CONTRACT LAW

Mon, September 24
• When is a contract formed?

When words or conduct showing/exhibiting willingness to enter into a contract. 



OFFER

• Harvey V Facey

1. Facey is looking at what H has asked him ,and he in effect replies answering both the
first and second question - an offer

2. F is simply answering the second question - if he wanted to sell to H, it would be at
this price - mere provision of information - H's statement becomes an offer to but

• Fisher V Bell 

- Sets out the law for invitation to treat - case states that if you have an item in the shop
window + a price it is an invitation to treat (but in the case of h v f its different - F v B is
distinguishable - not the same facts --- Items + price + words of commitment - careful
about what principle does a case establish)

- Clothes in the shop window with price tags - immediate obligation to be willing to sell
at that price? no—-> offer is when customer shows willingness to buy at said price and
then the shop keepers decide if they want to accept this offer or not

(invitation to treat - offer is made - offer (sale) needs to be accepted.)


• Two fold reason behind this


1. Shops are a place for bargaining - negotiation (Harrods not a place for negotiation)

2. Shop might have run out of stock, so the rule is necessary to protect the shop.



1. Diff b/w case law and legislation. Contractual position - particular rule developed by
the court and parliament through statues can change these

• Effective fine on shops if they fail to sell at the price they promised.
• Super market shelf - same thing - no material difference in the law



2. See what each case stands for, precision is required.

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Mon, October 1
• Advertisements (generally) are not offers - they do not show the relevant degree of
commitment

• Spencer V Harding

- Trade circular - offering for sale some products (furniture and stuff) - circulars do not
show the relevant degree of commitment - even though the word offer was used it did
not show commitment

• Carlill V Carbonic Smoke Ball Company


- Offers for reward case - promise of a reward on the performance of the act (made to
the world at large) - is the statement an offer or an invitation to treat? (depends on
language and context) 

- Such statements are usually considered to be offers (like in Carlill) primarily because
these ask the public at large to do something without reference to the persons making
the statement

• Auctions 

- Reserved Price - the price below which the auction house can choose to not sell it -
reason is to protect the seller of the goods 

- Auction without reserve - does it have legal consequences? It is an offer - contractual
obligation.

• Barry V Davies (Heathcote Ball &. Co) 


- Auction house advertised a computer for sale (analyses motor cars) 

- W/o reserve 

- Barry bid £400. Auctioneer refused because he knew the market price was £28000

- Offer by the auction house is accepted when Mr. Barry makes the highest bid - also a
sep offer to buy the goods - accepted when the hammer is slammed down (constitutes
both the acceptance and the offer to buy the goods 

- Contract for the sale of the goods (offering the highest bid and slamming the hammer)
plus a sep independent contract (where the auction house promises that the auction is
without reserve - Mr. Barry accepts this by making the highest bid)

- Damages for the breach of contract puts one in the same position as if the contract had
been performed (would’ve payed £400 if bought from auction and extra £27,600 (which
is what he recovers in damages) over and above the 400 he was willing to pay, if bought
from market)

- Court cannot force auction house to sell the painting - sues country - remedy in the
form of monetary damage

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• What makes an auction without reserve different from the clothes in the window shop is
that an auction without reserves entices people to come attend auction - it shows a
willingness to be bound - people will know there is a commitment - its the context (not
like an advertisement in the news paper)

• If one party knows theres a mistake in the terms of a contract there is no offer -if they
enter an offer knowing theres a mistake there is no offer - unilateral mistake - one cannot
take advantage of somebody’s mistake.

ACCEPTANCE

Problems that arise with acceptance;


1. Offer needs to be accepted by the offeree, in the exact terms proposed by the offeror.

• Hyde V Wrench

- A offered to sell his property to be for £1000

- B (Hyde) think its too much - sends communication back to A saying hell pay only
£950 for it - not an acceptance but a counter offer (cannot say he changed his mind and is
willing to pay £950)

- B’s counter offer extinguishes A’s original offer

- Sometimes its not a counter offer but a request for info

• Stevenson V McClain (under counter offers)


- Sale of Iron Ore

- A sends an offer to B, saying he’ll sell a specified quantity of Iron Ore at 40 shillings
(immediate payment in cash) per/ton - will keep the offer open till Monday

- B doesn’t want to pay all at once, wants to do it in stages - replies to the offer saying
‘please telegram if you would accept the same price for delivery over two months or if
not the longest period you would accept’ - staggered deliveries.

