A2 LAW

BOOK 1 - FORMATION OF A
CONTRACT

1. OFFER
2. ACCEPTANCE
3. CONSIDERATION
4. PROMISSORY ESTOPPEL
5. LEGAL INTENT

TEACHERS: MISS S.L. STANDING (HEAD OF LAW) & MR A. HOWELLS

www.loretolaw.blogspot.com

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 DEFINITION
 When deciding whether there is a contract or not the courts look for evidence of genuine
agreement from both sides – consensus ad idem – meeting of minds.

 They look through the eyes of the reasonable man – i.e. using an objective test.

OFFER ACCEPTANCE CONTRACT

 An offer is a willingness to contract on certain terms, made with the intention that it shall
become binding as soon as it is accepted by the person to whom it is addressed.

 The person making the offer is known as _______________________

 The person accepting the offer is known as _____________________

 There are two types of offer:

1. Specific / Bilateral – made to one person or group and only they can accept e.g.
________________________________________________

2. General / Unilateral – made to the „whole world‟, e.g.

_________________________________________________

1) UNILATERAL OFFERS
Carlill v Carbolic Smoke Ball Co (1893)
Carbolic Smoke Ball advertised that any person taking their smoke ball as directed and catching
flu could claim £100 from them. Mrs Carlill took the ball as directed and still caught flu.
Held: She could sue and claimed £100. It was an offer to the whole
world that she had accepted. Her compliance with the terms had
turned it from an offer to the whole world to contract with her
personally.

AO2

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 2) EXPRESS OFFERS

 The person accepting a unilateral offer must know that they are actually agreeing to an offer.
Therefore, if a person does not know of the offer, there is nothing to accept.

Taylor v Laird (1856)

A captain of a ship decided to step down during a trip and went back to working as a normal
member of the crew. Upon returning, he tried to claim wages from the owner of the
ship, but the ship owner was unaware of Taylor‟s decision to quit his job as
captain and he had not received an offer from Taylor to work in alternative
capacity. Held: His claim failed because Laird was not aware of the commander‟s
offer to do a different role, so there was not a binding contract.

AO2

3) IMPLIED OFFERS

 Arise as a result of conduct or circumstances.

Wilkie v London Passenger Transport Board (1947)

On a bus journey, it was implied by the parties‟ actions that a contract was
formed.

Bowerman v ABTA (1966)

A travel agents contained notices stating that it was covered by ABTA. It was
held that even though customers did not expressly accept this in words, their
acceptance of it was implied by their conduct which was booking a holiday
with this travel agent.

AO2

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 4) INVITATION TO TREAT
 An invitation to treat is not the same as an offer – it is an invitation to others to make or
negotiate an offer.

 Invitations to treat arise in the following situations: shop window displays; shop displays;
advertisements; catalogues; timetables.

 It works in the following way:

 Goods are displayed /advertised.
 Customer offers to buy goods at particular price.
 Seller can accept or reject offer. If the seller accepts, a binding contract is formed.

Invitation to Treat Offer & Acceptance

Fisher v Bell (1961)

A seller had a flick-knife for sale in his shop window.
Held: display is an invitation to treat only.

Harvey v Facey (1893)

H wanted to buy F‟s farm so sent the following by telegram: „Will you sell me
Bumper Hall Penn? Telegraph lowest price.‟ F replied with: „Lowest price
acceptable £900‟. H claimed this was an offer by F to sell to him. Held: A
statement of price is an invitation to treat, not an offer.

Pharmaceutical Society of GB v Boots (1953)

Boots supermarket style meant customers selected goods from shelves and took them to the
counter to pay. They were accused of offering for sale goods that required the
supervision of a pharmacist. Held: that the display was an invitation to treat, not
an offer for sale. The offer took place at the till point where the pharmacists was
situated. Boots was not guilty.

Gibson v Manchester CC (1979)

G entered into negotiations with the council to buy his council house after receiving a letter
from them stating they may be prepared to sell the house to him. When G returned his form the
council refused to sell. Held: the Council‟s proposal was an invitation to treat.
When Gibson replied this was the offer which was rejected by the council. As
a result there was no binding contract of sale.

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 When an item is displayed in a shop window, the seller can accept or reject an offer from a
customer to buy the item.

 A seller does not have to sell an item on display. E.g. if an item is displayed with the wrong
price on it, the seller can refuse to sell that item.

 “A shop is a place for bargaining not compulsory sales… If the display of such goods were
an offer, the shopkeeper may be forced to contract with his worst enemy, his greatest trade
rival, a reeling drunkard or a ragged and verminous tramp.”” (Winfield, 1939).

 Items displayed anywhere in shops (not just windows) are also invitations to treat, so when
items are chosen by a customer and taken to the till, the customer makes an offer to buy the
item.

AO2

5) ADVERTISEMENTS
Partridge v Crittenden (1968)
D was charged with unlawfully offering for sale wild live birds after putting an ad
in the paper. Held: the advertisement was an invitation to treat. AO2 - If it
was an offer then there may be problems when stocks ran out….

 Not all adverts are invitations to treat, an advert may be classed as an offer if there are terms
included in the advertisement that the customer has acted upon – as demonstrated in Carlill.

Lefkowitz v Great Minneapolis Surplus Stores (1957)

The store advertised a sale at 9am Saturday; 3 fur coats worth $100 for only 41 –
first come first served. On the day, the seller refused to sell a coat to one of the first
3 customers as he was a man. Held: the man had accepted the terms of the offer
so he was entitled to the coat for $1. THIS WAS AN OFFER, NOT AN
INVITATION TO TREAT.

AO2

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 6) AUCTIONS

 Section 57 of the Sale of Goods Act 1979 states that an advert to hold an auction is simply
an invitation to treat to prospective buyers and not an offer. (MORE INFORMATION ON
AUCTIONS IN THE ACCEPTANCE TOPIC LATER …)

Harris v Nickerson (1873)

P sued D for his expenses after travelling to an auction to discover that the item had
been withdrawn from sale. Held: there was no contract to hold the sale or to
have individual items for sale on the day. This is no more than an
advertisement for a sale which is to take place in a shop.

AO2

7) WAYS AN OFFER CAN END

1. Acceptance – when the offeree accepts the offer unconditionally then the offer ends and
a contract is formed.

2. Refusal – if the offeree refuses the offer, then the offer ends.

3. Counter-Offer – if the offeree replies to an offer with a counter offer – changing

elements of the original offer – then the offer ends. There is no acceptance since the offeree
is not agreeing to all of the terms of the offer. The counter-offer completely removes the
original offer. If the counter-offer is rejected by the offeror, then the offeree cannot go back
to the original offer.

