The Law of Contract

The Definition of a Contract

“A contract is a legally binding agreement made between two or

more parties with the intention of creating legally binding
relationship”-Sir William Anson. All agreements are not legally
binding. For an agreement to be legally binding certain
elements should be present. There are two essential elements in
a contract. They are,
1. An Agreement between parties
2. The intention to create legal relationship
The elements of a contract
For an agreement to be legally binding certain elements should
be present .the following elements are essential to create a valid
and enforceable contract.
1. An offer and acceptance
2. Valuable consideration
3. Capacity of a parties
4. Possibility of performance
5. Intention to create legal relations
6. Genuine consent
7. Legality
8. Terms of the contract to be certain

Requirement of writing
There is no requirement that a contract should be in writing.
Therefore a valid contract could be made

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Verbally or
In writing or
It could be assumed by the conduct of the parties. ( by
implication)

However, certain statutes expressly prescribe certain contracts

to be in a particular form i.e. either as a deed or as a written
document. When a statute makes such a provision contracts
should be in that form or method and n relief whatsoever could
be obtained from the court of law when such requirement is
ignored.

Examples:-
1. Prevention of fraud ordinance (section 2) states that
agreements relating to immovable property should be in
writing should be signed by the parties and by two parties
and by two witnesses and by notary public. This document
knows as a “deed “
2. The bills of exchange ordinance provides that bills of
exchange and cheques must be always in writing

1. Offer

An offer is defined as follows “AN OFFER IS A DEFINITE

PROMISE TO BE BOUND ON CERTAIN SPECIFIC
TERMS” According to the definition we may be say that an

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offer is a conditional promise. If there are no conditions
attached to a promise it is not an offer.
One who makes the offer is called the offeror. And the
person to whom it directed is known as Offeree.

There are several pre requisites to a valid offer

1. It should be a definite promise and it should not be a

doubtful one.

Gibson Vs Manchester City Council

The council sent a letter to Gibson, stating “The

Corporation may be prepared to sell the house to you at
the purchase price of £ 2.725” the court held that this is
not a valid offer

2. The terms should be specific. It cannot be vague

GunthingVs Lynn

In this case an offer was made as “If your horse is lucky i

will pay you more.” It was held that it is not a valid
offer. The term is not specific it is vague.

3. A definite offer need not be made to a particular person.

It could be made to a class of persons or to the entire
world

Carlills Vs Carbolic Smoke Ball Company

In this case the manufacturers of a medicine called

smoke ball , advertised that a £100 reward will be paid

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 to any person who has influenza after having used the
smoke ball three times daily for two weeks. The
advertisement added that the manufacturer had
deposited £1000 in the bank to show their sincerity in
the matter. The plaintiff read the advertisement, bought
the medicine and used it as directed.

But the influenza was not cured. Therefore she

claimed the reward of £100. The manufacturer argued
that they are not liable to pay the reward because there
is no contract between the plaintiff and the
manufacturer, because the offer was not specifically
made to the plaintiff. But the court held that there is a
contract between the plaintiff and the manufacturer,
because an offer can be made even to the whole world.
If any person acts according to the offer that is
acceptance, consideration is the reward of £100 and
getting influenza. Intention to create legal relations is
presumed by the deposit of £100 in the bank. Therefore
the plaintiff is entitled to the reward

4. A reply made to an inquiry does not amount to an offer

, because an offer is a definite promise and not a mere
supply of information

Harvey Vs Facey

P telegraphed to d asking whether d would sell Bumper

Hall Pen and inquired the lowest cash price. D
telegraphed in reply and mentioned that lowest price for
the Bumper Hall Pen was £ 900. Then p telegraphed
and stated that he accepted the offer held that d’s

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 telegraph was merely an answer to a question and it is
not an offer to accept.

5. Declaring an intention to do a thing is not an offer

Harris Vs Nickerson

An auctioneer advertised for the sale of furniture.

A broker came from London to purchase the furniture
but the furniture was withdrawn. Broker sued for loss of
time and expenses from the auctioneer. Held a
declaration of intention to do a thing does not amount
to be an offer for the broker to accept, therefore a
binding contract has not been created, and the broker is
not entitled to claim damages for breach of contract.

Invitation to treat

An offer should be distinguished from an invitation to

treat. If an offer is accepted, an agreement is made but if
an accepted, an agreement will not made. Accepting an
invitation is treated as an offer. There are many types of
invitations.

1. an advertisement is generally treated as an invitation

to treat

Partridge Vs Crittenden
P advertised for the sale of “quality British Bramble
finch hens” the protection of Birds Act 1954 made it an
offence to sell or offer for sale these birds. P was
accused of committing the offence of offering for sale, a

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 Bird, by advertising. Held, P was not guilty because the
advisement was not an offer to sell.
However it should be noted that advisement regarding
rewards for the performance of activities are offers.
Example: - Carlill Vs Carbolic smoke ball company.