- A reads this and sells Iron Ore to a third party - considers it a counter - offer

- Court says B’s response was not a counter offer - not a rejection of A’s original offer - it
was a request for info. 

- One can negotiate with more than one person at the same time but A made a direct offer-
offer to B is still open

- Look at the language and the context - is the offeree trying willingly to keep the
negotiations going?


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2. An offer can be accepted by conduct - i.e. through your actions.

• Brogden V Metropolitan Railway Company


- B provides coal to MRC- they don’t have a written formal contract

- MR sent a formal written contract to Brogden (delivery prices etc). 

- B responds - sends the form back to A but changes some of the terms 

1. Any disputes must be sorted via arbitration with a named arbitrator. 

∆ B changes the name of the arbitrator 

∆ MRC does nothing about this change in contract.

- Carries out dealing (coal, prices etc) in accordance with the contract - does this mean
they accepted B’s counter offer? YES by conduct.

- There needs to be an overt/ unequivocal act of acceptance - you can accept simply by
acting on it. 


3. In order to accept the offer, one must know of the offer

• In the case of an offer for reward - the person who provides the reward must know of the
offer being made.

• Cross offer (for this reason) is not a contract - both need to be aware of the offer to accept.


4. Offeree must generally accept in the way set out by the offerers offer.

• Manchester Council V Commercial General Investments


- A is CGI. B is MC

- B is selling school sites- they don’t need them - amalgamated schools. 

- They put the contract to buy it out to tender (asking ppl to put in the bid for how much
they’ll do the work (when public authorities are selling things its common practice-
when building work is being done its common practice)) - invitation to treat - replies
from builders are offers. 

- A put in a bid of £28500 - an offer to B - also said that any acceptance should be sent
to an official business address (provision in the contract) - sets out the method of
acceptance. 

- B accept this - but not in the way that it is set out by A - they told A informally, no
formal acceptance sent to A’s business address in the way asked - is there a contract?

- A has set out the method but has not stated that this is to be the only method of
acceptance - in this case the offeror can use another form of communication provided

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 that it does not prejudice the offerers position. 

- If a method of acceptance was specified the offeree MUST comply with that

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Mon, October 8

Battle of the forms

• Butter Machine Co V Excel O cooperation 

- Basic rule of communication of offer is that the offeror needs to actually hear of the
acceptance it has to be clearly communicated.
• Entores Limited V Miles Far East Corp 

- The offer was made by a telex machine to an offeree in Holland 

- Reply came back by telex – it was held that the contract was concluded when the
contract was printed and read at the receiving end 


• Exceptions 

1. Language and nature of the contract may indicate that no notification of the
acceptance is required 

- Carlill V Carbonic Smoke Ball Company (unilateral contract) – advertisement(the
language) does not require any form of notification 

- Waived communication 


• In relation to waiver - the offeror cannot compel the offeree to take positive steps to reject
the offer by providing that the offeree’s silence shall constitute acceptance 

- for e.g. If I don’t hear from you by so & so date/time, I will assume that the car is yours-
cannot deem offeree’s silence as acceptance 


• Felthouse V Bindley

- Felthouse (uncle) was negotiating to buy a horse from his nephew 

- Uncle wrote to nephew – giving his offer £30 50 shillings – if he doesn’t get a
response by Thursday, he will assume that the horse is his 

- When the nephew received the letter he was about to put the horse for auction – he
asked the auctioneer to take the horse out of the auction 

- Auctioneer let the horse stay in the auction and put his father in the auction – the father
was meant to bid on it (pretend sale) - trying to get other people to bid above the reserved
price without actually selling it (auction house wants rot appear to be successful) 

- Father forgot and fell asleep - a real bidder bought the horse

- Uncle sued the nephew claiming they had a contract 

- Court said the uncle cannot impose that the offeree’s silence shall constitute acceptance
- as a matter of principle 