DIAGRAM OF A COUNTER OFFER

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Hyde v Wrench (1840)
An offer was made to sell at £1000. The buyer offered £950. The seller refused so
the buyer insisted it be sold to him for the original price of £1000. Held: the offer
of £950 had terminated the original offer of £1000. As a result he did not have
to sell it to him.

Forms:
Counter-offers also arise where Company A sends an offer on a form to Company B, with A‟s
terms on the back, and Company B accepts the offer with a form with B‟s terms on the back. It
has to be established on whose terms the contract is. The general rule is that „he who fires the
last shot wins‟. Therefore, the courts look at which company was the last to send paperwork
containing terms before the contract is performed.

BATTLE OF THE FORMS DIAGRAM

Requesting more information:

It must be clear that a counter-offer changes the term(s) of the offer and rejects the offer;
whereas a request for more information leaves the offer open. Sometimes it has been difficult to
distinguish between the two.

Stevenson v McLean (1880)

The buyer responded to an offer to sell iron by asking whether credit terms were
available. Held: Asking whether credit terms were available was a request for
more information, and therefore did not constitute an offer or a counter offer.

AO2

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4. Lapse of time – an offer can end either if it was only open for a limited time or the time
that has lapsed between the offer and the acceptance is not reasonable.

Ramsgate Hotel v Montefiore (1866)

An offer to buy shares was made in June. Acceptance was attempted in November.
Held: Offer had lapsed due to the time that had passed.

AO2

5. Death – offers of a personal nature will end if the offeror dies. However, if it is of a
general nature, it does not need to end since the offeror‟s estate can honour it. EXAMPLES
ARE…

6. Revocation – if the offer is revoked (withdrawn) before it has been accepted then it
ends.

Routledge v Grant (1828)

G offered his house for sale for a period of 6 weeks. Before this time had passed,
G tried to withdraw his offer. Held: that was fine as long as there had been no
acceptance.

AO2

 The offeror cannot revoke an offer once it has been accepted.

Byrne v Van Tienhoven (1880)

D wrote from New York to Cardiff offering to sell goods. When the offer was
received, acceptance was telegraphed to New York. However, 3 days earlier D had
written to withdraw the offer which did not arrive until after acceptance had taken
place. Held: The contract was legally binding as soon as acceptance had taken
place.

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 AO2

 Effective revocation can come from a reliable third party.

Dickinson v Dodds (1876)

Dodds made an offer to sell a house to Dickinson, which was left open until Friday. Dickinson
decided on Thursday to buy the house, but found out later that day from a third party that
Dodds had already agreed to sell to someone else. Nevertheless, on Thursday evening
Dickinson delivered a letter of acceptance to Dodds. Held: That since Dickinson
knew acceptance had already taken place he was unable to validly accept the
offer – there had been no meeting of minds.

AO2

 Unilateral contracts can be withdrawn effectively by using the same method with which
the offer was made and giving it the same publicity, e.g.

Shuey v US (1875)
An offer of a reward had been successfully revoked as long as it had been given the same
notoriety as the original offer.

 The courts generally do not allow the offeror to withdraw the offer when the acceptance
is an ongoing act. This is to protect the offeree, the weaker party, who would otherwise
be greatly disadvantaged.

Errington v Errington (1952)

A father bought a house for his son and daughter in law with the promise that they would pay
him back in instalments and the house would be theirs. When the father died the widow
tried to take the house from them. Held: Paying the mortgage was an ongoing act
of acceptance. Once the couple had begun paying the offer could not be
withdrawn.

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 AO2

Lord Denning, using an example of an offer to walk from London to York, stated obiter that to
allow the offer to be withdrawn when the acceptance was an ongoing act was unfair because:

a) If acceptance took place upon completion – the offeror could withdraw at any point
before reaching York. This would be unfair on the offeree.
b) If acceptance took place when the walk was started - payment would be due as soon as
the offeree set off. This would be unfair on the offeror and would not guarantee that
the walk would be finished.

He decided:
That acceptance was a continuing act, and payment was only enforceable when the walk had
been completed. However, once the walk had been started the offer could not be withdrawn.

AO2

7. Failure of a precondition – an offer ends if a main term of the offer is not fulfilled
or is significantly altered.

Financing Ltd v Stimson (1962)

D offered to sell a car and P agreed to buy it. In between, and unknown to P the
car was badly damaged.
Held: Although P had signed the agreement, acceptance had not taken
place as the precondition that the car would be in a certain condition had not
been met.

AO2

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 Acceptance is an agreement to all the terms of an offer by words or conduct.

 The acceptance must fit the terms of the offer exactly, KNOWN AS THE MIRROR
IMAGE RULE – otherwise it could lead to more negotiations, for example a counter offer,
but it would not result in a contract.

 Acceptance can be by words or by conduct. If it is made by conduct then it may be difficult

to identify when the acceptance took place.

Brogden v Metropolitan Rail Co. (1877)

B supplied the rail company (RC) with coal regularly but without a written contract.
RC then decided to send B a written contract for the supply of coal. B altered some
of the terms, signed and returned it to RC. They simply placed it in a drawer and
continued to order coal. When a dispute arose, the contract was referred to. Held: RC had
made an offer to B, and by amending it B had made a counter offer. When an order was
placed this was acceptance of the counter offer – and the agreement took the form of
conduct.

AO2

1) COMMUNICATING ACCEPTANCE

 Acceptance must be communicated in some positive way.

 Sometimes this means the offeree must reply in a method given by the offeror, and this is
known as prescribed acceptance.

 With prescribed acceptance, the offeror states the offeree must accept in a certain format.
However, other methods may be accepted if they do not disadvantage the offeror.

Yates v Pulleyn (1975)

It was requested that the acceptance be made using registered or recorded
delivery. Held: Accepting by normal delivery when recorded/special delivery
was requested, made no practical difference whatsoever to the acceptance.

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 No prescribed acceptance – if no method of acceptance is stated then it is expected that the
acceptance takes the form of the offer. But, any reasonable method should be acceptable.

 Generally, it should be the same method used to make the offer.

Entores v Miles Far East Corp. (1955)

A Dutch company accepted an offer by an English company, and the issue arose
of where the contract was formed. It was held to have been formed in England,
since that is where the acceptance was received by telex. Held: The burden of
communicating acceptance is with the offeree. Acceptance is effective as
soon as it is received.

