter is discussed in Buttler Machine Tool Co. in his own mind. but on which terms ? Often the answer is that the party who fires the last shot wins.

Carhill should have notified the defendants of her intention put their medicament to the test. "Amendments accepted. carbolic smoke ball Co. even although in his own mind he did accept the amendments. It would still not have amounted to acceptance if the agent had written on the draft. are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write me a note saying that they have accepted my proposal ?" In such a case acceptance does .his drawer did not amount to acceptance. before stuffing in his drawer. However . the court rejected the argument that Mrs. This is commonly the case in unilateral contracts. the terms of an offer may be such that the requirement of communication of acceptance is waived by the offeror.J said: " If I advertise to the world that my dog is lost and that anybody who brings the dog to a particular place will be paid some money. In Carlill v. Bowen L.

But. Hearing nothing from the offeree. in the post. It is to be said that there has been no acceptance ? If so. the bringing along of the lost dog is. If on the other hand it is to be said that a postal acceptance takes effect from the moment it is posted that may be hard on the offeror. that very hard on the acceptor. or permanently lost. in a sense. This raises an almost insoluble problem in . Acceptance by post The general rule that acceptance take effect only when it is brought to the notice of the offeror raises difficulties where the acceptance is sent by post. who may have been expressly invited to make his reply by post. of course . The acceptance may be delayed. there is a kind of communication. a communication. the offeror may put it out his power to perform his offer and find himself liable in damages for breach of contract.not require communication in the ordinary sense.

view of agreement. There is no meeting of mind. Grant (1879. though not without one or two attempts to overturn it by judges who felt that it was inconsistent with a true doctrine of agreement. C. This is special rule relating to the post was laid down in Adams v. This was laid down in Household Fire (etc) Insurance Co.A) In this kind of extreme case the rule may operate very hardly on the offeror. and even where it is totally lost. has been the rule ever since. The rule is that an a acceptance by post takes effects as soon as it is posted. if merely posting a letter can clinch a contract. The rule for postal acceptance applies even where the letter of acceptance is delayed in the post. and the courts have been content to lay doen a rule upon a basis of convenience. not a subjective.justice. . That is the law takes an objective. Lindsell (1818) The rule laid down . v. the postal acceptance dates from posting. no consensus.

Revocation An offer can be revoked (that is. It is sufficient if the offeree learns from a third party that the offer has been revoked. . withdrawn) at any time before it is accepted. The revocation mustbe actually communicated to the offeree. the offeror cannot revoke his offer simply by a mental decision that he no longer wishes to proceed. Refusal and Counter offer Refusal of an offer puts an end to the offer. to be effective must be communicated to the offeree. a revocation need not be communicated by the party himself. Unlike the acceptance.Termination of offer There are five ways in which an offer may terminate without ripening into a contaract. Revocation.

in substantially the same state as they were in at the time of offer. until acceptance. then the offer lapses after a reasonable time. Death . depending on the means of the offer and the subject-matter of the offer. Non-Occurrence of Condition An offer which is expressly or impliedly made subject to some condition cannot be accepted if the condition fails. If no time is stated in the offer. A very important practical application of this principle is that an offer to buy goods ( or to take goods on hire-purchase ) is subject to an implied condition that they will continue.Laps of time If an offer is stated to be open for a fixed time. What is a reasonable time is a question of fact. then it cannot be accepted after that time.

even though there is offer and acceptance. putting it shortly. But this does not appear to be the law. Morgan (1862) Certainty A contract may fail to come into existence.g a house) for the intending purchaser to make an offer which is . because of uncertainty as to what has been agreed. At first sight one would think that there is an implied term in every offer that is conditional upon the continued existence of the offeror and the offeree. " in law. "Subject to contract" It is common practice in negotiations for the sale and purchase of land ("land. an acceptance will be valid if the nature of the contract is such that it can be performed by the offeror's personal representatives. it seems that if the offeree does not know that the offeror has died. see Bradbury v. includes a building .The effect of death on an offer is a surprisingly difficult question. e.

The phrase "subject to contract" has become a kind of magic formula. The clear general rule is that the phrase is conditional." In that event it is well settled that neither party is bound unless and until a definite contract is made between the parties. either party can withdraw. If authority is wanted. before that event.C.expressed to be "subject to contract. Esche (1924. in that the condition to be fulfilled before a contract comes into existence is that there should be an exchange of contracts. But there are circumstances in which this analysis is . and the rule that neither party is bound is so well known that authority for it is sometimes lost sight of. The limits of offer and acceptance It is variably possible to analyse agreement into offer and acceptance. it is to be found in Chillingworth v.A).

impossible or highly artificial. bind the parties at law. Dunraven (1897. but there may still be an agreement there. Two further elements are required to make the agreement binding: consideration and the intention to contract. Note on Mistake Ii is right to point out .H. however . the bones of the agreement are plain to se-offer and acceptance. A good example is to be found in Clarke v. In the vast majority of situation. by itself.L) one cannot always point to an offer and an acceptance. Consideration An Agreement does not. however. . that some (but not all) kinds of mistake amount to a failure by the offeror and offeree to reach agreement.

Those phrases have substantially the same meaning. What is consideration ? Consideration is an essential element in every contract which is not made under seal. A contract not under seal is called a "simple contract".It is sometimes a contract is made "under seal" or by "deed" . . The seal is said to give a contract "form". and a contract under seal can be called a "formal Contract". Having regard to the matters mentioned above. it would not be inaccurate to say that consideration is an essential element in every contract.

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