__ the fact that the nephew wanted the horse out of the auction shows his

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 commitment(can be argued that its not an overt/unequivocal act of acceptance)


• Empirnall V Machon Paull (diff principles applied - ops principles for either sides
argument) -silence combined w conduct can be relevant to acceptance


2. Failure to communicate is the fault of the offeror
- Brimnes case - the offeror must act in a reasonable business manner rain respect of
reviewing communication 

- for e.g if you are to revive an offer by email you cannot not open your email for 3 days,
must act in a business manner in relation to the acceptance

3. Postal Rule 



I. Post has to be in the contemplation of the parties
• Henthorn V Frazer 

- Offeree lived in Birkenhead - went to Liverpool through a ferry - tunnel under the
river - gets an offer to buy a house

- He’s given 14 days in which to accept the offer

- He goes back using the ferry to consider his position 

- Sends a letter accepting this offer to the real estate agents - when was the contract
formed?

- When the post is in the contemplation of the parties as a means of communication
the contract is complete as soon as the. Letter is put into the post (to facilitate
business transactions) - principle 

- Why was the letter into the contemplation of the parties? They were geographically
distant - reasonable to use the post + the fact that he was given 14 days

- Whether this is in the contemplation of the parties varies with the situation and the
context (speedy thing)





II. Offeror can stipulate that the acceptance needs to be actually received
• Holwell Securities V Hughs

- Offeror made it clear in his offer that he wanted a notice in writing 

- Postal rule will not apply

- Offeror is the master of the terms of the offer he can stipulate in the terms of the
offer that an actual acceptance is needed. 



III. PR is inapplicable where it results in absurdity or inconvenience

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 • Marriage example given by prof.

• Revocation of Offer 

(termination of offer - in lecture handouts)


• Determinant. Consideration.

- Doing something that you would not otherwise do without the arrangement 

- A promise to incur a detriment - constitutes a legal detriment - is consideration

- Promise to hand over the car on the 21st of dec is consideration 

- Other parties consideration is to pay £30000 to buy the car 

(wouldn’t do this, otherwise if not for the agreement - incurring a detriment for the

future aka consideration)





Mon, October 15


Consideration 


• Mutual exchange of a promise - a promise to incur a detriment - to do something you

would not have otherwise done


• Carlill V Carbonic Smoke Ball Company


- Promise to pay the money if they the smoke ball didn’t work

- Mr. Carlill’s consideration is taking the smoke ball for the specific period of time as
requested


• Adequacy of consideration is irrelevant (implied promise is good enough)

• Chapel V Nestle

- I promise to sell you a record if you give me 3 chocolate wrappers



Insufficient Consideration



I. Past consideration is no consideration

- Consideration must not occur before the specific promise is made 

- When A’s promise does not induce B to carry out their act of consideration 



- General request to carry our the act of consideration (even though the specific promise
of payment does not take place until after consideration (A’s consideration) is sufficient

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 - good consideration (must be a prior request)- Lampleigh v Braithwaite



II. Consideration is illusory 

- In effect B is planning to do nothing, under the contract B’s performance of
consideration is completely discretionary 

- If it doesn’t have substance its illusory 



III. Consideration must be capable of being measured

• White V Bluett 

- John (white) lent money to his son William (college student) 

- W didn’t spend it on academic matter - spent it on clubbing etc

- J doesn’t want money back if W shows father natural love and affection 

- Law cannot measure this form of consideration


Before

1. You had to be a party to a contract to sue on it 

2. The consideration must move/come from the promisee - person who receives benefit
the promise must provide the consideration 



- A promises B £2000, if C promises to service his BMW for a year. 

- Contract b/w A & C with this consideration.

- But B is getting the benefit of A’s promise.

- C owes B money. 

- B doesn’t trust C to give the money, arranges the contract

- A refuses to pay B the money



Under the old law, B cannot do anything because he is not a party to the contract and
even if he was the consideration does not move from B and so he cannot sue A.