AO2

 Lord Denning said that if two people are walking along either side of a river and a
message shouted is obliterated by the sound of a passing aircraft, it is necessary to
repeat the message until the person speaking is sure that the message is heard.
Similarly if a telephone line goes dead, it is necessary to redial and ensure that the
message has been received.

 Waiver of communication of acceptance - this means acceptance does not

need to be communicated. It can be expressed by the offeror, or implied
because of the nature of the offer.

 E.g. In the case of Carlill v Carbolic Smoke Ball Co, the nature of the advertisement implied
that conduct would be sufficient to obtain a reward. Therefore, Mrs Carlill did not have to
inform the company that she wished to accept.

AO2

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 2) SILENCE
 Silence alone does not indicate acceptance.

Felthouse v Bindley (1862)

An uncle wrote to his nephew with an offer to buy a horse, stating, „if I hear no more about
him, I consider the horse is mine‟. The nephew did not reply but was clearly going to
sell to the uncle as he withdrew the horse from the auction. However, the
auctioneer mistakenly sold the horse to a third party. The uncle tried to recover the
horse. Held: there had been no communication of acceptance by the nephew to
the uncle, and therefore there was no contract between the two of them.

AO2

The general theme of Felthouse v Bindley was taken up in statute in 1971. Clearly a contract
should not be imposed on any person who does not wish it, and this seems totally unreasonable.

It would be completely unreasonable to send someone an item in the post and to be able to
enforce a demand for payment. This did in fact happen a lot before the passing of the
Unsolicited Goods and Services Act 1971.

3) UNSOLICITED GOODS AND SERVICES ACT 1971

A person receiving unsolicited goods can treat them as an unconditional gift if:
 The goods are kept unused for 28 days and the seller informed that they are not wanted;
or
 The goods are kept as new for 6 months unused.

This has been a very effective statute, since there is now very little evidence in the UK of
selling in this manner. Consumers can also rely on Section 24 of the Consumer Protection
(Distance Selling) Regulations 2000, under this section unsolicited goods sent to consumers can
be treated as an unconditional gift immediately and it is an offence to demand payment for such
goods.

AO2

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 4) IGNORANCE OF AN OFFER

 There is no contract where a person performs the „acceptance‟ but is unaware of the
offer.

 E.g. a “reward” case…

 However, it is irrelevant if a person performs the „acceptance‟ but does so for reasons
other than the reward.

Williams v Carwardine (1833)

Details were supplied in response to a reward for information regarding a murder.
The information was also given to ease the woman‟s conscience. Held: As she
had given information knowing about the reward, she had validly accepted
although there were other reasons she was still entitled to the reward.

 If there is no knowledge of the offer, there is no contract…

R v Clarke (1927) (Australian Case)

D stated in court that he gave information to clear himself of charges and admitted he
forgot about the reward at the time of providing the information. Held: Forgetting
about the reward was considered by the court to be the same as never having
known of the reward. Therefore, he was not entitled to the reward.

AO2

5) ACCEPTANCE VIA THE POST

This method should be used by the offeree if:
1. The offer was made by post
2. The offeror specifies acceptance can be by post
3. The previous course of dealings between the two parties has been via post

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This method may not be acceptable if:
1. The offer was made in a more direct way, e.g. telephone, fax, word of mouth
2. The offeree is aware there may be some delay by post, e.g. strikes.

Henthorn v Fraser (1891)

This is a case where the offer was made in person and the acceptance was made by post. The
two parties worked in Liverpool, one lived in Birkenhead and the reply would have
involved travelling on the ferry across the Mersey. Held: acceptance by post was
reasonable, as long as it was within the contemplation of the parties that this
method may be used.

 Where it is reasonable for the offeree to accept an offer by post, the postal
rule will apply.

 The postal rule states that acceptance via post is effective as soon as the letter
is posted.

Adams v Lindsell (1818)

D wrote to P offering to sell wool fleeces and asking for a reply „in course of post‟.
The letter was misdirected but as soon as P received it he posted acceptance. When
D had not received an acceptance by the expected date he sold the fleeces to a third
party. Held: As acceptance had been posted on time, it was valid. Acceptance is always
valid as soon as the letter is posted.

AO2

Household Fire Ins v Grant (1879)

The letter of acceptance was lost in the post and never arrived. Held: the acceptance was still
binding.

Re London & Northern Bank (1900) A letter is classed as posted when it is:
1. Correctly addressed
2. Stamped
3. Put in official post box/given to a postal worker

AO2

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Holwell v Hughes (1974)
The postal rule does not apply when the offeror asks for notice in writing as he clearly expects
acceptance in writing in front of him.

Therefore, it should be noted that:

 Acceptance generally should be communicated to be valid.

 The postal rule is the exception to this general rule.
 An offeror is always able to specify that the postal rule will not apply in a particular
contract – as with Holwell v Hughes.

6) OTHER METHODS OF COMMUNICATING ACCEPTANCE

a) PHONE CALLS – As phone calls are instantaneous, as soon as acceptance is
received, it is binding.

b) TELEGRAMS: The postal rule applies here because as with letters, a third
party becomes responsible for delivering them (the post office) – this was
established in Cowan v O‟Connor. They are faster than letters, but not
instantaneous, and there is no acknowledgement of receipt.

c) TELEX: Telex enables a message to be dispatched from an office by a teleprinter (like a

small typewriter) using a modem and the telephone system. It is virtually instantaneous, so this
is treated like a telephone call, which was decided in the case of Entores. The communication
has to be received to be accepted – this was confirmed by the House of Lords in
Brinkibon v Stahag Stahl. If the message is not received, it is immediately obvious
to the sender, and their duty is to ensure the message has been received for
acceptance to be valid.

d) MODERN METHODS OF ACCEPTANCE, E.G. FAX, EMAIL AND TEXT

MESSAGES: It is difficult to predict exactly how these methods would be viewed by the
courts, and it would seem reasonable to suggest that faxes, emails and text messages would be
treated the same way as telex and phone calls. This is because they result in virtually
instantaneous acceptance, and acknowledgement of receipt can be obtained by the sender. The
following guidelines are likely to be applied to modern methods of acceptance:

1) Is the method relatively instantaneous?

2) Does a 3rd party take responsibility for delivery?
3) Is there acknowledgement of receipt?