2. Goods displayed in a shop with price marked by the

seller are not offers it is only an invitation to treat.
the customer who enters the shop makes the offer
when he demands the articles by tendering the price
the seller is free to accept or reject the offer
Fisher Vs Bell (1960)

Under a law, offering flick knives for sale was an

offence. A shop keeper was keeping in his shop flick
knives with price tag for sale. He was prosecuted for
offering for sale flic knives. Court held he was not
guilty. Because keeping goods in the shop for sale is
not an offer. But it is an invitation.

3. Displaying notices, hand bills, circular, prospectus

etc. are invitations

Termination of offer

An offer can be terminated in many ways

1. Revocation by the offeror
2. Rejection by the offeree
3. counter offer
4. Laps of time
5. death of offeror or offeree

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6. conditional acceptance

1. Revocation

a. The offer may be revoked by the offeror at any

time before the offer is accepted by the offeree.
That is an offer cannot be revoked after
acceptance.
b. Revocation is valid only when it is
communicated to the offeree and the offeree
receives that information.
Byrne Vs Van tienhoven (1880)

A offered to sell Goods to B by his letter of 1 st

October. B received it on the 11th October and
immediately telegraphed his acceptance. But A
wrote another letter on 8th October and revoked
his offer and it was received by B on 20th October.
Held, the revocation was of no effect until it
reached B, and a contract was made by B’s
telegraph. However revocation can be
communicated directly by the offeror to the 0fferee
or through some other reliable source.
Dickinson Vs Dodds (1876)

X agreed to sell a house to Y for £800, through a

document which state “this offer is open until
Friday 9am”. On Thursday X sold the house to C

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 and Y heard of this from the brother in law of X.
but before Friday 9am X delivered the letter of
acceptance. The court held that the offer had been
revoked by the time it was accepted. If a person
knows about the revocation, he cannot accept it
even though he received the information through
an outsider.
c. Revocation is possible at any time even though
there has been a promise to keep the offer open
for the specified period.

Routledge Vs Grant

G offered buy R’s house and gave him six weeks to decide
whether or not to accept. Before the end of six weeks G
withdrew his offer. Held G was entitled to revoke the offer even
though he promised to keep it open for six weeks. Because no
consideration has been given by R to G to reserve the offer for
six months.

But in two circumstances a promise to keep an

offer cannot be revoked. They are
1. If such a promise is given by a deed or
2. If such promise is supported by
consideration.

2. Rejection of offer

If an offer is made it can be either accepted by the

offeree or rejected by him. If he accepts it a contract is

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 made, but if he rejects it the offer is terminated. After
rejecting the offer, the offeree cannot again accept it.
An offer may be rejected in two ways.
I. by an express rejection by the offeree
II. by a counter offer from offeree

3. Counter offer or a refusal

A counter offer can be made in two forms.
a. By making a fresh offer

Hyde Vs. Wrench

W offered to sell a property to H for £1000. H started

that he would take it for £950. W refused to give it at
that price. Then H agreed to pay full £1000. Held
that the original offer of £1000 was rejected by the
counter offer of £950. Therefore, there is no contract
between W and H.

b. By accepting the offer by laying down conditions

A counter offer must be distinguished from a request

as to whether or not or the terms could be
acceptable, since such request does not, by itself,
terminate an offer.

Stevenson Vs Mclean
The defendants offered to sell some Iron to the
plaintiffs for cash. Plaintiffs asked whether they
could have four month credit. That inquiry was held
not to be a counter-offer, but only a request for

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 information, with the result that later acceptance of
the original offer created a binding contract.

4. Lapse of time
An offer may be started to exist for a particular period.
If it is no acceptance within that time, the offer will
terminate. If no time is mentioned, it expires after a
reasonable time.

Ramsgate Victoria hotel co Vs Montefiore

D applied to the company in June for share and paid a
deposit at the end of November; the company sent him
an acceptance by issues of a letter of allotment and
requested payment of the balance due. Held that the
offer can exist for a reasonable time only and five
months was much more than reasonable. Therefore the
offer had expired and it could no longer be accepted.

5. Death of either the offerer or the offeree

It is clear that the oferee cannot accept after he has had

notice of the death of the offeror. However, where the
offeree performance an act of acceptance in ignorance
of that death of the offeror, the legal positions becomes
more problematic. In such an event, are the offeror’s
personal representative bound to perform the contract?
Cheshire, fifoot and furmston here draws a distinction
between offers which are independents of the offerors
personality and can be satisfied out of his estate, and
offers such as an offer to write a book or paint a picture

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which involves some elements a personal to the offeror.
The opinion is expressed that death automatically
terminates the latter but not the former type of offer.

In the converse situation where the offeree dies before

acceptance, probably in offer comes to an end by
operation of law as the offer cannot be accepted by his
personal representatives after his death.

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