Now

1. Contracts rights of third parties acts

- Abolished the first two rules


• Section 1 : A person who is not a party to a contract may in his own right enforce a term
of the contract if the contract expressly provides that he may or the term purports to
confirm benefit upon the third party 




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 Two qualifications for this -

1. Section 1 does not apply if it appears from the construction of a contract that the parties
to the contract A&C did not intend that (put in a term in their on own contract to exclude
the operation of the act)



2. A&C can alter the arrangement, cancel or vary it but only up till a certain point of time -
i. Cannot change or vary the arrangement after B has accepted the benefit. ii. Cannot cancel
or modify the arrangement if (even if B hasn’t accepted) A the promisor knows, or should
have realised that the third party B has relied on the term and the third party has infant
relied upon it. 


• Promise to perform a legal duty is not valid consideration - simply doing something one
was already required to do by law. 


• First contract (extra 10k for quicker work) is important and the law should do all it can to
support the validity of the first contract - should not undermine

Claims for extra money will put undue pressure on the other contracting party 


• Stilk v Myrick



- A is a captain of a ship sailing around the baltic B are the sailors.

- Around a port in the Baltic A says to the rest of the sailors ‘I will pay u extra money if
the sailors promise to get the ship back to London’ - original contract was for them to
look after the ship during all emergencies of the voyage at a fixed price.

- Sailors get the ship back to London, A (captain) refuses to pay.

- Promise to performance an existing contractual duty is not good consideration 

- Sailors incurred no legal detriment because they were bound under the previous contract
- Nor did the sailors confer a legal benefit on the captain of the ship

- Captain of the shop entitled to receive the benefit under the initial contract.




• No informal variations of a contract allowed.


(B owes A £1000. A asks to be paid of the 1st of December. A will let him off £400 if B
pays £600 on Dec 1) - doing less than his contractual duty obliges him too - part payment /
deferral of debt is not good enough consideration.


FOLKS v BEER - deferral 

PINNELS - both say no good consideration because B is just carrying our their contraction

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duty or less than ( unless they decide to pay earlier or with interest)



Williams V Roffy (imp)

similar to stilk v Marrick 

contract b/w A builder and B subcontractor - quoted a price of £20000 by a certain date

A says hell give £10300 if B gets the job done earlier - builder himself has a contract w the
owner of the property 

B agrees - finishes by the due date

Not same argument ( same contractural duty) as of Stilk v Marrick

Court says carpenter doesn't incur any legal detriment nor gives any legal benefit to the
builder 

Does A receive any factual/commercial benefit from B’s promise of doing the work earlier?
Yes, his ability to carry on as planned, gets the job done, doesn’t have to pay any penalties for
being late for his work



The law in stilk v mar rick is still a general principle - performance of existing contractual
duty is not consideration

a qualification (Williams V Roffy) to that is that there will be consideration when the
promisee has conferred a factual benefit on the promisor 


Doctrine of Duress
- one of the parties can avoid the contract if they are placed under an illegitimate amount of
pressure - is it voidable for duress?



A promise to pay an additional amount - debt

Stilk v Maryk

Folks v beer all the same
- Can one apply the factual benefit argument to the debt situation
W V R said no it cant be
-MWB business exchange centres V rock advertising
- A owns premises which they license out in London B is a licensee - not paying their rent -
accumulated debt of £120000 - A says pay it off by installments ( theres a schedule )

B promises to do that and promises to stay on as a licensee
- B’s promisd to pay s not consideration -legal - doing less

Does B confer a factual benefit on A in the context of W v R

- one of the benefits is that they pay on to stay as licensees
-the other benefit is that they’re getting some money in

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The Court of Appeal said if you’re going to apply the W v R analysis in the debt situation you
need a factual benefit above and beyond the benefit of the creditor - the promisor - getting
money in 

the other benefit is that B stays on as a licensee ( special benefit ) - worried about a conflict b/
w Folks V beer and W v R 

Present law when someone waives or defers a debt - only consideration f you can fidnd on
the facts some special benefit beyond A getting money in


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Formative elements 

- Offer 

- Acceptance 

- ITCLR / certainty ———> consensus 

- Consideration 

- promissory estoppel


What needs to be present for a court to consider a mere agreement as a contract 

if you have all these elements you have consensus —-> therefore an agreement is then a
contract

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