16
 AO2

SO WHEN IS ACCEPTANCE RECEIVED?

 E.G. When a message is left on an answer machine, is it received when it is recorded, or

when it is listened to by the owner?

 How about a fax machine or an email account which takes messages during night time,
when the office is closed?

 There is very little case law on this area and no legislation – so it is very much a grey
area!

 Cheshire and Fifoot suggest that it‟s reasonable to assume that a letter that arrives during
office hours is “received” when it arrives, regardless of whether it is opened
immediately.

 This issue was discussed obiter in a case called The Brimnes where it was suggested
obiter that that it is the responsibility of the recipient to look for messages which are
delivered during normal office hours.

AO2

7) CERTAINTY IN A CONTRACT
 The acceptance of an offer has to be certain, otherwise vague terms cannot be enforced.

Guthing v Lynn (1831)

Promising to pay more money if a horse proved to be “lucky” was unenforceable as it
was too vague.

Scammell v Ouston (1941)

The phrase “on hire purchase” is too vague as the meaning differs from one party to another.
However, if it is a minor term and does not affect the main terms of the contract then it can be
overlooked.

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Nicolene v Simmonds (1953)
P wrote „I assume we are in agreement and the usual conditions of practice apply‟.
When a dispute arose, D argued there was no contract as the above terms were too
vague. Held: the words were vague and meaningless, but as they involved a
subsidiary matter, all main points being agreed, they could be ignored.

AO2

8) PRINCIPLES OF AN AUCTION

 The principles of sale by auctions were clearly stated by the court in Payne v Cave (1789),
and the Sale of Goods Act states an advertisement to hold an auction is an invitation to treat.

 The display of goods in an auction is an invitation to treat.

 The auctioneer‟s request for bids is an invitation to treat.

 Each bid is an offer, with the auctioneer accepting the highest bid on behalf of the owner of
the goods.

 The contract is between the highest bidder and the owner of the goods, the auctioneer acting
on behalf of the seller.

 The bidder is free to take back his bid at any point until the hammer comes down.

 The auctioneer is therefore also free to remove the goods from sale before the hammer
comes down.

 Where the goods are being sold without reserve (no minimum price), there are two
contracts, this was decided in Warlow v Harrison (1859). Here,

1. The main contract is between the owner of the goods and the highest bidder;

2. There is also a second contract, known as a collateral contract between the highest
bidder and the auctioneer. Under this contract, the auctioneer is obliged to accept the
highest bid.

 Therefore, whoever becomes the highest bidder will be entitled to the goods, whatever the
highest bid may be.

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Barry v Davies (2000)
Following an auction selling 2 machines worth £14,000 each, without reserve, they
were withdrawn when the highest bid only reached £200 each. Held: the bidder was
successful as he sued on the collateral contract and was awarded damages of
£27,600.

 Therefore, in an auction without reserve, acceptance of the auctioneer‟s offer to sell is made
by becoming the highest bidder. The auctioneer is in breach of contract not to sell to that
bidder. However, if the sale is cancelled altogether he cannot be sued.

AO2

9) TENDERS
This is where someone is either proposing work to be carried out, or goods to be sold, and the
person proposing wishes too investigate whether people are prepared to buy the items or
undertake the work. E.G.

 Single offer tenders – a statement is made that goods are to be sold or work needs to be
undertaken. Tenders are then invited. Those putting forward tenders are submitting offers
which can then be accepted to form a contract. There is no obligation to accept any of the
tenders at all. This was decided in Spencer v Harding.

 Standing offer tenders – this applies to situations where goods/work is required on an

ongoing basis. Tenders are invited – this is an offer – and then selected. The acceptance
takes place when an order is placed. Each time an order is placed this forms a separate
contract.

Great Northern Rail Co v Witham

W supplied coal to the railway co, in amounts and on dates that were chosen by the store
master. It was held that W‟s tender was a standing offer, and each tender formed a
separate contract. If W wanted to revoke the standing offer, he could providing it was
before the next order was placed. If an order had been placed, he was under
an obligation to supply at the stated rate. Whilst under the agreement, the
tenderer must supply as agreed whenever required, but cannot insist on any
orders at all.
19
 AO2

10) MULTI PARTITE CONTRACTS

 This where numerous people make the same contract with one person.

DIAGRAM

Clarke v Dunraven (1897)

Competitors entered a yacht race by submitting a letter to the yacht club secretary. The
competitors agreed in these letters to follow the club rules, including an
obligation to pay for any damage caused by fouling. During the race, Ds yacht
sank Cs yacht so C sued D for damages. D argued his contract was only with
the yacht club secretary and there was no contract between him and C. Held: it
was the same contract and it bound each other.

AO2

11) DEALING WITH MACHINES

 This is an exception to normal shopping rules. Where a machine is used to „accept‟ in the
formation of a contract different rules apply. E.G.

 Here, the owner of a machine holds it ready to make an offer. The person buying from the
machine accepts by activating it. This is the point of no return.

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Thornton v Shoe Lane Parking (1971)
Mr T‟s car was parked in a car park with an automatic barrier at the entrance. His car was
damaged whilst in the car park and Mr. T sued the car park. They tried to rely on a sign within
the car park excusing them from liability. The court had to decide at which point the contract
was made to determine whether Mr. T would have knowledge of the sign before entering the
contract. Held: That the car park owners were making an offer by having the car park
ready and holding the machine in readiness for use. The customer made an
acceptance by using the machine (by taking a ticket and paying).

AO2

12) PROMOTIONAL CAMPEIGNS AND COLLATERAL

CONTRACTS

This is where a person buys goods and in return is promised a promotional gift. Is there a
contract for the gift?

Esso v Commissioners for Customs & Excise (1976)

Esso were giving away a free World Cup coin for every 4 gallons of petrol
purchased. The courts had to decide whether the coins formed part of the contract
for the sale of the petrol. If they did, Esso would be liable to pay tax for the coins. If
they did not, motorists would not be able to insist on a free coin. The following
principles emerged from the case:

1. Giving away promotional items forms a second/collateral contract. The petrol company
makes a general offer to buy 4 gallons of petrol.

2. The collateral contract stands beside the main contract for petrol.

3. There is legal intent despite the trivial nature of the coin. Therefore there is a binding
contract, which means that the customer is entitled to receive a coin.

4. Consideration takes the form of the customer buying petrol.

AO2

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 13) DISTANCE TRADING

 The Consumer Protection (Distance Selling) Regulations 2000 were introduced to protect
individual people from problems that may arise when purchasing goods they cannot see.

 The regulations apply where the selling of goods takes place in any of the following ways:
by phone, by fax, by mail order or catalogue shopping, the internet, using digital telephone
services.

 The seller must give the buyer clear information about the goods; give written confirmation;
and allow a cooling off period of 7 days to allow the buyer to change their mind.

 The regulations do not apply to: vending machines, public pay phones, auction sales, sale of
land.

The Electronic Commerce Regulations 2002

 As well as The Consumer Protection (Distance Selling) Regulations 2000, the Electronic
Commerce Regulations 2002 have also been introduced and they apply to consumers
dealing with businesses and businesses dealing amongst themselves. Examples of situations
where this regulation applies is:

 The Regulations build on the common law rules on offer and acceptance, and Regulation 12
states that the display of items on the internet is an invitation to treat, and that the customers
order may be the offer.

AO2

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 All contracts require something to be given in return for something else.

 Consideration can be described as a benefit and a detriment.

Currie v Misa (1875)

A valuable consideration may consist either in some right, interest, profit or benefit accruing to
one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken
by the other.

Dunlop v Selfridge (1915)

An act or forbearance of one party, or the promise thereof, is the price for which the promise of
the other is bought.

THERE ARE TWO TYPES OF CONSIDERATION

Executed consideration: the act has been carried out.
Executory consideration: the act promised has not yet been done.
Both of these are legally binding.

1) THE CONSIDERATION MUST BE SUFFICIENT BUT

NEED NOT BE ADEQUATE
 Sufficient = of some recognisable value, however trivial.

 Adequate = generous enough to be a fair bargain.

 It is enough that there is something of value on each side. This allows people to make their
own bargains.

Thomas v Thomas (1842)

The case concerned an action brought by a widow against her husband's executor. On the day
of his death, the husband had said in front of witnesses, that he wanted his wife to
have one of the houses for life. After death, the executors agreed to convey a life
interest in one of the houses "in consideration of John's desires" - provided she
paid £1 per year rent and kept the premises in good repair. Later the executor refused to
complete the conveyance. Held: even though the consideration was not clearly adequate (it
was far below market value), it was sufficient consideration to enforce the agreement.

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Bainbridge v Firmstone (1838)
The need arose to find out the weight of some boilers, and a contract was formed whereby
boilers would be taken away to be measured with the condition they would be returned in good
condition. However, the boilers were returned damaged. Held: payment should be
made for this. Therefore, the consideration on one side was the benefit of
weighing boilers and on the other, the entitlement to having them returned in
good condition. Although the benefit of weighing boilers has no real market
value, it is acceptable to the courts as consideration due to the fact that it is
recognisable.

Chappell v Nestle (1960)

In exchange for three chocolate bar wrappers and money for postage & packaging,
Nestle were giving away records. Their main aim was to advertise the chocolate,
but they also profited from the sale of the records It was argued that Nestle owed
Chappell royalties for this as it was infringement of copy right.
Held: The chocolate wrappers and the money were consideration for the record. Given
the right circumstances, the chocolate wrappers alone could be valid consideration.
Therefore, although the wrappers had no intrinsic value (not adequate), they still formed
sufficient consideration.

AO2

2) CONSIDERATION MUST NOT BE TOO VAGUE

 Consideration needs to be tangible or identifiable.

White v Bluett (1853)

A son owed his father money, and when the father died, the son told the executors that he had
made a promise not to complain about the distribution of his father‟s estate in return for not
having to pay the debt. Held: The promise to stop complaining about the distribution of his
father‟s estate was held to be too vague to form valid consideration.

AO2

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 3) CONSIDERATION MUST MOVE FROM THE PROMISEE

 Only the parties providing consideration can enforce the contract. If a third party is promised
something as part of a contract between two people, the third party cannot sue as they have
not provided any consideration.

 E.g. A pays B £10 to clean Cs house. A and B have provided consideration so they can
enforce the contract. However, C cannot enforce it as he has not provided any consideration.

Tweddle v Atkinson (1861)

2 fathers made an agreement with one another that they would pay their children a sum of
money when they married. One father (who later died) paid the money but the other did not.
The son sued the father who had not paid. Held: Although there was a contract between the
two fathers, the son could not enforce the agreement as he had not given any
consideration for the promise of the money.

FATHER CONTRACT

No right to sue
No consideration

SON

However: The old rule that only a person party to a contract can sue under it has been updated
by the Contract (Rights of Third Parties) Act 1999. This statute allows a contract to be
enforceable by a person who has provided no consideration if it is very clear that the benefit
was intended for that particular person.

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 4) PAST CONSIDERATION

 Past consideration is no consideration.

 Consideration cannot be provided by something that has already been done.

 This is to prevent unscrupulous people from forcing others into contracts on the basis of
providing goods and services which they had not ordered.

Roscorla v Thomas (1842)

The seller sold the buyer a horse. Some time after the sale, the seller told the buyer the horse
was „sound and free from vice‟ but it became apparent the horse was not sound and free from
vice, but vicious and unmanageable. The buyer claimed that the seller‟s advice went
with the price paid. Held: the seller‟s advice at a later date could not be
connected to a price already paid for the horse. The payment had already
taken place, and was therefore past consideration, and not valid.

Re McArdle (1951)
Members of the McArdle family made alterations to a house to accommodate an elderly
relative. After the work was finished, other members of the family visited and were so
impressed with the work they offered to pay those who had done it. When the money had not
been paid, the family sued for the amount promised. Held: They could not insist
on payment because the work had been done before the promise of the money
was made. It was therefore past consideration and not valid.

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 5) EXCEPTION TO THE RULE OF PAST CONSIDERATION
 „Past‟ consideration will be valid where it was expected or implied all along.

 Here the later promise is seen as securing an amount after the initial agreement.

Lampleigh v Braithwaite (1615)

Braithwaite was accused of killing a man and asked Lampleigh to get him a King‟s pardon. A
pardon was obtained from the king by Lampleigh at considerable expense to himself, and
Braithwaite was so happy he made a promise to pay £100 for it. This was not paid.
Held: That it could be enforced in court. Although the amount was stated after the
pardon was obtained, it was expected all along that repayment of
expenses would be made. Therefore, this promise of £100 could be seen
as a setting of the level of repayment.

Re Casey‟s Patents (1892)

P did work and afterwards was promised shares rather than payment. When the shares
were not provided P sued.
Held: this could be enforced by law because it was understood that payment would
be given for work undertaken. Therefore, if a request of the promisor carries
an implication that payment will be made for the act, the later promise can
then be seen as just a fixing of the level of payment.

AO2

6) FORBEARANCE TO SUE
 The consideration here, is giving up the right to sue on a legal case.

 This is what makes an out-of-court settlement binding.

Haigh v Brooks (1839)

A financial settlement was reached in return for a legal claim being dropped. Held: It was
enforceable. Giving up a right to sue can be sufficient consideration, even if that right is
not certain provided:
27
 • the claim had some chance of success
• the person had intended to enforce the claim

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7) PERFORMING AN EXISTING DUTY

 If a person is required to do something already by law, they cannot claim that this duty is
consideration.

 The duty may be by law or by contract. Either way, it does not provide consideration.

A duty under the law of the land:

Collins v Godefroy (1831)

A lawyer was obliged to appear in court by a witness order, but agreed with one of the parties
in a case that they would pay him to give evidence.
Held: he was not entitled to enforce this payment, as he was already under a duty
to do this by law (to give evidence) and by doing that, it did not amount to valid
consideration.

But, if a person is legally obliged to do something but goes beyond that, then this „extra‟
provides consideration.

Glasbrook Brs v Glamorgan CC (1925)

During mining strikes the police provided a patrol of policemen to keep the peace. Glasbrook
requested a large patrol unit for their mine. The Council agreed but charged
Glasbrook for this. Held: it was enforceable, because the Council was going
beyond their existing duty in supplying more policemen than was their
legal obligation.

Ward v Byham (1956)

A mother was promised £1 maintenance per week from the father to keep their
child well looked after and happy. The child would later be able to decide
which parent to stay with. When the father stopped paying, the mother sued.
The law at the time said mothers were under a duty to maintain their children.
Held: the payment of money was enforceable because in keeping the child „well looked
after and happy‟; she was doing more than simply maintaining, which was the legal
obligation that was placed on her.
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 AO2

A duty under contract:

Shadwell v Shadwell (1860)

At a time when breach of promise to marry was still available in law, a young man became
engaged. His uncle wrote promising to pay him £150 per year until his income as a barrister
reached £600 per year. The man married, and sued his uncle for the money.
Held: Even though the nephew was legally bound to marry, the marriage was
good consideration for the uncle‟s promise. Therefore, the promise was
enforceable.

Stilk v Myrick (1809)

When 2 sailors deserted their ship on a journey to the Baltic, the 8 remaining agreed with the
captain that they would continue sailing short handed and share the 2 extra wages between
them. When they arrived the captain refused to pay and the sailors sued.
Held: the sailors had done no more than their contractual duty already owed to
the captain in their initial agreement to sail the ship.

Hartley v Ponsonby (1857)

When 17 out of 36 sailors deserted ship, the rest of the crew agreed to continue sailing
and the extra wages would be shared between them. They sailed dangerously short-
handed and when they arrived, the captain refused to pay so the sailors sued.
Held: the sailors had gone beyond their existing duty and therefore the wages
of the deserters had to be paid to those remaining.

Reason: it was suggested that what had happened was so different from the original agreement
that the initial contract had been discharged and a new one was formed.

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Williams v Roffey (1990)
Builders made a contract with carpenters for them to work on flats for them. The carpenters got
into financial difficulty and were unable to finish the work. The builders, wanting to avoid a
penalty for not finishing on time, offered the carpenters extra money to do the work. The
carpenters did their work but the builders refused to pay. The carpenters sued the builders for
the extra money. Held: the carpenters (Williams) were entitled to the extra money, as the
builders had made a choice to pay them in order to avoid the
inconvenience of having to find new carpenters, and that they had also
avoided the disadvantage of having to pay a penalty to the owners of the
building.

What problems does the decision in Williams v Roffey raise?

• Goes against the traditional requirement of consideration, as the carpenters were doing
no more than was asked of them in the original contract.
• On the other hand, avoiding the extra payment to the owners was of practical and
financial benefit to them, therefore it could be argued that the builders made a calculated
choice in agreeing to pay the carpenters.
• The case is an example of the courts making a real effort to consider the commercial
reality of the difficulties faced by the parties in financial crisis, and in the context of
recession in their trade.
• However, the courts have been unwilling to extend this principle any further at present,
and this was shown in Re Selectmove, where the court refused to apply the case of
Williams v Roffey in relation to part payment of a debt.
• Thus, the decision from Williams v Roffey is limited to the commercial sector.

Re Selectmove (1995)
A company owed tax to the Inland Revenue and offered to pay the debt back by instalments
without interest. The Collector of Taxes stated that it would contact the company if the
arrangement was unsatisfactory and the company began paying off the debt by instalments. The
IRC then insisted that the debt be paid immediately or it would begin winding – up procedures
against the company. The company tried to argue on the basis of Williams v Roffey that its
promise to carry out an existing obligation was effective consideration for the agreement to pay
by instalments - as the IRC benefited from not having to go to further trouble
to recover the debt. HELD: The CA distinguished this from the case of
Williams v Roffey as that case involved the provision of goods and
services, rather than payment of an existing debt – so the IRC was not
bound by the agreement to accept instalments and was entitled to
demand that the whole debt was repaid.

• This case has been criticized because it is glaringly inconsistent with the reasoning of the
judgment of Williams v Roffey.
• However, this could be viewed as a policy decision since it involved payment to the
Inland Revenue, not an individual.

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 A duty under a contract owed to a third party:

Scotson v Pegg (1861)

Scotson and X had an agreement that Scotson would deliver coal to X or a person nominated by
X (3rd party). X asked for coal to be delivered to Pegg. Scotson therefore contacted Pegg and
arranged to deliver coal on the condition that Pegg would unload it. Pegg agreed and Scotson
delivered coal. However, Pegg refused to unload it as agreed. Scotson sued.
Held: The court decided that it was in order to offer the same consideration to two
different parties, otherwise if Scotson had not delivered the coal at all he would have run
the risk of being sued twice, by Pegg and X. Therefore, the performance of a duty owed to
a third party can in fact provide consideration for a promise made to a third party.

DIAGRAM

8) PART PAYMENT OF A DEBT

 Paying part of a debt is not consideration, since there is already an obligation to pay the
debt.

 Nothing extra is being offered, so paying part of a debt is not satisfaction for the whole debt.

Pinnel‟s Case (1602)

Pinnel was owed money by Cole and requested that if Cole paid a lesser amount one month
earlier he would cancel the remainder. Cole did this and then Pinnel tried to sue.
Held: although in general a lesser sum did not satisfy the whole debt, earlier payment, at
the request of the creditor, would do so, as would payment in a different place or in a
different form

Foakes v Beer (1884)

The decision in Pinnel was confirmed by the House of Lords here, as Dr Foakes owed Mrs Beer
£2,090 after a court judged against him. They agreed that Foakes could pay by instalments, and
Beer agreed that no further action would be taken providing the debt was paid off by the agreed
date. Later Beer demanded interest (which is always payable on a judgement debt), and she
sued when Foakes refused to pay. Held: She was successful as a result of Pinnels case. This
can be argued to be unfair, as the debtor had genuinely relied on the promise of the
creditor.
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However, in the following situations consideration is evident because the person owed the debt
has requested/received something extra.

1. The creditor adds something else to the payment. It may be suggested that part of the
payment is provided together with an item of value. In Pinnel‟s Case the judge suggested
“the gift of a horse, hawk or robe”. Eg: If someone owes some money, and the other party is
happy to take part payment plus a car or jacket belonging to the other instead of money there
is no reason why this should not be acknowledged as payment.

2. The creditor requests a lesser amount but earlier. The time saved in waiting is the
„extra‟. E.g: If C owes D £30 to be repaid on the 15th October but at D‟s request C repays
£25 on the 1st October in settlement, this will be regarding as ending the debt

3. The creditor requests a different method of payment. Paying in a different way or in a

different place is something „extra‟. (D&C Builders v Rees – paying a lesser amount by
cheque rather than cash is not a great enough difference.)E.g. E owes F £100 to be paid at
his office in London and at F‟s request, E takes the money to F‟s home in Manchester.

4. There is an agreement with creditors. If the person owing the debt has become bankrupt,
creditors may arrange for several parties to receive a proportion of the debt in final
settlement. The parties involved make an agreement with each other to accept that amount
and cannot sue the person owing the debt.

5. The creditor accepts a lesser amount from a third party. If a third party agrees to pay a
lesser amount, the creditor cannot sue the person owing the debt for the remainder.

Hirachand Punamchand v Temple (1911)

Temple‟s uncle agreed to pay part of his debt in final settlement. Temple could not be sued for
the rest. This presumption that a third party settling part of the debt ensures the person owing
the debt cannot be sued, as this would have been a breach of the agreement with the uncle.
However, this principle has been rebutted in the following case...

IRC v Fry (2001)

H offered to pay £10,000 of W‟s debt of £100,000 “in full and final settlement” but this did not
prevent her from being sued for the rest. The presumption that his payment removed the ability
to sue her was rebutted. The Inland Revenue cashed the cheque and then asked for the rest of
the payment. Held: The court allowed them to insist on the rest being paid and said that
cashing a cheque gave rise to a rebuttable presumption of acceptance.

AO2

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 Promissory estoppel means that a party has given a promise to the other party that they will
give up their legal right to do something.

There is no consideration for that promise though.

If they give up this right they are prevented from going back on it.

It was first established as a defence in High Trees and then developed in Hughes:

Central London Properties Trust v High Trees House (1947)

Lord Denning:
“If one party promises to forego or not rely upon
his strict legal rights and the other party, in reliance on that promise, acts upon it, then the
promisor is estopped from asserting his full legal rights”

P owned a block of flats which he leased to D for £2500 per year. D then rented out these flats
to tenants. During WWII it was difficult for D to find tenants and therefore afford the lease. P
thus agreed that he would reduce the rent to £1250. By the end of 1945 the flats were full again
so P went back to the original rent of £2500. P sued for full payment for the last 6 months of
1945.
HELD: The full amount should be paid for the last 6 months of 1945, as the flats
were fully occupied. However, they could not sue for full payment for the war
years and would be estopped from doing so. It would have been inequitable to
allow them to go back on their promise.

AO2

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Hughes v MRC (1877)
Tenants of a property were given 6 months to carry out repairs otherwise they would be evicted.
The tenants then started to negotiate buying the property with the landlord. When this was not
successful, the landlord then tried to evict the tenants as their 6 months to carry out
the repairs had passed. HELD: That their duty to repair was suspended during
the time when the negotiations for sale were taking place– and the landlord
could not enforce their rights as it would have been inequitable to do so.

AO2

Promissory estoppel mitigates (takes away) the unfairness that would be produced if the rule
in Pinnel‟s case, which was later confirmed in Foakes v Beer was applied (i.e. part-payment
of a debt does not satisfy the debt if nothing extra is provided).

It is a defence to a legal case.

It cannot be used to bring a case:

Coombe v Coombe (1951)

H promised to pay W £100 pa. When he stopped paying she tried to sue him for 10 years worth
of payments using High Trees. HELD: She was not successful, and it was said here that
promissory estoppel cannot be used to bring a case but only to defend a case.

IT IS A SHIELD, NOT A SWORD!

Using this case, 4 essential elements were identified for promissory estoppel to be available:
1. Existing contract between the 2 parties
2. One party agrees to waive a right that they are entitled to under the contract
3. Waiving this right, they are aware the other party is relying on it
4. The other party alters their conduct and does rely on it

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 AO2

D & C Builders v Rees (1966)

The builders did work for a family, who only paid part of the bill claiming that the work was
unsatisfactory. They paid by cheque at the request of the builders. The family argued they could
not be sued for the rest based on promissory estoppel, because by accepting the cheque – the
builders had agreed to part payment of a debt.
HELD: The builders could sue, as the court felt they had been held to
ransom by being forced to take whatever they could in the form of a
cheque. In these circumstances it would have been inequitable to allow the
family to succeed in a claim of promissory estoppel, as the whole idea of
equity is to do justice.

AO2

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☺ This means the two parties involved in an agreement intend to create legal relations.

☺ The following presumptions apply:

Social or domestic – do not create legal relations

Commercial – do create legal relations

☺ However, in each of these agreements, the above presumptions can be rebutted, i.e.
overridden.

AO2

1) SOCIAL AND DOMESTIC ARRANGEMENTS

The general rule is that family/friends do not intend to be legally bound by their agreements.

A. Husband & Wife:

Balfour v Balfour (1919)
H worked and lived in India. He agreed with W that he would pay her £30 p/w in
return for her supporting herself and not asking for anymore. When he stopped
paying she tried to sue him. HELD: As the agreement was made at an amicable
time it was a domestic arrangement. Not legally enforceable.

The presumption that there is no legal intent was rebutted in the following case…

Merritt v Merritt (1970)

H and W were legally separated. H agreed with W that if she met the mortgage
payments he would give her the house upon completion. HELD: As they had
separated it is likely they intended to create legal relations. Enforceable.

Darke v Strout (2003)

The formality of a letter of agreement to child maintenance was enough to rebut the
presumption between family members.

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 AO2

B. Parent & Child:

Jones v Padavatton (1969)
Mother allowed her daughter to stay in a house provided by the mother whilst she was studying
for her bar exams. The mother then tried to regain possession, taking the daughter to
court.
HELD: Not enforceable – it was a family arrangement and not legally binding.

Webb v Webb (1997)

A father was legally bound as he had intended legal relations when he handed a flat
over to his son. The father took the case to court as he wanted the house back
when his son sided with the father‟s estranged wife. HELD: The father was not
entitled to the house.

AO2

C. Other Family Members:

Simpkin v Pays (1955)
A gran, grand-daughter and their lodger entered a competition each week, agreeing they would
share any winnings. When they won £750, the lodger sued for their share. The defence argued it
was a domestic arrangement so there was no intention to create legal relations. HOWEVER
THE COURT SAID THEY WERE CONTRACTULLY BOUND + HAD TO PAY.

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Parker v Clark (1960)
The Ps and Cs were related. The Ps invited the Cs to live with them so they would both benefit
financially. A written agreement was made regarding bills etc between them. The Cs sold their
house and moved in. When a dispute arose it had to be decided whether there was a binding
agreement. HELD: Giving up their security indicated they intended to be
legally bound. The presumption that usually applies to domestic arrangements
was rebutted.

AO2

D. Friends:
Buckpitt v Oates (1968)
Two friends gave each other lifts to work. On one occasion, there was an accident. The
passenger claimed that because he contributed to the petrol, there was legal intent
between them. HELD: It was a friendly agreement, so there was no contractual
relationship. However, this case was decided before car insurance was
compulsory. Nowadays the friend would be covered by the driver‟s insurance.

AO2

2) COMMERCIAL AGREEMENTS
The general rule is that businesses do intend to be legally bound by their agreements.

However, if the presumption is to be rebutted by either party, the burden to prove there was no
legal intent is usually very heavy.

☺ Legal intent found = legally binding contract

☺ No legal intent found = honourable pledge clauses; not legally binding.

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 AO2

Edmonds v Lawson (2000)

A pupil barrister argued that the agreement concerning pupilage was made in a commercial
context and was therefore a binding contract. If this was the case, then the presumption of legal
intent would mean that employment legislation regarding the minimum wage applied.
HELD: Here the courts looked at the context of the agreement and decided
that the presumption of a commercial agreement had been rebutted, as
payment was not traditionally made for a pupilage.

Edwards v Skyways (1964)

Skyways claimed the phrase „ex gratia‟ meant the same as legally unenforceable in a contract
between them and Edwards. This would have enabled the company to avoid having to pay a
large redundancy payment to a pilot. The court had to decide whether they had a binding
contract or an honourable pledge clause.
HELD: “Ex gratia” was an agreement to pay money and it was binding as it
had been made in a contractual context. They had to pay as the presumption
had not been successfully rebutted.

AO2

3) HONOURABLE PLEDGE CLAUSES

These are binding in honour, but not in law.

Rose & Frank Co v Crompton Bros (1925)

1 party had an agreement with the other that they would act as their agents to sell paper. They
had a written negotiation which stated that this was not a “formal or legal agreement”. When a
dispute arose it had to be decided whether they had entered a legally binding
contract. HELD: No intention to create legal relations, as they had gone
to the trouble of writing this down.

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Kleinwort Benson v Malaysian Mining (1989)
This case concerned letters of comfort, which occur when one party is considering lending
money to X and receives some encouragement or “comfort” from Y (not amounting to a
guarantee) to go ahead with the loan. Here, KB agreed with the defendants to make a loan of
£10 million available to M which traded tin on the London Metal Exchange. As part of the
agreement, the defendant provided KB with two letters of comfort stating that they would
ensure the business met its liabilities. The business collapsed, and M went into liquidation. KB
tried to recover payment from the defendant. HELD: The letter of comfort did have legal
intent as it had been provided in a commercial context. However, the CA held
(reluctantly) that the letter did not carry an intention to be legally bound.

COMMENT: This was a borderline decision. In support of the CA‟s decision it can be pointed
out that the bank was happy to accept a letter of comfort rather than a guarantee on the basis
that it could get away with charging a higher interest rate.

DIAGRAM

AO2

4) HOW DO THE COURTS DECIDE WHETHER IT IS AN

HONOURABLE PLEDGE CLAUSE?

☺ Generally, the courts aim is to protect the individual citizen from larger businesses.

☺ It therefore provides the individual with greater rights if they are legally binding.

Esso v Commissioners of Customs & Excise

The giving of free coins in return for the purchase of 4 gallons of petrol was held to
be legally binding. Otherwise, the consumer would not have been able to uphold
their right to receive one. Intention to create legal relations existed.

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However, the following two cases demonstrate that the courts will not always favour the
individual:

Jones v Vernons Pools, Appleson v Littlewoods

In both cases, the individual had entered the pools competitions and won money. Here, the
pools companies refused to pay, claiming the agreement was in honour only and
therefore without legal intent. The court upheld this argument in favour of the pools
companies. This was because the person claimed they won and sent in the coupon.
However the pools company had not received the coupon and refused to pay.

AO2

5) THE UNFAIR TERMS IN CONSUMER CONTRACTS

REGULATIONS 1999
- If similar cases to Appleson v Littlewoods and Jones v Vernons Pools should revisit the
courts, it is possible that honourable pledge clauses would fall foul of this legislation.

- Honourable pledge clauses are against the spirit of the EU Directive that led to the
Regulations, and the courts should look for an opportunity to outlaw this practice.

6) COLLECTIVE BARGAINING
One businesslike situation where legal intent is always presumed to exist is when employers
and trade unions meet to discuss pay settlements / working conditions.

In order to facilitate collective bargaining, it is presumed that any agreements are NOT intended
to be legally binding unless it is expressly stated in writing – Ford Motor Co v Amalgamated
Union of Engineering.

AO2

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